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Instant coffee technology has improved in last 10 years: Challa Rajendra Prasad, Executive Chairman, CCL Products

Challa Rajendra Prasad , Executive Chairman of CCL Products while speaking to ET Now has said about the reasons that helped CCL posts a strong Q1 earnings and aslo about various aspects of coffee market in India and abroad.

ET Now: You have definitely exceeded your bottom line guidance of 20-25% what really has helped the growth this time around?

Challa Rajendra Prasad: Well this is the same story which we have been telling, you know, whenever we do better products, you know we shifted our gear couple of years from doing plain vanilla products to very high end products and especially the Vietnam plant where we have put up our liquid coffee which has been used as spray dried product, is giving us both top line and bottom line increase and we could enter into some of these good markets, especially into Europe and some of the Japanese clients also have got in. So this is going to be in the future also like this.

ET Now: Can you also just tell us a little bit as to how coffee prices you have seen fluctuate and give us a sense of the kind of production and volumes as well?
Challa Rajendra Prasad: The truth is there not much of a difference, you know only the coffee there is always more coffee available than there is any shortage. In the earlier days always because there was no internet, that information technology was very primitive so everything used to be speculative.

Now everything is open, only thing is coffee qualities have improved. Earlier, most of the coffees used to come from Brazil and Mexico, very cheap quality, India and some of these African countries, the qualities are very high. So this is where we are getting value addition and better product. So there is no major issue as far as green coffee prices are concerned for CCL. CCL has always maintained we are a value added plus, plus product.

ET Now: Let us also talk about your margins that have consistently improved, what has aided margins this time around and is 25% a stable level?
Challa Rajendra Prasad: This is the reason, you know, we have gone into very high end products. One, most important is, we have concentrated on some of the major clients in Europe instead of manufacturing themselves in Europe they have shifted and also whenever there is instant coffee, this instant coffee technology has improved in these last 10 years which CCL has every time invested in technology. So some of our coffees are as close as roast and ground coffee, in blind test nobody can say that this is instant coffee. This the reason we could demand more premium on some of the products.

ET Now: Can you just tell us which segments have stood out geographically and on your US business, can you give us the update on the USFDA and the NCA communication regarding the import of coffee in the US?
Challa Rajendra Prasad: USA is going to take maybe a year more than what we expected. We thought by August-September this year we should be able to do it but unfortunately they are still some legal issues they are working on, otherwise this time of the time we could get some of the major European market and also in Japan some of these big clients have come and taken coffee which again they are using to produce their own liquid coffee in their plants.

In the long term

They take our instant coffee, they mix into instant– their own blends and they produce their own coffees there. So in the long term maybe in the next couple of years we feel most of our focus will be from our domestic market and also from US market which is already there for us.