Nidhi Nath Srinivas

They have waited too long for bread cast on waters. Cargill Foods, Indian arm of the US multinational Cargill, is looking for a buyer to sell its wheat milling facility here because tough competition in the branded atta market has left no scope for high-cost operations.

After its exit from milling, Cargill, one of the world’s biggest companies, will depend wholly on custom milling in India for its local brand "Nature Fresh". Cargill is already depending on custom milling in the rest of the country for selling Nature Fresh atta. This works out cheaper because the fixed costs and overheads are then substantially lower.

Delhi is the country’s largest and toughest market for atta and other wheat products, and the acid test for the success of any brand. Close competitors like ITC have also deliberately stayed away from investing in their wheat milling capacities because a lot of plants with good technology are easily available for lease in the Delhi market.

But finding a willing buyer at a good price may be difficult for Cargill because there are unlikely to be any new corporate entrants in the branded atta segment any time soon. "Only a company interested in wheat products like maida and with low overheads would like to acquire such a plant. Otherwise, with so much idle capacity in the market, it makes little sense to invest," sources said.

Cargill bought the plant, located in Uttar Pradesh, six years ago. But though the US company claims number two position for its brand in the tough Delhi market, the flour mill was being run at less than 40% capacity.

"The arrival of ITC’s Ashirvaad brand has sharply cut into Nature Fresh’s volumes in Delhi because it is priced substantially lower. Consequently, Cargill will have to do everything it can to save costs and improve margins. Getting out of running a plant is one significant decision which may help," say industry watchers.

Sources say margins are not under similar pressure in southern India because competition from neighbourhood mills is not so strong.