Siraj A. Chaudhry | Cargill India eyes bigger bite of food business6 min read . Updated: 16 Apr 2012, 05:44 PM IST
Siraj A. Chaudhry | Cargill India eyes bigger bite of food business
Siraj A. Chaudhry | Cargill India eyes bigger bite of food business
New Delhi:Cargill India Pvt. Ltd, a unit of multinational food producer and marketer Cargill Inc., that started in India with seven people 25 years ago now boasts of a workforce of nearly 2,000 with manufacturing, trading and retailing operations spanning major agricultural commodities such as cereals, edible oils, cotton and sugar.
Siraj A. Chaudhry, chairman of Cargill India, said in an interview that the company has identified food ingredients and staples as its focus, and that it may launch more products in the years ahead armed with its learning on the complex and fragmented Indian markets.
Chaudhry, who started his career with the state-run trading firm State Trading Corp., joined Cargill in 1995 and held several leadership positions in India after serving five years at Cargill in Geneva in the company founded in 1865. Edited excerpts:
Internationally Cargill is known as a food company, but in India you are primarily known as a trading outfit. Why is it so? And is this likely to change in the future?
In India, we are actually a food company. We originally have been supplying or buying commodities from India or into India. This was in the 1970s when India had a deficit in sugar and other commodities.
Siraj A Chaudhry talks about Cargill’s key focus area in India, their expansion strategy in the country and what he thinks of the ongoing debate over the Food Security Bill.
Over the years, we have evolved. We have gone into manufacturing and we have a reasonably sized asset based here. Today we have three world-class edible oil refineries. We have plants for manufacturing animal feeds, animal pre-mixes and we have a sugar refinery in a joint venture. We have some of the leading edible oil brands. We have distribution and marketing for animal feeds and pre-mixes. And we are into trading, of course, in commodities such as sugar, cotton and some other grains.
We manage supply chains. We manage the twice-a-year harvest but (also) a round-the-year need from consumers by coming in the middle between the farmer and the producer of food to link commodities to the end users.
Give us a sense of your size. How much of revenue do you get in a year and if you could compare with 25 years ago, how much have you grown by?
In edible oils, we have 15% of the branded retail market in a business where the organized brands form 25% of all of the oils consumed. This means we sell about 600,000 tonnes of edible oils, most of which is imported.
What is on your agenda for the next few years?
We are in the food and agriculture space, which is relevant today and is expected to stay so. We have the global wherewithal, access to best practices and experiences, technology and we have, over the years, built these linkages in the Indian market.
We do have the potential to bring in a lot of products, to create products, to help our customers create products which are going to be the need of the consumer. And this could be across the food basket.
What kind of business expansion are you looking at?
For example, we buy corn from farmers and export it. Going forward, we could get into wet milling, where we could be producing starch and glucose from corn.
That evolution we’ve seen and experienced in other parts of the world, and it will happen in India over the next few years. I have the broader plan in place.
What are the challenges you might face?
The challenge in India is not that we will not have demand for these products. It is just that the timing and the pace of change needs to be understood and business evolution needs to be brought in sync with it. Because it can be painful if you invest ahead of the curve, just as it can be if you are left behind of the curve.
It is not easy building food brands in India for the simple reason that we are a very fragmented market. There are tastes and preferences which vary across geographies. The retail networks are so fragmented that accessing it and creating the supply chain for it is extremely expensive and complex. And, obviously, these are businesses that have a very low margin; so the cost of building a brand can be phenomenal for a category like flour. The food sector typically takes about 8-10 years of work in the market to get established. We have already gone through that phase. Going forward, a lot of it would be leveraging on what we have already created.
What will be the mode of your expansion?
It will be a combination of various strategies. Looking at the past, it has been a combination of investing in assets; it’s been about acquisitions and also acquiring brands. Our experience so far tells us that it has to be a mix of these various things.
What kind of reforms would you like to see in the commodities markets?
Regulation is linked to maturity of the markets. These regulations are about protecting the farmer or consumer. To unshackle this, there has to be a lot of trust-building. This is something that needs to come into the regulatory system but I think the trade also has a responsibility, that of building trust with the government and with the consumer.
We have APMC Act (Agricultural Produce Marketing (Regulation) Act), which restricts access to farmers. We have stock limits which restrict movement of goods. GST (goods and services tax) is something very important to reduce the cost of doing business. The correct implementation of the new national food safety Bill is also very important. We have less disagreement with what the government wants to do. I think where we struggle is how the government is doing it. The concern I have for the food Bill is it could fail for poor execution.
Agencies have forecast a poor outlook for food in terms of supply and prices in the world. Fears are that there might not be enough food for everyone.
As a company, we don’t subscribe to that view. The world has enough food and enough calories to feed itself today and in the future. It is the distribution of those calories that is important and that’s where the government and society has a huge role to play.
It’s the supply, distribution, free trade, trust between countries and organizations that is important. The reality is only 15% of the world’s calories cross borders. So 85% of the food gets consumed where it gets produced. So it is about managing our resources better.
Do you think private firms could play a role in helping the food security Bill?
The first thing is that the Bill is a good thought. It is a need that has been expressed in a broad manner. The challenge is not with what is in it, but how it will get executed. So, I think, there should be a role for the private sector in the space of distribution, processing, managing supply chain and that’s where the government and the private sector need to come together.