Cargill Inc., a multi-national food major with a presence in 70 countries, started operations in India in 1987. Today, the company is one of the largest originators and marketers of several commodities in India. Siraj Chaudhry, Chairman, Cargill India, in an exclusive interaction with The Dollar Business, talks about Cargill’s journey in India – trials, tribulations, triumphs and the road ahead.


INTERVIEW BY AHMAD SHARIQ KHAN | September 2017 Issue | The Dollar Business

TDB: How would you describe Cargill’s journey in India so far?

Siraj Chaudhry (SC): Cargill has been in the Indian food and agriculture space for the last 30 years, a segment that is important to a large section of this country’s population i.e. farmers and consumers. And, so far, it has been the most rewarding part of our journey in India. We have been helping people thrive by applying our insights and our 151 years of experience. Initially, we traded in sugar, sold seeds and then forayed into the edible oil segment. As we grew, we kept expanding our footprint. Today, our business comprises refined oils, food ingredients, wheat flour, grain and oilseeds, cotton, animal nutrition, bio-industrial products and structured finance. We have come a long way and have built a large and credible business in India.

TDB: Cargill started operations in India in 1987, way before economic liberalisation and thus it has been a witness to the liberalisation process. How has India progressed since then?

SC: One good thing has been that since liberalisation began in 1990 nobody has tried to turn things back – and each government has only added to the reform process initiated by the proceeding one. An important point worth considering here is that no government is ever able to change any domestic economic policy in isolation from the rest of the world. Between 2000 and 2007, when world economy was growing, everything that was done looked good. However, this was not the case during 2008-2014. Going forward, I expect the economy to look up.

TDB: What has been the biggest challenge faced by Cargill India so far?

SC: In our initial days we had to operate in segments and sub-segments which were largely unorganised and fragmented. To add to that, the taste and preferences of Indians vary across geographies, making it difficult to establish a food brand. I am talking about the scenario some 30 years back. And, in that chaotic space, to keep performing as an organised player, that too with utmost honesty and compliance, as per the highest standards prevalent globally, was definitely a big challenge. Finding quality suppliers, reaching out to the right customers while continuing to grow was also a challenge.

TDB: What percentage of Cargill Inc.’s total revenues comes from India? What has been the company’s strategy with regards to exports from India?

SC: Currently, only 1% of Cargill Inc.’s total revenues comes from India. I know the number isn’t big, but we are very optimistic about our future. As for exports and imports, we do it depending on our business requirements. But, considering our emphasis on domestic operations and meeting the nation’s burgeoning domestic demand, we don’t export much. Though we export corn and soybean meal to the Asia-Pacific region, it’s not even 1% of our entire operations. However, we are importing a lot of commodities including pulses that typically come from Australia and Canada as well as edible oil from Indonesia, Malaysia, Argentina, and Brazil. We also source black tea from Ukraine and Russia.

TDB: How do you look at India’s position as an agri-commodities trade hub?

SC: The best part about India is that it is largely self-sufficient in many majorly-traded food grains. For instance, India has enough of wheat, sugar, corn, cotton, etc. The only two commodities, I reckon, India falls short in are edible oils and pulses. We have had oil deficit for the last 20 years and, in recent time, we have exposed our vulnerabilities in pulses – which is because of lowered domestic productions. In fact, today, India imports edible oils worth $10 billion, which is 65% of the total domestic consumption. Also, India’s imports of pulses is about 2-3 million metric tonne (MMT) each year, which increased to 5-7 MMT last year. I am hopeful that the deficit will narrow with increase in production.

By and large, compared to other adjacent geographies, India is definitely placed better. However, when seen from a business perceptive, India as a self-sufficient country does not offer many opportunities for international trading. Today’s India is more about self-production and self-consumption.

TDB: In many markets there is a sluggish demand for commodities. How do you see the slump affecting your trade?

SC: One thing to be noted, when we talk about a slowdown, is that it’s not a slowdown across the whole industry spectrum. We largely deal in commodities that have their own production cycles. Typically, when commodity prices go up, we also expect them to go down in a few years because high commodity prices give a signal to the market to produce more and, as you know, commodities can be produced within one crop season. So, there exists a self-correcting mechanism that gets activated on its own in the commodity market. In my view, if at all our commodity business can be linked to something, it is factors such as currency fluctuations, petroleum price, global climate, and the geopolitical environment prevalent in different regions.

TDB: Is our existing duty structure in sync with the ‘Make in India’ initiative?

SC: The difference in import duty of crude edible oils and refined oils has been a sore point for the edible oils industry. There is about 7.5% difference, but the cost of converting crude to refined is more than 7.5%. And there are some countries like Indonesia and Malaysia – from where we import palm oil which is a large part of our edible oils import basket – that benefit from such a policy mismatch. The irony is that every time India takes remedial measure, Indonesia and Malaysia reset their own policy to undo the effect and make refined oil cheaper to import – a scenario that in turn hurts the ‘Make in India’ goal. The industry has been speaking out against this and urging the government to make the duty difference at least 15%.

TDB: Cargill India’s product lineup has gained strong recognition in recent times, thanks largely to carefully crafted strategic tie-ups and brand acquisitions like Rath and Leonardo in the edible oils space. Are there more such acquisitions in the pipeline?

SC: In my view, for growth, you have to be open to all forms of opportunities that might come to you – organic or otherwise. Going forward, as the situation demands, we are open to employing more of such strategies to further our presence in various markets.

TDB: FTP 2015-2020 mid-term review is on. Would you want any specific change to be incorporated?

SC: We need more clarity on government policies, guidelines and procedures. The mid-term review should also look at boosting supply of (necessary) imports because many of these imports are used as inputs for producing several products that are consumed domestically. Though the government has been working in the right direction, there are many things that are still at the discussions stage.

"We will continue sourcing High-Quality ingredients from across the world"

TDB: What growth areas is Cargill currently focussing on?

SC: We want to further strengthen our position in edible oils and grain categories and, most importantly, focus on reaching out to more and more consumers. We will also continue sourcing high-quality ingredients from across the world. Going forward, animal nutrition and premixes categories are going to be focus areas for us. Backed by political stability, consumption growth, GDP growth and citizens with increased purchasing power, we believe, India is an exciting place to do business.