Prices of edible oils are likely to cool off in the coming months after unprecedented increases in the past six-eight months following global disruption and shortages, and demand outlook is positive for the overall fast-moving consumer goods (FMCG) sector, said Angshu Mallick, managing director of Adani Wilmar, the country’s largest packaged edible oils maker.
“We believe the high rates of edible oils are behind us. Though prices are internationally driven, we feel the pressure on margins will not be as much as in the past,” Mallick told ET in an interview.
Adani Wilmar, the equal joint venture between Adani group and Wilmar International of Singapore, sells oils, pulses, wheat flour and rice under the Fortune brand franchise. In addition, the company is a leading supplier to large packaged foods companies such as ITC, Parle and Britannia. “The country has had a good kharif, cotton and groundnut crop, and there are forecasts of a bumper mustard crop in March,” said Mallick.
Demand over the next two-three quarters is expected to be “certainly better” than the corresponding year-ago periods, said Mallick, with consumption normalcy returning across industries, including hospitality and travel. “We are big suppliers to institutions; we expect October-December to be surely better than last festive quarter. India is getting back into normalcy,” he said.
Adani Wilmar is finalising blueprints to enter functional, value-added foods products under the Fortune brand. While the company operates in existing categories including staples and kitchen essentials, it is exploring scaling up value-added categories such as macaroni, pasta, fortified rice and flours, and other ready-to-cook products. “In each category, we are trying to enhance base products with value added, functional foods,” said Mallick.
Adani Wilmar proposes to raise ₹4,500 crore from the market through an initial public offering. It has said it will infuse ₹1,900 crore in capacity expansion of its foods business, and spend ₹500 crore on acquisitions in the foods staples segment and some amount to clear outstanding debts.
In its mainstay packaged edible oil business, Fortune competes with Marico’s Saffola, Cargill’s Sweekar and Nature Fresh, Sundrop by Agro Tech, Mother Dairy’s Dhara, Ruchi Soya and Emami’s brands.
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Wilmar has passed on some increase in raw material costs to consumer prices. However, while a normal monsoon and healthy crop production have resulted in prices cooling marginally, industry analysts said some inflationary pressures on edible oils could continue, adding that a weaker rupee could impact imports.
Earlier this month, prices of edible oils declined ₹5-20 per kg after the government intervened by limiting stocking to curb hoarding and reduction in import duties.
Food inflation has been the single biggest concern for domestic and overseas companies in the past six months. India’s retail inflation rate, as measured by the Consumer Price Index, rose to 4.48% in October. According to the National Statistical Office, food inflation rose to 0.85% in October, compared to 0.68% in the previous month.
FMCG demand has been stable on the back of a festive quarter and higher consumer spending. Research firm Bizom data showed that FMCG sales grew 21.3% in October. While ecommerce channels for grocery saw 100% growth during the peak of the Covid-19 pandemic, Mallick said he expects the online channel to continue growing at more than 50%.