Back Adani's oil of Fortune
Vinod Mathew
| Adani Wilmar is the leader in edible oil. But it now wants to carve out a bigger slice of the pie by focusing on sunflower oil, which accounts for a big chunk of the edible oil market, through its Fortune brand. |
Hitherto considered the exclusive terrain of South-based companies, the sunflower oil segment is poised to see much action from Fortune in 2005, a year it hopes to close as number two, vaulting two positions over the next 10 months. Not a tall claim, say analysts who have been tracking the edible oil segment.
Three years was all it took Fortune to scale the edible oil market and get entrenched as leader by December 2003, with 17.25 per cent of the edible oil market (pushing Agro Tech Foods to second position with 12.9 per cent), riding mainly on its strength in soyabean oil. Though Fortune has held on to its position over the past one year, it has realised the need to get into the largest-selling oil segment: sunflower. As of December 2004, it has 22 per cent of the edible oil market, followed by Parakh Foods (Gemini) with 13 per cent, Kaleesuwari Refineries (Gold Winner) with 11 per cent and Agro Tech with 10 per cent.
The Gujarat-based company needed to set up a manufacturing base somewhere close to the sunflower-growing belts of Adoni, Kurnool and Raichur in Andhra Pradesh and Karnataka. The company could not have hoped for more when ITC's edible oil refinery (with a capacity of 300 tonnes a day) in Mantralayam came up for sale in March 2004. The deal was clinched at Rs 26 crore, and AWL will fully own the plant when it pays the last instalment by April 2005.
Fortune Refined Sunflower Oil has steadily hiked its market share from 4 per cent in April 2004 to 9 per cent in December. In other words, it accounted for 1,357 tonnes out of the total 14,722 tonnes of sunflower oil sold. Considering that sunflower oil per se accounted for 42 per cent of the 35,044-tonne branded edible oil market in the country in that month, the conviction behind AWL plunging into sunflower oil brooks no argument. Incidentally, soyabean oil accounts for 35 per cent of the edible oil market.
Says Rajesh Adani, Managing Director, AWL, "We are one of the very few national players in the edible oil category who are very brand-focused. Our main thrust would be to increase our market share in the South, especially in the sunflower oil category, through continuous brand-building." Product availability is said to be the lifeline of this sector and AWL already has 13 stock points in the South — four each in Andhra Pradesh and Tamil Nadu, three in Karnataka and one each in Kerala and Pondicherry. Between these stockists, AWL services some 800 distributors who in turn cater to over a lakh retailers selling its sunflower oil. Incidentally, Fortune claims to have the largest retail chain selling its products — a whopping 4.25 lakh outlets. At another level, AWL has tied up with a clutch of hypermarkets including FoodWorld, Spencer's, Big Bazaar, Subhiksha and Green. It has also tied up with some others with national reach such as the Taj Group of Hotels and the Ministry of Defence canteens, to name a couple.
"As South is the main market for sunflower oil and Andhra Pradesh is the heart of the sunflower-growing belt, we acquired the integrated crushing complex at Mantralayam. This would enable us to get a holistic view of the market right from seed origination to retail penetration," says Pranav Adani, Executive Director, AWL.
Currently, AWL is selling 3,600 tonnes of Fortune sunflower oil a month in one-, two- and five-litre packs. This is scheduled to touch 6,000 tonnes in a month's time, which will cap the capacity of one plant at the Mantralayam refinery. The plan is to start the second plant, with a 3,000 tonne a month capacity, by April. That means the next two months will see another landmark as Fortune sunflower will pull alongside with Gemini, which now accounts for 14 per cent of the sunflower oil pool. Thereafter, it will consolidate its position over the next couple of months, before tapping the capacity of its second plant.
The strategy for Fortune is to overtake Sundrop by December 2005. The belief at AWL is that it will take 6-8 months to pull it off. Fortune hopes to become the second best selling sunflower oil brand in the country, behind only Gold Winner, by the end of this year. With this goal in mind, the company is holding a price-line that is on par, or lower than its competition by Rs 1-1.5 a litre, the segment that accounts for almost 90 per cent of the sales.
"As South India and Maharashtra account for almost 80 per cent of th sunflower oil category, our main thrust would be to strengthen our distribution network in all the Southern States. We hope to cover at least 50 per cent of the retail universe by the end of this year in the edible oil category," says Angshu Mallick, General Manager (Sales and Marketing) of AWL.
In value terms, the monthly sale that is now at Rs 25 crore is expected to near Rs 40 crore. Says a Chennai retailer, "The Fortune brand has gained share. It competes as a low-priced oil, not as a premium brand like Sundrop or Saffola. Goldwinner was a price warrior five years ago, now it's not so well priced. Fortune undercuts it by 7 per cent, which is large for oils. The company is a good ad spender and retail support is good."
A spokesperson from Agro Tech Foods says, "Nearly 60 per cent of its volume comes from the South. It has not been able to make significant inroads in the other parts like it did in the soya oil segment." He says Fortune was able to make rapid gains riding on cheap soyabean oil prices and lack of competition. "Making similar gains in the sunflower oil segment is going to be tough as there are strong players in this segment - GoldWinner, Gemini, Gold Drop and Crystal in the lower end of the market and Sundrop in the premium segment, covering all price and need areas."
Sundrop and Fortune compete in two different segments of the market, offering distinct value propositions. As for the Vitamin-E fortification, it would be interesting to see if it appeals to consumers," he said.
Meanwhile, AWL inaugurated the country's largest edible oil refinery complex at Mundra in Gujarat last month. The plant, with a 2,200 tpd refining capacity, will see the company pull further away from the rest of the soyabean oil pack. With its market share already at a more than healthy 47 per cent of the 12,250 tonne a month pie, the new plant is more likely to cater to exports, point out analysts.
Also, the Gujarat plant is looking to put on offer the country's largest integrated packing lines with ability to manufacture PET, hDPE and tin containers as also an automatic corrugated box-making facility for other edible oil players. Being a port-based refinery, the Mundra refinery is looking to become a hub for edible oils and the fact is that Mantralayam too has port access at Karwar.
Clearly, sunflower oil will not be the last word from the Fortune brand as it keeps looking for newer avenues to reach Indian kitchens. AWL is heard to have taken on lease a coconut crushing plant in Kerala. Sure, the ground between sunflower oil and coconut oil can be slippery but then so was that between soyabean oil and sunflower oil.
Leveraging the Vitamin-E factor
FORTUNE Refined Sunflower Oil would soon come fortified with Vitamin-E and that too at a price that often rules at a discount vis-à-vis other sunflower oil brands. The Vitamin-E edge has not come easy as AWL had to tie up with Archier Daniel Midlands, the world's largest Vitamin-E producer, to import it. "We are changing our packing to accommodate the Vitamin-E fortification. The new avatar will be labelled `Vitamin-E Power.' In fact, we have already launched it in UAE as `Vitamin-E ++' and have sent 150 tonnes of Fortune sunflower oil in packs of 1, 2 and 5 litres," Mallick says.
The Fortune brand is looking to leverage its West Asian presence by participating in the Gulf Food Exhibition in Dubai this month. Next stop: the Private Label Manufacturers Association expo at Amsterdam in May.
Closer home, Fortune has kicked off a Rs 6-crore ad blitz with South Indian actress Bhanupriya endorsing Fortune sunflower oil that allows one to "take home something extra."
Mantralayam plant changes brands
IT was a bizarre end to a model refinery set up in 1996 by ITC, which later decided to sell its edible oil business to ConAgra's subsidiary Agro Tech Foods. Only the Sundrop brand and distribution division was sold while the Mantralayam plant of ITC was to be operated on lease by Agro Tech for a five-year period at around Rs 1 crore a month. The arrangement also allowed Agro Tech to co-brand Sundrop as an ITC-Agro Tech product.
It is now history that the arrangement regarding running the Mantralayam plant collapsed, forcing ITC to go in for arbitration against ConAgra in London. The latter lost the case and was asked to pay ITC Rs 45 crore. Subsequently, the 100-acre land with two refineries of 180 tpd and 100 tpd capacities each that was the base for the Sundrop brand came up for sale. Adani Wilmar, on the look-out for a base in South India as part of its sunflower oil foray, got in touch some time in December 2003 and had the deal all sewn up by mid-January 2004. As per the deal, it was to pay ITC Rs 26 crore in four instalments, the last of which is scheduled to be paid on March 31, 2005. So, on April 1, 2005, the Mantralayam plant will be a totally-owned property of AWL.
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