Food importance is obvious for everyone and it is one of the most sensitive and vital fields for every country. Food industry is a non-seasonal industry which means that there is a demand for it in every season and also in various economic conditions.

Food production constitutes approximately 3% of GDP and most of our business partners are neighboring countries like Iraq and Afghanistan.

Submission of food corporates in Tehran Stock Exchange (TSE) has increased competitiveness among them which has led to a considerable improvement in their products’ quality and trying to reach to a standard level of production quality. In addition, disclosure of corporates’ procedures and having more access to their financial statements makes clients more aware of their conditions and this can lead to more reliable investment. Food industry in TSE is divided into 2 subgroups: first is food and beverage except sugar and the second is sugar. In this article, food and beverage except sugar sector has been reviewed.

Some of this sector’s corporates in TSE are shown in the table below:

Corporate name Market value (Billion Rial) (12/5/2016) capital (Billion Rial)
West Azarbaijan Pegah Dairy 735.2 400
Kalber diary 527 250
Margarine 2139.48 360
Behshahr industrial Co. 8685 3000
Pars Minoo Co. 3568.95 630
East minoo food Ind Co. 494.834 80.5
Pak diary 2262.609 955.494
Behnoushiran 1494.72 240
piazar 254.55 75
Fars pegah diary 1204.8 200
Golestan pegah milk 894.48 120
nooshmazandaran 192.3 50
Glucosan 3732.816 76

 

Among these corporates, Behshahr Industrial Co. with a capital of 3,000 Billion Rials has an almost 32% share of the oil market (cooking oil). Its major shareholder is Savola Behshahr and its products’ brands are: Ladan, Golden Ladan, Bahar and Nastaran.

In the chart below net and gross profit margin of these corporates for three recent years has been shown:

Food and Beverage

As you can see, profit margin in this industry is almost low. Having low profit margin has a major problem and in the same time has a good advantage. The dilemma is that the lower profit margin of industry, the higher unsystematic risks of the industry is. As a result, when a small financial or economic problem happens for the industry, it overshadows its total profit and the industry may lead to loss which means the impact of unexpected events on industries with low profit margin is more. On the other hand, the advantage of having low profit margin is that in the case of getting an approval from the government to increase prices (prices are controlled by government) profitability will grow exponentially, so the lower net profit margin causes that the impact of an increase in product’s prices or increase in profit resulted from foreign currency rates be more considerable.  The reason for this is that in the case of this event, firm’s sale goes up but its other costs remain almost constant or will increase a little therefore sales compared to net profit is higher and a slight change in sales has a significant effect on net profit.

To conclude, food and beverage industry is an industry with 1.35 percent share of market. The index of this industry increased by 53% during 6th December 2015 to 6th December 2016 even though the TEDPIX has risen 30% so it shows the high potential of the industry and it will be a good opportunity to invest in prosperous corporates of this industry.