UK's United Biscuits makes India entry

UK’S United Biscuits, the world’s third-largest biscuit company, is exploring manufacturing and marketing opportunities to tap the Rs6,000-crore-plus organised biscuits market in India.
The biscuits and snacks maker with estimated revenues of £1.1 billion ($1.6 billion), which owns brands such as McVitie’s, Jacobs, Skips and Hula Hoops, is in exploratory talks with many biscuit companies, including Parle Products, owned by Sharad and Arup Chauhan, said a person familiar with the development.

He said United Biscuits is not looking at an outright financial investment or stake acquisition. Instead, it is keen on manufacturing, marketing and distribution tie-ups that will allow its products reach the consumer as soon as it starts operations.

“United is considering the possibility of manufacturing and marketing biscuits in numerous emerging markets including India,” said Bob Brightwell, the company’s corporate communications head. Parle Products’ Arup Chauhan denied the development. “We are not in talks with United Biscuits,” he said.

Two persons privy to the negotiations said United Biscuits first held talks with Hyderabad-based Ravi Foods, the maker of Dukes biscuits and a third-party manufacturer for some leading biscuit companies. But talks failed.

United then explored alliance options with NRI Rajmohan Pillai (brother of former Britannia promoter, the late Rajan Pillai), who runs a dry fruit and fast food business by the name of Beta Industries in Europe. But that venture too fizzled out.

The UK company has already set up a representative office in Mumbai and is in the process of hiring key officials to push its India plans. “It has mandated an executive search firm to find a CEO,” said a head hunter, requesting anonymity.

The company’s inclination for a manufacturing and marketing tie-up rather than greenfield operations is due to the existing economic environment. Besides, biscuit manufacturing has long-gestation periods. It is the only processed foods that attracts a 12.5% VAT and operates on low margins. The industry is intensely competitive and price-sensitive to the extent that biscuit makers fear increasing prices by even a rupee for a pack.

Also, besides the big three—Parle, Britannia and ITC—the category has strong regional brands such as Priya Gold in the north, Cremica in the west and Dukes in the south. If United does indeed forge an alliance with Parle Products, which makes Parle-G, Melody, Mango Bite, Poppins, Monaco and Krack Jack, it would get a strong foothold for manufacturing and marketing its products in India. The biscuit maker is learnt to be keen on tapping the high-margin, health segment of biscuits through its McVitie’s brand, which is sold in over 100 countries.

As for Britannia, it is unlikely that the Wadia company, which has just emerged from a three-year-long legal battle with France’s Groupe Danone, will enter an alliance with another multinational soon. Marketing and sales of United Biscuits and snacks in global markets is managed by group division United Biscuits International (UBI). The company has tapped global markets either through direct representation or distributor tie-ups. United Biscuits is owned jointly by global private investment and advisory firm BlackStone and leading European private equity firm PAI.

In October ’06, Blackstone and PAI acquired United Biscuits from private equity firms Midocean and Civen in a £1.6-billion deal. The company was founded in 1948 with the merger of two Scottish family businesses, McVitie & Price and MacFarlane Lang. In 1960, United Biscuits beefed up its portfolio by acquiring Crawford’s Biscuits and MacDonald’s Biscuits.

Source: http://economictimes.indiatimes.com/articleshow/4393252.cms