M&M enters edible oil segment

Utility and farm equipment major Mahindra and Mahindra ( M&M) entered the branded food business category with the launch of its edible oil product through its agri-business division. The company launched the mustard oil product for the easternmarket and will expand it nationally.

"Mustardoil is a big category in this part with an approximate size of Rs 7000 crore,we want to be in the top three in pecking order in three years time," said Ashok Sharma, CEO, agri and allied business, M&M. With a superior qualityproduct , the company intends to be a player in the premium category.

This is the first product under the NuPro brand which the company will extend to otherbusiness "Under this brand, we look to sell soya oil, rice bran oil and pulses like arhar, chana, urad and masoor but first we want to consolidate the mustard oil business," Sharma said.

At present, the company will do the production through contract manufacturing in Jaipur but intends to manufacturein future. According to analysts, the edible oil market,whose market size is estimated to be in the region of Rs one lakh crore,is fragmented with small players dotting the landscape.

The unbranded segment constitutes 60 per cent of the market. For the branded oil market, thecompany has to compete with the likes of Ruchi Soya, Marico, Emami and Adani Wilmar. "Local brands have a benefitin this regard as their cost of operation is lower than the bigger players," ananalyst noted. Sharma though says that the company's strong network in the farm sector through will help it cut down logistics cost andsource better quality of materials.

"The margin will be lower in the first two to three years as there will be heavy expenditure behind brand building, subsequently the company wants to maintain a margin of around 10 percent of the total turnover," he said.

The company entered the agribusiness division in 2010. At present, M&M has a joint venture with Belgium-based Univeg to develop supply chain and sell fresh fruits in the domestic andinternational markets under the 'Saboro' brand. Besides, it has inked a JVwith Dutch firm HZPC to produce high quality seed potatoes for both domesticand export markets.

It will also start trade with Kenya this year by importing pulses and exporting rice. Sharma says with the new areas thatthe company is venturing to he expects the agri-business division to clock aturnover of Rs 1000 crore by 2016.