With Spread On, we're entering into mayonnaise and spreads category: P Rajan Mathews
Pune-bassed Desai Brothers is a 100-year-old company with diversified business interests including tobacco products, food processing, speciality chemicals, healthcare (hospitals), logistics, finance and hospitality (hotels). Having diversified into the ethnic foods business in 2001, Desai Brothers Ltd (DBL) owns and manages the brands Mother's Recipe, Dabee, and acquired Elmac in November 2015 to mark its foray into the food services business selling sauces, ketchup and spreads to hotels, restaurants and institutional catering firms. P Rajan Mathews, vice president – marketing and sales, Desai Brothers Ltd - Food Division (Mother's Recipe) in conversation with Ashish K Tiwari talks about the company's performance, overall business environment, product range, brands and future plans.
How has the business performed in the last fiscal? How was the first quarter?
Last fiscal we crossed Rs 200 crore revenues for the food division alone including exports. In the domestic market, we have retail, consumer retail, modern trade, general trade and then the recently started food service business. In the current fiscal we are expecting to grow the business by 25% and will maintain this momentum for the next three years. The first quarter has gone well with a good growth which is in line with our expectations for the year. Having said that, due to drought conditions in the previous year, raw material prices (mango, vegetables, tomato etc,) also saw price increase and that has impacted the business a bit. Usually, April, May, June is the mango season and we buy it for the entire year, so there was a 5 to 10% increase in the prices due to the lower availability of mangoes.
So have you taken a price increase for your product range?
When raw material and fuel price increases, we are forced to take a price hike. In fact, we also have ready to fry products like papad made from toor dal and the prices for dal have gone up to over Rs 200 per kilogram. Papad is one category where we have increased prices by more than 10%. For mango-based products, we have taken a 5% price increase.
In total, how many product categories do you have?
Offering a complete cooking and culinary experience, Mother's Recipe brand has 12 product categories viz. pickles, cooking and condiment pastes, curry and gravy pastes, chutneys, blended spices, ready-to-cook mixes, ready-to-eat instant breakfast mixes, ready-to-fry products, curry powders, mango pulp and canned foods in 150 different variants. Out of this, we have six categories for the domestic market and we export total of 12 categories. In the domestic market, pickles is our basic category where we are the national leader. For pickles, every region has a recipe, so if you look at total types of pickles, it is 123 varieties. Serving 47 varieties of pickle in the domestic market, we are today the only brand that is nationally available. In the international markets, we serve 60 varieties of pickles.
How much do exports contribute to revenues?
Exports form 40% of our total turnover. We mainly target the Indian diaspora and Mother's Recipe has a strong presence in the global arena especially in the Middle East, Far East, Australia, UK - Europe, US - Canada and Africa, being one of the largest providers of traditional and authentic Indian taste. Our products are exported to more than 40 countries in the world.
Do you manufacture in-house or it's outsourced?
We have our own factory at Sarole outskirts of Pune on the Mumbai highway and that's a huge plant. We are coming up with another plant in Nadiad, Gujurat where we intend to manufacture products specifically for export. The third plant is the acquired plant of Elmac in Kolkata and we are in the process of modernising this facility. We do not outsource manufacturing for any export-oriented product but for the domestic market and for certain products like ready-to-fry like papads, we do outsource. That's because papad manufacturing is much localised. So for appalam we outsource from Chennai, for certain bikaneri papads, we outsource from Rajasthan. So wherever the flavour is very localised we outsource.
What is the impact of the unorganised sector on the business of pickles and papads?
If you look at the pickle business, 55% of the sales is from the unorganised sector. However, with consumers gradually moving towards the branded packaged products the share of organised sector is growing. Organised businesses are certainly eating into the unorganised sector. Take any other category in food like spice powders; though the market is Rs 30,000 crore in India, organised sector is Rs 5,000 to Rs 6,000 crore. Also, 50-60% sale happens with lower price offers like single use packs priced at Rs 5 or Rs 10. Consumption of products via sachets is a little more in the rural areas than urban.
Has Patanjali's impacted your business as well?
They have pickles but haven't launched masalas yet. Interestingly, the game in pickles is to have varieties to serve. You can come out with a local variety but you cannot service everywhere - that is the challenge they will have. If you take local brands like Maharashtra's Bedekar or Pravin, they could not grow beyond the region, or take for instance Aachi in Chennai, Eastern in Kerala. They dominate the market but have no visibility outside. So there are two different strategies - you either go the regional route or national route. We have taken the national route from the beginning because of the backing of the organisation. Usually, the small players they take the regional way and slowly move to national.
Would you be looking for more acquisitions?
We are entering into mayonnaise and spreads category for which we have acquired a plant in Jabalpur and that's a brand called Spread On. It's 100% vegetarian. Mayonnaise will be a new category we will be introducing soon.
What is your annual marketing spend?
We spend around 15% of sales. We are a growing brand. We have a lot of new categories. Since we are in a growing phase, we need to spread awareness and build the brand. Our advertising is based on two pillars: One is mother as a brand and we do activities and promotion where mother comes in play. The other is traditional food. Based on this, we promote our offerings on various platforms like digital, BTL, TV, print etc. Special thrust is now being given to digital platform. We also try to engage with our consumers on a more personalised basis like people who like to write blogs. We have invited consumers to share recipes and many other interesting information. The idea is to create more brand awareness amongst the consumers and create recall value for the brand.
Given the range you offer, are there any plans for exclusive brand outlets?
It's in the testing phase. We have started a few company- branded stores in Pune. Going forward we would be looking at expanding it to other cities, more from the point of creating an experience for our consumers. In the next 2-3 years, we are looking at having 1-2 stores in all the major cities.