Tuesday, August 27, 2013

Rice exporters to hit domestic market with snacks

India may be the largest exporter of rice, but of late, rice exporters are eyeing the domestic market with a slew of ‘healthy’ value-added rice-based snacks.
Appetite for growth
Non-tariff related barriers and volatility in exchange rates are driving export-oriented players such as LT overseas, Radikal Overseas and Best Foods to go beyond the pure play rice commodity segment.
Today, most of them are looking at the ‘healthy snacking’ ready-to-eat category to derive better gross margins in the domestic business.
“Though certain countries have objected to the chemicals and pesticides used by rice exporters, the food category is not witnessing a slowdown. The Food Security Bill will also benefit food companies like ours. We intend going beyond rice to becoming a foods company under the Radikal umbrella. We are now getting in to rice-based snacks on the health platform,” said Sidhant Chaudhary, Managing Director, Radikal Overseas.

The three-year-old company is exploring new categories such as rice-based cup noodles in the ready-to-eat segment and is also considering an initial public offering (IPO) in the future to fund its entry in this segment.
Considering that rice is still treated as a commodity, getting margins has been difficult for branded players. They are now looking at more value-added products. Being a low margin product, it has also not been easy for these branded players to compete with smaller rice mills.
Even LT Overseas, with its Dawat brand, plans to enter the healthy snacks category with its MyMy brand under a separate subsidiary. “We have yet to launch MyMy in the market. Initially, there will be adequate investments behind the brand. The rupee volatility is too high and we want to play it safe and have hedged our risks with forward trading. Gross margins have always been better in the ready-to-eat segment compared with staples and we want to leverage our presence in the branded food category in the domestic market,” said Anil Khandelwal, Director, LT Foods. Currently, LT Overseas’ sales turnover is equally divided between the overseas and domestic market.
Best Foods, one of the largest rice exporters, had 70 per cent of its turnover skewed towards the export market, but has decided to enter the domestic market piggybacking on its network of stores in the kiosk format. “Consumption patterns are changing with regard to rice and having built our Best brand for the past three years, we have now launched it in the domestic market. We have 39 stores in Delhi and the NCR region,” said Aayushman Gupta, CEO, Best Foods.
The Best branded kiosks showcase its ready-to-eat range such as dal makhani and kebabs along with rice variants.


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