Your Company is in the business of manufacturing and selling coffee
products for more than 25 years. Out of all coffee products, Instant coffee is your
Companies main stay and accounts for more than 90% of the sales. By virtue of its product
development capabilities and pricing efficiencies, your Company today is one of the
leading instant coffee manufacturers in the world.
For most of the renowned brands across the world, your Company remains
the preferred supplier of instant coffee. Constant innovation has made sure that new
clients are added year on year.
Business Review
Inspite of increasing recessionary trends and unstable global geo
political scenarios, your Company continued to grow at a healthy pace. This growth has
been driven by all product types in our portfolio and has been spread across all
geographies. During the year under review, your Company has secured the business of a few
prestigious new customers. The inclusion of their brands in its portfolio has given
further confidence to the innovation and R&D efforts. Capacity expansion at Ngon
Coffee Company Limited, Vietnam has been completed and the additional capacity has been
operating at 50% utilization, driving the growth further.
The branded business in domestic market has been growing consistently
and is firmly entrenched as one of the top 3 coffee brands in India. The brand has
generated strong awareness among consumers, backed by an above-the-line marketing
campaigns and below-the-line sampling activities. New products and variants were launched
to cater to different market segments, including the launch of ‘Continental
Greenbird products in the plant-based meat product category.
With an objective of gaining more penetration and access in European
coffee markets with the help of locally popular brands, your Company has acquired Percol,
Rocket Fuel, Plantation Wharf, The London Blend, Perk Up and Percol Fusion from Food
Brands Group, a subsidiary of Lofbergs Group, UK. The agreement helps accelerate your
Companys strategy in expanding the manufacturing and distribution of FMCG products
globally.
The turnover of your Company on standalone basis is 133525 Lakhs and
the net profit of the Company is 16,794 Lakhs (including Rs 3723.69 Lakhs dividend
received from Ngon Coffee Company Limited, wholly owned subsidiary of the Company).
Earnings per share (EPS) (Face value of Rs 2/- per share) for the current year is 12.62
for the year 2022-23.
The turnover of your Company on consolidated basis is Rs 207122 Lakhs
and the net profit of the Company is Rs 26888 Lakhs. Earnings per share (EPS) (Face value
of Rs 2/- per share) for the current year is Rs 20.21 for the year 2022-23.
Industry Structure and Development
International Instant Coffee market has been growing at low single
digit. Emergence of niche categories and developing economies are driving growths.
The domestic coffee market in India is growing at a guestimate rate of
approximately 10% year on year. With the evolving coffee culture, consumers are evaluating
a lot of gourmet coffee and are open for more coffee experiences while trying different
formats of coffee. Quick delivery model from key ecommerce players have helped in
penetration of coffee as consumer can order coffee whenever and whatever they want to
consume at the comfort of home.
Outlook
Coffee continues to thrive as one of the most consumed beverages
globally. World coffee consumption is estimated to grow by 4.2% to 178.5 million bags in
the coffee year 2022-23.
One notable trend in the coffee market is the growing demand for
specialty coffee. Consumers are seeking unique and high-quality coffee experiences,
exploring different flavour profiles, and appreciating the artistry and craftsmanship
involved in coffee production.
Also, coffee brewing methods continue to evolve, offering consumers
diverse and personalized coffee experiences. Alternative brewing methods like cold brew,
capsule coffee, and AeroPress have gained popularity. These methods allow coffee lovers to
experiment with different brewing techniques, extraction times, and flavour profiles,
enhancing their overall coffee enjoyment.
Another significant trend in the coffee market is the increasing
emphasis on sustainability and ethical sourcing. Consumers are becoming more conscious of
the environmental and social impact of coffee production. They seek out brands that
prioritize fair trade practices, promote sustainable farming methods, and support the
livelihoods of coffee farmers. This trend has led to the rise of certifications like
Rainforest Alliance and Fairtrade, which assure consumers that the coffee they purchase
meets certain social and environmental standards.
The coffee market is expected to continue its upward trend, driven by
factors such as expanding coffee consumption in emerging markets, premiumization, and the
rising demand of organic and fairly traded products.
Opportunities
Entry into new markets will be the key focus area for your company.
Small packs will be actively targeted. Distribution expansion and market penetration will
drive the growth in domestic markets.
With opening of offices, Institutions and restaurant, HORECA segment
has started to grow and thus providing an opportunity in placement of Coffee machines and
consumables accordingly.
Risk, Concerns and Threats
Global recessionary trends and geo-political disturbances continue to
persist as the most concerning risk factors.
The additional capacity being created as part of our competitors
expansion plans are expected to be completed in the upcoming year and pose a threat to
future growth prospects.
As Continental Brands has been gradually grabbing market share, the
competitors in coffee categories have been very aggressive from both Media, consumer offer
as well as trade front. Apart from the big players, D2C players backed with investors
(private equity funds) have been pumping huge amount of money on the digital platform to
grab consumers attention.
Segment-wise or Product-wise performance
The standalone operations of the Company relates to only one segment
viz., Coffee and Coffee related products. Hence, segment-wise or product-wise performance
is not required to be disclosed.
Internal Control Systems and their Adequacy
Your Company has appropriate internal control systems for business
processes, efficiency in its operations, and compliance with all the applicable laws and
regulations. Regular internal checks and audits ensure that the responsibilities are being
effectively executed. In-depth review of internal controls, accounting procedures and
policies of Company is conducted. Your Company has adopted adequate internal control and
audit system commensurate with its size and nature of business.
Internal audit is carried on a quarterly basis. Internal auditors work
with all levels of management and the report is placed before the audit committee. The
audit committee after reviewing the findings and suggestions directs the respective
departments to implement the same.
Industrial Relations and Human Resources
Management
Employees are the valuable assets and the strength of an organisation
in its growth, prosperity and development. Your Company has a team of qualified and
dedicated personnel who have contributed to the growth and progress of the Company.
Necessary training is being imparted to the employees and various seminars and workshops
are being conducted to continuously hone their skills.
Your Company is continuously striving to create appropriate
environment, opportunities and systems to facilitate identification, development, and
utilization of their full potential and inculcating a sense of belongingness. There are
848 employees in the Company as on March 31,2023.
Your Companys industrial relations continued to be harmonious during
the year under review.
Financial performance with respect to operational
performance
During the year, the Company has achieved a turnover of Rs 1,33,525
Lakhs recording a net profit of Rs 16,794 Lakhs. Profit includes Rs 3,723.69 Lakhs
dividend received from Ngon Coffee Company Limited, wholly owned subsidiary of the
Company.
Details of significant changes (i.e., change of
25% or more as compared to the immediately previous financial year) in key financial
ratios, along with detailed explanation
During the year on a standalone basis, the significant changes in the
financial ratios of the Company, which are more than 25% as compared to the previous year
are summarised below:
Financial Ratios |
Consolidated |
Change(%) |
Reason for change |
|
2022-23 |
2021-22 |
|
|
Inventory Turnover |
1.76 |
1.32 |
33 |
Due to increase in turnover and
faster dispatches. |
Net Capital Turnover |
7.94 |
5.02 |
58 |
Decrease in inventory and
trade receivables, let to increase in net capital turnover ratio. |
Return on Investment |
23.70 |
16.77 |
41 |
Due to increase in dividend
income from Rs 26.34 cr to Rs 37.24 cr. |
Financial Ratios |
Consolidated |
Change(%) |
Reason for change |
|
2022-23 |
2021-22 |
|
|
Trade Payable Turnover |
23.67 |
32.53 |
(27) |
Due to increase in credit
period offered by suppliers. |
Details of any change in Return on Net Worth as compared to the
immediately previous financial year along with a detailed explanation there of: There is
no significant change during the current financial year 2022-23, compared to previous
financial year 2021-22.
Disclosure of Accounting Treatment:
The Company has prepared financial statements which comply with IndAS
applicable for periods ending on March 31, 2023, together with the comparative period data
as at and for the year ended March 31, 2022, as described in the summary of significant
accounting policies. Primarily, a treatment different from
that prescribed in an Accounting Standard has not been followed in the
preparation of financial statements. However, as regards amendments to certain accounting
standards, the applicability / effect on the financial statement has been evaluated and
been treated accordingly as explained in Notes to the standalone Financial Statements.
Further, the financial statements represent a true and fair view of the
underlying business transactions. Certifications
Your Company has the following certifications:
1. BRC- Version 8 with A Grade (British Retail Consortium) - Global
Standard for Food
2. IFS - Food Version 7 with Higher Level (International Featured
Standards) - International Food Standard.
3. Organic Coffee Certificate (Processing & Trading)
4. Fair Trade Certificate
5. Halal Certificate
6. Kosher Certificate
7. FSSAI License - Food Safety Standards Authority of India
8. BIS License - Bureau of Indian Standards (ISI) License
9. UTZ Certificate ( Chain Of Custody Standard - Coffee)
10. US.FDA Certificate of Registration
11. RFA Endorsement certificate Social Accountability compliance
1. SGP (Supplier Guiding Principles and Human Rights Policy Assessment)
2. ICS (Initiative for Compliance and Sustainability)
3. SA 8000 (Social Accountability audit)
Awards
During the year under review, your Companys brand ‘Continental
Coffee was bestowed with Brand of the Year 2022 award by Marksmen Group in association
with India Today. Your Company was also conferred with third rank (Joint winner) in Best
Industry category of the 4th National Water Awards, 2022 by the Ministry of Jal Shakti,
Department of Water Resources, River Development and Ganga Rejuvenation.
Cautionary Statement
Statements in this management discussion analysis describing the
Companys objectives, projections, estimates, expectations may be forward looking within
the meaning of applicable securities-laws and regulations. Actual results may differ
materially from those expressed in the statement. Important factors that could make
difference to Companys operations include economic conditions affecting the domestic
market and the overseas markets in which the Company operates, changes in the Government
regulations, tax laws and other statutes and other incidental factors.
For and on behalf of the Board
Sd/- |
Sd/- |
Challa Srishant |
B. Mohan Krishna |
Managing Director |
Executive Director |
DIN:00016035 |
DIN:03053172 |
Place: Dak Lak Province,
Vietnam |
|
Date : July 14, 2023 |
|
+91-9892691696
