Britannia Rues Lack Of Consumer Demand After Demonetization And GST

Ferrero, an Italian chocolate giant, is acquiring the biscuit and snack businesses of the American Kellogg Company for $1.3 billion. The brands that Ferrero will buy include popular Keebler cookies as well as Famous Amos and Murray Sugar Free cookies and fruit snacks like Stretch Island.

Founded in 1946, Ferrero has acquired several US brands and businesses since 2017. It is now the third-largest company in the global chocolate confectionery market.

Steve Cahillane, Chairman and Chief Executive Officer, Kellogg, said, "This divestiture is yet another action we have taken to reshape and focus our portfolio, which will lead to reduced complexity, more targeted investment, and better growth. Divesting these great brands wasn't an easy decision, but we are pleased that they are transitioning to an outstanding company with a portfolio in which they will receive the focus and resources to grow."

Giovanni Ferrero, Executive Chairman of the Ferrero Group, stated, "The Kellogg biscuit businesses "are an excellent strategic fit for Ferrero as we continue to increase our overall footprint and product offerings in the North American market."

"We have great respect for Kellogg, it's legacy and values, and are proud that Kellogg has chosen Ferrero as a good home for these businesses," he added.

Anmol Industries, a branded packaged food company focused on biscuits and cakes, has received approval from markets regulator SEBI for its initial public offering (IPO). The Kolkata-based company filed the DRHP (draft red herring prospectus) for the IPO in June.
Since 1994, Anmol Industries Limited has come a long way to become one of the fastest growing FMCG brands of India.

The IPO would aggregate up to Rs 750 crore through an offer for sale. 

The offer for sale would be by Baijnath Choudhary & Family Trust, represented through its trustees aggregating up to Rs 720.4 crore, by SKG Land Developers LLP aggregating up to Rs 22.5 crore, by Delta Nirman LLP aggregating up to Rs 4 crore, by Anmol Hi-Cool LLP aggregating up to Rs 2.5 crore and by Puneet Mercantiles LLP aggregating up to Rs 60 lakh.

Edelweiss Financial Services Limited, ICICI Securities Limited and Motilal Oswal Investment Advisors Limited are the BRLMs (Book Running Lead Managers) to the issue.

India’s leading biscuits and confectionery maker, Parle Products, is planning to consolidate its position in the Indian market. The company aims to double its turnover in the next five years.

“If you look at Parle as a company, we have always been known for biscuits and confectionery. But we have got into quite a few categories over the last two years. We have entered into the bakery items segment like cakes and rusk, high-end chocolates, snacks and of late into pulses. So, I think now is the time to consolidate before we move forward and get into new categories," said Mayank Shah, Category Head, Parle Products in an interview.  

“Quite a few categories are moving over from unorganised to organised segments since consumers have started moving from unorganised to organised segments. One category which has seen conversion is bakery items. Then there are categories like gluten-free products, which have small and niche markets. However, we are at least a decade away from getting into that kind of specialised offerings. These categories are too small for big players like us to cater to," he further added.

Going further, the company aims to be a total food company by filling in the gaps in its offerings.

“Eventually, we are looking at several other categories and whenever and wherever there are opportunities, we would grow into a total food company,” he further said.

Biscuits and confectionery maker Parle Products is planning to increase the prices of its glucose, Marie and milk biscuits by 4-5 per cent in the first quarter of 2018.

Parle Products Category Head Mayank Shah said “As of now, we have not taken any price hike (decision) but we would be thinking of a price hike considering the increased taxes. It will happen in the first quarter of next year, which is January-March. There might be an increase of 4-5 per cent in the price in brands which are below Rs 100 per kg. For mass (category) earlier we were taxed at a lower rate and now we are taxed at a higher rate, so there has been an impact there and they (mass offerings) have suffered a bit. Growth has been slow in the biscuit below Rs 100 per kg category at 6-7 per cent, compared to the industry growth of 14-15 per cent. Biscuits have been able to overcome both demonetisation and GST. Biscuits which were earlier taxed at a higher rate and now have been brought down under 18 per cent, have grown better. Because of the tax benefits (in biscuits above Rs 100 per kg) being passed on to the consumers, there has been a growth in consumption. Rural demand has also seen an uptick this year, with a growth of almost 60-70 per cent. Primarily, glucose, milk and Marie are the categories which will see increase in prices. Company will probably look at one category at a time for the price increase. Its flagship brand ParleG that is dominant in the glucose segment, BakeSmith English Marie and Milk Shakti are the brands that would see a price revision."

Company had not increased the prices of these products post the implementation of the Goods and Services Tax (GST), when the government had slapped a uniform tax rate on biscuits.

Biscuits below Rs 100 per kg, including the glucose category, and those above Rs 100 per kg were placed in the 18 per cent tax slab under GST.

Earlier, biscuits priced below Rs 100 per kg did not attract excise duty but the effective tax rate was around 9-10 per cent.

Low priced high nutrition biscuits that are largely priced below Rs 100 per kg is estimated to be a Rs 9,000 crore market, constituting 35 per cent of the Rs 25,000 crore organised biscuit market in the country.

Premium cookie maker Unibic eying a market share of over 10% in next 12 to 18 months. Cookie market in India is pegged at Rs 7,500 crore, split equally between the premium and mass segments.

Foods Managing Director Nikhil Sen said "Our ambition is to have more than 10 per cent market share nationally in the total cookie market over the next 12-18 months. In the premium-end, in the four markets of South, we have double digit market share. Our presence in the North, East and West is much smaller. We plan to improve our footprint in these three areas that we are not that well available in. We have 900 distributors and close to 60 per cent of our volume comes from traditional trade. We will expand by putting feet on the street in the areas we are under weighted, in terms of market share and try and garner market share there. Our target would be to reach half a million outlets in couple of years. We just invested a fifth line at an investment of Rs 12 crore which takes our capacity to 100 tonnes a day. We are looking at adding at least one new line every year. We are still looking at whether we should invest ourselves or look at contract packing facilities. If we were to invest in capacity ourselves, we would need an investment of Rs 50-60 crore in next five years.”

Cookies constitute around 30 per cent of the total biscuit market which is estimated to be between Rs 25,000-27,000 crore and is growing at twice the rate of the biscuit industry.

Unibic has a strong presence in South and close to 60 per cent of its sales come from the region.

Company, backed by private equity investor Peepul Capital, has 21 variants of cookies under five categories with presence in 2, 00,000 outlets.

Company, which has been growing at a CAGR of 50 per cent and 4.5-5 times the market rate, recently added a fifth manufacturing line at its facility at an investment of Rs 12 crore.