Peanut Butter Sales Surge The Most During Pandemic For Dr Oetker

Indians are spreading it thick, quite literally. Dr Oetker Group doesn't mind it.

For the German group, sales of peanut butter surged during the pandemic. Demand for the breakfast spread, often consumed as an alternative to regular butter, has risen “exponentially” in the last two years, Oliver Mirza, managing director and chief executive officer-Saarc, Dr Oetker Group, told BloombergQuint in an interview.

“Affordability, its health benefits and an unmatched taste have all contributed to growing sales,” said Mirza. “Family is the primary target audience. Bodybuilders, gym-goers and fitness enthusiasts comprise another target group that has been re-emerging after lockdown measures have been lifted and gyms have returned to normal operating hours.”

Spike in demand for peanut butter marks the changing consumption pattern in India as packaged food gains greater acceptance in a country known to prefer homecooked meals. The pandemic accelerated the shift as people, confined to their homes during lockdowns, craved for comfort food.

Dr Oetker's revenue in India rose 25.8% rise to Rs 356.7 crore in FY21, according to its latest available annual report. Peanut spreads contributed Rs 81 crore, growing at the fastest pace among all categories.

The German group's nut butter spreads, the second largest category after mayonnaise, have grown at an annualised rate of 41% over the last five years. The German group said citing industry data that it has a 31.2% share in India's Rs 400-crore peanut butter market.

Dr Oetker replaced Agro Tech Foods Ltd., an affiliate of U.S.-based Conagra Foods Inc, as India's No. 1 peanut butter brand by revenue in FY21. Agro Tech, according to its annual report, generated Rs 80 crore revenue from the category during the period.

Even Agro Tech saw a spike in peanut butter demand. “Revenue from the spreads business increased 33% driven by continued strong growth in peanut butter and with product extensions into chocolate spread, nut butter and hummus,” Agro Tech said in its annual report for FY21.

Other peers include Ruparel Foods Pvt., Das Foodtech Pvt., United Foods Pvt., Bajaj Foods Ltd., and Sonya Foods Pvt. Amul's owner Gujarat Cooperative Milk Marketing Federation Ltd., Mother Dairy, and Parag Milk Foods Ltd., too, have jumped into the market as demand for nutritional products soars.

Doubling Turnover Every Four Years

The $7-billion-euro Oetker Group entered India in 2007. It acquired local brand FunFoods a year later and has since been doubling its turnover every four years—from Rs 50 crore in 2009 to Rs 100 crore in 2013, Rs 200 crore in 2017 and Rs 400 crore in 2021, Mirza said.

He expects the top line to cross Rs 500 crore in 2022 and hit Rs 1,000 crore in the next five to six years.

"Mayonnaise, peanut butter, and ready-to-eat cakes, which we had forayed into last year, would be the three big pillars driving its next phase of growth," said Mirza. He hopes to replicate the success in mayonnaise and peanut butter in cakes.

“In 15 years, mayonnaise has grown from Rs 5 crore to Rs 500 crore and we hold a market share of about 50%," he said. "We were able to sustain both mayonnaise and peanut butter growth despite many new entrants coming in and we hope to do the same with cakes."

With the acquisition of Noida-based Spycy Fast Food Pvt.'s Kuppies brand, Dr Oetker aims to generate Rs 300 crore in annual sales from the new segment in seven years. The company is looking to expand its cakes category in cities like Jaipur, Rajasthan and other northern states, Mirza said. The company, a supplier of condiments to American fast food chain Burger King, has launched Chocolate Mousse Cup to be sold through them exclusively.

The company has invested Rs 300 crore at its master plant at Bhiwadi in Rajasthan which opened in 2017 with an initial capacity of 25,000 tonnes annually. ''We have by now scaled up the capacity to 50,000 tonnes,'' he said, adding the company still has space at the facility and will expand it to 1 lakh tonnes per annum in the future.

Dr Oetker has lined up investments worth Rs 100 crore, of which ''half will go into advertising and the remaining will go into productive assets, which is machinery".

Inflation Challenge

Mirza, however, cautioned that the current operating environment is “extremely challenging”.

Russia's war in Ukraine has sparked a global shortage of cooking oil, pushing up prices. “Oil, a major constituent of Mayo and emulsion-based sauces, has more than doubled in the past two years. We are also seeing double-digit inflation in packaging material such as laminates, foil, PET jars, peelable seals, etc., causing major cost escalation,” Mirza said. “The global supply chain crisis and unpredictability of supply for raw materials such as starch, cocoa, mustard, etc. is a growing concern.”

Mirza said consumption has slowed but it is unclear if soaring prices or a higher base of previous year is the primary cause.

“We should be able to get a clear picture on this in one-two months.”