CCL Products (India) Limited (519600) Earnings Call Transcript & Summary

Good morning, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome all the participants to CCL Products Q3 FY '22 Earnings Conference Call. From the management side, we have with us Mr. Challa Srishant, Managing Director; Mr. Praveen Jaipuriar, CEO; Mr. V. Lakshmi Narayana, CFO; and Ms. Sridevi Dasari, Secretary and Mr. P.S. Rao, Consultant, Company Secretary on the call. Without further ado, I would like to hand over the call to Mr. Srishant for his opening comments, and then we'll open the floor for Q&A. Thank you, and over to you, sir.

Yes. Thank you for this and good morning everyone. The group has achieved a turnover of INR 423.59 crores for third quarter of '21, '22 as compared to INR 299.85 crores for the corresponding quarter of the previous year. And the net profit is INR 58.57 crores as against INR 47.11 crores for the corresponding quarter of the previous year. The EBITDA is INR 93.04 crores, and the profit before tax is INR 74.68 crores. For the 9-month period, the group has achieved a turnover of INR 186.65 crores as compared to INR 911.32 crores for the corresponding period of the previous year, and the net profit is INR 151.65 crores as against INR 133.06 crores for the corresponding period of the previous year. The EBITDA is INR 247.62 crores and the profit before tax is INR 193.20 crores. I mentioned last time that we will be having growth of more than 15% on a consolidated basis, and we are on track for the same. We can open up the floor for questions now.

[Operator Instructions] The first question is from the line of Jignesh Kamani from GMO & Company.

Congratulations for good set of numbers. Just on the gross margin part. So if you think about revenue has been pretty good. However, gross margin has partly corrected both Y-o-Y and Q-o-Q. Is it purely because coffee prices increase in load and [indiscernible] and because of the higher [indiscernible] margin looks lower or the mix of the freeze-dried and the small pack was lower this quarter?

No, no. It's only [indiscernible] bean coffee this time.

And how on the mix of freeze-dried and you can say [indiscernible] just compared to earlier quarters?

Compared to quarter 2, it's very similar, actually.

Okay. Understood. And any update on the expansion plan and the utilization level?

Yes. The previous expansion in Vietnam that was completed in last quarter. And that's 1 of the reasons for the enhanced capacity utilization also in last quarter itself. We are -- the doubling of capacity plans have already started. And by quarter 3 of next financial year, we should be up and running.

And the expanded capacity at Vietnam is running at optimum level?

Yes, more or less at optimum levels because there was a lot of backlog that was there earlier also. So we are running at more or less full capacity. And it will take some time for us to actually get a higher volume out of the plant because some customers, we still have to get their approvals for the -- for the revised blends that we have to submit to them. So that process will usually take 1- or 2-months. So yes.

Understood. And you increased your capacity small pack also, right? Close to around 12,000 tonnes. Any color in the second half, what kind of small pack volume we can do?

So small packs and all, yes, we have increased, but most of the equipment is already existing equipment that is there. There is a couple of new equipments that we have added. In fact, we will be adding some more in this quarter. So that 12,000 expansion will be completed in this quarter, actually.

The next question is from the line of Vivek Ganguly from Nine Rivers Capital.

I had 1 quick question on the domestic branded coffee business that was launched about 2, 2.5 years ago. Can you share some details of the same? How it's spanning? What's the market share. By the way, we are also consumers of this particular -- we have tried out this coffee. We really like it. But from a company perspective, if you all can give some details, it will be very helpful.

Sure. Praveen, I think you can take this one.

Yes. Praveen this side. So domestic market, the branded business continues to do well. If you remember, the last year figures that we had quoted was we had achieved turnover of -- total turnover of INR 150 crores, half of which [indiscernible] is branded retail business. So in 3 years' time, we could achieve that milestone of INR 100 crores. These were last year numbers. This year also, we continue to do well. And both on a total level and on the branded side, we continue to grow at around 40%. So that's been the 9-months performance till now.

And would it be fair to assume that you are far away from a breakeven -- not just because you all want to break even other thing, but the business is growing and developing business and what kind of spend you'll do, what kind of support? What is the thought process you all can also share some -- from a product standpoint, that would be very helpful.

Yes. So your second part is right. We want to invest back into the business and keep building the brand. But the first part to say that we are far away from breakeven, that probably is not correct. We probably will break even this year itself. So that's a [indiscernible] thing. And we will continue to support the business, both ATL and BTL. I had multiple times kind of said this that both from a brand building perspective as well as making the consumers interact with our product, you yourself said that you like the product. And so we want to do a lot of consumer interaction and sampling so that consumers are -- they are able to taste our product. It's a very high inertia category where people don't want to easily change. So that's the strategy we will keep on adopting and investing back into the business.

So this year, you will both -- both from the branded and the non-branded in the domestic market year will end up at around INR 200-plus crores?

Yes, around that number, plus/minus INR 5 crores, INR 10 crores here or there.

And how much of that would be the branded category?

So almost, let's say, just a second that, almost 70% to 75% will be branded.

Okay. Got it. And in the branded category, what would you all now be having as a market share of the domestic markets?

So as per Nielsen, we still are very small because our reach is very less. So the sampling becomes that much more difficult for small brands. But in spite of that, Nielsen now reports us as the #3 brand, and we have got a 3.1% market share in the South of India, which is the southern part of the country, which almost accounts for 70% of coffee consumption. So there, we have already reached the 3%, 3.1% market share. And we continue to grow. This is like every quarter, we keep on adding to the market share.

So 3.5% of the instant coffee, South India Instant coffee market?

Yes, yes.

Next question is from the line of Mayur Patel from IIFL Asset Management.

Congratulation for a good set of operating performance. Just 1 question, Srishant, is it possible to share with us the overall volume numbers some breakup between different territories than [indiscernible] also the EBITDA per kg because like we have always assured us that percentage margin is not the right way of looking at it as far as we are maintaining the spread per unit. Is it lower than the normalized level, EBITDA per kg? And how much price hikes or how that will normalize going forward?

So volume's numbers and the EBITDA per kg, this data is something that we have consciously mentioned that we will not be sharing because it is going to be detrimental for us for multiple reasons, I'm sure you'll understand. And as far as volume is concerned on a percentage basis, I can mention that around 17% or so was the volume growth that we had at this time.

Okay. And how is the EBITDA per unit or some spread per unit, how far is it from the normal level?

So on the normal levels, it's almost the same, actually. There is not much of a change. So we work on a cost-plus basis. So that's very -- if there's any change in raw material prices based on the extent of raw material prices or maybe pass on to the customer. So based on the blend that we are supplying to that particular customer, the per kg based realization will always be the same. So that's 1 of the main reasons why the same customers have been with us for so many years because if there's any fluctuation in prices also, it's not like we use that as an opportunity to increase prices or anything like that.

Sure, sure. So 17% volume growth is -- that's helpful. That gives us some perspective. And Srishant, what is -- are you maintaining your 15% to 20% growth guidance for this year?

Yes, yes. We are.

That's on revenue or that's on volume?

That's on the volume growth. See, we normally give a guidance based on volume growth, revenue becomes a little misleading because revenue will definitely be more than 20%, so maybe even 25%. So that's why we usually give only on the volume numbers.

Sure. And just like you mentioned, but my line was there, what is the current status of the capacity expansion time lines that if you can just reiterate that would be helpful?

So the -- right now in Vietnam, we have completed the previous round of expansion. So we have 13,500 tonne capacity over there right now. And we're in the process of doubling capacity by quarter 3 of next financial year.

Okay. [indiscernible] That would be the commissioning of doubling of capacity in Vietnam.

Yes.

And the packaging-related new capacity all those things are commissioned already?

Yes, that will be completed in this quarter. We've -- actually, the plant is already up and running. We are using the facility, but all the equipment shifting hasn't taken place because we have back-to-back orders right now, and we are not able to transfer the equipment unless we get a small window. So we're doing it in a very phased manner. So that will be completed by this quarter.

The next question is from the line of Nitesh Jain from Birla Mutual Fund.

So since I have 2 questions. Number 1 is on the India business. So if the domestic B2C business picks up well as Praveen mentioned, would you give the unit dedicated to apply to, say, India branded business because I believe some of the old [indiscernible] said benefit will less and you would require capacity. So if you can confirm that. This is question number 1. And secondly, what is the plan on the new unit [indiscernible] unit in India. Do you have any plan to double up capacity of freeze-dried also at this point in time or you will wait?

Okay. So as far as domestic market is concerned, yes, our thinking process from day 1 was that once we reach a certain minimum threshold level that's when we'll initiate the process of setting up a new factory or DTA unit, which is dedicated for the domestic market. So that process also will be starting by maybe end of this year itself. And as far as the second question, what did you ask? Hello?

Yes.

What was the second question?

Second question is on the FDC expansion.

FDC expansion, yes. So FD expansion, we are not really looking at that at this point in time because based on the market information that we have. There are a couple of new plants that are coming online 1 in Brazil, another in Vietnam by next year. So there is going to be a lot of pressure on FD going forward. So we were thinking that it is better for us to delay this process a little bit. When we have a little bit more confidence about whether it's worth going in for the FD expansion, at that point in time, we will go in for that expansion. Right now -- see, there's normally like a cycle that the market follows for SD and FD. Today, the gap between SD and FD has come down drastically. With the green coffee prices going up the way that they are, people are looking at cheaper options and SD is the only option that they can transition to. In SD also, you have really good qualities, which are possible, which are still cheaper than FD. So that's why there is more of a movement towards SD that we are seeing. And we foresee that the green coffee prices are likely to be high for the next 2 years at least. So that's 1 of the reasons why we are more confident about SD the expansion rather than FD at this point in time.

Fair enough. And my last question is, so you mentioned that overall, you have 3.5% market share in South India. If you were to dissect -- or if you were to look at some of the micro markets, okay, coffee consuming market in South India. For example, let's talk about say Andra, Telangana, or some smaller regions, what is our market share in those micro markets? In any of those markets, have we crossed a 7%, 8% market share also in some of the pockets? Basically, I'm going 1 step down, what you -- I will mention.

sure, sure. Praveen? Praveen will answer this.

[indiscernible] extremely well especially like, say, a whole of AP and Telangana, we probably are at 6% to 7% market share. So that's pretty hardly. Even in Karnataka, we are now very close to 5%. Tamil Nadu is a market, which we have to develop more. So yes, there are pockets that we have done well. And now we know that, okay, what works in the market -- in these micro markets. And we just have to kind of try and replicate more of what we have done in these markets into other markets.

Fair enough. And last 1 is, can you [indiscernible] on this coffee vending machine business? How [indiscernible] going in this business?

Yes. So coffee vending machine business for the last 2 years has been a little on a roller coaster because of COVID because large part of coffee vending is out-of-home consumption. And we all know that, time and again, this has been hampered. But we are quite bullish on this segment that sooner or later when the COVID thing goes away and when people are back to office, this segment is going to grow because out-of-home coffee consumption is set to rise. And considering the India's work force, which is going to consume that much amount of coffee, this segment is going to grow big. So we're just waiting for this right opportunity where we can mount a par pressure on this business.

The next question is from the line of Ashwini Agarwal from Ashmore Investment Management.

Good numbers, congratulations. So 1 of the things I was wondering is like if you look at the next 2 or 3 years, how should we think about margins on a per kg or a per tonne basis? Because you have multiple drivers, right? I mean there is consumer pass and there is the cold brew. And then you have [indiscernible] operating leverage from larger capacities at Vietnam in terms of spreading the overhead over a larger volume. And you have the consumer business going from a loss to profit. So how should we think about this? I mean, is this going to be a significant driver of margins over the next 2 or 3 years on a rupee per kg basis, if we were to clock them?

I think Mr. Lakshmi Narayana can answer this.

Can you repeat the question, please, if you don't mind?

No, no. The question I had posed was that on a strategic basis, if you think about it over the next 3 years or so, there is a lot of efforts that from what I understand the company has made over the last 3 years, which includes during the consumer foray, which is now turning around, as explained earlier on the call, then there is the consumer pack then there is larger capacity in Vietnam, which would hopefully see some operating leverage, and you have the cold brew. I mean putting all this together, I mean, what kind of a lift to operating margins on a per kg or per tonne basis should we think about over the next 2 or 3 years?

[indiscernible] We have certain issues. [indiscernible] so that we cannot expect upon the part of kgs raises the margin and all. But by introducing a different kind of products and the capacity expansions in force, and [indiscernible].

Excuse me, this is the operator. Sir, I'm sorry to interpret your voice is breaking.

Yes. There is a let after introducing of different varieties of products that we are working on and as well the completion of the installed capacity at Vietnam and all and even after implementing the operated facility for DTA requirement for our domestic business, there is a possibility that -- there is a possibility that to increase the margin. But as we treat it that we work on the cost-plus model, we keep following the same the procedures that we adopted so far. And -- but we still having introducing the new products. Definitely, there will pay a little amount of improvement in within the operating margin.

So in other words, we are talking about when we are adding premium products as well as small packs going forward, on an average basis, the per kg margins also will improve slightly.

Okay. So it's going to be a small improvement is what you're suggesting not a significant improvement?

Yes, because our volume base is already so high, so if -- I mean, whatever new products that we introduced, that volume will be initially small. It will take some time for that base to increase substantially more.

Right. Okay. And the second question I had was that, over the last 4 quarters, shipping cost, container availability has been challenge here. What we are hearing is there is a lot of parts has now normalized. What are you seeing on the ground?

Actually, things really haven't normalized. It's not as bad as it was before because we are getting containers, but we are still being forced to pay the higher premiums and all that, which is impacting everything for us. In fact, as a country as a whole, if you have to supply from India, we're not able to compete with Vietnam. Vietnam raw material is available locally, so there's no transport cost. Earlier, the gap between India and Vietnam is only marginal, so we could supply to customers from either option. Today, customers are saying, no, I'll just buy from Vietnam because there's a huge cost variation that's coming about. So there is an impact of transport. And it looks like, for the next 1 year, it's going to be the same.

Right. Right.

Opportunity for us are dependent -- we're using most of the domestic -- and for the domestic market, we are using the India plant more. So that's actually a big saving grace for us actually.

The next question is from the line of Vineet Mehta from Sameeksha Capital.

My first question was on the broader picture. What I wanted to know was, in terms of world level coffee and geographies like Europe and U.S., the big geographies, what is our market share? And what kind of opportunities are we seeing in that segment?

Market shares in each geography will be in the range of maybe 5% or so in most of these places. In the U.S., we'll be at around almost 7% in the U.S. Europe will be a little lesser because that's a much bigger market. And Asia and other places, there's some countries, we are -- like in Russia, we'll be, more or less, at around 15% or so approximately. Yes. In Asia and other markets also, it keeps varying depending on the region that we're looking at.

And where are we seeing the growth opportunity in these markets?

We've actually seen across the board, it's not restrict to any 1 area. There are a lot of new territories that we keep going to as well. So we have new markets also where we are seeing a good growth potential.

Okay. Okay. And my second question was regarding the working capital. The working capital requirement for us has increased in the last 2 or 3 years -- last 2 years actually. So is this -- what will be the case going forward? Or is this going to get normalize to [indiscernible] level?

So actually, I think the working capital there be further enhancement going forward because of the volumes that are increasing. You would have noticed that there is a good amount of volume growth compared to last year same quarter. And in addition to that, the green coffee prices also have gone up substantially. So keeping these 2 main factors in mind, the working capital utilization also will increase proportionately.

But as a percentage of sales, would it increase? Or would it normalize at these levels?

It's more or less stabilized of these cells. On a percentage basis also, because of the raw material price increase, it's increasing a little bit more. We are expecting the normalization to take place in the next 2 quarters, at least.

The next question is from the line of Dikshit Mittal from LIC Mutual Fund.

Sir, my question is on, you mentioned that logistic cost has still not normalized. So can you give a sense like how much the container costs are up? on a normalized level?

So normally, earlier we used to have $4,000 as a container cost from India to U.S. Now India to U.S. is costing around $12,000. And even from Vietnam, for instance, it -- what used to be, say, $4,500 is now around $19,000. So that's the kind of price increases that we have seen today, whether as -- whether the contractor is FOB or CRL, it doesn't matter because either we bear the cost or the customer bears the cost, eventually, the cost has to be borne. So customers today are actually deciding which origin to buy from based on the transport, more than anything else. So for us to import raw materials also because the prices have gone up, it's becoming much more expensive to buy the raw materials as well.

And sir, because as you mentioned that basically most of the costs are passed through, but I think logistics will be borne by you, right? The green coffee prices...

Logistics prices -- So if it's green coffee logistics that gets added and then only we quote to the customer. In fact, that's 1 of the reasons I mentioned earlier also that Vietnam is becoming much more attractive for customers because they have -- we have certain products, which have been approved from both factories, and we usually give both options to customers. Earlier, the situation was that either factory that they select from, the landed cost for the customer was more or less the same. So based on that, they used to take a decision. Today, the gap has increased between India and Vietnam, which is why the customers would prefer to buy from Vietnam more than from India.

Okay. But on the finished product side, that is borne by you?

Finished products side, mostly we do FOB contracts. So because of that the freight is usually borne by the customers only. In some instances, yes, we do CIF contracts as well. In those cases, it's borne by us.

And sir, lastly, you mentioned from India manufacturing, you are servicing only Indian customers. So how much is that out of total, for example, 30,000 tonnes, how much is sold in India currently? And how much is exports?

So India we're doing around maybe 5,000 tonnes or so? So rest of it is exports.

The next question is from the line of Nakshita Mehta from Credent Asset Management.

Congratulations on a good set of numbers. I had a couple of questions. One is on the capacity. So what would be our existing capacity? And how much is the capacity utilization as this -- the level?

Our existing capacity is around 38,500 tonnes. And utilization, we are at around 80% to 85% utilization as of now.

Okay. And are we expecting it to, to be utilized at the full capacity any time soon?

So again, utilization will definitely improve going forward. But equipment, typically, you should take only around 90%, I mean, as maximum utilization, you won't be able to really -- that 100% part at any point in time. Because you have to plan for plant shutdowns, maintenance shutdowns and all this as well.

Right. Perfect. And so since we are expanding in Vietnam also. Can I know the export and the import revenue -- import breakup as well? And how much is the exports from Vietnam and how much is from India?

Lakshmi Narayana [indiscernible] Can you please answer this?

So from Vietnam, we did our revenue to INR 1,086 crores of the business, INR 322 crores. So we does it from Vietnam and which is almost around 97% are exports. On the balance, remaining INR 100 crores, unless we [ derivate it ] from India. And way out of this, almost around, I can say that around 90% is exports and the 10% is the domestic.

Okay. Okay. And so coming to a next question, since you said the container cost has risen and there's an inflation effect also. So could you just give us a little color on that? And what do you think is the inflation effect? And what is it going forward? What do you expect? And how do you expect to deal with it? Is it a pass-through cost? Or can you just throw some light on that?

Yes. So as far as container costs are concerned, again, it depends on the type of contract that we have with the customers whether that's the CIF contract or an FOB contract. For all the CIF contracts, we end up bearing that cost to the maximum extent possible we usually do FOB contracts only from the company. And we usually customers also we'll -- if they want the conversion also to CIF, we do it at the cost of that particular point in time.

Right. And what about inflation as in -- even on your raw materials? So -- and also, since coffee is a premium product, right now, because of inflation and those things, what is the demand? how is the demand...

So inflation really doesn't have too much of an impact for us because whatever -- so globally, coffee is bought in dollars. It's traded in dollars. So our raw material purchases is in dollars as well as our finished product sale is also in dollars. So that's why there is not much of an impact of the inflation of currency fluctuation on our business. There is natural health status there.

And also my last question is, how is your distribution channel? How -- can you just tell us a little bit about how you distribute your products? And what is your channel basically?

You're talking about for exports or for the domestic?

For both, both actually.

Okay. So for exports, actually, we end up supplying the coffee to our customers who take care of the distribution from their side. We have partners in different regions who take care of their local distribution. For instance, in the U.S., we have this company called Ground Up. We've been working with them for more than 35 years. And we supply to them based on whichever port they ask us to supply. And they do the warehousing internally and they supply to customers after that. So we have similar partnerships in Europe as well in other parts. And in other -- several other customers, we just apply to them directly to whichever warehouse that they ask us to, and they take care of the distribution after that. In India, though, we have a distribution network that has been built up by Praveen and the team, and we're using that for the domestic market.

The next question is from the line of Akhil Parekh from Centrum Group.

Congratulations on a very good set of numbers. My first question is Praveen. Our domestic Indian market is roughly around INR 1,500-odd crores, and you mentioned that 70% is South India, which roughly converts into INR 1,000 crores. And if we take 3%, 3.5% of INR 1,000 crores, it comes only at INR 30 crores to INR 35 crores of the branded business. why we are at run rate of around INR 140 crores. So I kind of didn't get this math actually.

So Akhil, the first point that you mentioned, the market is not INR 1,500 crores. It is INR 2,300 crore to INR 2,400 crores.

Okay. Okay.

So if you do the mathematics from there, then you will see that 3.5% falls in place. Secondly, there will always be a gap between Nielsen picking us and our sales because we are a very small brand. So the larger the brand is, the sampling becomes that much more robust because Nielsen also works on a sampling basis to record takes, yes. So that is where the gap would come a little bit of gap. But it is not as far as what you mentioned because your starting point is different. It is INR 2,200 crores, INR 2,300 crores to 70%, if you take, it will be almost INR 1,500 crores into 3.5% give or take, it will be around INR 55 crores, INR 60 crores, yes? So that is what Nielsen is taking. And there is a little bit of a distinct gap because of the sampling this thing.

Sure, sure. And the second question is, you mentioned that we're reaching around 70% to 75% of INR 200 crores this year, basically in the branded business, which roughly is around INR 140-odd crores. Is that number correct?

Yes. Yes, absolutely.

Okay. And will the PAT even basically profitable this year please?

To breakeven, we are not generally -- that was the target we have -- we had put that we'll break even whatever we are earning, we are trying to invest back into the business because brand building does require a lot of continuous effort. So we will not be looking forward to pull back our efforts in the next 1 or 2 years or so.

Sure. And my last question on the branded business. Have you increased our marketing expense because I mean, it's heartening to see TV commercials across multiple channel on prime time basically. If you can please guide us in terms of how much we are spending?

Yes, we haven't increased our margins. Generally, every year, we have been spending around INR 13 crores, INR 14 crores -- INR 13 crores to INR 15 crores on marketing spend. The reason you would have seen is that the first time we advertise on a non-South channel. So we put our ads. You would have seen the freeze-dried add on various news channels and things like that in the prime time yes. So that was the first time we kind of went -- because we are now expanding our distribution in other cities as well, like Delhi, but all the 10-lakh-plus town India, we are expanding our network. So therefore, we thought that it will be good for us to build some brand awareness across, and therefore, we had done a little bit of advertising. But that wasn't hugely -- there isn't any additional, additional spends on that. We are within that range of INR 13 crores to INR 15 crores of advertising budget.

Okay. But will we stick to this target for next year ever? Or are we planning to say maybe ads during IPL matches and all basically [indiscernible] ?

I don't think so will we afford to -- we can afford to be on IPL. But yes, we are making our plans. This quarter is when we'll make our plan. And definitely, we will add to awareness building exercises. Now whether it is in a niche way to do it on news channels or whether we do more of digital medium advertising, we'll figure out a plan. But yes, the bottom line is that we will look forward to build awareness in the non-South area as well.

Sure. Got it. And just 1 book-keeping question to Srishant. So sir, did you mention that we are going to add capacity for spray-dried as well as India starting of end of this year, basically?

I said that, yes, we should be looking at that option. We're not -- as once the domestic volumes increase, the idea right from day 1 was that -- today, [indiscernible] is 100% export-oriented unit. And anyway, 50% of whatever we are exporting, we can sell in the domestic market. So as of now, there's no problem. With, what, 14,000 tonnes spray-dried capacity, if we are crossing 7,000 tonnes, that's when we'll start having problems because we'll be exceeding the limit. So that's 1 of the reasons why we talk and start the process by the end of the year so that we can then create a DTA unit for the domestic market exclusively.

The next question is from the line of Kashyap Javeri from Emkay Investment Managers.

Just start to -- starting with some book-keeping questions. When you say doubling the capacity in Vietnam, this will be additional 13,500 or 10,000 tonnes?

Another about 14,000 tonnes.

14,000 tonnes.

Yes.

So on the expanded capacity, we are doubling the number?

Yes. On the expanded capacity, maybe with the line balancing, it may go up to 15,000 tonnes. It would be each unit more than double.

So the total capacity in Vietnam will be approximately slightly upwards of 28,000 tonnes?

Yes, around 28,000 tonnes.

Right. And what was the FDC to SDC proportion in the ratio in M-9 FY '22? And on the expanded capacity available in FY '24, what would be the ratio on the production capacity basis?

I didn't get you. What ratio are you asking about?

freeze-dried to spray-dried, what was the ratio in M-9 of FY '22? And on the expanded capacity with Vietnam, on the consolidated basis, what could be that ratio on the expanded capacity, which will be available for full year in FY '24?

Okay. So and 38,500 is where we are at right now and freeze-dried is at 11,000. So the 11,000 will remain constant and with adding 15,000 to spray-dried. Everything else is spray-dried. Apart from the 11,000 everything else is spray-dried.

Okay. Second question is on the U.S. operations. The market share that you mentioned is only on the outsourced business or including whatever likes of Nestlé do in-house?

What outsource business are you referring to?

So you mentioned about market share in geographies, right, earlier?

Yes, yes. So market share, I was talking about like overall consumption, which is taking place in the U.S. So based on that consumption...

Including the whatever some of the brands do in-house also manufacturers.

So on the bulk and brand suppliers, everything that we are supplying to that market [indiscernible].

Okay. Okay. And in the last conference call, we had mentioned about another large U.S. retailer besides 1 large brand that we are working with, who has approached us for sourcing. Has those conversations have they progressed any further?

Yes. One that have asked us for capacity, available capacity. And we're saying only once we have that excess capacity they can consider us before that, it doesn't make sense for them to undertake the entire exercise. So we need to complete our expansion and then only we'll be able to approach them again.

Okay. But I mean the blend or the type of coffee and all those approvals or let's say those conversations have been done once [indiscernible], it will just start from there?

No, no. That is the easiest part for us. We already submitted samples to them in the past. And in principle, they are interested, but it's just that they don't want to have too many vendors. They want to have only 2 vendors, 2 different territories. And they want to have simplified procurement. So that's the reason why they're saying unless that capacity is there for us, it doesn't make sense if you're giving us only small volume like 1,000, 2,000 tonnes, it doesn't make sense but this is what they were saying.

Right. And last question from my side, Vietnam operations, can you give separate numbers in terms of what was the revenue and EBITDA for the quarter?

I think Mr. Lakshmi Narayana can give that.

Top line, it was INR 322 crores.

Sorry, I couldn't hear you, sir. Can you come again?

The top line at the Vietnam operation are at INR 322 crores. And coming on to the EBITDA -- turning on to the EBITDA, it was INR 87.39 crores.

Sorry, 87.?

39 crores.

And top line, you mentioned was INR 322 crores?

Yes.

Sir, just 1 last question from my side. Again, just a clarification. If I look at our EBITDA number in Vietnam and in Indian operations, it's sort of materially different numbers. So the EBITDA number in Vietnam was about 27% for the quarter versus that Indian operations just did about 16%, 17%. Why would such a large difference would be there between the 2 operations?

Transport cost.

Sorry, transport cost.

It will be transport cost. Yes, we have to import coffee from Vietnam and other origins to India. And Vietnam, we are able to procure locally. This is 1 of the points I mentioned earlier, right?

But I mean the difference in this particular quarter is like the widest that we have seen in many quarters, and which is why I'm asking the question.

Transport costs have increased the maximum extent in this quarter, in quarter 3. If you look at the transport cost on a per tonne basis, we used to pay around $80 per tonne for green coffee to transport it. Now we are paying $300-plus per tonne. So there is a huge increase in transport cost itself, which is having a direct impact.

The next question is from the line of Mohit Kumar (sic) [ Khanna ] from [ Banyan ] Capital.

Am I audible? I'm not able to hear anybody.

Yes, you are audible.

Sir, my question is regarding the distribution network that we have. Could you quantify the amount -- number of distributors or the retail point of sales that you are reaching currently as compared to 6-months ago or any targets that you have for the next year or so? And I'm Mohit Khanna not Mohit Kumar.

Mohit, can you hear me. This is Praveen this side.

Yes.

So 6-months or, let's say, last year, Mohit, we were distributing our product to approximately 70,000 to 75,000 outlets. And today, a peak, we are disputing directly to almost 1 lakh plus outlets. These are all the retail outlets that I'm talking about. So that is the distribution that we have created. And this is distributed through almost 300 to 350 distributors across the geographies. So that is -- those are the numbers as far as distribution is concerned. Going forward, obviously, we'll have to plan -- we have to expand our network. Now networks expanding is a tricky thing because you must be very confident that the cost of reaching that additional outlet should be less than what throughput that you get from that outlet. So as we go along, we will take it up in a step-wise manner. But our whole idea is to get to a distribution level where the weighted distribution comes to around -- crosses the 50% level. Right now, it is at 30%, 35% level. So we need to cross to -- cross over 50% to 60% level. So that is what we are looking for.

Right. And if you could just also give a quick overview of how this is -- this network is divided among the geographies, north, west, south and east?

So largely, until 6-months ago, all of that 30,000, 90% was in South and the rest was a little bit to East and rest. Today, as we speak, out of this 1 lakh outlet almost 75% is in South. And the rest 25% we have started building in the East, West and North. So East, West and North are relatively small right now. But as we gain momentum -- what has happened is that every time we have kind of started to expand the distribution network, unfortunately, COVID has struck us, and that leads to a little bit of this thing -- a block for us. But thankfully, this time, it's not so severe, and our efforts have started seeing lights of the day. So almost now we are present minus out the non-South areas into 25,000 outlets. So just, for example, in [indiscernible] area now in almost 3,000 outlets. In Delhi, almost 2,000 outlets. In Kolkata 1,500 outlets. So similarly you know step by step, we are taking our distribution ahead in these zones as well. And this will continue going forward because the more we expand, the more sales we'll be able to generate.

Got it. Got it. Now just a final thing on this one. What is the sales force or -- that you have currently on the ground to expand this network? And what are the internal targets to -- on the sales force expansion, hiring more personnel for -- to reach out or cover the territories?

So as I told you, we are -- we will be expanding in a calibrated manner because cost is an important factor. But as we stand today, we are almost -- we have got around 250 people on the street. And we are looking to add another 20% to 30% this year. And through that and building through more efficiencies with the current sales force we have, we are looking to expand approximately another 50% of outlet by the next -- end of next year.

Next question is from the line of Ritu Modi from IIFL Management.

Congratulations on good numbers. I think I missed this in the beginning of the call, if you can just help me understand how is the mix of FDC and small packs for you currently?

Yes. So freeze-dried, you're talking about capacities or you're talking about?

Volumes and the revenue mix that is something you would want to shed.

Okay. So SDC, as 1 of the things that you mentioned is around 80% to 85% capacity utilization is being done. So that stands across the board. So capacity side, I've already mentioned that 1,000 is FDC and balance is on spray-dried what we have out of the 38,500, 11,000 is freeze-dried and the rest is spray-dried. So you can take 80%, 85% of that across the board will get [indiscernible].

Okay. And in regards to the small pack, what sort of volume contribution are we getting from small packs currently?

So small packs includes both our domestic market as well as for our exports. So around 25% of our capacity is in small packs right now.

Okay. So the expanded capacity, which is going to be somewhere close to 12,000 tonnes for the small pack, even going forward, it will be used [indiscernible] consumption like the domestic canter business would be close to 25%? Or is it likely to increase?

It will definitely increase because domestic volume is also increasing and our export volume is also increasing. We are starting with this 12,000 tonne capacity. But we have the ability to expand up to 20,000 tonnes in the same facility. Yes.

Okay. Okay. Great. And if you could just also help me understand how much would be the -- for all the other -- for our other clients, what should be some delta between bulk orders and small pack orders that we get in terms of profitability?

I can't clearly comment about anyone else because we won't have that data. From our side, I can say that the small packs is definitely more profitable than the bulk packs. That's 1 of the main reasons why we've been focusing on the small pack business. Because if you are given the final finished product to the customer, the customer is willing to pay that extra premium as well.

Sure. Okay. And just if you can just call out something if there have been any new client additions or new [indiscernible] which are currently -- simply or anything worth highlighting on that?

So adding new customers is something that we do on a constant basis that customer needs and all that is something that we don't reveal because of customer consent and all that. So every year, we do this over the 3 years, every quarter, we keep adding new customers, and new ideas, new territories. We keep expanding into new geographies that we haven't gone before as well. So this is a constant ongoing process for us.

So the orders which we currently have are -- and the capacity which we are currently even expanding and building, that will cater to all the orders that we currently have in the pipeline? Or do you need additional capacity expansion even at Vietnam and in India?

So we will be taking additional capacity in both locations, which is by quarter 3, the additional capacity in Vietnam will come online. We've already initiated the process with order everything. So that will be completed by quarter 3 of next financial year. And in India, once this expansion is completed, we will be able to free up a little bit more of the India capacity for the domestic market. So there won't be any immediate need for expansion in India, but we will be initiating that process of expansion in India now. So that in the next year or 2, it will be completed.

And what sort of CapEx would be required for this expansion in both -- I mean Vietnam obviously, we've indicated earlier, but for the new India plant, what is the CapEx requirement that is required?

So it is too early for me to say this right now. So I think after the next 2 quarters or something like that, we can get into these details.

Sure. Not a problem at all. Just lastly, on the domestic branded business, we are currently at some 150, we've gone up to 200. So over the next probably or 3 to 4 years, how are we looking at this entire business shaping up in terms of our contribution to the overall business at the consol level?

I think, Praveen...

Ritu, Praveen here. Yes. So as we have been growing, we would like to keep the growth [indiscernible] I see that our endeavor of brand building should continue -- And we should -- we are looking to grow at this and obviously, the bases are growing, so we'll not be able to grow at the kind of pace we are growing. But in terms of adding absolute values, we are looking to grow. We are not putting any numbers right now, but putting the same kind of aggression that we have been putting in the last couple of years. As far as the contribution is concerned, today, we are almost 10% of the total value business of the parent company. Of course, a lot of times people have asked this question that what is that branded business contribution will be? That's a tough 1 to answer because for both these segments, we are looking to grow aggressively. So we're not putting 1% of the pie as a target. But what we are saying is that how can both the businesses have kind of a growth that -- aggression in the growth that we have seen earlier and that we maintained or not? So similar to what we have been doing for the last couple of years, we want to be in a 30%, 40% growth in the domestic business. And as we have given guidance, as Srishant has also spoken a number of times, we are looking, at least in the next couple of years, to grow both top line and bottom line for the parent company anywhere close to 15%, 16%, 17%. So that's the kind of momentum we are looking to maintain over a period of time.

The next question is from the line of Jignesh Kamani from GMO & Company.

We aggressively focus -- started focusing on the U.S. market in the last 2, 3 years in -- particularly in the specialized coffee and the small pack. So how is the progress in currently right now? In a sense we are targeting this year in the U.S.? And [indiscernible] earlier you were slightly interest in the on the receivable days, if you want to develop this partner in. How is the current [indiscernible] the U.S. business?

So the response in the U.S. has been quite good and our volumes also are increasing. In fact one of the biggest challenges we've been facing right now is there's a lot of backlog that is there. That's a good problem to have. [indiscernible] So overall, our U.S. business is growing, but I can't get into any specifics about any particular client over there.

So what will be next, say, 2,000, 3,000 tonne this year in U.S.?

Yes, yes, more than that.

On the working case cycle because our receivable days from the U.S. was slightly higher than the other markets because we are even supporting the client in terms?

The volume is increasing beyond that. So that's the same receivable base and on will continue. U.S. [indiscernible] able to pass on credit to their customers. Yes. That's part of the normal course.

Second thing on the Vietnam. Like In India, we have a [indiscernible] tangible capacity so we can produce more small pack, more variety of instant coffee. While Vietnam -- we have limited -- we need to have a bulk production -- large production, which you can say doubling of capacity will be so [indiscernible] in the sort of producing small quantity, small variety, multiple variety at Vietnam also just like India, or it will more in line bulk large client market for Vietnam?

So Vietnam, the expansion that we are doing now, we are going in for increasing flexibility in bulk production only. Right now, we have maximum flexibility in India, and that's 1 of the reasons why we're doing more of small packs and specialized products from India as of now. But going forward, we want to offer premium products and specialized products from Vietnam as well. so We're building that. We do have the ability to do a little bit of small packs in Vietnam also. So we -- right now, we are not clearly focusing too much on that because there is a lot of bulk coffee demand that is already there. We are just trying to cater to that from Vietnam as of now.

Understood. So it's more doubling of capacity is also more towards targeted to the bulk demand customer compared to India?

[indiscernible] bulk demand but we are getting some inquiries, especially from the Asian regions saying that they want small packs also from Vietnam. So for those customers, we are concentrating setting up a couple of small packing lines in Vietnam itself. We already made a provision on day 1 for this option. So we'll start building a little bit of small pack capacity. It's not worth getting into more details for small pack on Vietnam at this stage.

The next question is from the line of Richard D’souza from SBI Mutual Fund.

Congratulations on a good performance. And just a couple of questions. One is, when you look at the gross margins at stand-alone [indiscernible] quote a bit. So is that a function of the logistics cost or? And do you think it is something which is a more permanent feature going on? What would be your view on that, sir?

So as of now, yes, it's privately because of logistics only, especially in the import logistics for green coffee that we are seeing the impact because all the contracts that we are currently getting, it's -- these are contracts that have been entered into long back. That's what we are seeing coming in now. And going forward also, as of now, the indications we are getting is things are going to remain more or less the same way for the next 1 year at least is what indications we have got until now. After 1 year, we'll have to see how things shape up.

Okay. Okay. The second aspect to this is, if you look at your subsidiaries growth, I think those have grown far faster than what the [indiscernible]. So any listing on that?

Yes. So all the units are doing well, fortunately, because; one, as far as Vietnam is concerned, I've already mentioned there are a couple of things which are running in favor of Vietnam. As far as the Swiss unit is concerned also, thanks to our Managing Director over there, he's also been able to grow some volumes, do a little bit more of supermarket business in Europe, which has enabled us to grow faster there. And domestic, as you have seen, what Praveen mentioned, we are seeing about a 40% decrease in volumes year-on-year. So the product acceptance has been excellent and demand has been very good. And our main constraints right now are with respect to meeting their supplies. So that's the main issue that we're facing at this point in time.

Okay. A couple of questions on the international market, basically. -- the value-added products, what percentage would they be of your total term currently? I believe last year or something, it was about 5%, 5% or 6%.

Value added products -- As of on the instant coffee itself is a value-added product. So you're talking about specialty products within instant coffee?

Yes. Speciality coffee.

Specialty Coffee will, yes, be around maybe 5% or so.

Okay. That hasn't grown much, is it?

No. That -- because the volume base is also growing, right? So the fact that it's still at 5% means, this is also growing at the same pace.

Okay. Sir, this was saying as a percentage of turnover or percentage of volumes?

Percentage of volumes.

Volumes. So turnover could be that?

Yes, when it comes to turnover, it will be a little bit more.

Okay. Okay, sir. And any update on the markets in U.S. and Europe, how they are shaping up after this third wave? How do you see it going ahead?

Demand as such, there's no fair negative impact. The demand is more or less the same. It's constant. And for them also, institutional business got converted into from home business. So that's 1 change in trend that we have observed across the world just the way we have seen it to enter. Same thing is applicable in other country as well. But now with offices opening up, even the institutional segment to slowly increasing again.

Okay. But are we seeing any corresponding dip in the home business? Will it revert back to the norm?

There could be a slight decrease in the home business once the offices open up. But one good thing is that because the consumption, the pattern has gotten created in the last 1 year, people are getting used to consuming some coffee in the house.

Okay. One last question on the this thing, sourcing in the domestic market. With instant coffee, which we are importing. Now going ahead, the pricing, which is going to be there for the new contracts. Are you going to factor in the higher logistic costs, which are there or you are...

Of course. All the current contracts, we have to factor in the existing logistics costs and then on the quote. So that's what we are doing. That's also 1 of the reasons why most of the customers are preferring to go to Vietnam rather than India.

Okay. A couple of questions for, Praveen, Sir. On the domestic market, the competition seems to be heating up. We are seeing a lot of aggression by ETC. And even Nestlé has launched -- started launching in [indiscernible]. So how do you envisage this going ahead?

Yes. So the competition is there. There is no doubt about it. And the competition is coming from both fronts. One is that you have got larger players like Nestlé and Unilever putting the pressure and you have got players like ITC trying to enter this way. And then you have these -- all the niche players, the D2C players, who are also trying to launch coffee. But this is part of a larger trend, and we're actually happy about all of this thing that is happening in coffee market because it is expanding the coffee. India has largely been a tea-drinking nation. And all these innovations and all the things that are being launched in coffee is only going to expand the market and will help us grow as well. So while, yes, there is competition, we are looking at it in a more positive way that it is going to increase the pie itself.

Okay. The second question, [indiscernible] on the online initiatives, how far is that?

So we are doing pretty well on online as well. And if you really go to sites like Amazon and Flipkart, you will see the amount of reviews and the amount of ratings that we are getting is actually indication of the fact that we are doing pretty well in online business. Today, the online business is almost 10% of the total retail business. So that is good news. And we are kind of keeping the growth momentum on and growing on not only seller portals like Amazon and Flipkart, but we are also now have created our own online shop, and we'll try and expand as much as possible on that front as well.

Okay. Coming back to Srishant, sir. Any new customer sign-ups or anything which has happened over last quarter?

Yes, there's a lot space of new customers that keep getting added every year. So that's a normal ongoing process for us.

Okay. Okay, sir. And this is [indiscernible] which was asked earlier. When you look at the overall product mix, the way it is shaping up and expanding new customers and new this thing. So would it be fair to say that your EBITDA for margin, the target which you have set of 138, you would exceed that service over the next 3, 4 years?

For the domestic market, 130?

i think for the [indiscernible] consolidated level in target of about INR 130 rupees per kg?

I can't get the question. You are saying INR 130 per kg, or what was INR 130 per kg?

So INR 130 per kg of spreads on your expanded capacity, let's say, 3 to 4 years down the line?

Lakshmi Narayana, can you please take this?

So we are hopeful of maintaining that.

The next question is from the line of Lokesh Maru from Nippon India Asset Management.

Congratulations on the amazing results. I just have 1 or 2 questions from understanding the business side, which is, for regarding the order book, for how long is the visibility that you usually have into your order book in, let's say, just to maintain the -- or rule the order book which you already had? And another is, what is the percentage of short-term contracts that you signed, and how to go [indiscernible]? And what is the proportion of long-term contracts maybe which you signed or must have signed previously? And how do you maintain that ratio balance? Or what is your view on -- or visibility on that part?

So usually, most of our customers, around 70% or 75% of our customers do long-term contracts, which is 1-year-plus contracts. Out of this 75%, there are about 15% of the customers who do up to 2 years as well. And as far as visibility of the order book is concerned, usually, we'll have it around 6-months to 1 year visibility of the order book at any point in time.

Next question is from the line of Dhiral Shah from PhillipCapital.

As we know that Brazil is facing a severe drought-like situation, which has taken at all on the coffee production also. So are we seeing any market share gain because of that impact?

There is an extent of market share gain because of that as well. Now Brazil has become very expensive. They're not able to supply to several other countries because of that decrease in prices. So that did give us an advantage during this financial year.

Okay. Are -- So we are seeing that positive impact, right?

Yes. Yes, we are.

And, Sir, since we are at the start of the new year and believe many annual contracts get renewed. So looking at the current order book, do we expect 15% to 20% kind of a volume growth even for FY '23 or even higher since we are also doubling the Vietnam capacity?

So we're -- actually, we already have existed at 1-year contracts alone. Typically, the customers will come more towards the middle of the year middle of the calendar year. That's when we will get more 100% clarity for next year. As of now, our internal target is the same. We should be targeting around 15% volume growth. But we'll be able to confirm once the year starts, the next financial year starts.

Okay. Okay. And sir, just that our spray-dried mix is higher. And as you said, green coffee prices would remain elevated at least for next 2 years. So because of the higher spray-dried mix, would our EBITDA margin would remain in the range of 21% to 23%? Or you believe you know we would be delivering even higher EBITDA margin?

The EBITDA margins on a per kg basis will remain the same. We're not expecting any significant change over there.

Okay. So whatever current EBITDA per kg is there, we would like to maintain it for next 1 to 2 years?

Yes.

The next question is from the line of Suvarna Joshi from Axis Securities.

Yes, most of my questions have been answered. Just 1 question, maybe on the product launch side. Like we've seen in the domestic business, a few of products that were launched a couple of years back and we are kind of building on to that. In the wake of -- or these higher coffee prices that we are seeing, do we expect to launch any new products in the coming year? Or how are we planning on that front?

We are not looking to launch immediately a lot of products because we have -- we already launched 3 segments, the instant -- the filter coffee, which is roasted ground in the premix. So we'll look to rebuild on these segments. Within these segments, of course, there will be a little bit of product extensions, but not really new, new product that we are looking to launch at this point of time.

Sure. And also on the export side, I mean the last new product that you actually introduced was the cold brew coffee. Anything working on that side as well?

So cold brew is 1 product that we have launched. We do have other products like micro ground coffee and all that. This is -- this cold brew is a new product category by itself. So that is why it stands out. It's not just a new product, it's a new product category. So, similarly, as an increase in product categories is not an easy task as in and you'll have a very, very limited product categories, such as there in the coffee market. Today, we are presenting all those product categories.

The next question is from the line of Vivek Tulshyan from New Mark Capital.

Based on this divergence on the margins on stand-alone and subsidiary, you mentioned that the transport cost is the biggest factor. Could you tell me how much of -- on a percentage of cost basis, how much does this transport cost spend come about to for our green coffee procurement?

So I can give you the actual numbers if you want. So earlier, it was around $80 a kilo. Now it's around $300-plus. So that translates to around $230 into 2.4, would be around maybe $0.60 or so approximately. So $0.60 per kilo would be the extra cost that is going to be there.

Understood. Understood. And thinking.

So if you take $6 as your average selling price, so 10%?

Yes. About 10% is right. Yes. Got it. Got it. And this you think is going to remain because the freight costs will continue to remain elevated for the next few years?

Yes.

Got it.

Fortunately, for us, in India, as far as freight line is concerned, almost 50% of the capacity is being utilized for the domestic market itself. So that is actually a positive sign for us.

Understood. Was there any [indiscernible] incentive that we received during this quarter?

Yes, we did. Production [indiscernible] 7.5 or something, no?

No, we have saved during this quarter. Yes, INR 7.57 crores we [indiscernible].

Understood. So you mentioned for this quarter, you did about 17% of volume growth, which is very encouraging Y-o-Y. Would you have the same number for 9-months, how much we give in terms of volume growth?

So volume growth for 9-months, it was 18.7%.

Got it . Got it. And just 1 last question on the domestic branded side, how much would we have done on the absolute revenue basis?

So domestic business total was approximately INR 141 crore, INR 145 crores for 9-months, out of which INR 100 crores will be from the retail branded business.

Next question is from the line of Amit Zade from Antique.

Sir, my question is regarding to the recent price increase, which we have seen in the last 3-months, 3, 4-months in green coffee prices. Sir, do we see any risk to the volume guidance given -- because last year -- earlier part of the last year, we had only 1 impact of logistics or freight cost, which has increased to highest levels in the third quarter. And maybe, going ahead, there would be even higher stretches from the green coffee inflation. So is there any risk for us or for the industry in terms of volume, sir?

So whatever is applicable to us is applicable to the rest of the industry. So whatever problems we are facing everybody...

Right.

Excuse me, this is the operator. Participants the line for Mr. Srishant has disconnected. We request you to please stay connected while we reconnect, sir. Ladies and gentlemen, thank you for patiently waiting. The line is reconnected. Sir, you may go ahead.

Sorry, I think I got dropped. So whatever risk that we are currently facing, the same risk is being faced by the rest of the industry as well. So the competition levels, everything remains more or less the same. Now it's more or less become country versus country rather than competition within the country. If you look at Brazil on a home today with the raw material prices becoming extremely high in Brazil because of the shortage of supplies. Brazil has become much more expensive than either India or Vietnam even after factoring in the increase in transport costs. If you compare India versus Vietnam, Vietnam is definitely much more economical than India, again, because of the largest fixed costs. Everything else is more or less the same. So if you -- I mean, if you look at it on a broad level, all the manufacturers in each country are facing the same issues. So there is no change as such in competition, which is why the volumes and all that as far as customers' decision-making and all that is concerned also, it's not very difficult for us to project that we are aiming for that 15% at least volume growth going forward.

Ladies and gentlemen, we take the last question from the line of Kashyap Javeri from Emkay Investment Managers.

So beyond is Vietnam, which is another about 14,000, which will be completed middle of next year, what are plans for capacity expansion after that? Also, in India, probably in Duggirala or in Chittoor where we have excess land available, have you thought at least some initial thoughts on that at this point of time?

Yes. I have actually mentioned this earlier in the call that after the Vietnam expansion by the end of this year, current calendar year, we will be looking at expansion in India for setting up a spray-dried unit for the domestic market. Now with the volumes in the domestic market are increase, we'll have to go in for expansion accordingly.

And any particular reason why, at this point of time, there is no expansion plans on freeze-dried because; one, it's in the size, it's small; and, two, the EBITDA per kg, I would -- you have already highlighted earlier in some of the calls as well as meetings that it's higher. Is that -- that particular market is not finding favor at this point of time with the consumers?

Yes. So normally, what we see is there is a cycle that takes place. And today, with the green coffee prices going up to the extent that they are, people are not willing to pay that extra premium for freeze-dried and they are looking for more economical products end of the day. So that's why the demand for spray has been increasing. And considering that the green coffee prices are expected to remain high for the next couple of years for multiple climatic reasons, we're expecting that the spray-dried demand is going to keep going up. And on top of that, last year itself, before this change in prices, there are several manufacturers who've already initiated the process of setting up freeze-drying units in different parts of the world, including Brazil and Vietnam. So there will be additional competition coming in that is going to put more pressure on this market. And the thing is in freeze-dried end of the day, you are running a cold room with minus 60 degrees temperature. So there's a minimum level of operational efficiency that one has to achieve. So you need to have a minimum amount of orders also. If you don't have the minimum amount of orders, it's not going to be viable to run the plant. So whoever is setting up these plants are anyway going to be under tremendous pressure to desperately sell in the market. So that's 1 of the reasons why we don't think it's the right time for us to consider getting into freeze-dried expansion at least now.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Abhishek Navalgund for closing comments.

And basically, I would like to thank the management for patiently answering all the questions, and I also thanks to the participants for joining in. Now I would like to hand over the call to Srishant sir his closing comments. Over to you, sir.

Thank you for organizing the confidence, and thank you all for participating. And I just wanted to add 1 point to what Praveen has mentioned earlier that we've launched our own online portal for buying our products. So the website is shop.continental.coffee. So since we have a lot of loyal customers on this call, I hope all of you will take this opportunity to visit the site and buy from it. Thank you.

Thank you. Ladies and gentlemen, on behalf of Nirmal Bang Equity [Audio Gap]