Facing stiff competition on domestic turf, Indian biscuit makers are now looking to expand overseas by forming joint ventures (JVs) and acquiring companies.
While Parle Products Ltd is looking for a JV partner, another biscuit maker is looking to buy a company with distribution capabilities in Turkey, three persons close to both the deals said. They declined comment on the identity of the Turkish company.
Parle is looking at JVs and even investing in greenfield projects in emerging and developing economies, said Pravin Kulkarnii, general manager (marketing) at Parle Products. He declined to provide details of the planned investments or JVs, but said the company is in preliminary talks with Religare Capital Markets Ltd, an investment bank, to look for assets overseas.
A Religare Capital Markets executive, who did not want to be identified, said the bank is talking to some foreign companies on behalf of Indian biscuit makers, but declined to name any of them, citing confidentiality.
Mumbai-based Parle Products, best known for its glucose biscuits brand Parle-G, gets less than 8% of its revenue of around `6,000 crore from exports and overseas markets, but Kulkarnii sees this growing to at least 12% of its revenue.
Britannia Industries Ltd, the maker of Vita MarieGold, Tiger and NutriChoice, has also stepped up investments in its overseas subsidiaries.
In fiscal 2011 (FY11), the company raised its stake in Dubai-based Strategic Foods International Co. Llc and Al Sallan Food Industries Co.
SAOG (based in Sohar, Sultanate of Oman) from 70% to 100%.
SAOG (based in Sohar, Sultanate of Oman) from 70% to 100%.
Britannia has inducted a new chief executive for Strate- gic Foods, said Anand Rathi Share and Stock Brokers Ltd in a July 22 report. Overseas revenue account ed for 15-18% of Britannia's `4,213 crore revenue in FY11 according to Mehul Desai, an alyst at Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.
“Biscuit companies are looking at emerging, develop ing and neighbouring markets for growth,“ said Desai. He added that Britannia was al NT ready the second largest bis cuits company in West Asia and that the company would look at further strengthening its position in that market.
The foreign focus comes a a time when competition in the Indian biscuits market `15,000 crore by sales, is in creasing on account of the en try of multinational compa nies and the presence o strong local firms in regiona markets.
Last year, Kraft Foods Inc launched Oreo, and United Biscuits, the makers of McVi tie's biscuits, too, entered the segment.
The unidentified biscui maker is looking at a distribu tion platform in Turkey which is a high-growth mar ket, said an investment bank er. “The company will eithe o buy a distribution channel o a small but significant firm in a the Turkish market,“ the - banker said, asking not to be i identified.
d He added the firm could spend anything between $50 - million and $100 million (`230-460 crore).
d He added the firm could spend anything between $50 - million and $100 million (`230-460 crore).
According to a 13 July research report by Ekspres Yatirim Menkul Degerler AS, a Turkish equity research firm, the biscuit industry in Turkey is expected to grow at around 5% a year for the next five years-in line with the country's gross domestic product.
- There are around 30 manufacturers with the two largest owning an 84% share of the market.
According to a second intvestment banker, the Indian market is highly saturated , and competitive, and the growth markets are South-East and West Asia, Turkey, - South America and other de- f veloping economies.
l “The cost of production in India is lower. The quality of . produce is very high and hence getting into a smaller market with a distribution platform and scaling it up gives a headstart to compatnies in newer markets,“ added - this person, who did not want , to be named.