ADF Foods Limited - Enjoy the Indian taste

ADF Foods Limited incorporated in 1932 as a small retail store selling dry fruits and nuts under the name of American Dry Fruit Stores, later ADF was converted into a public limited in 1991. ADF Foods has steadily grown and diversified into  major food processing company manufacturing ethnic indian foods under various brands which are today leaders in their segments and categories and operates in more than 50 countries.

The company manufactures, markets, and distributes ethnic Indian food products like  ready-to-eat foods, frozen parathas and naans, frozen vegetables, snacks, frozen paste cubes and paneer, frozen rolls, curry powder, papad, Indian pickles, chutneys, instant mixes, canned food, mango pulp, condiment pastes, vegetables in brine, cooking sauces and pastes, flavored water, spices, and frozen breads. The company has manufacturing set up at Nasik in Maharashtra and Nadiad in Gujarat which include capacities for cold and dry storage of raw materials and finished products. Company’s manufacturing facilities are HACCP and BRC accredited along with ISO 9001:2000 and ISO 22000:2005 certification. It also offers contract manufacturing services.

ADF Foods has successful brands like Ashoka, Camel, Truly Indian, PJ’s, Nate’s, Aeroplane and ADF Soul across the globe in its portfolio through distribution networks in Europe, United States, Middle East, Australia, Canada, and Asia.

Ashoka

In 1988, ADF Foods launched ethnic Indian food brand Ashoka. This became company’s flagship brand with a strong presence in the US, Europe and Australia. Ashoka brand is famous for its range, which includes ready-to-eat curries (heat & eat), frozen foods (Indian breads & snacks), pickles, condiment pastes, mango pulp /slices, chutneys, pappadums, IQF (Individually Quick Frozen) ready-to-cook vegetables, and Microwaveable rice. These frozen entrees, rolls, frozen vegetables are prepared and well packed to meet the needs of  today’s contemporary lifestyle. It is probably the widest distributed ethnic Indian brand in the world. It is primarily targeted for Indian diaspora worldwide with over 300 products in different categories under shelf stable and frozen range. 

http://www.adf-foods.com/brand-category/ashoka

Truly Indian

Truly Indian brand is launched  to serve the perfect blend of Indian spices, herbs to give the true feeling  Indian cuisine  to the Indians living abroad. The complete range on Indian ready-to eat delicacies, chutneys, pastes are created and prepared in such manner, which is reflected in the authentic Indian taste. Truly Indian is available in the US and Germany.

http://www.adf-foods.com/brand-category/truly-indian

SOUL

SOUL offers a range of premium quality food targeting the health conscious consumers. Product range comprising traditional ready-to-eat curries, pasta sauces, pickles, ginger garlic paste and mango chutney. It created a niche space in the market and become well recognised brand within short period. Soul offers India’s first range of pickles made in virgin olive oil, making it the healthiest option in pickles. Soul is a urban-centric brand and launched in India in 2011.

http://www.adf-foods.com/brand-category/soul

Nate’s (US)  

Nate’s is an fast growing vegetarian brand in US and EU. Product are preferred for healthy lifestyle due low sodium and fat content. Initially Nate’s brand has Nate’s Meatless Meatballs in Classic, Zesty Italian, and Savory Mushroom, and Nate’s Mediterranean Bites in Kale, Garlic and Pesto, Sweet Potato, and Southwestern. Later Katti rolls, roti rolls and chaat are added under brand expansion.

http://www.adf-foods.com/brand-category/nates

PJ's Organics (US)

PJ’s is non-vegetarian organic brand burritos. It is Mexican fast food with low calorie, low sodium and low saturated fat stuffed with nutritious and quality ingredients in bread roll.

http://www.adf-foods.com/brand-category/pjs-organics

 Camel

ADF acquired the 100-year-old brand pickle brand Camel in 1965. The brand was quite popular among Arabs who used to buy it during their visit to India. This marked the foray of the company into the processed foods business. It offers range of arabic style pickles, spices cooking pastes & curry powder in Iraq, Qatar, Bahrain, Saudi Arabia, UAE, and Oman to other parts of the Gulf.

Aeroplane

Aeroplane  brand offers variety of Chutneys, Curry Powders, Pickles, Tamarind pastes . ADF  launched the ‘Aeroplane’ brand for Indian diaspora in middle - east countries in mid 70s.

Investment Rationale

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.

https://www.ibef.org/download/Food-Processing-January-2017.pdf

https://vibrantgujarat.com/writereaddata/images/pdf/agro-and-food-processing-sector.pdf

https://assets.kpmg.com/content/dam/kpmg/in/pdf/2016/11/Indias-food-service.pdf

ADF had launched of pickle and ready-to-eat brand 'Mother’s Recipe' in 1991. But after a decade, it sold the brand to Pune-based Desai Brothers to focus on its core strength in overseas market. Mother’s Recipe has given above Rs 200 crore turnover for 2015-16.  ADF (earlier export-oriented consumer products company) has re-entered the domestic market with 'SOUL' brand for packaged ethnic Indian & International food in 2011 with motive to recapture the premium segment of the market. Its product range consists of pickles made in virgin olive oil, ready-to-eat curries and mango chutney. As the products have low cholesterol and are without preservatives, the company is focusing on an ever-increasing number of health-conscious Indians. Now company is striving hard to make similar success story with 'SOUL' brand.

ADF Foods acquired Elena’s Food Specialties Inc in 2010. Elena’s is a US-based manufacturer and marketer of organic and natural products and provider of protein-based Mexican foods in the natural and organic category. Elena’s owns brand like PJ’s Organics, Elenas and Nate’s. This business faced tough times over the past six years and making losses. Company stopped its manufacturing operations since December 2015, on the expiry of the factory lease and switched to a more cost-effective option of getting the products manufactured through contract packing. It helped to make considerable savings, improve gross margin and management is hopeful to cross  break-even by end current quarter. This decision has turned the fortune of overseas operation and results are encouraging. US business is now become an asset-light model with significant labour cost savings and gross margin improvement.

ADF is giving more focus on organic food in US business, which is a new food market trend witnessed in Western countries. Nate's Mediterranean Bites' has received an overwhelming response in the US market. Company has developed a new product category, and looking forward to the launch it in the US market very soon. 

ADF has long experience in food product business in regulated market like US and EU, where extreme focus is given on product and packing quality for refreshing the flavour, fresh new look and feel. Company is using latest technology for product manufacturing  and user-friendly product packing. 

ADF  is expanding it  distribution network very aggressively for domestic and international business with vision to  achieve the target of  Rs 500 crores revenue by 2020. ADF Foods plans to reach a total of 50 cities across India, widening its distribution reach by the end of 2017. To provide an added impetus to the ADF Soul range, company entered into smart e-distribution tie-ups in major cities like Mumbai, Delhi, Ahmedabad and Bangalore. 

ADF has strong R&D capabilities for continuously developing the new products to meet the ever changing taste of the consumers,  recently introduced a new range of vegan, dairy-free products in the ready-to-eat category.

In last quarter, company has completed buyback of equity shares at Rs. 125 per equity share to utilize its surplus cash, which shows strong confidence of promoter in future  growth of the company. 

Conclusion

Food processing sector has the huge growth potential and government also giving special focus on it. Now health conscious consumers prefer low fat, low cholesterol food due to change in lifestyle and living standard. Consumers have become aggressive in demanding tasty, nutritious, better, safer, convenient food products and willing to pay higher price for health and convenience. 

Theme of ADF products (tasty, healthy & guilt-free food) are in line with changing consumption patterns and evolving consumer needs. Company is working aggressively towards enhancing market share and brand reputation. ADF has very strong branded product portfolio, high quality products, very attractive user friendly packing, well established market in more than 50 countries, investor friendly and experienced promoters. Now company is well set to convert its past efforts into results. It has all the elements to give decent return in future.  

I was expecting some correction in this stock after demonetization but company has posted much better result and it did not correct. It is one of the best option available for long term investment in fast growing food processing sector at cmp 152.