CCL Products (India) Ltd Management Discussions

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