Jayen Mehta, MD, Amul India, says “today, more than 38% of the sales come from towns with a population of less than 20,000. This shows the brand is not just an urban brand, but the range of products is helping us go deeper into the country. We want to reach every single village of the country. So, high double-digit growth is not just a starting point. As the summer base last year was not very good, almost a 45-50% growth in all these product categories will be perhaps a normal growth for this season.”
Cocoa prices have doubled. They are sitting at record high levels. What do you think will be the impact when it comes to the chocolate products of yours, the entire portfolio? Are you passing on the hike in raw material prices completely to the consumers?
Jayen Mehta: Yes, the chocolate price and cocoa bean price increase is actually a big dampener in the beginning of the season not only for the chocolates but the entire range of cocoa-based products – be it beverages or ice creams.
Having said that, it is the pure chocolate players who get affected the most. Amul is the largest dark chocolate brand in the country and we have a range of dark chocolates ranging from 55% dark to almost 99% dark. Within that, the biggest composition is cocoa and cocoa powder, cocoa butter and so on. The price of cocoa butter has shot up more than Rs 3,000 a kg.
So, if palmolein is Rs 60-70 a kg, ghee is Rs 600-700 a kg and this is five times that and these are record prices and obviously since they form the core ingredient of the chocolate that we sell, we will be forced to pass on part of that increase to our consumers. Having said that, Amul is still a value for money brand, so it would pinch the consumers much.
Global cocoa shortage to drive up cost of chocolate bars
You may watch full video at the below link
https://www.youtube.com/watch?v=xNOVZrqtnrE
CAMPCO has more than 1,40,000 members and of which 35,000-40,000 are cocoa bean producers. So, the benefits of international price increase at least in India are being passed on to our producers, thanks to the cooperative model.
You would not have as much sensitivity as it is because if you could just spell it out, how much is the chocolate/cocoa exposure in your revenue pie in any case.
Jayen Mehta: There are two ways to look at it. As a brand, of course, it is there. As you are aware, we expanded our capacity five times in 2018. We are now doubling up that capacity. And in this season, if you look at it, whatever chocolates we sell in the retail market, half of it also goes in the form of ingredient for our other consumer products, like ice cream and beverages. So, it is an important part of our portfolio.
More importantly, what I am trying to emphasise is that anybody who wants to indulge in pure chocolate will feel the pinch. There are brands, there are products which substitute the cocoa butter with cheaper palm olein, so they may not feel the pinch as much. But yes, this is an abnormal increase. It has never happened so far in the history of cocoa beans in India or internationally.
Sure, you are the largest in terms of brands in dark chocolate, but how big is chocolate as an overall portfolio and also the focus area going forward?
Jayen Mehta: As I mentioned, two ways. The focus is there because we are doubling the capacity. We are having a wider range of cocoa-based products also, be it in beverages and ice creams. And of course, we launched a new range of milk chocolates under the brand name Velvet and the dark chocolate portfolio continues to expand. So, it is a focus area.
If you look at the size of the organisation and the Amul brand which is Rs 72,000 crore last year, maybe Rs 80,000 crore this year, it will not be very large, it will be hardly 3% to 4%. But as an ingredient, it becomes a very core part of our business. Obviously, it is the strongest flavour which the consumers love. It is important for us to keep an eye on what is happening in the cocoa market.