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Corporate Report

Published on: May 2, 2022, 4:34 p.m.
BL Agro goes beyond ‘Bail Kolhu’
  • Ashish and Ghanshyam Khandelwal: We have profitable growth and are growing at our own set pace

By Ritwik Sinha. Consulting Editor, Business India

Bareilly in Uttar Pradesh, a modest-sized city with a population base of over two million, has a long and interesting linkage with Bollywood. Screen diva Sadhna’s complaint of losing her ear rings in Bareilly expressed through a chartbuster in the 1960s has not been forgotten. More recently, the current heartthrobs of Hindi cinema – Kriti Sanon and Ayushman Khurana – had turned the spotlight again on the city with the film ‘Bareilly Ki Barfi’ released in 2017. 

In the past one year, the city seems to have yet again developed a strong Bollywood connect, which is slightly different this time. It has been established by the locally bred company, BL Agro, an over 75-year-old firm known for its dominance in the packaged mustard oil business with its brand ‘Bail Kolhu’ being offered in UP and the surrounding states.

Roping in some of the most respected names of Hindi cinema – Manoj Vajpayee, Nawazuddin Siddiqui and Pankaj Tripathi for brand promotion – the company has upped the ante in grabbing the attention of consumers through its consistent marketing and advertising drives. Furthermore, the company has also forayed into the big ring of FMCG with its brand ‘Nourish’ which is now promoted by Shilpa Shetty. 

For the family-owned firm (the fourth generation is now in command), this is probably the most happening hour in their journey as the aggressive marketing drive seems to have brought them out of their low visibility zone. Being in a transitional phase, the company is now aiming to grow beyond the regional market periphery and is eyeing creating a bigger splash via its FMCG business.

“We are expecting to touch the Rs5,000 crore mark in the next few years and half of it will be contributed by our FMCG business,” says Ghanshyam Khandelwal (65), chairman of the firm, who is credited with building the company from a low base edible trading firm in the 1970s to its present size and is one of the leading figures in domestic edible oil manufacturing. 

Large scale set-up 

BL Agro may be trying to shrug off its ‘prominent-in-a-small-corner’ positioning, but from a distance, the basic image of the company is still that of an emerging firm. The perception, however, may well change once you land up at its factory gate at Parsakhera in Bareilly. A government designated industrial belt, BL Agro’s dominating presence at Parsakhera is quite visible.

It has nearly a dozen units across the belt (established within a radius of three-four km, you can’t easily walk from one unit to another) covering about 50 acres – a stage with all the trappings of hosting a big show. 

There are huge tankers in some of the edible oil refining complexes and you will come across state-of-the-art machinery in the manufacturing and packaging units of the FMCG products. Behind one of the large-scale refining complexes, you will also come across a railway track that runs from Bareilly station to the plant gate. This is used for getting the railways tankers of raw edible oil to the plant (including other categories of imported oils like sunflower) with BL Agro having taken this line on lease from the railways. 

  • BL Agro has the largest refining capacity for mustard oil in the country

Among BL Agro’s operational pillars, you will come across a three-storeyed in-house research and development lab with the latest machinery. The unit has nearly 40 scientists working to ensure compliance to all quality standards. Company officials will tell you that the lab has become bigger and more sophisticated in recent years as BL Agro’s FMCG engagement has expanded.

“We know quality is going to be our major calling card as we tend to expand our FMCG wing and, therefore, we have to ensure that whatever consumers get from us is best in class. This lab plays a critical role,” says Ashish Khandelwal (44), MD of the firm (son of the chairman) who is particularly credited for the FMCG foray and has been involved in operations for more than two decades now. 

For the first time visitor who arrives here expecting to witness operations of a modest scale, the entire spectrum of activity is clearly much larger and truly remarkable. But equally remarkable is the modesty expressed by its chairman Ghanshyam Khandelwal when he responds to the assumption that the company seems to be knocking at the doors of the prominent where only the big boys of the game have an entry permit.

“I don’t think it is right for you to compare us with the big companies in the fray. We are still quite small. All my life I have worked to dispel the theory that qualitative and healthy mustard oil can’t be catered to consumers. And I may have succeeded somewhat in it,” he explains, showing the typical demeanour of tier-2 entrepreneurs who often believe in downplaying their success. 

 Twin pillars

The oil trading enterprise has been in existence for more than 75 years, owned by two generations of chairman Ghanshyam Khandelwal’s family. But it was his entry in the 70s that became the starting point for changes in the enterprise. In the 80s he was in charge of the business and the major move made by him was launching the mustard oil brand – Bail Kolhu

Trying to sell mustard oil in packaged form was somewhat contrarian to market trends (conventional wisdom till recently suggested that mustard oil is mainly sold in loose form). “I was convinced that if water can be sold in bottled form, the days are not far when edible oil, including mustard, would also be made available to consumers in packaged form. And this is how things evolved,” he says. 

The business grew, as Khandelwal senior indicates, around 2005 when it moved its operations to Paras Khera belt by setting up a refinery. “Even as BL Agro largely had a regional presence during those days, it had shown gumption by putting up a modest scale refinery. It was demonstrative of their focus to supply healthy products to the end user notwithstanding the fact that mustard oil blending was then allowed,” points out Suresh Nagpal, Chairman, COOIT (Central Organisation for Oil Industry & Trade). 

From a mere oil trading shop to a small milling unit to a set of refineries and now also a fast-growing FMCG platform – BL Agro, as industry veterans point out, has come a long way. Apart from the packaged branded sales of Bail Kolhu, the company is also heavily into other vegetable oil bulk sales (mainly soybean and sunflower). “We currently have a refining capacity of 850 tonnes per day. We have the largest refining capacity for mustard oil in the country,” says Ghanshyam Khandelwal. 

  • The company made its FMCG foray with the ‘Nourish’ brand of products

The decisive twist in the company’s journey came in 2016 when it decided to foray into FMCG with the ‘Nourish’ brand of products which is headed by his son Ashish Khandelwal. Ashish’s excitement at once becomes visible when he takes you round to the large scale FMCG unit close to the headquarters and shows off advanced machines for grain sorting (imported from Italy), a wooden chakki (bought in Austria), a pet jar manufacturing set-up, and a Daifuku ASRS automated inventory management system. “We started on a very low-key basis, with seven categories of products which have now shot up to over 80. Besan, arhar dal, rice and packaged wheat are our main offerings. We are close to a Rs600 crore business,” Ashish underlines. 

And the market has taken note of this. “There aren’t too many pan-Indian edible oil players and this large business is mostly dominated by what we call regional champions. But I can’t think of many examples where a regional edible oil company has successfully forayed into FMCG. In that sense, BL Agro’s feat is remarkable,” points out Ankur Bisen, Senior Partner & Head (Consumer, Food & Retail), Technopak Advisors.

A market insider says that before foraying into FMCG, BL Agro had hired a leading consulting firm to prepare a strategy paper for it. “We had sought advice but the execution has been totally ours. I have myself been a regular visitor to leading, global FMCG technology events which has helped me understand the best and the optimal systems we can install here. All our packaging is vacuum-free here; we do not use tin for our oil products,” asserts Ashish. 

Scaling up

The company has three clear earning verticals: bulk vegetable oil sales (close to Rs1,700 crore), branded Bail Kolhu (Rs1,200 crore), and FMCG Nourish sales (around Rs600 crore). Its mustard oil offering is the dominating component both in terms of packaged and bulk sales, accounting for more than half of its total sales. “The mustard oil business contributes 70 per cent to our business, refined oil 10 per cent and the remaining 20 per cent comes from FMCG,” Ashish points out. “We have invested close to Rs850 crore in the last 20 years in building this kind of scale,” adds his father.

Driven by mustard oil, which is popular in some northern and eastern states, the company is believed to have developed some defining geographical strongholds led by Uttar Pradesh – a market which is as big as Pakistan in population terms but has a better purchasing capacity. “Our major markets are UP, Bihar, Uttarakhand, Delhi/NCR, Haryana, Rajasthan, MP and West Bengal. Among these, UP, Delhi/NCR and Uttarakhand account for 70 per cent of our mustard oil sales,” explains Ashish.

“In the northern and eastern belt, there are a host of regional packaged mustard oil brands which are popular apart from Bail Kolhu. These are: Engine, Panchi, Gopal and Ugna. Bail Kolhu dominates in what we call North-2 markets which comprise UP, Uttarakhand and Bihar,” adds Suresh Nagpal. And in establishing its FMCG brand, the company is trying to expand on the basis of its stronghold markets for its mainstay ‘Bail Kolhu’ brand. 

  • Brand ambassodor of Bail Kolhu Pankaj at the Launch of #RasodeMeinMardHai campaign

As the father and son duo assert (they are supported by daughter Richa Khandelwal who takes care of marketing and brand promotion), a major expansion drive is currently underway with primary focus on expanding the FMCG business at breakneck speed. “We have to significantly scale up our FMCG business and plans have been set afoot. We are eyeing a revenue base of over Rs5,000 crore by the end of fiscal 2024. We expect our FMCG business to be on par with the mustard oil sales sometime in fiscal 2025 or 2026. On both the FMCG and oil refinery sides, we will be enhancing our capacity with new plants,” says Ghanshyam Khandelwal. Ashish provides the details on the FMCG side. 

The significant scale-up plans include the opening of a new plant by the end of next month which will enhance the production capacity from 180 metric tonnes per day to 900 metric tonnes. Walking through the unit, which is getting ready, you will come across high end machines lying in a corridor waiting to be installed. 

“It will be one of the most automated FMCG units in the country where human intervention will be minimal. We have invested Rs150 crore here and expect this to help us expand our portfolio of products to around 300 categories from the current base of over 80 in the coming years,” explains Ashish.

The growth in its mainstay business – mustard oil – is also likely to stay intact for a variety of reasons. The company, like other organised players in the fray, has benefited immensely from the 80-100 per cent price escalation in the prices of edible oils, including mustard, in the past year, putting its topline in a skyrocketing trajectory.

There has been a clear escalation in commodity prices in the world which has been further aggravated by disruptive supply side developments like the Russia-Ukraine brawl. Indonesia’s recent decision to impose a ban on the exports of palm oil might only add fuel to the fire. However, marketmen say, even in regular conditions, firms like BL Agro stand to benefit as there is a clear uptick in the demand for mustard products.

“The perception that mustard oil is not pure and unhygienic is decisively losing its grip over the mindset of consumers now. Evolved consumers are increasingly adopting it and there is a particular inclination for products by players selling it in packaged form. There is statistical evidence to suggest that demand for packaged mustard oil is going up, post Corona,” observes Suresh. 

Market insiders, meanwhile, believe that BL Agro’s decision to come out of the regional closet and make its offerings known to the world via Bollywood may well have been quite timely (with the demand tide turning in favour of mustard oil). Its choice of brand ambassadors – actors Manoj Vajpayee, Nawazuddin Siddiqui and Pankaj Tripathi – has been equally impressive. They are originally from the Hindi heartland where mustard oil consumption is high. But individually, they are credible pan-Indian figures today.

In fact, these actors have been associated with the cult film, Gangs of Wasseypur, and when they were signed, interesting eye-catching headlines and then television brand promotion significantly improved the brand recall of BL Agro (later they also signed up actress Shilpa Shetty for the Nourish Brand). Quite interestingly, the company launched a campaign early this year titled – #RasodeMeMardHai – built around the concept of gender equality. 

  • Besan, arhar dal,rice and packaged wheat are our main offerings. We are close to a Rs600 crore business

“We are spending close to Rs150 crore in our brand promotion and it will continue to be an ongoing exercise now,” points out Ashish Khandelwal. “During the early days when I had joined my father, we even used to put up stalls at local melas organised during Ramleela and other such occasions. We’ve come a long way since then,” underlines the chairman of the firm. 

The company, meanwhile, is also pushing a dedicated online sales platform for Nourish products (Ashish claims it has begun getting good traction) even as it admits going slow in opening 100 exclusive retail stores through the franchise route which was announced earlier (20 openings till date). A critical point, meanwhile, is: having shown a decisive intent to grow beyond its regional identity in recent years, will the company make attempts to shrug off its strictly family-owned and family-driven identity and structure?

“I don’t think going for an IPO or inviting strategic investors is needed. We have profitable growth and are growing at our own set pace. Anyway, it is a decision which the next generation will take,” responds Ghanshyam Khandelwal. Pose the same question to Ashish and he responds no differently. “In the past, we have seen reports saying that we are being acquired by other, bigger firms. But no, there are no plans to look for equity diluting collaborations. We are quite comfortable with what we have done so far in putting up a bigger show,” he asserts. The market will definitely be observing this show more closely, now that the regional curtains have been somewhat lifted.

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