Monday, August 26, 2013

FOOD BUSINESS SPECIAL...... POPCORN



 POPCORN BUSINESS 

Pop This  A Business that Makes Slowdown Corny
Why popcorn business is booming in India, with high sales & margins and new investments 

    Where, everyone is asking, is a business that’s got some serious pop and crackle? With double-digit growth rates, new investments, great margins? If you are watching a movie, you are most likely munching on the answer. Popcorn, that eternal movietime munchy, has become a sizzling business in India, as much of a slowdown-buster as movies are. Sales, say industry watchers, are growing 10% annually. Nationwide regularised production, sales and profit data on the popcorn business is tougher to find than a Bollywood movie with a tragic ending. But ET’s close study of the popcorn economy produced enough evidence to support the claim that the business of heating corn kernels is, well, a hot new business. Consider the following:

• So high is the demand that despite a 56% Customs duty on quality imported corn (sourced mostly from the American continent), the two major popcorn players — Agro Tech Food, which has India rights for American company Con Agra’s Act II brand, and Banaco Overseas — import around 23,000 tonnes annually. That makes a lot of multiplex-style popcorn tubs (35-120 gm) and microwavable popcorn packages (50-100 gm). Agro Tech didn’t respond to ET’s questions, though Banaco did. Agro Tech’s import estimates are sourced from industry.

• PVR, India’s leading multiplex chain with 383 screens in 90 locations, sells on average 18,000 popcorn tubs daily. Popcorn sales are growing very fast, says Rahul Singh, senior VP, operations, PVR. Banaco’s proprietor Vinod Kansal says 70% of multiplex revenues come from popcorn and soft drinks. Banaco supplies corn kernels to almost 80% of India’s 500-plus multiplexes. You now know just the Khans can’t keep movie halls going, they need the corn too.

• The popcorn business has margins that the wildest movie script can’t dream of. A bulk supplier of corn kernels, who did not wish to be identified, said the raw material is sold to movie halls for . 120-130 per kg. You buy, say, a 110 gm of popcorn tub in a multiplex for . 150. The retail price of popcorn is around . 1,500 a kg. Accounting for everything from equipment to labour to packaging costs, that’s an eye-popping margin. Popcorn Entrepreneurs
Almost a similar kind of math applies to the microwavable variety of popcorn that retails for Rs 35 for 85 gm packs. Consumers are happily paying these prices, industry says, because India’s love for this very American snack seems inexhaustible.

• The high demand/high margin popcorn business is inducing a major change in India’s agriculture. Traditional Indian corn, used mostly in poultry and starch industries, is deemed unsuitable for popping kernels. But farmers are responding to the market. Total area under maize cultivation is 8.5 million hectare. Around 25% of corn produce goes to the food industry, but the share of popcorn-worthy corn (small-kernelled, flinty type corn with very low starch content) is still small. But acreage devoted to popcorn-worthy corn is growing fast, says OP Yadav, director, Directorate of Maize Research, a government body. Popcornworthy corn grown around Bangalore is seeing 25-30% growth in acreage. This corn variety, experts say, will typically be cultivated in areas close to urban centres, partly because the popping strength of corn depends on good storage.

• New popcorn entrepreneurs are emerging, making new investments. Hyderabad-based Venagro has started contract farming for corn. It will launch its brand this year. “We will be selling 100 gm pack of popcorn in different flavours under the Cornella brand,” said Venu Akula of Venagro. Currently, the company annually sells 2,500 tonnes of corn in bulk. Delhi-based Puneet Garg of Mohar Singh Ratan Lal has started supplying popcorn in 100-200 gm packs to retail stores under the Farm Way brand. “We will now produce butter and cheese flavour popcorn,” says Garg. Bangalore corn is the mainstay for those who source popcorn corn domestically. But it is inevitable there will be more growing centres, says Yadav. Consumer research analyst at Espirito Santo Securities, Nitin Mathur, says more players are going to enter the popcorn business. Conditions are ideal.
And here’s the final good news. Popcorn is unlike most other snacks — nutritionists say it’s healthy, and recommended for weight-watchers. It’s got more protein than any other grain, more iron than eggs and meat, and more fibre than potato.
Pop that corn, it’s good for business and good for you.
MADHVI SALLY ET130819

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