Cargill India, an arm of the $110-billion agribusiness conglomerate, has expanded its portfolio from a mere trading house 25 years earlier to a company with wide-ranging interests such as edible oil refining, marketing, sugar refining and animal feed manufacturing. It has been in the news after acquiring the Sweekar brand of edible oil from Marico, not the first brand it acquired in India. Siraj Chaudhry, chairman of Cargill India, tells Ajay Modi the strategy behind these and other India plans. Edited excerpts:
After Sweekar, would you look to expand refining capacity?
The current capacity to process sunflower oil is sufficient. Sweekar will help us utilise the capacity better.
What is your ranking after this acquisition?
We do not chase ranking. Our strategy is to produce best quality products and we wish to be the brand of choice to all our consumers. The consumer has access to all brands but prefers one that gives the best value. Sweekar is a premium brand and provides us access to a certain specific segment of premium consumers. It also brings a heritage and strategic fit into the business strategy.
Since you have acquired three leading brands (Gemini, Rath and Sweekar) over five years, should I say it is easier to acquire brands and difficult to create one like your Nature Fresh?
Yes. I think building brand is a long-term proposition and it requires big investments. In categories which have low margins, it takes even longer to make brands profitable. So, acquiring brands in a way shortens that journey.
Through acquisitions, we seek to augment our existing access to consumers by taking up brands with decades of consumer loyalty and value. ‘Rath’ is a case in point. It is a brand of over five decades, which has strengthened our access. Sweekar provides us access to a certain specific segment of premium consumers.
Would you be looking for more acquisitions?
As a growth company, we look for all opportunities for growth, both organically and inorganically. Increasing our brand portfolio is a part of that strategy.
Would it be restricted to edible oil?
For the time being. As our strength is in edible oil, we are well-placed to look at opportunities in this industry. But as we grow, we would be open to looking at other categories if they fit into overall plans.
Over the years, vanaspati has gained a negative perception. How is this business performing for you?
It is doing well. Vanaspati is a fat that serves a particular need and consumer segment. While some of us may worry about too much of fat content in our food, there is a large population base which does not even have access or can afford the required levels of fat. Also, vanaspati is a stable cooking medium. The small and fragmented food sector requires vanaspati to make food that can be preserved for a long time.
Does any product category remain unexplored? Where would you like to gain presence?
Edible oil is a large space and the market is maturing. Buoyed by rising incomes, consumption has been growing at a robust pace and is expected to maintain the growth momentum. The industry is also undergoing certain changes, as consumers begin to recognise quality and prefer value over price. Besides, the number of health-conscious consumers in India is also growing. So, there are different categories of food that require different types of oil and other inputs. These come with minor variations. We look to create more functional choices.
Nature Fresh currently has only oil. Atta was discontinued. Would you look to re-enter atta?
We discontinued atta six years ago because it presented a very challenging environment, where we were competing with a roadside chakki. The opportunity to differentiate our brand at that point of time was limited. But with the consumer becoming more discerning, we don’t rule out looking at atta at some point of time, if we see an opportunity to add value.
Is there any other such product on the branded side?
Being in a business which straddles the entire range of consumer segments, from the lowest income group to the highest, has given us a good understanding of how the Indian consumer is evolving. It is for us now to look at areas where we have a role to play. Such areas are those where we have built successful business models across the globe. Leveraging on our global knowledge to suit the Indian consumer will be the key. Such areas could be in flour, various ingredients for the food industry, etc.
Cargill has been into lots of trading activity in India, involving export and imports. On and off, the government comes up with restrictions on procurement and export of different commodities. How does it affect your trading?
We do recognise that a country as large and diverse as India, with the kind of food needed to ensure food security, will have its own challenges and ways to deal with those challenges. Government action is very often justified from a socio-economic perspective. Perhaps, it is about placing our business in a mode which is in sync with the needs of the country. There are times when things are not the way we want them to be. But we have, over the years, recognised the political and economic logic behind these decisions. However, whether India should export/ import commodities like wheat should be decided with a broader perspective, as we do not know the future.
What per cent of Cargill’s $110-billion business comes from India?
It should be around one per cent. Going forward, we wish to see a larger share of Cargill’s business coming from India.
What are the growth areas that Cargill is exploring?
We explore areas of growth in our existing businesses. The animal nutrition business has a great growth potential. Our play in the grains and oilseeds business and flavour businesses are slated to grow with the fast-growing food industry. Our cotton business is poised to get more stable with consistent government policies. Areas like corn milling, flour milling, starch & sweeteners for food and industrial use need to be explored.
