Adani Wilmar Targets To Add 100 Fortune Mart Stores In FY23 — BQ Exclusive

Adani Wilmar Ltd. plans to add at least a 100 new Fortune Mart physical stores this fiscal to drive growth of its direct-to-consumer business.“E-commerce, for us, is growing faster than any other channel and the trend is here to stay with the buying pattern rapidly changing among consumers,” Angshu Mallick, chief executive officer and managing director at Adani Wilmar, told BloombergQuint in an exclusive interview.Mallick called buying groceries from a store or mall as “laborious”, and said that “at least 40-50% of (its) sales in bigger cities like Bengaluru, Pune and Delhi-NCR come from e-commerce”.Still, it will continue adding offline stores as these also serve as fulfillment centres for home delivery of products ordered online. Currently, Fortune Online—Adani Wilmar’s D2C channel—is available in 25 cities. And it has 33 Fortune Mart brick-and-mortar stores.In FY22, the recently listed company saw 34% year-on-year growth in e-commerce, while modern trade—or sales via supermarkets and hypermarkets—rose 19% over the previous year.Even though the direct-to-consumer business is "small" by volume, Mallick expects it to pick up as the company adds categories and sets up fulfillment stores across pin codes.According to its investor presentation, more than 29,000 online orders were placed in FY22 with an average value of Rs 740. .Price-Led Revenue SpikeAdani Wilmar, a joint venture incorporated in 1991 between the Adani Group and Asian agribusiness conglomerate Wilmar International, dislodged Hindustan Unilever Ltd. to becomes India's largest consumer goods maker by revenue.Adani Wilmar’s revenue rose 46% to Rs 54,214 crore in fiscal ended March, ahead of HUL's Rs 52,446 crore, according to its exchange filing. Adani Wilmar, however, clocked Rs 804 crore profit in FY22 compared with HUL's Rs 8,892 crore. HUL's operating margin was 24% against Adani Wilmar's 2.8%.Adani Wilmar's food and FMCG business—where it competes with HUL—is yet to turn profitable. In FY22, it reported a Rs 22.47 crore loss at a gross level, according to the exchange filing. Yet, revenue rose to Rs 2,621 crore from Rs 1,905.6 crore in FY21."We aren’t gung-ho (about overall revenues) as it was due to the spike in edible oil prices…," Mallick said. "The value growth has been 46% in FY22, which is not sustainable.” In the quarter ended March, the company increased prices of edible oils by 30-35% to offset margin pressures, he said.The cost of materials surged 40% year-on-year to Rs 13,666 crore during the quarter. For the full year ended March, raw material costs were up 49% at Rs 48,214 crore.“While the value growth in the coming quarters will depend on market prices, we are aggressively focusing on volumes,” said Mallick.In FY22, volume rose 8% to 4.8 million metric tonnes, of which edible oil grew 10% to 3.25 MMT and the packaged food business grew 34% to 0.64 MMT.Over the next few years, the company expects edible oil volumes to grow at 6-8%, and the staples and food basket to grow more than 30%. "Edible oil has reached a maturity level but we see opportunity in the branded staple category, which is hardly 11-12% of the entire staple market, unlike edible oil which is 80% branded," Mallick said.The company expects its food and FMCG business to turn profitable at the net level in three to four years. "As volume grows and the pricing power increases, no one can stop us from making profits," said Mallick.Scouting For Food Brands, AssetsThe Gautam Adani-led company is scouting for acquisitions to scale up the packaged food business, Mallick said. It recently acquired the premium rice brand Kohinoor from McCormick Switzerland GmBH.The Kohinoor portfolio comprises two more brands—Charminar, catering to the value range of products; and Trophy, which is popular in the hotel, restaurant and catering or HoReCa segment. In FY21, Kohinoor clocked revenue of Rs 300 crore.The deal also gives Adani Wilmar rights over Kohinoor’s ready-to-cook and ready-to-eat curries and meals portfolio. "The packaged food category is underpenetrated with significant headroom for growth," said Mallick.While Adani Wilmar didn't disclose the deal size, it said the purchase was financed from IPO proceeds. It had earmarked Rs 450 crore for mergers and acquisitions from its Rs 3,600-crore IPO.Mallick expects the acquisition to “fuel the next level of growth” and widen the portfolio to cater to premium customer segments across rice and ready-to-eat rice-based products, improving margins.In terms of capacity expansion, Mallick expects the 500-tonne per day wheat flour plant in Bundi, Rajasthan to be operational in October.The company is also looking to acquire abandoned factories as it expects the food business to grow four times faster in terms of volume than the traditional edible oil business. “There are a lot of stressed assets in the food space with owners struggling to run factories because of working capital constraints or other family issues. We plan to take over such factories… this would help us in multiplying volumes faster.” .Palm Oil Prices To FallMallick expects palm oil prices to fall 10-15% by the end of the June quarter.India, the world's largest palm oil importer, depends heavily on Indonesia and Malaysia for supply. And Indonesia's decision to ban export of the commodity came as a blow, said Mallick. However, he expects the impact to be "short-lived" as Indonesia may find it difficult to store the huge quantities of palm oil it produces."There is a meeting on May 7 on this issue. I feel they would start exporting and prices should start looking downwards," said Mallick.Adani Wilmar expects to hold on to its margins with edible oil prices coming down. “Overall, margins should not go down; it should remain at these levels what we have done in the fourth quarter of FY22.”

Adani Wilmar Targets To Add 100 Fortune Mart Stores In FY23 — BQ Exclusive

At least 40-50% of sales in bigger cities like Bangalore, Pune and Delhi-NCR come from e-commerce, says Adani Wilmar's CEO.

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