CCL Products Sees 30% Volume Growth In Next Two Years
Coffee beans (Photographer: Amit Bhargava/Bloomberg)

CCL Products Sees 30% Volume Growth In Next Two Years

CCL Products (India) Ltd. expects its volume to grow about 30 percent year-on-year from 15-20 percent at present in the next two years, its Managing Director C Srishant told BloombergQuint.

Srishant also expects 50 percent capacity utilisation in the first year from the coffee producer’s Chittoor unit in Karnataka.

There would be some impact on the profits, since the plant is in a tax-free zone. Chittoor unit will start contributing towards the company’s financials from the second quarter of the next financial year, he said.

Watch the full conversation here:

Here are the edited excerpts from the conversation:

What is happening for coffee prices?

The coffee prices have come down now. In the last two years, if we compare, now they are at the lowest point. Our core business is such that irrespective of coffee prices, there will be no impact on our balance sheet. We work in cost plus basis. Since we work with major brands and established players, we will pass on the coffee prices, or tell them the necessity of increase in prices, or give discount if the prices come down.

Is it fair to estimate that the prices will move up over the next 12 months?

There are a lot of information in market that artificially inflate the price. At the ground level, we are in coffee on daily basis. There is bumper crop this year in Vietnam and Brazil, which are the two major manufacturers or major coffee plant growers. 

There is no shortage of coffee. This is the reason that we feel that the price will come down. Also, there is no issue in the demand and supply.

Can you take us through the next key steps in increasing the brands and what could be the financial outcome for it?

Our core business is private labeled. We are adding major brands in our portfolio. Apart from that, we have introduced our own brand in domestic market and the response is good. From next year, we are going to introduce another wider range of products. Major contributor to the performance could be Freeze Dried Unit, which will be online.

Is it from Vishakhapatnam SEZ?

It will be produced in our 5,000-million-tonne plant in Chittoor.

When will we see the output from the plant reflect in your financials?

From second quarter of the next financial year.

What kind of capacity utilisation, margins and bottom line you are looking at?

We have 50 percent capacity utilisation in the first year itself. There will be significant contribution to the bottomline because it will be a tax-free zone for the next five years. It is too early to comment for me in a consolidated basis as how would be the performance. We are aggressively investing in brand building in next year. So, closer to March we can give the details.

Where will be the bulk of the output go?

It will go to private label business with global clients.

What would the domestic business contribute towards revenue and profit?

Last year, we did Rs 50 crore in the topline for domestic business. This year we are targeting Rs 80-85 crore. As far as the bottomline for the domestic business is concerned, we are getting about Rs 5 crore.

When will it become the substantial part of your business?

We are making it the significant portion of business within the next 4-5 years. From next year, we will start marketing our products. Right now, we are just placing our products seeing customer response. We tweaked our products and we have got it ready. We will start advertising from the beginning of next calendar year.

Will all of this be under continental brand?

Yes.

What is the plan in the next three years to boost that side of the business?

Because there is significant demand for ‘Freeze Dried’ coffee, we are able to supply the product to existing customers. Last year, we were at threshold with capacity of one-year in advance. So, this year also we are at 60-70 percent of capacity utilisation for the next financial year.

Is that what you pre-sold already?

Yes.

What does the volume growth for next 2-3 years look like?

This year it will be a little higher. In the last couple of years, we were growing at 15-20 percent. This year we are targeting 20-30 percent. We expect the same growth to continue over the next couple of years until March 2020.

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