Vadilal Industries Ltd Management Discussions

1 INDUSTRY STRUCTURE & DEVELOPMENT AND OUTLOOK.

a) Ice Cream Division Overview

India is the largest producer and marketer of milk. It accounts for over 1/5^th of the global milk production. This provides the ice cream industry with a large volume of raw materials to manufacture ice creams. The ice cream market in India is forecasted to exhibit a CAGR of 17.41% during 2022-2028. Keeping up with the economys quantum growth in recent years, the ice cream market has also set new records. Today, the total organized Indian ice cream market is estimated at approx. Rs. 20,000 crores & more. Though overall organized & unorganized ice market are estimated near about Rs. 32,000 crore with National, Regional & Local players presence. Compared to Western countries, per capita Ice cream consumption in India is low. So, considering the fact that still in India there is a huge scope for ice cream market expansion and penetration with an innovative product mix to attract India with all class & mass of Consumers.

The ever-growing urbanization, rise in disposable income, and increase in the "out of home food" consumption coupled with the steep increase in the availability of multi-cuisine restaurants, online portals, and modern trade, in the residential areas are some of the reasons behind the thriving ice cream industry.

The Ice cream industry has evolved, resulting in many developments, right from consumer perception to products and services being offered. Ice creams have seen a shift in the category, from being considered an indulgent dessert to a snacking essential. This, in turn, has resulted in innovation within the category. Adapting to the changing trends Vadilal has become the brand with the widest range of ice cream variants. Ice cream as a product has seen a huge transformation and this has created ample investment and growth opportunities for investors. Vadilal Ice Cream division has shown sustainable annual growth and aims at maintaining it further in the years to come.

Since its inception, Vadilal has been a trendsetter & is committed to delivering the best quality products at affordable prices to customers from diverse cultures. Improving products in terms of their nutritional value, packaging, as well as quality, is a constant at Vadilal.

Developments

Growth in Quality and Quantity

In the past few years, India has seen an inflow of a huge number of international ice cream brands, which have offered a plethora of products in the category for consumers. To curb the competition and challenges in the market, Vadilal reinvented its strategy to consolidate its leadership. Being brave, like it has always been, Vadilal revamped its look with an aggressive marketing approach and the menu to give the brand the lift it required to combat its international counterparts. With all due efforts and now the with same aggressive marketing approach Vadilal products with brand identity with packaging are established in the market and trade with consumers are identifying the Vadilal products with their unique brand color code and visual uniqueness with clutter-free brand presence in Trade & Consumer top of mind recall. This was welcomed in the market and worked in the brands avor in setting a fresher and younger brand perception in the consumers mind. In a few years, Vadilal has taken a huge leap in the ice cream market as per its brand perception.

Apart from aesthetical revamping, the brand also paid special attention to upgrading the production technology. This has made it easier for Vadilal to offer premium and delectable products to its valuable patrons.

With International brands crowding the market, consumer awareness and the size of the premium ice cream segment have increased in India. Following these developments, Vadilal introduced many variants in the premium segment like Gourmet Natural ice cream tubs, cups, and kul s, with no artificial color, avor, and preservatives, premium bars, cones, ice cream sandwiches, Artisan ice cream cakes, and many more unique products launches with different format, taste & innovation. Taking forward the tradition of introducing novelty in products at regular intervals, in the year 2022-2023 Vadilal has made numerous additions. The brand had three new delicious additions to its offerings, ice creams in the 1+1 party pack form every 6 months. We have recently launched Vadilal Gourmet Natural cups & lots more. Also, at regular intervals, Vadilal is launching new avors in 1+1 party packs & other innovative products based on extensive R&D as well market with consumers feedback. With such initiatives, we have created a unique space in trade & consumer minds.

The brands existing variants like Gourmet, Gourmet Naturals, Badabite, Flingo, Jumbo Cups and Ice trooper continue to show substantial movement in the market. Besides this, Vadilal has also introduced new delicious products like the Vadilal Gourmet Natural Motichoor Laddoo cup, Vadilal Gourmet Natural Falooda cup, Almond Nautanki party pack, Jamun party pack, Gourmet rich cookie crumble tub, Gourmet Madagascar vanilla crunch cup, American nuts ice cream Cake to name a few.

While the grown-up consumer strata had a remarkable range of products to their delight, Vadilals Ice Trooper range continues to consolidate the kids market and has become every kids favorite across India.

Growth in Infrastructure and Production

After enjoying widespread popularity amongst the mass for decades, the brand is now in constant efforts of upgrading. In the wake of ramping up consumer targeting and brand positioning, it has started exclusive parlors - Vadilal Scoop Shops & Now Forever Caf?. These revamped parlors & caf? offer a delicious range of Premium Ice Creams, Scoops and Concoctions in a very enjoyable ambience. These parlors are an exercise to give the brand a youth appeal and also to shift the focus from Mass-to-Mass Premium, Mass Premium to Premium.

The introduction of new mega brands, installation of state-of-the-art machines and significant expansion in production facilities is what the brand is focusing on to be an even stronger force to reckon with in the domestic ice cream market. Vadilals strategic approach towards the controlled usage of resources and raw materials has boosted its growth in the market by many folds.

Vadilal proudly possesses the label of having, Indias fastest cone-making machine, with a production capacity of 13 lakh cones per day. The brand is known to be the first and the only ice cream producer in India to have a machine with such a huge capacity. This has made Vadilal the largest player in the Cones, Cups, and Candy categories.

Currently, the brands ice cream production facilities are located at Pundhra in Gandhinagar district, Gujarat and the other at Bareilly in Uttar Pradesh. To increase the production capacity and to have better automation, an expansion-cum-modernization project of the factories was undertaken, which has been successfully completed.

Quality first

Like every other industry, the ice cream industry has a vast unorganized market that works at low costs and margins. These unorganized players pose the biggest challenge and are a competition to the big players. While there are hurdles in the journey of growth, Vadilal has always seen these unorganized, small yet tough competitors as an opportunity to excel. Being the 2^nd largest ice cream brand in India, Vadilal has always focused on maintaining product quality, and constantly improving the same.

Progress in Niche Market

International brands venturing into the Indian ice cream market have provided an impetus for Vadilal to evolve. Vadilal has once again proven its mettle in launching international ice cream experiences in India.

Vadilals MELT IN parlor offers a range of high-end Artisanal Gelato ice cream that has gained a lot of popularity in the past few years.

Vadilals launched NOWFOREVER caf? was initiated and ideated and to be at par with the new ambience, an intricate menu was crafted to present our ice creams in an extremely innovative, most enticing classy manner and to serve premium and unusual desserts, with a new twist and taste, for all the never-ending dessert cravings. The caf? also offers delectable, mouth-watering and interesting food prepared from the best ingredients, in perfect proportions, for the people who love fusion with taste, to tickle their taste buds.

The brand is making steady progress in launching new products in the premium segment. The latest introduction is the seasonal party packs category with premium quality and a unique mix of avours that is quickly catching hold over the niche market.

As we have had an early summer this year, we have taken the opportunity to showcase our brand on all the various platforms for promotions, social media, other OTT platforms, new avenues on digital platforms, retail activation, and YouTube We have also penetrated heavily into the market of Pan India horizontally & vertically with an increase in our distribution width. The brand has a wide media mix targeted for the release of this campaign ranging from outdoor hoardings, point-of-sale branding, television, digital, radio, and print. The brand will be investing heavily in digital mediums given the inevitable digital era namely social media, other OTT platforms, new era all digital platforms, and YouTube.

Our new and trendy campaign Dil Bole Waah Vadilal! is an extension of past research, highly valuing what our consumers make us and the experience we offer to them. The idea of the campaign is to showcase Vadilal as a young at heart, classic, energetic, royal and vibrant brand. What is the one thing anybody says when they bite into something delicious? Its "Waah!". And when you bite into the irresistible Vadilal ice creams, you are bound to go "Waah Vadilal!". Its not just your words that say Waah, it is your heart.

We translated these exact words of our consumers hearts into a campaign, and thus came Dil Bole Waah Vadilal.

The entire campaign of Dil Bole Waah Waah Waah revolves around the catchy and upbeat song called Dil Bole Waah Waah Waah. Everything from the music and beats to the dance moves have been ideated keeping relatability as our primary motive across all ages. The genre of this song is such that it can easily be moulded into the content of every style. A creator can hip hop to it, rap to it, even fusion dance to it, or simply move to its groovy beats. It is catchy, funky, and absolutely dhinchak! What started off as a Har Dil Bole Waah campaign has now been elevated to Dil Bole Waah Waah Waah to perpetuate the campaign recollection value whilst creating new connections. Once you listen to this song, you will find yourself humming it for days on end. Every Indian will surely have Waah Vadilal by the end of this campaign.

We believe people are ready to experiment as far as premium ice cream avours are concerned, and we feel the Dil Bole Waah! Vadilal campaign will make them want to indulge in Vadilals premium offerings, so we strategized, planned, and executed the new Dil Bole Waah Waah Waah song campaign, which has become a rage Pan India.

Within the research, Consumers relate the Vadilal brand with Heritage and legacy producing unique products, Health, Hygiene & Happy feeling.

b) Processed Food Division Overview:

The frozen food industry is a burgeoning market with a diverse range of products, including frozen fruits and vegetables, ready meals, bakery items, and snacks. This industry provides consumers with an easy and time-e cient meal preparation option, as they require minimal preparation time and can be quickly heated in a microwave or oven. With a longer shelf life than fresh food, frozen food is also a practical choice for consumers who want to stock up on groceries and minimize their trips to the grocery store. The popularity of frozen food in the international market can be attributed to its convenience, availability of seasonal products, cost-e ectiveness, nutritional value, diversity of products, and food safety.

The ice cream industry is also a large and growing market that is beloved worldwide. The preference for healthier, natural, and high-quality ice cream products has led to the emergence of artisanal manufacturers, and increasing disposable income has boosted demand for premium ice cream. Ice cream manufacturers are continually innovating with new avors, textures, and packaging, while retail channels are expanding, including online sales, vending machines, and partnerships. With diverse ice cream options available in a globalized market, seasonal demand sees sales rise during the summer months.

Global market view:

The global frozen food market size was valued at USD 256.2 billion in 2021 and is projected to reach USD 328.4 billion by 2028, with a CAGR of 5% from 2023 to 2028. Sales of frozen pizza, appetizers, and desserts are growing at a faster pace than the overall market, and private label products are gaining market share in the competitive frozen food aisle.

The convenience food and ready meals segment, which contributed significantly to the global market share in 2022, is expected to continue its domination during the forecast period. The segments growth from 2023 to 2030 can be attributed to the changing lifestyles of young people, who increasingly rely on frozen foods.

Europe dominated the frozen food market with a 37% share in 2022, followed closely by North America with a 28% market share. The North America frozen food market was valued at US$ 73.43 billion in 2022 and is expected to reach US$ 101.54 billion by 2028, with an annual growth rate of 5.5% from 2022 to 2028. The markets expansion is attributed to rising consumption of convenience food and the growing popularity of e-commerce.

The global ice cream market size reached US$ 70.6 billion in 2022 and is expected to reach US$ 94.3 billion by 2028, exhibiting a CAGR of 4.94% from 2022 to 2028. The North America ice cream market is expected to grow from US$ 29.12 billion in 2022 to US$ 36.43 billion by 2028, with a CAGR of 3.8% from 2022 to 2028. The cups and tubs segment dominated the market in 2022, but the bars and sticks segment is expected to register the highest CAGR during the forecast period. The supermarkets and hypermarkets segment dominated the market in 2022, but the online retail segment is expected to register the highest CAGR during the forecast period.

The European ice cream market is projected to record a CAGR of 4.87% over the next five years. The Middle East and Africa ice cream market is projected to register a CAGR of 10.7% during 2023-2028.

2 OPPORTUNITY AND THREATS a) Ice-cream Division

Indias ice cream market was dominated by the ‘impulse category of ice creams for the past 8 years, and this category is further expected to continue its dominance during the forecast period as well, owing to a growing demand for premium ice creams and changing consumer taste.

Looking at the trends from the recent past, we foresee fast growth in the ice cream and frozen dessert category. However, along with the increasing demand for convenience, the continuing need for value as a trend is growing as well. Earlier, Vadilal was focused on offering only mass-segment products.

Gourmet Natural ice cream

With every new generation, newer ideas,formats and avours have been introduced to build a connection through the years. As we embarked upon another milestone, it was time we took another step, so we launched our new premium category, Gourmet Naturals icecream, made without any artificial avors & preservatives ., We launched this premium segment for the people with class to offer them the best and never-ending experience to linger till the next craving, with the most unusual avors last year and are proud to add more to the Gourmet Natural category new avors of such as- Gourmet Natural Kesar Rasmalai Ice cream, Gourmet Natural Mahabaleshwar Strawberry, Gourmet Natural Falooda Ice cream.cup, Gourmet Natural Motichoor Laddoo cup. We have also launched a new avor in the Gourmet Natural Kul Range – Gourmet Natural Mawa malai kul . We have been able to increase our share in the premium segment as well and it has resulted in overall enhanced growth We plan to continue with the strategy of consolidating our presence in the high-end premium segment We also reach out to our customers through different supermarkets like the Big Basket, D mart, Reliance Smart, Star Bazaar [in selected areas] Max Bazaar and also on online portals like Zomato, Swiggy, Swiggy Instamart, Blink It & Zepto.

Distribution and Logistics

Distribution plays a key role in the success of a business. We plan to increase our reach in the existing market in terms of consolidating our presence in the Cash and Carry format as well as the Modern Retail segment. The logistics of ice cream, being a cold chain product, are complex and we are continuously expanding our cold chain distribution network through refrigerated vehicles and deep freezers.

We have worked on increasing the physical touch points with our consumers and executed it by putting in place a robust network of dealers, FOWs (Freezer on Wheels) and Ice Cream parlors. Along with various extensive ATL marketing campaigns, heavy investment has been done in various BTL marketing activities to enhance the consumer experience. We are also committed to deeper penetration in the trade sector. Innovative cross-promotional activities and digital media activities such as the influencers activities have been our point of extensive focus to increase consumer engagement and brand recall.

b) Processed Food Division

One of the Surge in online grocery shopping activities and the launching of new shopping apps are expected to open up new growth opportunities for the global frozen foods market. With the growing demand for convenience food, the market is poised for significant growth in the years ahead.

The popularity of Indian cuisine is on the rise worldwide due to its unique avors and ingredients. Increased cultural exchange facilitated by international travel and social media has allowed people to explore and discover new foods from different parts of the world, leading to the growing preference for Indian food.

The Russia-Ukraine conflict has disrupted the chances of global economic recovery from the COVID-19 pandemic, at least in the short term. Economic sanctions on multiple countries, surging commodity prices, and supply chain disruptions have caused inflation across goods and services, affecting many markets globally.

3) HIGHLIGHTS OF FINANCIAL PERFORMANCE AND OPERATIONAL PERFORMANCE.

The Company has earned Revenue from Operations of Rs. 89,671.40 lacs during the year ended on 31^st March, 2023 as against

Rs. 54,411.61 lacs earned during the previous year ended on 31^st March, 2022 giving an increase of 64.80% as compared to previous year.

After adding thereto, other income of Rs. 1,224.08 lakhs, the Company has earned total income of Rs. 90,895.48 lacs during the year under review. The Company has incurred total expenses of Rs. 81,246.51 lacs including Finance cost of Rs. 1,287.81 lacs and Depreciation and Amortization expenses of Rs. 2,023.38 lacs, during the year under review.

The Company has Incurred profit before Tax of Rs. 9,648.97 lacs during the year under review as compared to profit of Rs. 1,414.94 lacs during the previous year ended on 31^st March, 2022. The Company has earned profit of Rs. 7,194.33 lacs during the year ended on 31^st March, 2023 after deducting total tax expenses of Rs. 2,454.64 lacs as compared to profit of Rs. 1,034.43 lacs during the previous year ended on 31^st March, 2022 after deducting total tax expense of Rs. 380.51 lacs.

Turnover History
Financial year	Rs. in lakhs
2013-14	37170.32
2014-15	41288.57
2015-16	45538.21
2016-17	48438.1
2017-18	52013.98
2018-19	50705.78
2019-20	51662.97
2020-21	35654.01
2021-22	54411.61
2022-23	89671.40

4 SEGMENT WISE PERFORMANCE.

The company is primarily engaged in one business segment namely Food segment as determined by the chief operating decision maker in accordance with IND AS 108 - "Operating segment" and hence, Segment-wise Performance of the Company has not been provided.

5 RISKS AND CONCERNS

a) Ice Creams Division

Brand Vadilal has a 16% of the organized market share against the total organized Indian ice cream market which is estimated at approx. Rs. 20,000 crores. Vadilal has a robust and extensive pan-India distribution network with more than 1,75,000 dealers and trade partners that cater to every nook and corner of the country.

Vadilal stays ever-ready for competition with a strategy in place beforehand. Keeping a check on competitor products and constantly innovating is the key to staying at par with the ever-changing market. The unorganized market that poses a threat to sales is taken care of by maintaining the quality of our products. Expertise and decades of experience is what make Vadilal stand a class apart in the highly competitive market.

However, there are certain concerns like infrastructure and rising input costs, which the company keeps in mind and is working towards.

b) Processed Food Division

The proper cold chain logistics infrastructure is essential for expanding the frozen foods market worldwide. Unfortunately, many emerging economies lack a robust cold chain system. The insufficient cold chain infrastructure in developing markets is a major obstacle to transporting frozen food, resulting in limited supply to consumers and a slower industry growth rate. Therefore, it poses a significant challenge to the global market.

6 INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

In view of the management, the Company has adequate internal control systems for the business processes followed by the Company. The External and Internal Auditors carry out periodical reviews of the functioning and suggest changes if required. The Company has also a sound budgetary control system with frequent reviews of actual performance as against those budgeted. The Audit Committee of the Board meets periodically to review various aspects of the performance of the Company and also reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them from time to time. The External Auditors also attend these meetings and convey their view on the business processes and also of the policies of financial disclosures. When found necessary, the Committee also gives suggestions on these matters.

7 HUMAN RESOURCE DEVELOPMENT:

Employee being prime force the Company gives equal emphasis on employee development and their engagement. The Company believes in enhancing the competencies of employee to create a high performing and innovative organization. Equal emphasis is given on the on technical & soft skills. There are cordial relations between the management and employee of the Company. As on 31^st March, 2023, the Company has employed total 638 employees at all locations.

8 SIGNIFICANT CHANGES IN FINANCIAL RATIOS:

Refer Note 51 to Standalone Financial Statement

9 CAUTIONARY STATEMENT:

The statements made and figures given in the various sections of "Management Discussion and Analysis" are keeping in mind the Companys objectives, estimates and expectations. The Actual results may differ from those expected depending upon the economic conditions, changes in Govt. Regulations, tax regimes and other external and internal factors.

	By order of the Board of Directors
	Mr. Rajesh R. Gandhi	Mr. Devanshu L. Gandhi
Date : 09th August, 2023	Managing Director	Managing Director
Place : Ahmedabad	DIN: 00009879	DIN: 00010146