Instant coffee maker CCL Products to invest $40 million on a green-field plant

Hyderabad-based CCL Products (India) Limited, one of the largest instant coffee product makers present in the export markets, is planning to set up a green-field freeze dried instant coffee manufacturing plant at an investment of $40 million (around Rs 265 crore) in Chittoor district of Andhra Pradesh.

Proposed to be completed in December, 2017, the new plant will bring in an additional capacity of 5,000 tonnes per year, taking the total installed capacity of the company to 40,000 tonnes. The company had completed the brown-field addition of a similar capacity in December last year.

"The new investment is a part of our ongoing pursuit to expand in the high-end product market that gives us good margins as well as help beat the seasonal cycles," Challa Rajendra Prasad, executive chairman of CCL Products told Business Standard on Tuesday.

Started 25 years ago with a plain vanilla coffee product, the company now engaged in manufacturing of soluble instant spray dried coffee powder, spray dried agglomerated/granulate coffee, freeze dried coffee, roast and ground coffee as well as freeze concentrated liquid coffee besides other varieties. Export markets account for 96 per cent of its sales revenues.

The company's main focus is Europe and Japan where high-end products like freeze dried coffee and freeze concentrated liquid coffee have a huge market potential. "We have less than 10 per cent market share in Japan and the potential for growth in that country is very huge as our products already found acceptance by the quality conscious Japanese consumers,"he said. The company had moved one of its plants to Vietnam just to cater to the Japanese market.

The new marketing tie-ups with cold coffee players and ice cream makers in these and other markets helping the company to maintain the sales volumes even during the summer months and this has been helping the bottom-line growth of the company, according to him.

Prasad said they were currently in negotiations with a bank to raise a debt of about $ 25 million for the proposed manufacturing facility and the balance $ 15 million will be arranged from the internal accruals of the debt-free company.

The stock-exchange listed CCL Products has reported a 70 per cent jump in consolidated net profit at Rs 36.66 crore for the quarter ended March, 2016 on a total income of Rs 264.45 crore. For the full year ending March, 2016, the total income stood at Rs 932.12 crore as compared with Rs 880.56 crore in the year ago period. Net profit for the full year was Rs 122.12 crore an increase of 30 per cent over Rs 93.97 crore previous year.

According to Prasad, just about 4 per cent of the company's sales volumes were generated in India, which is completely dominated by Nestle in the instant coffee market followed by other players like Hindustan Unilever and Tatas among others.