CCL Products


(Gary) #249

If I recall correctly - they were planning to get to 100 cr branded sales this year. So clearly the branded business - which is a major factor in rerating - seems to not have played out.

Any thoughts on why is this. Because I see the reviews for continental are quite good on Amazon and flipkart.


(Kumar Saurabh) #250

As per concall, they mentioned the new leader dedicated to branded business has decided to completely revamp the business model and instead of going for revenue, has decided to go for higher margins,so, we need to see how it pans out. I am a bit surprised as in how can you pitch same product as a low margin product and then all of a sudden decide that you want to sell as premium product.


(rupaniamit) #251

Below table shows their Branded B2C sales growing at good pace in last 3 years:

image

Have to keep in mind that they have not gone pan India with their branded B2C retail play. This will be very slow and gradual progress as they succeed in current geography and then move to neighboring states.

Management is targeting 100cr of branded sales (B2C + B2B) in FY19. I completely share @suru27’s skepticcal view on management suddenly selling it as premium product and compete with likes of Nestles.
Will have to see how their new price point stacks up vs competition.


(Jaclyn) #252

With heavy discounts the gross margins were 5% to 8% range. Mr. Praveen Jaipuria has removed this and thus the margins increase. Probably the product price may remain the same. Also there was mention that these sales were happening using credit which Mr. Jaipuria changed it cash sales. These steps lead to the change in the margin to the CCL without the consumer being affected. In other words change of working capital management. That is how I interpret it.


(Vinith Jain) #253

The new website for domestic biz
http://www.continentalkafe.com/

Twitter handle
@continentalkafe


(Rudra Chowdhury) #254

From recent Edelweiss update on the Retail part of the business,

Targeting INR1bn revenue from domestic branded in FY19
In FY18, the domestic business generated revenue of INR460mn, falling short of INR800mn
guidance. The miss was mainly on account of strategy adopted by the new chief executive
officer (CEO) of M/s. Continental Coffee Private Limited, Mr. Praveen Jaipuriar. However
management is confident about achieving revenue of INR1bn in FY19 from branded sales. It
includes ~50% under its own brand which generates high margins, 25% from private label
like railways and the balance 25% from institutional sales to customers such as Reliance.
The retail business is likely to generate a high margin of ~30%, but not in its initial years of
operations due to focus on branding and advertising.


(Vivek Mashrani, CFA) #255

Recent management interview on BloombergQuint:


(Deepen) #256

In general sense, I think it can be more of a conscious call to control discount by the way of lesser marketing spends / discounts / offers. In the short term, revenue tends to take a dip but if the product is sustained demand then the new pricing becomes a new normal. Another way can be, price the product even higher, keeping potential discounts in mind.


(Saji John) #257

(Prince V) #258

CCL%20Q119

Good Resutls by CCL. After adjusting for Excise duty on Revenue reporting, Revenue growth should be 20-22% YoY. I think that is a good growth considering declining green coffee prices.
Growth of Domestic Sales is the key.

Disc: Invested. Steadily adding more.


(Manojlion) #259

Hi Sir,

How do you infer that domestic sales has increased from the financial results ,which was published on saturday, as I could not find any section wise division in Revenue

I am new to investing.So kindly ignore if the question is very basic


(Vivek Mashrani, CFA) #260

CCL Concall summary (please excuse any typos or missing of any comments)

Vietnam margin guidance on similar lines; Better utilization; Completed 5 year >> may get extension to tax benefits based on new provisions

Vietnam new capex next FY (~4000 Tonnes) for ~8 million USD; still in initial stages

Domestic Biz: Margin increased; started regional advertising for brand building; Will be introducing few new products next month onwards

Current focus on AP, Telangana; Next focus this year Karnataka and other south Indian states; These are major consumers in India

Focus on yearly transactions not focussion on quarter basis

10-20% profit growth guidance currently; Revised update after new plant commissioning

Lag of 6-7 month for lower coffee prices to get reflected in contracts

Orderbook for FY19 ~70-75%

Global market oversupply >> COmpetitive edge: 1. Marketing capability 2. More than 1000 blends; 3. Product offering 4. First mover advantage and Economies of scale

Might see decline in volume in 4-5 years hence focus is on B2C

Don’t see export incentive to go very soon; This is embedded in price, if there is removal then sale prices needs to be adjusted accordingly

Debt: 160 Cr Long term debt for project, else its debt free; Spent 250 Cr on project; Balance 50 cr will get spent this year

Working capital situation similar to March BS numbers

New freeze dried unit: Planning trial production in Q3; will take some time for production to get on steam then need customer approvals

Certain discounts on B2C for incentivizing customers to try coffee once; This will reduce slowly in future

Green coffee price fall 15-20 YOY

Volume increase ~30% (combined of both operation)

Decline in coffe prices will impact the realizations

100 Cr. domestic business guidance (this quearter around 17 cr); 75 Cr. to come from B2C; Next few years to focus on topline growth and building brand, not to make much profit

Capacity utilization Vietnam >> 80% utilization guidance vs. 70% last year

Freeze dried - global competition has decreased a bit this year; There are new plants getting built so expect some competition in future

Currently 6-7% market share, can go to 9-10% in next 4-5 years (assuming new capacity dont come fast)

Instant coffee space: 1800-2000 cr.; 3-in-1 (soluble) - 500-1000 cr. (mainly institutional); Roasted ground: 500-1000 cr.(mainly regional)

Domestic focus on all of the above; This year is more about product introdcution (more than 90% fail so we are doing it systematically)

EBIDTA breakeven from new plant at 50% capacity; This is expected in first year itself

Seeing faster offtake and placing products in supermarkets due to promotion and branding strategies

Swiss plant: Come up with solution with Swiss govt; Added customers this year as well; Brand introduction in future; Some solution might come in next few months

Some youtube vidoes for branding; Planning along with product launch

Product mix likely to remain the same overall (to operate efficiently)

40 Cr budget for this year (brand building+offers etc); 10 cr from parent company; NExt year onwards there will not be any additional support required from parent


(Saji John) #261

(cool_gaurav) #262

Promoters bought 2 lac shares @ Rs. 271 per share on 27th July,2018.


(Vijay Dosapati) #263

Can you please provide the source


(cool_gaurav) #264

https://www.bseindia.com/stock-share-price/stockreach_insidertrade_new.aspx?scripcode=519600&expandable=2


(Akansha17) #265

Mutual Fund holding of CCL Products (India) Ltd. has shown a decrease from the last 3 months (i.e Apr’18 , May’18 , June’18)

Source : https://www.rupeevest.com/Mutual-Fund-Holdings/119600


(ManuAgarwal) #266

The business of CCL Products can be divided into two separate entities:

  1. The bulk export contract manufacturing business
  2. The domestic retail business

The bulk export contract manufacturing business:
This forms the major portion of the revenue. The company has shown concern regarding the excess capacity of contract coffee production in the world to the tune of 50%. Keeping that in mind the company has given a moderated growth projection of 10-20% for the next 3-4 years, post which there could be a further moderation in the growth given there is no major changes in the industry dynamics (ex. any major supplier shutting its operation etc…). The company seemed confident to showcase this growth as they claimed to have a better product portfolio (larger variety of coffee products under a single head) and better relation with customers which will help them grow with this rate.
The company is looking to expand its freeze-dried production capacity by 5000 tonnes by FY19-20 and another 4000 tonnes at the Vietnam Plant also by FY19-20.

Currently total capacity
Spray dried: 24000 tonnes. Freeze dried: 6000 tonnes
Agglomeration: 10000 tonnes(only possible with the spray dried coffee))

The raw material which forms the 70% of the total cost (which is green coffee) should only affect the revenue realization with a lag of 2-3 months. The margins will remain stable even with the fluctuating green coffee prices as all the orders are pre-booked both for sale and coffee procurement.
Net off: A stable business, good management, and a moderate growth. Debt free operations, debt needed only for expanding capacities.

Domestic retail business:
A new entrant in the business with a total market size of 3000cr. The company will focus mainly in South India (Andhra Pradesh, Telangana, Karnataka, Tamil Nadu). The company started first with the institution supply with the aim of getting feedback and improve the product as to be easily acceptable to the Indian masses. Now the company is rolling out its B2C plans with target sales of this year 100cr. The company plans to gain a 10% market share in the next 3-4 years. The management is confident that the domestic business will be self-sustainable by this year (i.e will not require any budget from the core business to fund its domestic operations) However the business will not be PAT accretive as their major focus would be on gaining share for next 3 years. Though a better picture will be given in the next 2 quarters as the result of the new operations are out.

Disclaimer: Not invested yet, Though following the story.


(Manojlion) #267

Any one from AP or Telangana,can you check if the 10rupee sachets are available in super markets?


(sandriano) #268

I have seen it in some of the super markets in Hyd.

Roberto el S