Avishek Modi, Managing Director of Suvino Exports

Despite being a commodity that is consumed by every single human being, every single day, salt is not a very fancy product. But making a mark in its exports of it is Suvino Exports. In an exclusive interaction with The Dollar Business, Avishek Modi, Managing Director of Suvino Exports, gives an insight into this ‘salty’ business.

Sachin Manawaria | @TheDollarBiz

TDB: Suvino Exports was formed originally with the intention of manufacturing and exporting synthetic yarn. How did you get into the exports of products and commodities like salt?

Avishek Modi (AM): Suvino Exports was incorporated in the year 1987 by my father Vinod Modi. He wanted to set up a textile manufacturing unit. However, the plan never worked out and was dormant for several years. Only in 1996, did we start in right earnest, exporting textile machinery and spare parts.

TDB: You started exporting sea salt in 1999. How did you get your first lead?

AM: In 1999, due to the effects of El Niño, salt production in most South East Asian countries had dropped dramatically, forcing them to depend on imports. One day, my father was going through a newsletter published by one of the export promotion councils and saw an advertisement by a prospective buyer in Philippines. This led to regular communication with that buyer and helped build confidence. Initially, we tried to act as the middleman between him and salt sellers in India, but since it didn’t work out we decided to take the plunge and export on our own. In fact, the buyer in Philippines convinced banks in India to extend credit to us. Since then, there’s been no looking back. Currently, we export to nine countries.

TDB: How difficult was it initially for Suvino Exports to consistently get orders from abroad?

AM: After bagging our first order from Philippines we took the salt exports business very seriously since there were only a handful of players in India who were exporting sea salt. Luckily, during that time, there was very erratic rainfall in several South East Asian countries, which negatively impacted salt production in those countries, increasing the need for imports. We thought of venturing into these markets in a calibrated way. We began by advertising in several foreign journals, and slowly but steadily our efforts started yielding results. We got a few small orders from countries like Malaysia, Indonesia and Vietnam. But by the end of 1999, we were shipping large consignments to several South East Asian countries and became the largest exporter of sea salt from India in the year 2000. In the second half of 2001, effects of  El Niño began to fade, which forced us to explore other markets like the Middle East. In fact, ours was amongst the first vessels of salt shipped to UAE in the year 2003 and to China in the year 2004.

TDB: Give us a sense of the competition in the sea salt business.

AM: Although our main competition is Australia, importing from there is often a very expensive affair because of its location. On the contrary, we have the flexibility of supplying in smaller quantities and have the advantage in terms of logistics cost. For several countries, importing from Australia is much more costly than importing from India. So, in some ways, we have very little competition. Mexico and Chile are also present but they cater to different geographies.The salt business is also unique in several ways. Generally, one seller sells to only one buyer and then the buyer does the retailing in its own country. We have also developed our own channels in several countries to which we export. Generally, in each country, channel partners are limited to just one or two. China, however, is the only country where we have multiple channel partners who procure from us for multiple regions. Our channel partners also provide us with feedback on pricing and the demand-supply situation in their respective regions. Further, salt is a low-value commodity and efficient use of logistics is the key to success in this business. This makes the situation very difficult for a new entrant. In fact, salt exports is more about logistics and less about salt! Logistics makes up for almost 50% of my FOB cost. So, if I can’t manage logistics properly, I will kill my business. It has taken a lot of time for us to master the tricks of the trade and hence I believe it will be really difficult for a newcomer to enter the business.

TDB: Where do you see demand coming from going forward?

AM: Currently, China is where the maximum demand is. About 37-38% of India’s total salt exports are to China and about 12% to Japan. Japan has several direct production tie-ups with Indian companies, which makes it very difficult for us to export there. China is also a massive market for industrial salt and we are a well-established player in this category. We have several channel partners in multiple regions of China and orders flow in very smoothly. It is also rapidly expanding chloro-alkali manufacturing, which should keep the demand for the raw material – salt – high. So, in the near future China will continue to be the biggest market for us.

TDB: Where do you see yourself five years down the line?

AM: The nature of the salt business is such that despite being one of the biggest exporters in India, we are still just a small enterprise. So, five years down the line, I want to ensure our position as one of the top salt exporters in India and maintain market share. But since I don’t see the nature of the market change drastically – which is bound to keep a lid on demand – we are making constant efforts to diversify into new products. Five years hence, I want the company to be a leading exporter of at least two additional products besides salt. For now, we are exploring opportunities in the agro-processing sector.