For a company that started small – as a trading company in 1965 in a village in Amritsar, Punjab – Gurgaon-based LT Foods has traversed a long distance. Having achieved 15 per cent share of the Rs 2,000 crore branded basmati rice market; the company recently entered the snacking market with its ‘My Taste, My Health’ range of products. As part of its plans for the year ahead, the company is looking at producing power from biomass. With these additions, it is targeting 20 per cent year-on-year growth and revenues of Rs 1,500 crore this fiscal.
In its journey so far, LT Foods has taken the organic and inorganic approach to growth – through timely acquisitions, it has established a strong presence across the U.S, Europe and the Middle-East, and is currently present in 45 countries.
The new identity
Perhaps, the biggest change at LT Foods is one of identity – the company moved from being a privately-held business to a listed one in 1993-94 and the management commissioned Ernst & Young India to help manage the change. “The greatest challenge in the last five years has been to move from a family-owned setup to a professionally managed one,” says Ashwani Arora, joint-managing director. In addition to bringing in professionals to all the key departments, each of its six subsidiaries is headed by a professional chief-executive officer and with the management becoming decentralised, it enables them to focus on their business areas. The core focus, however, remains the food business.
“Some of the greatest challenges to establishing our new identity was converting rice from a commodity to a brand, creating product differentiators and increasing distribution”
Through its six subsidiaries, namely, Daawat Foods, Nature Bio Foods, Staple Distributions Company, LT International, LTO & Kusha Inc, USA, and Sona Global Limited & Nice International FZE, Dubai, LT Foods offers different varieties of rice – raw, parboiled, basmati, organic; rice products, retail distribution and caters to international markets. One of the company’s key acquisitions came in 2007 when it acquired Kusha Inc., a U.S.-based distributor of rice varieties with 30 per cent market share. Sona Global and Nice cater to the Middle East while LT International distributes to the rest of the world.
As for the various brands under its belt, LT Foods’ flagship product is the Daawat range of basmati rice targeted at the premium segment, while Heritage is for the midrange and Orange for the masses. Two of the main product differentiators for their products are the age of the rice and their source. LT Foods sources its rice from independent farmers and also engages contract farms. “Some of the greatest challenges in establishing our new identity were converting rice from a commodity to a brand, creating product differentiators and increasing distribution,” says Arora.
Expanding the product range
Last year, LT Foods made a foray into the snacking market with its ‘My Taste, My Health’ range of products with ‘MyMy’ chips being the first product that was launched. “We found that there weren’t enough number of healthy, fat-free snacks available in the market,” says Arora. And LT Foods intends to bring about that change with the use of rice cakes and multi-grains. “Our promotional strategy is to focus on guilt-free snacking,” he adds.
Arora estimates the overall snack market to be Rs 5,000 crore and expects that the healthy snacks segment will grow to Rs 700 crore-800 crore in two years. This year, LT Foods expects to register Rs 25 crore from this brand.
Investors have also expressed confidence in LT Foods as it recently received US $ 10 million in funding from a Dutch company, Rabo Private Equity. They intend to use this funding for establishing a food plant in Amritsar for paddy and a rice plant for parboiled rice in Madhya Pradesh.
For future expansion, the company has announced plans to enter the renewable energy sector and has initiated the process to set up a power plant using rice husk. It has applied for license and expects that it will take another year and a half for the plant to become operational. “Rice husk is a by-product for us and we are trying to add value to that. Part of the power generated will be used for our purposes and part of it will be sold,” explains Arora.
The company’s focus will remain on marketing. With its products available at 80,000 retail outlets across the globe, visibility will hold the key to growth. To work towards achieving this, individual subsidiary heads will be focused on improving advertising and building brand equity.
Milestones since becoming a private limited company in 1990-91.
- Launch of MyMy chips on health platform.
- Acquired two European companies Rice N Spice International Limited and A&A International.
- Under the PPP (public-private partnership) model with Pungrain, LT Foods developed 50,000 MT capacity Silos in Amritsar for bulk storage of grains.
- LT Foods established a new plant in Barpal, Amritsar.
- Launch of four new variants of Specialist Range of Daawat Basmati Rice
- Rabo Equity Advisors, the private equity arm of Rabobank, invested a total sum of Rs 48.7 crore (US $10 million) in LT Foods and one of its subsidiaries ‘Daawat Foods Ltd’,
- Staple Distribution Company launched in domestic market to cater to the demands of modern retail.
- State of the art plant set up in the Mandideep, Bhopal (MP.)
- Acquired U.S. Company, Kusha Inc; Kusha’s brand, Royal is among the top 20
- Set up own milling capacity