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Jayen Mehta: Yes, the chocolate price and cocoa bean price increase is actually a big dampener in the beginning of the season not only for the chocolates but the entire range of cocoa-based products – be it beverages or ice creams.
Having said that, it is the pure chocolate players who get affected the most. Amul is the largest dark chocolate brand in the country and we have a range of dark chocolates ranging from 55% dark to almost 99% dark. Within that, the biggest composition is cocoa and cocoa powder, cocoa butter and so on. The price of cocoa butter has shot up more than Rs 3,000 a kg.
So, if palmolein is Rs 60-70 a kg, ghee is Rs 600-700 a kg and this is five times that and these are record prices and obviously since they form the core ingredient of the chocolate that we sell, we will be forced to pass on part of that increase to our consumers. Having said that, Amul is still a value for money brand, so it would pinch the consumers much.
But yes, it does affect consumers because any increase is not taken so kindly. Having said that, we have been talking to CAMPCO, the Karnataka-based cooperative which manufactures cocoa bean and cocoa-based products, whom we work very closely with for sourcing our raw material. They are increasing the prices of cocoa beans to the farmers of Karnataka and that region and obviously this increase at least in the domestic market is being passed on to the producers.
CAMPCO has more than 1,40,000 members and of which 35,000-40,000 are cocoa bean producers. So, the benefits of international price increase at least in India are being passed on to our producers, thanks to the cooperative model.
You would not have as much sensitivity as it is because if you could just spell it out, how much is the chocolate/cocoa exposure in your revenue pie in any case.
Jayen Mehta: There are two ways to look at it. As a brand, of course, it is there. As you are aware, we expanded our capacity five times in 2018. We are now doubling up that capacity. And in this season, if you look at it, whatever chocolates we sell in the retail market, half of it also goes in the form of ingredient for our other consumer products, like ice cream and beverages. So, it is an important part of our portfolio.
More importantly, what I am trying to emphasise is that anybody who wants to indulge in pure chocolate will feel the pinch. There are brands, there are products which substitute the cocoa butter with cheaper palm olein, so they may not feel the pinch as much. But yes, this is an abnormal increase. It has never happened so far in the history of cocoa beans in India or internationally.Sure, you are the largest in terms of brands in dark chocolate, but how big is chocolate as an overall portfolio and also the focus area going forward?
Jayen Mehta: As I mentioned, two ways. The focus is there because we are doubling the capacity. We are having a wider range of cocoa-based products also, be it in beverages and ice creams. And of course, we launched a new range of milk chocolates under the brand name Velvet and the dark chocolate portfolio continues to expand. So, it is a focus area.
If you look at the size of the organisation and the Amul brand which is Rs 72,000 crore last year, maybe Rs 80,000 crore this year, it will not be very large, it will be hardly 3% to 4%. But as an ingredient, it becomes a very core part of our business. Obviously, it is the strongest flavour which the consumers love. It is important for us to keep an eye on what is happening in the cocoa market.
What about the international expansion because I hear that Amul is now going international, getting into US and other territories as well in a big way. Talk to us about that strategy.
Yes, we have recently tied up with a Michigan-based 108-year-old dairy cooperative, which is among the top 10 co-operatives in the US for the launch of the Amul range of fresh milk products. So, Amul Gold, Amul Shakti, Amul Taaza, and the gallon pack which we will be launching very soon. After that, we will be launching buttermilk, curd, paneer, and the range of fresh products. Wider availability of Amul fresh range in any market expands the reach of the brand and also we have been exporting butter, cheese, ghee, shrikhand, gulab jamun, mithai, everything from India, and ice creams also for the last 25 years.
So, the US is the largest economy in the world, the Indian diaspora is very strong and the Asian community is also there. We will be launching these product ranges. I am sure that because of a very strong cooperative model there and a strong partnership, we should be able to gain a foothold in the fresh milk market which is a very-very competitive market out there.
Locally speaking, what are the early trends emerging as far as summer season is concerned? Are you seeing an uptick in terms of the ice cream sales as well as the entire dairy consumption habits?
Jayen Mehta: Yes, the ice cream portfolio, the beverages portfolio, our dahi, our buttermilk, all are temperature-sensitive products. And with, at least in the western, southern part, we have seen an early onset of summer and as a result of which a good uptick in demand. Fortunately, we have been preparing for it for a long time. We have been the largest investors in ice cream under the PLI scheme with more than Rs 1,000 crore of investment, increasing the capacity by 50% in just one year.
Six new ice cream plants have already been commissioned. So, 25 plants manufacturing ice cream, huge expansion in retail, and as much in the backend. We hope this to be a bumper season with more than 50% growth. Last year, the summer was bad, but we made up during the rest of the year. So, for the year ending March, our growth will be upwards of 25%.
We are not complaining, but the opportunity this summer will be much bigger. A wider range, new launches, and excitement in the category with the form of new advertising campaigns, brand building to retail distribution expansion. All that is happening simultaneously. Similarly, in the case of beverages, we are launching a new campaign today, and we will be showcasing the entire range of over 100 plus products and SKUs in the beverages, the largest portfolio in the country. A new campaign is being released today on IPL and the buttermilk, the lassi, the dahi, all products gaining very-very good double digit and very high double digit growth since the beginning of this month. So, we are very hopeful and optimistic for a very bumper summer this year and which means a good brand traction and also the growth that all of us are expecting.
You said double digit growth is what you have seen starting this month. But what is the expectation for the entire summer season as a whole? Are you expecting upwards of 25% growth this year? Also, are you increasing your market share or is it just that the entire pie is increasing?
Jayen Mehta: There are two ways. When we set up new plants, enter new geographies, obviously the market share increases because that is where not just you are riding on the surge in demand, but also making efforts to expand the market. So, both ways, yes, we are widely and deeply penetrated into the country. The focus on distribution is yielding very good results. Today, more than 38% of the sales come from towns with a population of less than 20,000. This shows the brand is not just an urban brand, but the range of products is helping us go deeper into the country. We want to reach every single village of the country. So, high double-digit growth is not just a starting point. As the summer base last year was not very good, almost a 45-50% growth in all these product categories will be perhaps a normal growth for this season.
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