The imposition of a 5 percent goods and services tax (GST) on pre-packed labelled food items may have fanned fears of higher inflation but Adani Wilmar CEO and MD Angshu Mallick thinks the move bodes well for FMCG companies.
The GST Council in July agreed on a 5 percent tax on single packages of food items like cereals, pulses, flour and paneer weighing up to 25 kg.
“Over the last few years, the regulation under which branded players had to pay 5 percent GST while unbranded players were exempt created a lot of confusion. 5 percent is a significant amount when we are talking about packaged rice which is being sold at Rs 30 or even wheat flour,” the CEO told Moneycontrol on the sidelines of first-quarter results.
According to Mallick, the move would create a level-playing field between the branded and unbranded players and propel consumers towards branded products in packaged staples.
Branded products command only a 10 percent share in the packaged food market, while unbranded products-packaged as well as non-packaged–have a 90 percent share of it, various industry estimates show.
Adani Wilmar has a presence in the packaged staples segment through Fortune brand under which its sells rice, wheat flour, pulses and its mainstay—edible oil.
In the 10 days since the imposition of the new GST rates, the company had seen an increase in demand for its products from retailers who were earlier selling unbranded packaged staples, Mallick said.
Adani Wilmar on August 3 reported a 30 percent year-on-year (YoY) jump in revenue from operations at Rs 14,732 crore in the June quarter from Rs 11,312 crore in the year-ago period.
Its net profit in the June quarter stood at Rs 194 crore, up 10 percent from Rs 176 crore in Q1 FY22. The company reported an overall volume jump of 15 percent YoY during the quarter.
FMCG backs performance
The company said the growth in its volumes and revenue came on the back of a strong performance in the FMCG and foods business.
The company’s FMCG and food business witnessed a volume jump of 53 percent YoY in Q1. The segment clocked revenue of Rs 860 crore in the quarter. Its edible oil volumes grew 6 percent.
“Our FMCG and foods portfolio witnessed growth across the segments,” Mallick said.
Wheat flour products saw volumes jump by 33 percent YoY and rice grew by 73 percent YoY on volumes. Soya nuggets and value-added products grew by 21 percent on volumes YoY in Q1.
The volume share of FMCG in the company’s overall business stood at 16 percent in Q1 FY23 as compared to 12 percent in Q1 FY22.
Market share gains
The company said it witnessed market share gains across segments in the quarter gone-by.
“Fortune Atta (wheat flour) continued to be the number 2 brand in India, with a consolidation of market share from 3.8 percent in Q1FY22 to 4.9 percent in Q1FY23 as per Nielsen,” the company said.
“Fortune Basmati rice continued to be the No. 3 brand in India with a consolidation of market share from 5.7 percent in Q1FY22 to 8.4 percent in Q1 FY23. With the acquisition of Kohinoor, the combined market share is 10.6 percent in Q1 FY23, as per Nielsen data.”
In the edible oil business, Adani Wilmar continued its leadership position (as per Nielsen), with a market share of 18.7 percent on a standalone basis and 19.7 percent along with its joint venture KTV Health Foods in Q1 FY23.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
