CCL Products


(Dhinakaran AK) #84

I have been using it since last 8,9 months, its available in Reliance Fresh stores as Kaffee. Like it very much, as its better than SunRise, Bru… Am holding a few shares also since last one year.


(Vinith Jain) #85

I have tried many brands, right from Nescafe to Davidoff, i think ‘Continental Speciale’ is a really very good taste. I have been using it regularly for past 6 months, buying from bigbasket.com.

As such the instant coffee market in India is not very big, some put the figure as a Rs.3000 crore market. But there is a lot of competition and converting a good coffee into a good brand needs a lot of money spend.

I think the next breakthrough for the company could be only when FSMA is implemented in USA. Branding will take 2-3 years.


(Saji John) #86

Small cap world fund have increased stake in CCL by 2%. Now they have total 7%. http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/F858710C_9D97_49C0_94BA_C78EF87F8226_085822.pdf


#87

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/42A9B287_B1C9_4002_98BD_D2E6D4A089C1_185840.pdf

Q1 results released. Sales up 18% profit up 33%. TTM EPS 9.94!!


(Vaibhav1512) #88

very good results from CCL. important to note that export incentive is not included in Q1 FY 17 results. I talked to co CS last week and she said that they have started receiving incentive in July. if we include export incentive of around 7-8 cr per quarter then profit after tax can easily move higher by around 5 cr. so 45 cr profit is around 50% higher compared to Q1 fy16.

EBITDA margin improved to 25% in Q1 17 compared to 24% in Q4 16 and 23% in Q1 16.
Standalone profits (india operation) is up 22% yoy while profit from vietnam operations is up 56% yoy.


(VB) #89

Hi, I just read through the entire thread and as always fantastic info captured by the valuepickr community. I was starting to think its an interesting company when I noticed Quest4value’s post on the effluents discharged by CCL affecting nearby villages. There are other articles as well that talk about this such as => http://timesofindia.indiatimes.com/city/vijayawada/Toxic-effluents-impacting-fields-public-health/articleshow/47498273.cms.

I wonder why esteemed members may have felt this isn’t worth discussing further? If the reports are true, I feel this could very well escalate like the Nestle Maggi issue and wipe out all gains earned in recent times. Sometimes, companies take for granted their “social” license to operate, as a large FII investor called it, and its only a matter of time before they realize the extent of their folly.

I also wonder if this is indicative of their political clout in AP in being able to continue to discharge effluents recklessly, if the press reports is true. Or is there a different political or other reason for this kind of a report surfacing?

Would be good to hear from members who have invested and have deeper knowledge on this issue.

Thanks,
Varun


(Gary) #90

Maggi was probably either an overzealous food inspector or someone who didn’t get his cut in time. Isn’t it weird that of all the places for food safety in a country where Gol Gappa sells in every street, we only managed to find traces of MSG in noodles! (Doesn’t it remind of the two mosquitoes in KFC restaurants?)


#91

My notes for Q1FY17 concall.

• Margin increase – Due to higher utilization from liquid coffee plant in Vietnam. Fortunate to get new costumer for premium product. EBIDTA margin guidance 22-25% This quarter best margin attained in Vietnam due to premium product, need not maintain that in every quarter depends on customer requirement. There will be definite margin improvement from last year.

• Volume growth – management reluctantly mentioned 10-15% as they did not want to give. Indian operations running at full capacity. Focus on selling premium products rather than volume in Vietnam so may reach full capacity this year. Next year we may think of Vietnam capex depends on demand.

• US market – Currently 20% of volume as well as revenue comes from US. Still no clarity on FSMA when govt will fully implement it. No issues with current capacity utilizations till then. Even retaining current customers and adding 1-2 costumers per year will give 15% growth.

• Tax guidance – this year 22%, next year plan is 19% as more utilization from Vietnam (last year 24% I guess) and new freeze dried capacity in india which comes into play from FY19 is also tax free as its in SEZ.

• Competitors – Lot of competition more than 50% spray dried coffee excess capacities in world. Competition from brazil, mexico, Singapore, Malaysia, china, Vietnam, india, Europe. But we were able to grow mainly due maintaining strong customer relationship over many years some almost 20 years. We create unique blends to our customers exclusive blends in that region and do not reveal even to them the composition. Initial years we used to have only 4-5 blends but now with investment in research and technology we have over 200 blends. Thanks to our customers for support. Once a customer introduces a particular blend into the market it is difficult for them to switch to other blends. So costumers are usually very picky and they will stick with same quality standards with us.

• India brand operations – 150% growth yoy sales. Exclusive supplier to defense establishments. Entering supermarkets and kiranas slowly. Received minimum traction that we were expecting, so now we will start spending on brand promotion etc. volume still less compared to export operation 7-8%. India is just a 2 player market and those 2 players are not reporting significant growth in coffee sales. But Indian consumption is growing at 15%. So we are trying to capture the new growing market. Scope for growth – US consumption is about 80K tons, japan is 35K tons compared to india is only 12K tons consumption so there is huge scope for coffee consumption to increase. Indian market is very price sensitive and that is why preference is for tea more than coffee. But due to our technology advantage we can supply coffee almost at the price of tea. So potential for us in Indian market is big.

• Raw material – price increase in Vietnam is mainly due to farmer hoardings although there is some fall in coffee bean production. Every 2-3 years we face these cycles but both our suppliers and big customers always go through with contracts whatever market prices may be.

• Liquid coffee plant in Vietnam due to tech improvement supplying liquid coffee in spray dried solid form as a premium product which is cheaper transportation for customer. 40-50% capacity utilization. Full utilization for liq coffee is not easy as premium customers are not easy to get.

• Indian 5k ton freeze dried coffee expansion 260 cr will come up end of next FY. Currently Indian freeze dried market is v.v.small. Just 100 ton. Nestle imports by paying 110% duty. We are the only manufacturer in India and that is our advantage we can supply at 30% lower prices than big brands. But this capacity is mainly for exports.

Disc - Hold ccl products.


(Rohit Balakrishnan) #92

Great set of notes Anjan. Thanks for sharing this :slight_smile:


#93

Edelweiss result update…Raising a toast to robust show with target of 300! :slight_smile:

ccl products edelweiss report AUG16.pdf (177.2 KB)


(Yogesh Sane) #94

Read through most of the thread here and found some good info. thanks to all the posters who posted valuable information.

I looked at CCL products financials and they look quiet impressive. Given the valuation, A strong conviction is needed to build a position in this company. I think that strong conviction will come from forecast of sales of instant coffee in the long term. This is where I am unable to see the future.

I don’t like instant coffee. Traditional brewed coffee has a mouthfeel that I never get from instant coffee. In India, the coffee that is served in restaurants is just sugary milk flavored with coffee. Outside India, it’s extremely easy for restaurants to serve brew coffee and espresso and all it’s variations including cappuccino etc.

One advantage of instant coffee over brew is ease of preparation. You don’t need any efforts or skills to make an instant coffee. But even that advantage is not relevant anymore with intelligent espresso machines and single serve cups that address the skill and effort requirement of the brewing process.
Given all this, it’s difficult to say that instant coffee sales will grow at a decent rate. I am interested in knowing if fellow VPers have a different opinion here.


(eyesice) #95

I am from a South Indian family who drink coffee like the Germans drink beer. We detest instant coffee like anything and never drink Bru / Nescafe at home. We always get ground coffee powder which is freshly roasted and ground and make the dicotion at home.

Coming to the point, I thought of trying Continental Coffee from a local supermarket and we really liked the taste. It didn’t taste anything like instant coffee and was fresh.


(sandriano) #96

Same here. I will take your advice and try this one. Thanks for posting your view.

Roberto el S


(Yogesh Sane) #97

Thank you for posting your views. In terms of costs, how do you find instant coffee vs brewed coffee? Although I never calculated, I think cost per serving must be lot less for brewed coffee compared to instant coffee. If you use a simple coffee maker (which I use) a filter coffee can be cheaply made. You don’t have to be a barista to enjoy quality coffee at home.
I will have to try Continental Coffee myself. I have been drinking brewed coffee for years and in Mumbai you don’t get that kind of coffee outside home unless you are willing to pay three digit sum at CCD or Starbucks.


(valuebuyer) #98

Brazil’s robusta harvest will probably tumble 16 percent this year to 9.4 million metric tons, the smallest since 2006 due to Drought - like situation in Brazil

However, considering that the CCL business model is on cost plus basis, this should not have a significant impact

Views invited

Disc : Invested with a small position


(Value Seeker) #99

Thanks for making a key point :slight_smile: from an end user standpoint. I completely agree. I for one will not make the move to instant coffee. We buy “kaapi podi” from a local shop and brew at home. The taste is different and cannot be matched by instant coffee.

That said if instant coffee can replicate the brewed coffee taste there is a possibility (hence my interest in SH Kelkar for the long term :wink: ). I am guessing there will not be many takers in S. India…do we have breakup of sales numbers by geo (i.e. domestic/ international, pan India by state?).

DISCLOSURE: No holdings in any of the stocks quoted in my post (i.e. CCL, Kelkar).

best regards
VD75


(Kumar Saurabh) #100

I believe in one of concalls management said categorically that they did want to disclose domestic revenue numbers for few years . They are in 10 states and intend to scale up in 7 more states if i remember from concall transcript


#101

Sumeet Nagar: Yes I am pretty sure if I take a view it will be wrong so we do not take a view on the commodity. The one investment we have made in that space is in CCL Products and it is actually as a company does not take commodity risk either. So they do processing of a green coffee beans and turn that into instant coffee. Thing is like, not many people realise that outside of Nestle, CCL Products is a largest manufacture of instant coffee in the world, not only in India, but in the world.

ET Now: Do they have brand, do they have pricing power or are they just making it for somebody else?

Sumeet Nagar: See they are making it for somebody else but consider it even if you think about Nescafe, what you think of Nescafe is not the same thing across the country. Nescafe has hundreds of flavours across the world so each country has specific taste, specific flavour and in case of CCL, they are serving hundreds of different customers and different countries and for each one of them there is a different blend, replicating that blend is not that easy and their customers are dependent on them. So it is a very strong relationship. They have been doing this for last several decades.

ET Now: Are they just a convertor because if they are just a convertor, the margins may not be very premium because it is the B2C segment or the consumer brand which always enjoys disproportionate margins or B2B in this case may not be a business which will enjoy premium margins?

Sumeet Nagar: See there are both components. I will answer both of those. So first one the B2B part. I think if you are a great B2B player, you can enjoy fairly good margins. But you need to have a differentiation. You cannot be easily replaced by somebody else so I think that is the case with CCL and that is why they are benefitting.

But they are also foraying on the consumer side. They have launched a consumer brand. It is very early days. It is continental coffee and the coffee taste is very good and the point is that the instant coffee market in India, there are only two players and there is definitely a room for a third one, somebody is lot more efficient and actually making the same product. So they can make the same quality if not a better quality of product, price is cheaper and actually gain some market share. But that is a story that is going to take five years, ten years but I think they have a very strong case to be able to succeed there.

Read more at:


#102

CCL Products had got approval from AP government to establish their new Freeze Dry Instanst Coffe unit (SEZ) in Chitoor district (I think may be in Sri City). The new factory in built in 29.33 acres and may cost around Rs260 crores with 5000 tons capacity. AP govt is giving 25% seed capital subsidy max of Rs.10 crores (don’t know what this meant) and 7.5% reimbursement for external infra CCL creates (like roads, electirc lines etc)

(News from today’s telugu daily ‘eenadu’)


(eyesice) #103

Sales has dipped by 70 % this quarter. Any particular reason for this dip?

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=4e5eb199-a2ed-48d2-9e93-255a291c8dab