KS OILS LIMITED
ANNUAL REPORT 2009-2010
The year 2009-10 has been a memorable year for KS Oils. Our Company entered
the 25th year of its operations. The silver jubilee year has been an
occasion for celebrating with our consumers, our brands and our people!
Like any individual who has just turned 25, we feel young, energetic and
motivated to reach new heights. It is that period of life when strength,
intelligence and performance are at their youthful best. At 25 years, KS
Oils proudly possesses some commendable achievements. Today, we are an
Indian MNC that is well poised to tap the young Indian consumer's demand
with a premium brand like Kalash and a mass brand like Double Sher.
'Kalash', our premium brand is already the leader in the branded mustard
oil segment. During the year, Kalash Refined Soyabean Oil became one of the
top five brands in the soyabean oil segment in selected states within nine
months of its launch. This has only gone to prove that we have got our
branding story right and we have so far been on the right track. We intend
to invest significantly in our brand portfolio and ensure greater consumer
loyalty, increased profitability and an inclusive and sustainable growth.
The global scenario in 2009-10 was much better than in the previous year.
To begin with, we have witnessed stability in edible oil prices, which
reduced the country's import bills. Secondly emerging markets, especially
Asian economies like India, China, Indonesia and Malaysia are being built
on strong industrial, manufacturing and service sector growth. For us, the
biggest story is our local population.
Since growth has led to a rise in per capita income and higher standards of
living in these economies, it has given an unprecedented boost to domestic
consumption, leading to higher per capita spending.
I believe the emerging economies will be the theatre for action as the
decade unfolds. In this scenario, to stay competitive, the global companies
will have to significantly invest in creating assets, building brands and
winning consumers in these economies. Similarly, the domestic companies too
will have to compete, or else, build close business relationships with the
MNCs, in order to scale-up. With increased levels of consumer spending,
brands will become key differentiators, as competition will rage not only
in the market - place but also in the minds of consumers. That said, in
edible oil space, the biggest differentiators are the brand and quality -
the two most important attributes of our Company's products.
KS Oils Performance in 2009-10:
Despite the challenges thrown up by the market and the regulators, KS Oils
delivered a record profitable growth during the year. The Company clocked a
turnover of Rs.4,027 crore and a bottom-line of Rs.224 crore. Even in a
tough year, the Company registered a growth of 28% on the top line and 33%
on profits. KS Oils strengthened its brand portfolio, while investing
significantly in the new product launches in the soyabean segment. This
helped the company in increasing sales and improving margins.
Understanding the Indian consumer:
In today's young and vibrant India, two-thirds of India's population is
below the age of 35. In terms of aspirations and expectations, increased
consumerism is bridging the urban and rural divide in this age group.
Farmers have benefited due to increasing urbanization, SEZs and new
townships as the demand for rural land for development purposes increases.
The availability of cheap credit, better minimum support prices (MSP) for
crops and government schemes like NREGS (National Rural Employment
Guarantee Scheme) has increased rural employment and income of farmers.
This has given huge benefits to the farmers and seen a new consumer enter
and drive up consumption in the rural market. But equally, better living
standards have created an increased demand for healthy and high quality
foods, including edible oils. The discerning consumer of today, both in
urban and rural markets is willing to pay a premium for quality, which is
causing a significant shift towards branded oils.
Quality has become paramount in purchase decisions, especially for food
items like edible oils. Thus, our brands, Kalash and Double Sher, built on
the platform of purity and quality, have shown premium growth. With a
better lifestyle, consumption of edible oils across the three segments
(mustard, soybean and refined palm oil) has gradually increased.
Building FMCG Brands in FMCG markets:
With more than a billion consumers, India is one of the most exciting FMCG
markets in the world today. Buying habits, consumption patterns and
spending trends indicate a quality-conscious mindset. Thus, connecting with
the consumer is the key to building FMCG brands. At KS Oils, we realize
that building FMCG brands, especially in the commodity-led edible oil
sector, is a slow and steady game. It will require significant investments
in brand building, advertisement spends and trade channel development.
Having made the right moves, KS Oils has achieved 12% market share of
mustard oil market in India and our brands Kalash and Double Sher are the
leaders in the branded mustard oil market. With our feet firmly on the
ground and our understanding of the consumer, we believe Kalash will be one
of the finest edible oil FMCG brand in India's vast FMCG market.
In the past year, we have significantly invested in creating the last mile
connectivity with urban and rural Indian consumers. Today, we reach out to
over 2,00,000 retail outlets and are growing this network significantly.
Our focus on Tier II and Tier III Indian cities and upscale rural clusters
continues. Our marketing strategy for the urban segment is to ensure value-
added national and local advertising, and brand promotion. Organized retail
is a key strategic partner in growing our brands' sales and we have shelf
space in all of the organized retail chains.
Robust Backend to Build a Premium Brand:
AS you may be aware, in the past three years, we have invested capital,
human resources and time in building a formidable back-end support system
for the retail led brand push. Today, we have five state-of-the-art
production facilities that follow international best practices in
manufacturing high quality products. This is a key differentiator in the
edible oil business. Our procurement strategy in India is bearing fruit, as
we continue to develop long-lasting relationships with Indian farmers
through our Khushali program. Our international palm plantation ownership
program is progressing well. Having an integrated low cost production base
in place and thus our ability to control quality has been key to our market
leadership in India.
Today our business can be distinctly divided into three separate
* Raw material procurement through farmer outreach programs in India and
international ownership of palm plantations.
* Manufacturing plants, refineries and logistics management.
* Brands - Kalash, Double Sher and KS Gold.
In the last three years, we have created three categories which function as
independent SBUs. It has enabled us to evaluate them separately and
identify our strengths and weaknesses. We believe competitive edge, global
operations and scale, flexibility to multi-sourcing, building significant
distribution capabilities and innovative marketing strategies, will be the
key drivers of our growth in the future.
Creating the Leaders for Tomorrow:
During the year, we invested significantly in building up leadership. We
believe, as we grow to a market-driven brand company, we will need diligent
and adaptable talent to take us forward. While we will follow our 'grow
from within' policy for preparing leaders of the future, we will not shy
away from inducting exceptional talent from outside the Company.
In order to build a consumer-centric, innovation-led organization, we have
rolled out a company wide program to ensure that each employee is focused
on the consumer. We have identified over 100 young achievers to create a
second rung of leadership and put them through a fast track career program.
When ready, they will become the driving force of the Company, leading it
into its golden jubilee era.
Building Brands Responsibly:
It is my personal belief and the guiding 'mantra' at KS Oils, that we will
be responsible for our actions. Today, we have created a growth story with
multiples take holders and are answerable to each one of them. Concern for
environment, people and communities in which we live, is a key to
developing our brands responsibly. During the year we undertook various
initiatives around our manufacturing plants in order to protect the
environment and focus on the use of alternate energy, recycled water and
Education has been a passion at KS Oils and our association with school
activities continued during the year. Our Khushali project is ensuring a
better produce and a better living for Indian farmers and we plan to grow
this program in the coming years. While we expand our brand presence in the
market-place with Kalash and Double Sher, we are committed to building KS
Oils as a responsible corporate brand that believes in inclusive growth.
Winning in the Market-place, Winning with Consumers:
Going ahead we will have a clear agenda for the next 24 months to
strengthen our FMCG brand strategy in the edible oil sector:
* Reaffirming Market Leadership: We will reaffirm our market leadership in
key markets like Eastern India. We will strengthen, grow and protect our
market share with our renewed consumer focus.
* Reaching the un-served and under served markets: Our marketing and
distribution network will be further strengthened to create a pan-India
reach. We will win market share in our new markets of Northern and Western
* Renewed focus on innovation driven profitable growth: We will continue to
focus on innovation driven profitable growth. Our brand-led strategy,
coupled with our low-cost integrated backend model, will help us in
lowering costs, realizing better brand premium and delivering healthier
To conclude, let me ask you two questions: Who is our biggest competitor?
And, What is our biggest risk?
While you guess, let me answer it for you. At KS Oils, we are our biggest
competitor and also our biggest risk. Complacency and arrogance that stems
from success will never be allowed to set foot in KS Oil. Today, we have
built the best edible oil brands, the best manufacturing plants and the
best team and will continue to deliver and excel as we go forward. Humility
of action, integrity of purpose and transparency of conduct will be the key
traits driving our Company's growth as we journey forward into the next 25
Ramesh Chand Garg