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

Godrej Sara Lee buys Sara Lee biz in India

Consolidating its operations in the Indian subcontinent, the US-based Sara Lee Corporation has sold its subsidiary’s business in India and Sri Lanka to its existing joint venture company Godrej Sara Lee(GSLL) for $13 million.

GSLL will now be manufacturing, marketing and distributing the brands owned by Sara Lee Household and Body Care like Kiwi Shoe Polish, Kiwi Drainex drain cleaner and Brylcream brand of hair care.

Sara Lee Corporation has a 51 per cent stake in Godrej Sara Lee while the balance is held by the Godrej Group in which Godrej Industries has a 20 per cent stake.

(Source: Business Line)

Tata Group buys Innovative Foods

The Tata Group today announced its foray into the processed foods business with the completion of acquisition formalities of 70 per cent stake in the South-based Innovative Foods Limited (IFL) from the Amalgam Group. The Rs 16.5 crore Innovative posted a loss of Rs 4 crore in the last fiscal.

The acquisition, estimated at under Rs 20 crore, has been made through Residency Foods and Beverages Limited (RFBL), a subsidiary of Indian Hotels Company Limited (IHCL). The acquisition of Innovative Foods outlines our strategic intent for the processed foods business. We strongly believe in leveraging our in-house expertise within the group with our FMCG, F&B and retail businesses.

The company has a presence in the various food segments through group companies like Tata Tea, Tata Coffee and Tata Chemicals (Tata Salt). As part of its diversification plan, the Tata group through RFBL has recently entered into an exclusive agreement with Jasper Aqua Exports, a seafood company based in Vishakapatnam.

(Source: Business Standard)

Dabur exits, Emami & Godrej enter fray

Even as Dabur dropped its $250-million acquisition plan of Malaysian consumer goods company Unza due to risk factors, two other Indian players Godrej and Emami are considering bidding for the company.

While Dabur group director PD Narang declined to comment, Godrej Consumer Products executive director and president Hoshedar Press said, “I cannot confirm or deny the move. We keep talking to several companies for potential acquisitions.” But Kolkata-based Emami Group, another keen contender for Unza was more forthcoming. Emami Group director Aditya Agarwal confirmed the move and said, “We are interested in Unza and in talks with them.” Dabur had been close to acquiring a controlling stake in Unza but talks with PE funds had to be suspended because of resistance from the company’s management. Apparently, the management wanted Actis and StanChart to sell their respective stakes to PE funds and not to a strategic investor. The two funds agreed to its condition but couldn’t find a suitable PE partner. Consequently, the two have now decided to put their 60% stake on auction and learnt to have invited bids.

Indian FMCG companies have shown interest for Unza for several reasons. Companies such as Dabur, Marico, Godrej Consumer and Emami believe that overseas buyouts will give them a foothold in foreign markets and be a key driver of their globalisation strategy. It can also act as a derisking strategy against a downturn in the domestic business. For instance, Indian FMCG company Marico’s international business has over the years grown more than 35%. The company acquired soap brands in Bangladesh—Camelia and Aromatic—which have a 1.5% market share in the country. It has helped Marico enter a category through existing brands and allows it to learn about a new segment. Recently, it bought post-wash hair care brands Fiancee and Haircode in Egypt and looking for more such acquisitions in Africa.

(Source: Economic Times)

Marico still hungry for acquisitions

After acquiring a slew of brands recently, Marico is in restructuring mode even as it hunts for more buys in its segment.

"Marico would always be looking out for acquisitions. Some proposals are under active consideration," Mr Milind Sarwate, chief for HR and strategy, told Business Line.

He added that most of the recent acquisitions have already started yielding results.

After restructuring, Marico now comprises three strategic business units (SBUs): consumer products business, Kaya business and international business, all of which are profit centres, and three support units - technology, finance and IT and HR and strategy.

This has been carried out as a proactive measure and to accelerate growth.

Mr Sarwate said that certain segments have been modified and the business units have now become more cohesive.

He added that Marico expects growth in sales of its domestic business to be led by flagships Parachute (coconut hair oil) and Saffola (edible oil).

"We believe that growth in one business unit does not come at the cost of growth in another unit. Thus, we can keep firing on all cylinders, be it domestic or international business."

He added that the company's recent acquisition, Nihar (an oil brand), boasted of a turnover of about Rs 120 crore during 2006-07.

The two brands which the company acquired from a company in Egypt, Fiancee and HairCode, have been integrated into its portfolio completely.

The company expects to generate a turnover of about Rs 90 crore during 2007-08 from these two brands.

However, the growth of the recently acquired soap brands, Manjal in India and Aromatic and Camelia in Bangladesh, have been moderate.

"We expect that the soap brands will take some time to perform because we are still new to the soap category," Mr Sarwate said.

During the fourth quarter of 2006-07, the Group recorded net sales (plus services) of Rs 397 crore, posting a 33 per cent rise over the same period last year, 21 per cent of which came organically and 12 per cent inorganically.

Mr Sarwate said with the company raising equity through the qualified institutional placement route, Marico expects the funds situation to be under control, "such that a further equity issue may not be required."

Marico raised funds worth Rs 150 crore through private placement of 29 lakh equity shares at Rs 522 a share in December 2006.

Mr Sarwate also said that the interest costs went up in 2006-07 and may go up further during the current fiscal with the increase in the average level of debt.