Cofco Agri to enter the branded wheat flour and maida segment

In order to finalise a buyer for the edible oils company, the lenders of Ruchi Soya are resorting to the Swiss challenge method. This is the first time that banks are using this method to find a resolution under the Insolvency and Bankruptcy Code (IBC). There are just two players left in the fray. Edible oils player Adani Wilmar is pitted against Baba Ramdev’s Patanjali in a contest which may see Godrej Agrovet joining forces with the latter.

Swiss challenge, a method that has been used in India by various states to award roads and housing projects, could become the final round to decide the winning bidder for Ruchi Soya.

Under the auction process, both candidates will submit their detailed resolution plan. As per the process finalised, Adani Wilmar will be given the first opportunity to raise its bid which will be followed by an option to Patanjali to revise its offer. Adani Wilmar will then be given the second opportunity to up its bid following which Patanjali will get the final chance to beat Adani Wilmar’s bid, sources said.

Banks last year dragged Ruchi Soya to the bankruptcy court to recover dues of around Rs. 12,000 crore.

Adani Wilmar and Patanjali have submitted their bids to the committee of creditors (CoC) in a meeting held on May 30 with Patanjali holding an edge with its bid of Rs. 4,150 crore plus a commitment to infuse about Rs. 1,800 crore of capital. Adani Wilmar has offered Rs. 3,250 crore.

The CoC in consultation with independent evaluator BDO, then decided to adopt the Swiss challenge to maximise the value for the asset, the sources said.

“Patanjali is expected to maintain its aggressive approach in the challenge and will have the advantage of having the last go. It’s evident from the fact that Baba Ramdev himself made the final presentation before the insolvency professionals,” said one of the sources.

An executive committee comprising representatives from IDBI Bank, State Bank of India, Standard Chartered and Corporation Bank are expected to conduct the Swiss challenge and conclude the process by mid-June, sources said. They expect the final bid to be around Rs. 5,200-5,300 crore.

While Patanjali’s appetite for growth and desire to be a market leader in edible oils have led it to bid for the company, Adani Wilmar’s position is significantly different. Adani Wilmar already has a sizeable market share in India and the addition of Ruchi Soya’s market share will put it in a position of holding 65% of the market that may raise a red flag for the Competition Commission, whose approval is mandatory for the acquisition to be completed.

Ruchi Soya is the largest edible oil seed extraction and refining company in India, with 3.72 million tonnes of oilseed extraction capacity across 10 locations and 3.30 MT refining capacity in 13 locations. It also has a 3.05 MT soya meal extraction capacity. The company is the largest player in the cooking oil and soya foods category in the country with iconic brands like Nutrela, Mahakosh, Sunrich, Ruchi Star and Ruchi Gold.

Baba Ramdev-led Patanjali Ayurveda has made the revised offer to the Committee of Creditors (CoC) for the debt ridden company Ruchi Soya, sources said.

As per the sources, the latest bid is around 30 per cent higher than offered by vying Adani group, which has offered around Rs 3,300 crore to the company.

For the revised offer, the Yoga Guru led Patanjali group met the CoC of Ruchi Soya, said a source, adding that they had asked the group to sweeten the offer.

Patanjali has also assured the lenders that it would invest extra capital required to revive the company.

Haridwar-based Patanjali group had emerged as the front runner with a bid of over Rs 4,000 crore to acquire Ruchi Soya.

The CoC of the company is meeting tomorrow and may finalise the bids.

When contacted, Patanjali spokesperson S K Tijarawala said, "Tomorrow CoC is meeting and we are waiting for the outcome."

Patanjali and Adani apart, Wilmar, Emami Agrotech and Godrej Agrovet have also put in bids to acquire Ruchi Soya.

Patanjali Ayurveda and Indore-based Ruchi Soya has previous partnership for edible oil refining and packaging.

Ruchi Soya Which has many manufacturing plants and leading brands include Nutrela, Mahakosh, Sunrich, Ruchi Star and Ruchi Gold in its credit is facing the insolvency proceedings for a total debt of about Rs 12,000 crore.

Earlier, Patanjali Spokesperson had said that the company has bid for Ruchi Soya as it aims to be a major player in edible oil segment, particularly soybean oil. It also wants to work for farmers benefit.

In December 2017, Ruchi Soya Industries Ltd went into the Corporate Insolvency Resolution Process (CIRP) and Shailendra Ajmera was appointed to act as interim resolution Professional (IRP). The appointment was made by the National Company Law Tribunal (NCLT) on the application of the creditors Standard Chartered Bank and DBS Bank Ltd, under the Insolvency and Bankruptcy Code.

In a big boost to its commitment towards sustainability and circular economy, Uflex Limited has developed a customised formulation that renders barrier packaging for edible-oil re-processable. The country’s largest multinational flexible packaging materials and solutions company developed the packaging alternative seeing the huge potential of packaged foods market in the country.

 “Edible oil needs to be carefully protected from oxygen that makes it rancid. Barrier properties in a coextruded film for edible-oil packaging are imparted by Nylon and/or EVOH. However, it is the presence of these two elements that makes the packaging of edible-oil non-reprocessable. We at Uflex have developed a specialized formulation that renders barrier packaging for edible-oil re-processable despite the presence of Nylon and/or EVOH,” said Jeevaraj Pillai Joint President, Packaging and New Product Development at Uflex while talking about this major breakthrough in promoting flexible packaging sustainability.

“Now the edible oil manufacturers need not worry and can easily fulfil their recyclability commitments by using barrier packaging having our formulation. According to data from market research firm Euromonitor International, the edible oil category, which had overtaken dairy to become the largest packaged food segment in our country a few years ago, grew at 25.6 percent to cross the Rs. 1.3 trillion mark in 2017. In fact, edible oil formed over 30 percent of the Rs 4.34 trillion packaged foods market in India. Thus the potential is huge and we are fully braced up to cater to the flexible packaging requirements of all edible-oil players in the country and overseas in a sustainable manner,” he said further.

“We accord prime importance to sustainable flexible packaging solutions and business processes. I am very glad to share that my R&D engineers have been able to develop a specialized formulation that renders barrier packaging for edible oil re-processable. Considering that edible oil category is the largest packaged food segment in our country, one can well imagine the massive global boost India as a Nation will get in terms of sustainability and promotion of circular economy if it is able to reprocess all the barrier packaging for edible oil. This is a great victory for Sustainability. This is a great victory for India.” said Ashok Chaturvedi, Chairman & Managing Director, Uflex Limited while Expressing joy over the development.

India's edible oil industry has welcomed the clearance given by Genetic Engineering Appraisal Committee (GEAC) for commercial cultivation of genetically modified mustard seeds.

In a statement, the Extractors Association (SEA) of India said, "India is producing about 7 million tonnes of mustard seeds. SEA, at its first national conclave on rapeseed and mustard held on March 25 this year in Jaipur, had adopted a resolution to actively work for achieving a target of 15 million tonnes of mustard seed production by 2025, with a sub target of 10 million tonnes by 2020, thereby doubling the income of the farmers to accomplish the vision of Prime Minister of India."

The association said it had strongly suggested cultivation of GM mustard crop which can raise productivity by 20 to 30%.

The Supreme Court has earlier issued a stay on the release of GM Mustard seed.

SEA said, "In light of GEAC clearance for cultivation, India is one step away from commercial production of its first GM food crop and, hopefully, with all scientific evidence before it, the Supreme Court will lift the stay and pave way for commercial cultivation."

SEA said the decision will go a long way in increasing production and productivity of mustard seeds in India.

SEA added, "We also congratulate Prof. Deepak Pental, Delhi University for developing indigenous GM mustard seed suitable for India’s climatic condition."

Food regulator FSSAI has given its approval to sell edible oils in loose through vending machines in West Bengal and the pilot project will start from Kolkata.

FSSAI has given permission to a company to sell edible oils in loose via vending machines.

The approval for the pilot launch has been given amid concerns over growing adulteration of edible oils sold in loose, especially in rural areas.

Ashish Bahuguna, Chairman, FSSAI, said, "We have given permission to a company to launch edible oils vending machines on a pilot basis in West Bengal."

Just like milk vending machines, edible oils vending machines can be of great benefit to the poor, who can buy quality oil and whatever quantity they want, he said.

The project has been sanctioned last week. The machines may be installed in Kolkata to start with and later in other big cities, Bahuguna said without disclosing the name of the company.

Meanwhile, the FSSAI has asked edible oil manufacturers to sell cooking oils in smaller packs.

Emami Group, the Rs. 12,000 cr diversified business house in India with a market cap of around Rs.50,000 cr, takes its edible oil brand "Emami Healthy & Tasty" on a national platform by expanding its footprints in the northern and western parts of the country. 

Emami Healthy & Tasty is one of the leading edible oil brands with a leadership presence in West Bengal.

Having consolidated its position in the existing market of West Bengal, Emami Healthy & Tasty, manufactured and marketed by Emami Agrotech Ltd, the edible oil arm of Emami Group is entering Maharashtra, Delhi & NCR regions, Uttar Pradesh, Haryana, Punjab, Bihar and Odisha with its range of mustard, soybean, sunflower and rice bran oil.

Aditya V Agarwal, Director, Emami Group said, "We are very excited to introduce our edible oil brand – Emami Healthy & Tasty in the national market. H&T, since its launch in West Bengal, has become one of the fastest growing edible oil brands with a CAGR of around 50% for the last 3 years. 

The brand enjoys 16% market share in West Bengal currently and its Rice Bran oil variant enjoys category leadership with a 57% market share in the State. The national launch is expected to triple the brand’s volume growth in a year’s time."

Agarwal further added, "We have lined up aggressive marketing plans involving both ATL and BTL activities, with a total A&M investment of around Rs.150-200 cr in the brand for it to become Rs.5000 cr brand in the next 3-5 years.

I also take this opportunity to announce Amitabh Bachchan’s association with our brand ‘Emami Healthy & Tasty’ nationally, for a universal consumer connect."

Manish Goenka, Director, Emami Group said, "We are very aggressive with the national launch of Healthy & Tasty and have set an ambitious growth target. 

We are confident of winning the consumer trust with both our quality products and innovative consumer led marketing communication. In the 2nd phase of rollout, regions like Madhya Pradesh, Rajasthan, Jharkhand would be covered."

Goenka further added, "Emami at present has two edible oil refining units in Haldia (West Bengal) and Krishnapatnam (Andhra Pradesh) and packaging units in Jaipur with more than 5000 tonnes per day / 16 lac tonnes per annum refining and packaging capacity. We plan to add new refining units in Jaipur and in West Coast of India to cater to the rising demand of western part of India."

Sudhakar Desai, CEO, Emami Agrotech Ltd, said, "We have put together a strong distribution network for establishing the national journey of Emami Health & Tasty with direct coverage in 4-5 lac outlets and product reach in almost 30 lac outlets in India.

Oils surpassed dairy as India's largest packaged food item, underpinned by increasing awareness among consumers who now prioritise health and hygiene over expenses on the staple cooking medium.

Sales of cooking oils increased 22 per cent at Rs. 1.05 lakh crore, outpacing dairy that was below Rs.1 lakh crore during 2016, according to Euromonitor International. Domestic companies harnessed their last-mile distribution network beyond metropolitan centers to dominate sales: The top five companies in the overall packaged foods industry worth Rs. 3.5 lakh crore were homegrown.

Angshu Mallick, chief operating officer at Adani Wilmar that sells the Fortune brand of cooking oils, said rural India was at the vanguard of sales growth. "People are becoming conscious of what they eat. The per capita consumption of edible oil too has increased from 8 kg per person annually to 16 kg in the past one decade," he added.

Sales are increasing by more than 25 per cent in rural India, where increasing farm gate prices of cereals and vegetables are helping broaden the consumer base. The introduction of smaller and more affordable pack sizes is also bringing more packaged food categories within the reach of price-sensitive consumers in semi-urban and rural India. By contrast, companies are stressing health and wellness through innovative marketing in urban India, helping shift value to the premium end of the spectrum.

Ruchi Soya, the third largest company within the foods segment, launched the "Kill lethargy with Sunrich Sunflower Oil" campaign as part of the strategy to focus on health and well-being. Similarly, Adani Wilmar sought to attack diabetes, a condition that affects millions of Indians, with the Fortune VIVO diabetes care oil.

Siraj Chaudhry, chairman, Cargill India said the efforts of the industry and the government to increase consumer awareness on food adulteration and safety have helped spur sales.

"Consumers believe it is convenient to buy packaged oil. The cost difference between the two is also not much," said Chaudhry, who believes that sales growth would get more companies to fortify oil with vitamins.

Experts, however, attribute higher sales in part to a wider category: Dairy is consumed largely by end-users, but cooking oils have consumers within the processed food industry.

"The growth in edible oils is driven more by out of home consumption by fast growing snacking companies and quick service restaurants. Also, oil comes with a higher price tag compared to dairy products on a similar pack size," said Devendra Chawla, group president at Future Group, adding that dairy will be the next big bet within foods as the economy matures.

Changing lifestyles are leading to strong growth in areas such as savoury snacks, and manufacturers remain sensitive to the peculiarities of the Indian palate.

By contrast, dairy has not innovated much and the industry is largely controlled by state-led co-operative producers that are beset with challenges of prompt logistics and preserving products that have short shelf lives. Amul and Mother Dairy, the state co-operatives that lead the dairy business, remained the two largest food companies and accounts for about 10 percent of the entire packaged food market.

Dairy was the slowest-expanding category with 4 percent volume growth last calendar year due to its relative maturity in the food sector. India is the ninth-largest market for dairy products and the largest for milk, globally. "Dairy is still driven largely by loose or unbranded products even at urban centres. Hence, as a product category, it is way bigger than edible oil that is hardly being sold loose now," said RS Sodhi, managing director at Gujarat Co-operative Milk Marketing Federation that sells Amul.

Leading edible oil firm Cargill Foods India has introduced anti-counterfeit technology in its cooking oil brand Gemini at a cost of about Rs 2 crore to fight against fake products, besides protecting brand image and revenues.

Cargill Foods India, part of the US food major Cargill, will launch this technology in other brands from next month, such as Nature Fresh, Sweekar, Rath, Sunflower and Leonardo, as the company said that it witnesses 10-20 per cent business loss in smaller cities and rural markets due to fake products.

The company will soon bring new range of 'Leonardo' olive oil, its Chief Marketing officer (CMO) Neelima Burra said.

"We have introduced new-age anti-counterfeiting technology in Gemini, which is our popular brand in South and West India. From next month, this will be in our all other brands," she said.

Burra said this anti-counterfeiting technology has a unique feature with a two-way process to check the authenticity. The estimated cost would be about Rs 2 crore.

"This process includes a 3D Hologram of Cargill Foods India which signifies the authenticity of the product. On looking at this hologram using the phone's torch light, one can see '1865' written the year of foundation of Cargill Foods India's operations," she said, adding that there are multiple layers of security in this hologram.

Besides, the customer can download an app called 'Mojo Tags' to scan batch code of the product and receive the reassurance of the genuineness of the product.

"We can now identify where the counterfeit has been detected and take immediate action," Burra said.

According to a study by KPMG-FICCI, about 80 per cent of the consumers are victims of deceptive counterfeiting, i.e. they buy fake goods in the belief of buying genuine ones, the company said.

"Counterfeiting in India is rising at an alarming rate, especially in the FMCG sector. A report by FICCI-KPMG suggests that out of the total counterfeit market, 65 per cent is from this sector. Edible oil industry is one of the most unorganised sectors in terms of distribution in India, hence, it holds a larger risk of duplicity," Burra said.

While consumers end up paying excessively for low quality products that could possibly have health and safety risks, producers risk damage to brand image, she said.

Burra said the company would launch awareness campaign for consumers as well as its wholesalers and retailers, while continuing to take necessary legal action against counterfeiting and getting the cases registered.