Patanjali Foods Sees Green Shoots Of Rural Recovery

Patanjali Food Ltd. is seeing "green shoots" of rural revival and a sudden surge in overall consumption after months of inflation-led slowdown.

“Demand was down 3-4% for many quarters, and sentiment was low… but since October, we are seeing a sudden surge in demand on account of Diwali and then the ongoing wedding season,” Patanjali Foods' Chief Executive Officer Sanjeev Asthana told BQ Prime.

He said the rural economy is expected to pick up further on the back of a good harvest season, which typically puts more money in the hands of households. “So, the third and fourth quarters look very good." 

"The inflation pressure on margins is bottoming out," said Asthana. He expects higher demand and softening commodity prices to aid the company's margins in the quarters to come.

For edible oil, Asthana said, prices have come down from peak levels, and the company has passed on the benefit of lower prices to consumers. “If global prices come down further, there could be further softening of prices in domestic retail markets.”

To keep retail prices under control, the central government recently extended concessional import duties on specified edible oils till March 2023. The import duty on crude varieties of palm oil, soyabean oil, and sunflower oil is now zero. However, after taking into account 5% agri cess and 10% social welfare cess, the effective duty on the crude varieties of these three edible oils is 5.5%.

Similarly, the effective duty rate for refined varieties of palmolein and refined palm oil is 13.75%, and for refined soyabean and sunflower oil, it is 19.25%.

In a recent statement, the Ministry of Consumer Affairs, Food, and Public Distribution also highlighted that the global prices of different edible oils have fallen by $200–300 per tonne in the last two months.

“This decline has started to reflect in the retail markets. The retail prices of edible oils are expected to come down further," according to the statement.

Patanjali Foods is also looking at launching margin-accretive premium offerings. “For instance, in the biscuit segment, which continuously faces price pressure, we are undergoing branding exercises as we look to launch more premium packs with added value,” he said. “Biscuits is a fairly big category for us, and this year we are likely to do about Rs 1,400 crore business in this segment.”

Similarly, the company is looking to launch premium offerings in the edible oil business as well. However, he expects small packs “to be the heart of the business."

In the next five years, Patanjali Foods expects to have a 50/50 share mix for its oil and non-oil portfolios. Currently, the majority of its business comes from oil, with a share of 80:20, said Asthana.

(Corrects an earlier version that misstated Sanjeev Asthana's first name in the strap)