Corporate: Winning Ingredients
It takes almost two hours to reach FieldFresh India’s state-of-the-art manufacturing plant in Hosur — some 100-odd kilometres from Bengaluru’s Kempegowda International Airport — that manufactures Del Monte’s range of products. FieldFresh India is a joint venture between Bharti Enterprises and Del Monte Pacific based in Singapore. This diversified JV produces everything from ketchups and mayonnaise to fresh juices and fruit-products, making it a unique proposition in the specialised Indian fast-moving consumer goods (FMCG) space.
Spread across 21 acres, the Hosur plant — set up in November 2010 — produces the entire functional processed foods range of Del Monte India: fruit drinks, ketchup, sauces, mayonnaise, derivatives, packaged fruits and vegetables. All under one roof.
“The plant is a good example of ‘Make in India’. We use 65 per cent locally-grown tomatoes for making ketchup and sauces. Our fresh produce such as baby corns, sweet corn, and chillies are exported to markets in the United Kingdom and Western Europe virtually every day. We are leaders in B2B, supplying to all international QSRs (quick service restaurants) such as Domino’s, Pizza Hut, KFC, Subway, McDonald’s and Burger King in India,” says Yogesh Bellani CEO of FieldFresh Foods (Del Monte India). Incidentally, Bellani is the first employee of the joint venture that was forged in 2009.
Bellani says brand Del Monte is available to consumers across 70 cities and in over 50,000 modern and general trade outlets. But what’s most striking about the company is its phenomenal growth in less than seven years of its existence. The company has been virtually doubling its turnover every third year. Currently, the India operations of Del Monte is estimated to have crossed Rs 650 crore in revenue, despite 2016-17 being an extremely challenging year for the company. “Twenty-eighth of June, 8 July and 8 November are the three dates that impacted us in a big way,” recalls Bellani as we settle down to discuss the company’s phenomenon growth rate.
“Brexit was on 28 June, Kashmir valley went into a long period of lockdown after 8 July, and demonetisation hit everybody on 8 November. The UK and Western Europe are the biggest markets for our fresh produce. The value of the pound declined drastically after the Brexit announcement. This impacted our exports. The state of Jammu and Kashmir is our largest market for canned juices, particularly Green Apple. It is the top gift item, which is exchanged when people visit each other. Due to the bandh in Kashmir, that part of the business got adversely hit. Of course, demonetisation had its impact on distribution. Overall, the last financial year proved very challenging for the business. But despite all this, our growth rate continued to grow in high double-digits,” says Bellani.
But how so? The consumption of eggless mayonnaise and ketchups has been on an upswing, helping brands such as Del Monte, Dr. Oetker and others expand the market. According to market research firm Research & Market’s India Table Sauces Market Overview, the table sauces market has been registering a growth rate of 18 per cent year on year. In comparison, eggless mayonnaise has been clocking a growth rate of 23-25 per cent every year for the last three to four years, jumping to over Rs 700 crore across retail and institutional segments.
Del Monte manufactures and supplies a large chunk of eggless mayo in the B2B and B2C segments. Bellani attributes the burst in growth of eggless mayo to rapid urbanisation, increasing disposable incomes, and growth in modern retail outlets. “From being traditionally an out-of-home consumption product, today it is an in-home product. This has helped the category expand in a big way,” Bellani adds. Del Monte is today one of the biggest suppliers of eggless mayo to McDonald’s India. Oliver Mirza, Managing Director, Dr. Oetker India, which also has an eggless variant under the Fun Foods brand, acknowledges the growth of eggless mayo. “We are on a journey to grow mayo by four times over the next four years to Rs 1,000 crore. Major growth for us will come from this category,” says Mirza. For 2015-16, Dr. Oetker India clocked Rs 165 crore in revenue, up from Rs 125 crore generated in the previous year.
Ketchups & Sauces
Del Monte manufactures and sells over 8 crore sachets (8-10 grams each) of ketchup every month. This year, the company will cross 100-crore sachets of ketchups. “If we take an average of 9-grams a sachet, we are producing over 720 tonnes of ketchup every month across two plants. For us, the sachets are 100 crore touchpoints for our brands,” says Bellani as Del Monte does not believe in above-the-line advertising. It does not spend money on traditional media such as television and radio. Instead, it pushes digitally.
Del Monte produces sachets of ketchups for various QSRs such as Domino’s Pizza and McDonald’s. Sachets are a tremendous “branding tool for us. That is where people have been trying us. We want people who try our sachets to come back and buy ketchups in large bottles,” says Bellani. Del Monte brands of ketchups used 14,000 tonnes of tomatoes last year, 60 per cent of which was produced in India.
Currently, the culinary range of Del Monte products including sauces, ketchup, and mayo, contributes over 45 per cent to the company’s revenue, and by far, is the largest contributor, followed by its Italian range of pasta, olive oil, and olives that contribute around 22-23 per cent. Canned juices contribute 15-16 per cent, while fresh and packaged vegetables contribute the rest.
“On the retail side we are growing at 60 per cent year-on-year, while on the B2B, the growth is around 35 per cent. Our olive oil has been growing at over 25 per cent in volume. We continue to dominate olive and pasta categories. We are no. 1 in imported pasta. Overall, Del Monte as a brand has grown at over 45 per cent in sales. In the last three years, the growth rate has been at around 35 per cent. At this rate, we should double in less than three years,” says Bellani with confidence.
When asked how the company will double its revenue in the next few years, Bellani says: “We are looking at both retail and B2B as growth areas. Today, we are the most distributed brand in the category with over 350 towns, but the challenge is to grow within a large geography like Delhi NCR. There are more opportunities to grow because there’s always a new bakery opening or new QSR popping up.” He also sees more opportunity in putting products into more towns as out-of-home consumption is growing. Every second day there is a new food joint or restaurant or outlet delivering to home. The company also intends to launch its juices in tetra packs, particularly for the B2B segment. It will also help the company reduce costs.
Brand Connect
Lately, Del Monte has stayed away from above-the-line advertising. It has not spent any money on television. Yet, the brand is growing from strength-to-strength feels brand expert Harish Bijoor. He says “Advertising is expensive today, and in any case, memory-tags of advertising need boosting every four months or so. And that in itself is an expensive process. If you can pour that money into retail and product-centricity, I think you have got your act right.”
“Del Monte has its act right for India. The brand believes in building itself up on the basis of consumer use, rather than brand-push. The brand has deepened B2B and B2C inroads through what I would call WoT: Word of Taste,” says Bijoor adding that since the brand name ‘Del Monte’ sounds foreign, this adds to the premiumness of the brand. “The brand has carved for itself a space that is defined more by taste and less by imagery.
According to him, the game of literally no-money marketing is a slow one. It requires a lot of patience, but then, if the model clicks, it clicks!
GST Impact
How will the Goods & Services Tax impact the FMCG sector? “Under the current tax regime, the industry pays innumerable taxes such as VAT, service tax, excise duty and central sales tax (CST). But with GST, all the above taxes will come under a single tax,” explains Bellani. And while packaged food items such as pickles, spreads, ketchups, mustard sauce will attract a tax rate of 12 per cent, categories such as pastas and noodles, mayonnaise, salad dressings and mixed condiments have been put under the 18 per cent tax slab. “On the face of it, taxes in GST look higher, however, it will significantly bring down other expenses such as manufacturing, packaging, transportation, etc. The benefits of which will be passed on to the companies and consumers alike. In addition, there will be a potential cost reduction in storage and transportation of goods due to smoother supply chain management, claiming input credit and elimination of CST under the GST regime, thus making consumer goods cheaper and more affordable,” says Bellani.
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