Agro Tech mulls launch of new food brands soon

Withdraws its wheat flour brand from northern, eastern

The Rs 1,200-crore Agro Tech Food Limited has withdrawn its wheat flour brand from the northern and eastern markets, three years after its introduction.

The food major is also mulling the introduction of new food brands from the stable of its parent company, ConAgra Inc which has a 51 per cent stake in the company.

Utpal Sen Gupta, president of Agro Tech, told Business Standard that the company had withdrawn its Healthy World brand of 'atta' as the product was not getting the kind of demand that was originally expected.

"We have withdrawn the product from the northern and eastern markets purely because results were not satisfactory. There was no differentiation in these markets for our product," Sen Gupta said.

"We have decided to continue with the brand in the southern markets where we enjoy healthy margins," he said.

Agro Tech, according to Sen Gupta, had decided to focus only on those brands that gave the company healthy margins.

"Logically, it makes sense for us to go after those areas where the gross margins are anywhere between 15 and 25 per cent. We did some analysis and found that there is a huge market for 'indulgence products', and we plan to introduce some products from our parent ConAgra's stable into the market soon. The brands will be the same global ones but the food products will be different."

Agro Tech, in which ITC has a 17 per cent stake, is still obliged to pay an amount of Rs 43 crore to ITC over a five-year period with regards to an arbitration settlement.

Though the payments started last year and will continue till 2007, they have also meant that the company has seen its bottomline shrink. This makes the situation challenging in certain ways especially when some of the products that it has launched are still in the investment stage.

"We have three segments in which we operate. The branded foods and the bulk and processed commodities divisions are profitable. The ready-to-eat segment is the area in which we are still in the investment mode. But I do not foresee any problem in being able to invest in our brands to increase our market share," Sen Gupta said.

For the year ended March 31, 2004, the company reported a turnover of Rs 1,260 crore and a net profit, after provisioning for extraordinary items, of Rs 2.6 crore.