'Adani Wilmar will cross Rs 10,000 crore FMCG revenues by 2027': Angshu Mallick, MD & CEO of Adani Wilmar on the company's ambitious growth plans

Q: What is AWL’s business strategy?

A: The Adani Wilmar story has been that with edible oil, we have also grown the foods business. We always believed staples is a very big business. There isn’t any national brand; rather, the market is dominated by regional players. But as the country’s economy expands, consumption of better quality rice, wheat, sugar, as well as blending will take place, [and] value addition will happen. Currently, the entire business of staples is very small in terms of brand share, unlike edible oils, which in the past 20 years have grown because of big multinational companies entering [the space] and building it through capacity and technology. With this in mind, we embarked on the journey of foods.

Q: Why is AWL betting heavily on consumer staples, that is otherwise considered a low-margin business?

A: We started in 2014-15 with rice; in 2018 we entered the ready-to-cook [space], and today we have a range of all essential staples and ready-to-cook items, which cater to [everyone from the] urban rich to the poor and rural households. The entire game of kitchen essentials lies in the ability to distribute at the least cost—procuring, processing, manufacturing and distributing at the least cost… So, if you were to do this only one product at a time, you will find that it is very difficult to reach the entire country with one brand. And with one product, the cost of handling becomes very high and so is the cost of manpower. Integrating all these results in a lot of synergy. Once you have synergy, there is a brand fit in all the products, and there’s a distribution fit.

Just like a farmer increases his yield by planting different crops on the same land according to the season, integrating the plants with more products reduces the cost of operations. Warehouses can also be used seasonally. The technical staff can remain common. One can always shift whenever there is pressure on one commodity, because when wheat and mustard are harvested, it is off season for paddy. Further, efficient utilisation of the same stuff helps in easy processing. Common distributors handle all these products; the retailer is also common because he sells all the products. Then there is the consumer who consumes all the products. So, this entire chain has got a lot of synergy. And if we can use this with better quality products, processing, procurement, distribution and brand building, then you add value to the entire chain. We can give consumers good quality products at the most affordable price.

Q: How big is the potential for growth in the foods business in India, which has low per capita consumption?

A: If these [the above steps] can be done [effectively], then this business is enormous. In terms of size, edible oil is hardly 17-18 kg per head. But when you add other items like sugar, it is another 24 kg [per head]; pulses are around another 24 kg, while wheat is around 52 kg and rice 60 kg. So, all these products are much bigger in terms of volume than oil. This entire basket gets you volumes, which in turn give you the strength to procure or decide the price.

Q: How do you plan to achieve that?

A: First, we have been steadily adding capacities because we know that the country doesn’t have enough capacity. It doesn’t have the technically advanced capacities, neither the advanced means of processing all these [large] plants. Mostly, there are small, old plants. So, we are setting up state-of-the-art plants to get higher productivity and processing, at lower cost and better quality consistency. All these are [being] looked into.

Second, this is a business inside the home, but there is now equal amount of business coming from outside the home. Outside the home business means the hotels and restaurants market, which has great potential. The stakes are getting high because of the growing out-of-home consumption—from the range of 15-20%, the share has grown to 30%. According to estimates, it is now worth Rs 60,000 crore annually. In supply chain materials, 30% is vegetables, 20% is meat and fish, and 50% is grocery items & staples—around 100,000 tonnes. The market [for grocery items & staples] is seeing 30-40% CAGR and would eventually become 40-50% of the food consumed. In other countries, we have seen people eat out more because it is as affordable as eating indoors. The local market has not reached that level yet, but in the coming days, with competition growing further, it will soon be. Thus, hotels and restaurants are also looking for suppliers, who can supply them with good quality products consistently. For instance, we are already working with international brands like Domino’s that is very strict with the quality standards of wheat that is perfect to make pizzas. We are working with others as well, like McDonald’s. This market has major potential but requires large players with advanced technologies at their disposal to meet their specific requirements. The market is already very big in China, where Wilmar is a leading player. As more people start eating out regularly, the market in India will also grow larger. Adani Wilmar will be a big player in the out-of-home business.

Q: In FY24, AWL’s sales suffered as edible oil sales declined. How do you mitigate that?

A: Last year, despite growing handsomely, external factors came into play. Volume-wise we grew our edible oil business by 12%, while foods grew by 40%. However, crude edible oil prices crashed—from $1,800 to $900—very fast. Thus, even if you have some hedges, that didn’t match the steep fall in prices. So, whatever you have you end up selling that at lower price.

This year, there has been no such problem. Stability is much higher [now] and we could manage. And the brand is always resilient enough to bring back the volumes. Anyway, gaining volumes was not the issue, it was the price. We are doubling our FMCG business every two and half years. Now, with the situation stabilised, I expect to touch Rs 7,000-crore revenue for the FMCG business and cross the Rs 10,000-crore mark by FY27. The scope for growth is ample as even today, less than 10% of staples consumed in India [is branded]. The transition from non-branded to branded items started some 20 years ago and continues to gain pace. The trend is going to sustain for the next 10 years. Therefore, for companies like ours that have the first-mover advantage, there is no risk on growth.

Q: Deep presence through distribution is a key factor in a vast country like India. What are your plans on that front?

A: Availability of products is very crucial. Consumers tend to give greater importance to that. So, distribution is at the centre of the commodity business. Thus, we are expanding direct coverage and at the end of Q1FY25 we were at the level of 740,000 retail outlets. Through wholesalers we reach some 2.1 million outlets, which is about 50% of the total 4.2 million retail outlets in India that sell edible oils. Among cities, we cover all that have a population of more than 100,000. We started some years ago in the rural [areas], and now cover around 30,000 villages, which I expect to go up to 50,000 by the end of the year. The number may look small in comparison to the 640,000-odd villages that India has. But only 20% of these villages contribute 80% of the sector’s sales. Thus, 125,000 villages form the cream, and out of these, 20,000 villages contribute 60% of the revenues, which we have already covered. Our aim is now to reach 75,000 villages, which will practically cover 80% of the market.

Q: Are you expanding manufacturing capacity?

A: In terms of manufacturing, we now have 23 plants of our own, and 46 tolling units that are run and managed by Adani Wilmar but not owned by it. Moreover, we have 96 depots spread across the country that cover the remotest of areas. With 4 million sq. ft of warehousing space and 10,000-odd distributors, the network is well-equipped to reach as many customers as possible.

Additionally, 60% of our dispatches are direct that further helps us in cutting costs. Each factory will supply directly to the distributors without going into the depot. So, we eliminate the loading, unloading and any consequent damages, and we pass on some benefit to the distributors.

Q: What are your capex plans?

A: The last capex cycle started in April 2022 and lasted till about March 2024... of the total Rs 3,600 crore of IPO proceeds, Rs 2,200 crore was utilised as capex and the resultant assets... Additionally, Rs 1,200-crore capex was earmarked for FY24, out of which some of the projects are already complete... In FY25, we have another Rs 700-800 crore capex for capacity expansion.

Q: Are you concerned about the consumption slowdown?

A: After Covid-19, incomes got impacted while most small and medium businesses like restaurants suffered. This, coupled with the war in Ukraine, steep rise in commodity prices, and the cost of ocean freight added to the burden and put us under a lot of pressure. Ocean freight has jumped three times. Further, the monsoon was not good in several key states last year, which further aggravated the situation.

Looking ahead, I expect the monsoon to be good— resulting in higher income for the rural households and, thus, demand revival. The government is also keen on beating this slowdown and is investing significantly as it has announced in the Budget. Having said that, a good monsoon leading to better crops is the most crucial factor.

@arndutt