Food Survey of India

Food
Abneesh Roy
+91 22 6620 3141
abneesh.roy@edelcap.com
Harsh Mehta
+91 22 4063 5543
harsh.mehta@edelcap.com
Edelweiss Securities Limited
Food
Foodforthought
Indiansspend~INR17tnperyearonfood
Currentpercapitafoodexpenditurein
Indiais1/6thofChinaand1/16thofUS
Only12%offoodisprocessed,muchlower
than40%inChinaand80%inMalaysia
Spendingonprocessedfoodlikelytosurge
4xby2020fromcurrentINR2tn
Saltysnackcategorypoisedtodouble
overnext3years
Higherfailureratefornewlaunchesin
foodthannonfood
Healthy+snacks=recipeforfailure
MostfoodcompaniestradeathigherPE
multiplescomparedtononfoodpeers
Potatoescorner~75%ofexistingstoragecapacity,
withmeager~1%forotherfruitsandvegetables
EdelweissSecuritiesLimited
Food
THISPAGEISINTENTIONALLYLEFTBLANK
Food
Foodonfire
ThereisnolovesincererthantheloveoffoodGeorgeBernardShaw
ThedomesticFoodandBeverages(F&B)marketisacriticalcoginthegrowthwheelofmost
consumer companies. Unlike apprehensions of market participants on sustainability of
growth,oursurveyfindingsindicatethatgrowthisnotonlyheretostay,butwillalsomove
intothenextorbitwiththeintroductionofnewproductsandcategories.Highergrowthwill
alsoimproveoverallprofitability(asmarginsarerelativelyhigher).
Further,asisthenorm,whenallcompaniesareinexpansionmode,onlyahandfulemerge
potential winners. Hence, to understand these changing dynamics, we commissioned an
extensiveresearchacrosscategoriesofF&B.Simultaneously,wedwelledonwhatwebelieve
isthemostimportantcomponentforgrowthofF&BdevelopmentofasupplychaininIndia.
Wealsodelvedeeperintotheregulatoryframeworkforthissegment.
With many food companies being privately held or regional, we tried to cover important
unlisted players with a view to gauge the demand growth, competitive scenario and brand
preference in the sector. We conducted a survey in urban markets (focused on earning
populationencompassingbothgenders).Afieldstudyofthesamesurveywasalsoconducted
that comprised facetoface interviews of consumers at neighbourhood stores and
hypermarkets. This was backed by secondary research primarily done to study changes in
consumerhabitsandbrandpreference.
Keyquestionsaddressedinthesurveyinclude:
Howhastheconsumerfoodhabitandbrandpreferenceevolvedoverpast35years?
Whatisthelikelygrowthandkeydrivers?
Howsustainableisthecurrentmarketgrowthacrossdifferentfoodcategoriesovernext
35years?
Basedonoursurveyfindings,industryinteractions,studyoftrendsinChinaandanalysis,we
expect the growth trajectory to accelerate to 20% CAGR over the next five years (past five
yearCAGRof18%).Ourbiggestbetsarestaples(currentsize~INR3,325bn;packagedstaples
togrowat18%),snacks(currentsize~INR409bn;expectedgrowthrate20%),dairy(current
size:~INR3,500bn;expectedgrowthrate10%),beverages(currentsize~INR193bn;expected
growthrate14%),andbottledwater(currentsize~INR30bn;expectedgrowthrate22%).
Overall,brandedplayersareexpectedtogrowmuchfaster(brandedsnacksgrowingat~20%
versus 7% for unorganized players) than the total market. We expect Nestle, ITC, GSK,
Britannia, Marico, Agro Tech to be the biggest winners. We expect HUL, Dabur and Tata
GlobalBeveragesalsotodowell.Therearebiggapsinproductportfoliosofforeignparent
companiesandtheirIndianarms.Weexpectthelattertolaunchproductsfromtheirparents
stables;however,mostproductswillneedhighlocalisationapartfromIndiaspecificproducts.
Food
Contents
Executivesummary....................................................................................................................6
Ataglance................................................................................................................................10
Whyfoodswilloutperformnonfoodcategories?...................................................................18
Twomainmacrodriversforpackagedfood............................................................................22
Keytrendswitnessedinfoods.................................................................................................40
ThemesfromFoodsurveyandindustryinteractions.............................................................43
WhathappenedinChina?........................................................................................................54
MNCcompaniestoremainveryaggressive.............................................................................57
Weexpectbigopportunitiesinthesefoodsegments............................................................61
Staples..............................................................................................................................62
Snacks...............................................................................................................................65
Milkandmilkderivatives..................................................................................................76
Beverages........................................................................................................................80
Bottledwater....................................................................................................................87
HealthFoods.....................................................................................................................89
Nonvegetarianfood........................................................................................................96
Restaurantindustry..........................................................................................................98
InvestorshaveahugeappetiteforFoodcompanies.............................................................100
Supplychainandpackagingkeyforsustainedgrowth.........................................................101
Casestudy
NestlevsBritanniaAllarenotequal............................................................................109
HealthandWellnesscategoryNoCompromiseontaste.............................................111
Keyrisks.................................................................................................................................113
Ratedcompanies
Dabur..............................................................................................................................115
GSKConsumer................................................................................................................119
HindustanUnilever.........................................................................................................123
ITC...................................................................................................................................127
JubilantFoodworks.........................................................................................................131
MaricoIndustries............................................................................................................135
Nestle.............................................................................................................................139
PantaloonRetail.............................................................................................................143
Notratedcompanies
AgroTechFoods.............................................................................................................147
BritanniaIndustries........................................................................................................151
TataChemicals................................................................................................................155
Food
Unlistedcompanies
Amul...............................................................................................................................161
BagrrysIndia..................................................................................................................163
Bisleri..............................................................................................................................165
BlueFoods......................................................................................................................167
Cadbury/Kraft.................................................................................................................169
CalorieCare....................................................................................................................171
CapitalFoods..................................................................................................................173
Cocacolaindia...............................................................................................................175
Cremica...........................................................................................................................177
Danone...........................................................................................................................179
Dr.Oetker.......................................................................................................................181
DSGroup(CatchMasala)................................................................................................183
EverestSpices.................................................................................................................185
Haldirams.......................................................................................................................187
JSMCorporation.............................................................................................................189
JumboKing.....................................................................................................................191
KFCIndia.........................................................................................................................193
LittleItaly........................................................................................................................195
McDonalds.....................................................................................................................197
MirahGroup...................................................................................................................199
MotherDairy..................................................................................................................201
MTRFoods......................................................................................................................203
ParagMilkFood..............................................................................................................205
ParleAgro.......................................................................................................................207
ParleProducts................................................................................................................209
Pepsico...........................................................................................................................211
PerfettiVanMelle..........................................................................................................213
PizzaHut.........................................................................................................................215
Rasna..............................................................................................................................217
Subway...........................................................................................................................219
TunipAgro......................................................................................................................221
Unibic..............................................................................................................................223
VenkysIndia..................................................................................................................225
AppendixIEvolutionoffood...............................................................................................227
AppendixIIFoodandfoodprocessing.................................................................................230
AppendixIIITrendofadspends...........................................................................................233
AppendixIVConsumerSurvey..............................................................................................241
Food
ExecutiveSummary
Foodtooutperformnonfoodsegments
FoodandBeverages(F&B),thelargestcategoryinIndianconsumerspending,isexpectedto
maintain its dominance. Food and food products constitute ~ 40% of urban household
spending and 36% of the blended (urban + rural) wallet spent. The packaged F&B segment
zoomed in past five years growing at a CAGR of ~18% and we expect growth trajectory to
accelerate to 20% CAGR for the next five years. Overall, branded products are expected to
growmuchfaster(brandedsnacksgrowingat~20%vs7%forunorganizedplayers)thanthe
total F&B market growth. For listed players revenues from Food segment (3year CAGR of
~19%) outpaced nonfood (3year CAGR at ~17%). Also, the profitability profile of food
segmenthasturnedsuperiortononfoodasthecompetitiveintensityislesserinfoodasthe
penetrationlevelandpercapitaconsumptionareextremelylow.Theevolutionandinflection
ofIndianpackagedF&Bmarketwillbedrivenbyseveralgrowthdriverssuchasurbanisation,
demographics, female working population, low penetration, increasing media consumption
aidingbrandconsumptionetal.
Newplayerstoexpandmarket,readytoeatmayremainsmall
Right strategy in packaged food is more about baking a new cake, rather than launching
metoo products to get a small market share. However entry of several new players in
packaged foods will expand the market size, we believe, instead of cannibalising existing
consumers.WehaveseenanexampleofthisforNestlsMaggiwheretheentryofHUL,ITC
andGSKConsumerjusthelpedthenoodlesmarkettoexpand.ThisisevidentfromBritannia
entering upma and poha, Marico chipping into oats and rice (targeting 25% from Foods in
Saffola from current 5%), ITC, GSK & HUL tapping multiple segments, Dabur tapping fizzy
drinks, Agro Tech in convenience meals and peanut butter and Danone in dairy. Also
Britannia is experimenting with fusion of products biscuits mein chocolate. As per ITC
Chairman Y C Deveshwar, ITC will eventually enter dairy, tea, coffee and aerated drinks.
Indianwomenwanttoretaincontroloverthekitchenandtaste.Sowhileshewillusecooking
aids,masalas,sheislesslikelytobuyReadytoeatMeals.
ExpansionbyMNCsturnsheatonIndiancounterparts
Multinational F&B companies were always fascinated by the Indian growth story, primarily
ledbythefavourabledemographicprofileasseenbytheearlyentryofPepsiCo,Coke,Nestle
and Cadbury. However, progressively more companies have become aggressive, initiating
meaningful investments in the domestic market (Conagra via Agro Tech, Kraft tasting good
success post Oreos entry via Cadbury, Nestle investing in capacity addition and HUL
savouring its focus on foods segment). These investments though at nascent stage will
eventuallysetthebaseforthenextlegofgrowth.Mostleadingplayersareadoptingamore
localised business model, including India specific products (KFC selling vegetarian products,
pizzassellingtandoorivariantsetc)andawellspreadoutdistributionnetwork.
Health,wellnesskeydifferentiators,buttasterulessupreme
India faces contrasting problems of facing one of the highest malnutrition cases and also
being the diabetes capital of the World. In our view, both of these are an opportunity for
Food companies. Intense focus on health and wellness plank is extremely important for
Consumer players due to an alarming rise in obesity and diabetes (India is home to the
largestdiabeticpopulationglobally),forcingcompaniestoputnutritionalinformationon
6
Food
foodpacks,stoppromotingunhealthyfoodandintroducehealthieritems.Organizedplayers
are better placed in this segment. With the increase in disposable income of consumers,
thereisamarkedinclinationtowardshealthfoods.Webelievethatwithanincreasingsetof
serious health conscious consumers in the country, the big challenge is maintaining taste,
where consumers clearly do not want to compromise. Taste remains of paramount
importancetoIndianconsumerswhowouldcutdownonthefrequencyofconsumptionbut
withoutgivingupontaste.
WhathappenedinChina?
Chinawithdemographics,urbanruraldividesimilartothatofIndiawillprovidegoodinsight
into evolution of food industry in India. Chinese over the time have moved from accepting
basic features to demanding value added customized products, even if it comes at a cost.
Chinese are brand conscious but not brand loyal. While quality remains a critical
consideration,valueisthemostimportantone.Consumersdonotapproveofoutstretching
theirbudget;whentheyuptradeinaparticularcategorytheydowntradeinlesscompelling
categories.In2011,domesticcompaniescontinuedtoleadChinaspackagedfoodsales,with
MengniuandYilirankedfirstandsecondrespectively.Multinationalswereinaweakerplace
inpackagedfoodsaleswithNestlandMarsatthe9thand10thpositions.InChina,where
diabetes,cancerandotherchronicillnessesareontherise,peoplearegrowingmorehealth
conscious creating a fastgrowing market for companies selling health foods. The extent of
foodprocessedissignificantlylowerinIndiathanmostemerginganddevelopingeconomies
(12%inIndiavs.40%inChinaand80%inMalaysia).
Needsupplychainefficienciestohelpdelivervalueproposition
The agrisupply chain in India faces several constrains. It involves multiple players such as
farmer, aggregator, commission agent, wholesaler and retailer, which results in price rise.
Inadequate storage facilities lead to significant wastages (wastage is ~35% for tomatoes,
~30% for mangoes and ~25% for potatoes). High capex requirement for setting up cold
storages and shortage of power are major hindrances to a ramp up in supply chains.
Therefore,theFDIinmodernretailwillbethemostimportantelement,feedinginvestments
in backend operations. Supply chain efficiencies will help offset rest of the inflation and
deliverpackagedfoodsasavaluepropositiontoconsumers.Throughmegafoodparks,the
government is creating necessary infrastructure and a viable ecosystem to enable cost
efficient manufacturing of Consumer products. The government has already chosen public
privateparticipation(PPP)modeforthisschemeandhaskeptitsstaketolessthan26%.
Biggestwinners:Nestle,ITC,GSK,Britannia,MaricoandAgroTech.
Wealsolike:HUL,DaburandTataGlobalBeverages.
Food
Twothreeyearsview
We believe that within food, there are certain categories which will outperform the rest.
Changing consumer habits, low penetration level, increasing health consciousness among
consumersandchangingdemographicsmakethesecategoriesthebestplaywithinfood.We
expect, salty snacks to be INR299bn (from current INR120bn) category over next five years
growing at a CAGR of ~20% thereby benefitting ITC, Haldiram, PepsiCo and Parle. Due to
increased health awareness among consumers, we expect health and wellness segment to
benefitthemost.SuchachangewouldbenefitGSKConsumer(maltedfoodslikelytogrowat
~15%CAGR),Dabur(Juicestogrowat22%CAGRandchyawanprashtogrowat12%CAGR),
Zydus Wellness (sugar free, adult nutrition and butter alternative), Marico (Saffola oil to
growat20%CAGRvaluewiseandfoodstobecome25%ofSaffolaportfoliofromthecurrent
5% in next 3 years) and Britannia extended its health biscuit brand, NutriChoice, to the
Diabetic Friendly Essentials range after establishing it with the Hi Fibre and Multi Grain
ranges. In the last three years, health and wellness (H&W) has become a key driver for
Britannia and accounts for ~55% of sales. Due to the increased urbanisation and reduced
timetopreparefood,conveniencefoodisgoingtobetheothermajorcategoryinthenext
fiveyears.WeanticipateNestle(Noodlestogrowat20%CAGRandPastatodisplayaCAGR
of25%),AgroTech(enteredReadytocook(RTC)segmentwhichweexpecttogrowatCAGR
25%),HUL(expandinginRTC),ITC(noodlesandRTC)andMTR(presentinRTC/RTEcategory)
tobenefitthemost.
Threefiveyearsview
InlongerruntherewouldbeconsiderableshiftinconsumerhabitandpreferencewithIndian
consumermovingmoretowardsconvenienceandhealthrelatedproducts.Weexpectsurge
inconsumptionofcookingaids,readytocookwhichhelptheconsumerreducecookingtime.
Also,weareextremelypositiveonthecompaniesplayinghealthplankaswebelievethereis
increasingdrifttowardshealthconsciousnesswithlifestylegettingmoreandmorestressed.
Weexpectbigopportunitiesinthefollowingeightfoodsegments
Staples: The ~INR3325bn category is one of the largest categories. Packaged part of this is
expected to grow at a healthy rate of ~18%. It can be further classified into packaged salt,
packagedwheat,packagedrice,packagedspicesandedibleoil.
Snacks:Thisincludesbiscuits,namkeen,noodles,pasta,chocolates,confectionaries,Readyto
eat(RTE),upma,pohaetc.ThesnackfoodmarketinIndiaisestimatedtobeworthINR409bn
and growing at 1520% yearly. Munching between meals iscommon in the country with a
varietyofsnacksofferedinmindbogglingregionalspecialtiesgainingnationalacceptance.
Saltysnacksarerapidlyreplacinghomemadesavouriesinbothbigandsmallcities.INR70bn
unorganised sector is growing at 78%. We expect ITC, Haldirams, PepsiCo, Parle, Balaji
NamkeenandPrakashsnackstobenefitfromthisphenomenon.TheReadytoCookmarketis
estimated at around INR15bn. With the changing socioeconomic pattern and increasing
number of working couples, the concept of convenience food is fast becoming popular in
Indiaforsavingtimeandeffort.Asthissegmentextendsshelflife,makingproductsavailable
offthemarketshelves,demandhasbeenrisingatagoodpace.WeexpectthistobenefitITC,
AgroTech,Britannia,MTR,McCain,Atkins.
Food
Milk and milk derivatives: Indian dairy industry stands at around INR3500bn with the
unorganizedsegmentdominating80%ofit.Indiandairyindustryisstillinitsinfancyandwe
expectittobethebiggestpackagedfoodcategoryinnext10years(sizeof~7042bn)thereby
benefitting Nestle, Britannia, Amul, Motherdairy and Danone. With Amul and Motherdairy
also entering frozen foods which again is at a nascent stage makes us enthused about the
companies.As perITCChairmanYCDeveshwar,ITCisexperimentingwithaprogrammein
MungerinBiharindairysegment.
Beverages: Total size is ~INR260bn. India accounts for approximately 10% of the global
beverage consumption, being the third largest market in the world after United States and
China.Mainreasonsforgrowthare:increasingpopulationanddisposableincomes.Around
120bnlitresofbeveragesareconsumedbyIndianseveryyear,ofwhichonly5%comesfrom
thepackagedsegment.Thusthereliesanimmensegrowthopportunity.
Bottled water: The bottled water segment is estimated to be worth INR30bn. There are
about200bottledmineralwaterbrandsinIndiaandnearly80%ofthemarelocal.Threekey
playerswhodominatetheIndianbottledwatermarketareParlewithBisleri,CocaColaIndia
withKinleyandPepsiCoIndiaHoldingswithAquafina.
Healthfoods:ThissegmentislikelytoseeoneofthehighestgrowthlevelsintheentireFood
segment.IthasmanysubsegmentslikeChyawanprash,Butteralternatives,healthycooking
oils,sugarsubstitutes,energydrinks,Healthdrinks,HealthysnacksandHighfiberbeverages.
Nonvegetarianfood:ThepoultrymarketinIndiacomprisesofthreemaincategories:meat,
eggs and processed value added products. Organised sector dominates the poultry market
(meat and egg comprise 95% of this segment) with a share of 70%. With INR300bn, meat
segmentdominatesthemarketwhileeggsmarketstandsatINR150bninsize.
Restaurants: The total restaurant industry in India is ~INR430bn, comprising two distinct
segments:theorganizedandtheunorganized.Theindustryhasshownagrowthrateof56%
perannumwiththeorganizedsectorestimatedatINR85bnandgrowingatanannualrateof
2025%.Thechangingperceptionsoftherichandtheuppermiddleclasswithariseintheir
disposableincomehavealwaysdriventhemarket.WeexpectJubilant,McDonalds,KFC,Blue
Foodstodowell.
VariousunlistedmultinationalandlocalcompaniesarebettingbigonIndianpackagedfood
market. We see immense potential in these unlisted players who have either just entered
Indianmarkets(Danone,McCain,Atkins,etc)oroneswhoexistinIndia(Amul,MotherDairy,
Parle,Rasna,MTR,Haldiram,etc).
10
393
204
1,028
162
4,270
190
ITC
JubiliantFoodworks
Marico
Nestle
PantaloonsRetail
2,664
GSKConsumer
HindustanUnilever
98
Dabur
Price
(INR)
217
96
614
65
7,738
2,161
42
1,750
Shares
O/S(mn
nos)
41,249
409,920
99,468
66,820
1,578,552
849,273
112,036
171,467
Mktcap
(INRmn)
HOLD
HOLD
BUY
REDUCE
BUY
BUY
BUY
BUY
Reco
FY09
FY10
FY11
FY12E
FY13E
CY09
CY10
CY11E
CY12E
CY13E
FY10
FY11
FY12E
FY13E
FY14E
FY10
FY11
FY12E
FY13E
FY14E
FY10
FY11
FY12E
FY13E
FY14E
FY10
FY11
FY12E
FY13E
FY14E
CY09
CY10
CY11E
CY12E
CY13E
FY10
FY11
FY12E
FY13E
FY14E
63,417
89,261
110,123
123,045
143,988
51,294
62,547
74,908
91,172
110,414
26,608
31,283
40,365
45,996
54,650
4,239
6,781
10,194
14,088
18,804
276,247
320,782
370,587
420,293
483,878
177,643
196,910
226,246
258,264
292,293
19,772
23,685
27,707
32,732
38,597
34,143
41,045
51,414
59,961
70,060
Revenue
6,684
8,191
9,600
10,779
12,829
10,345
12,497
15,528
19,247
23,537
3,751
4,098
4,824
5,887
7,050
666
1,196
1,869
2,589
3,486
63,243
74,077
86,040
98,502
112,939
25,759
23,771
30,142
35,004
41,142
3,623
4,365
5,101
6,050
7,113
6,470
7,625
8,729
10,449
12,576
1,405
2,302
1,897
1,222
1,526
7,196
8,554
9,616
11,772
14,228
2,317
2,865
3,191
3,972
4,822
330
717
988
1,397
1,954
41,684
50,179
60,237
69,303
80,423
21,566
22,961
26,864
30,252
35,458
2,328
2,999
3,552
4,241
5,011
5,032
5,686
6,244
7,594
9,387
EBITDA Netprofit
Financials(INRmn)
7.4
11.8
8.7
5.6
7.0
74.6
88.7
99.7
122.1
147.6
3.8
4.7
5.2
6.5
7.8
5.3
11.0
15.6
22.0
29.9
5.5
6.6
7.9
9.0
10.5
9.7
10.5
12.4
14.0
16.4
55.4
71.3
84.5
100.8
119.2
2.9
3.3
3.6
4.3
5.4
EPS
(INR)
25.6
40.8
23.4
11.7
17.0
18.6
21.9
19.8
21.7
21.1
11.4
17.6
29.0
14.0
18.8
51.0
59.9
50.3
38.2
33.5
11.4
16.4
15.5
13.4
15.1
(13.3)
10.8
14.9
14.2
13.2
24.8
19.8
17.0
18.1
17.9
20.9
20.2
25.3
16.6
16.8
Revenue
45.1
22.6
17.2
12.3
19.0
19.8
20.8
24.3
24.0
22.3
23.4
9.2
17.7
22.1
19.7
97.3
79.6
175.2
114.7
108.4
11.0
17.1
16.2
14.5
14.7
(3.9)
(7.7)
26.8
16.1
17.5
32.1
20.5
16.9
18.6
17.6
33.5
17.9
14.5
19.7
20.4
EBITDA
Net
profit
11.5
73.0
(22.0)
(35.6)
24.9
27.5
18.9
12.4
22.4
20.9
22.8
23.7
11.4
24.5
21.4
358.7
114.7
41.9
41.2
35.9
5.6
20.4
19.9
15.0
16.0
(13.9)
6.5
17.0
12.6
17.2
23.6
28.8
18.5
19.4
18.2
28.6
13.0
9.8
21.6
23.6
Growth(%)
(6.6)
59.7
(25.9)
(35.6)
24.9
27.5
18.9
12.4
22.4
20.9
22.7
22.4
11.6
24.5
21.4
320.0
108.4
41.9
41.2
35.9
5.1
20.4
18.5
15.0
16.0
6.3
8.7
18.1
12.9
17.2
23.6
28.8
18.5
19.4
18.2
16.9
12.7
9.8
21.6
23.6
EPS
10.9
9.7
11.9
11.3
10.1
39.5
32.6
26.4
21.4
17.5
27.0
25.4
21.1
16.8
13.6
98.1
55.0
35.0
25.0
18.2
23.4
19.9
17.5
15.2
13.1
32.0
34.8
26.9
22.9
19.2
28.7
23.4
19.8
16.3
13.5
25.8
22.8
19.5
15.9
12.9
EV/EBITDA
(x)
25.7
16.1
21.7
33.8
27.0
57.2
48.1
42.8
35.0
28.9
42.6
34.8
31.2
25.1
20.6
195.5
93.8
66.1
46.8
34.4
37.1
30.8
26.0
22.6
19.5
40.7
37.4
31.7
28.1
24.0
48.1
37.4
31.5
26.4
22.4
34.0
30.1
27.4
22.6
18.3
1.4
1.4
1.3
1.3
1.2
70.8
48.1
36.0
27.5
21.4
15.1
10.8
8.4
6.6
5.2
55.6
35.1
23.6
16.3
11.5
10.7
9.4
8.8
7.9
7.0
32.0
31.5
24.3
19.5
15.8
12.4
11.7
9.8
8.2
6.8
18.2
12.3
9.7
7.7
6.2
P/E(x) P/B(x)
Valuations
10.0
9.6
8.2
7.0
7.7
206.0
195.5
148.9
129.5
118.1
36.6
26.5
24.5
26.6
27.8
36.6
60.8
70.0
69.8
70.4
38.6
58.0
58.6
59.1
59.0
126.9
143.0
144.6
118.4
104.2
38.3
42.6
44.0
43.8
43.3
75.6
48.2
35.9
37.2
38.5
10.5
9.2
8.7
8.8
8.9
20.2
20.0
20.7
21.1
21.3
14.1
13.1
12.0
12.8
12.9
15.7
17.6
18.3
18.4
18.5
22.9
23.1
23.2
23.4
23.3
14.5
12.1
13.3
13.6
14.1
18.3
18.4
18.4
18.5
18.4
19.0
18.6
17.0
17.4
18.0
ROCE
EBITDA
(%) margins(%)
Company
ATAGLANCE
Food
TataChemicals*
352
255
120
BritanniaIndustries* 486
Shares
O/S(mn
nos)
24
Price
(INR)
429
AgroTechFoods*
Company
ATAGLANCE(contd.)
Reco
89,760 Notrated
58,320 Notrated
10,296 Notrated
Mktcap
(INRmn)
11
FY10
FY11
FY12E
FY13E
FY14E
FY10
FY11
FY12E
FY13E
FY14E
FY10
FY11
FY12E
FY13E
FY14E
EBITDA Netprofit
EPS
(INR)
Revenue
EBITDA
Growth(%)
Net
profit
EPS
EV/EBITDA
(x)
P/E(x) P/B(x)
Valuations
ROCE
EBITDA
(%) margins(%)
95,438
110,602
127,260
134,978
132,866
37,729
46,052
53,643
63,503
74,164
18,374
18,368
22,419
23,846
23,802
1,629
2,349
3,102
3,897
4,659
8,693
8,562
8,824
9,653
10,128
1,032
1,343
1,851
2,369
3,027
30.8
26.0
35.0
38.6
40.2
9.0
11.0
15.5
19.8
25.3
(22.1)
15.9
15.1
6.1
(1.6)
10.3
22.1
16.5
18.4
16.8
(1.4)
(0.0)
22.1
6.4
(0.2)
(31.6)
44.2
32.0
25.7
19.5
(10.4)
(1.5)
3.1
9.4
4.9
(31.9)
30.2
37.8
28.0
27.8
(15.4)
(15.7)
34.5
10.3
4.2
(31.9)
30.2
40.5
28.3
27.7
6.4
7.0
6.6
6.2
6.2
37.2
25.4
22.2
17.7
14.8
11.4
13.5
10.7
9.7
9.3
56.2
43.2
34.3
26.8
20.9
19.3
16.6
17.6
17.7
17.9
4.3
5.1
5.8
6.1
6.3
*Bloombergestimates
14.0
13.4
7.6
7.6
8.3
17.5
19.2
18.0
22.6
N.A.
Source:Edelweissresearch
Priceason09thFeb2012
1.8
1.6
1.5
1.3
1.2
20.5
17.8
12.3
9.7
7.6
6,496 225 245 10.0 (16.0) 45.4 49.4 17.8 42.5 42.6 6.9 13.9 3.5
7,187 275 318 13.0 10.6 22.1 (42.8) 29.6 34.8 32.8 5.9 13.9 3.8
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Revenue
Financials(INRmn)
Food
Food
Fig.1:CompetitiveanalysisoflistedplayersinF&Bcategory
Company
Brandsalience Intensityofcompetition
Productmix
Distribution
Appetitefor
adspend
Innovation
Past
Foodas%
success
ofsales
ITC
HUL
Dabur
PRIL
Nestle
Marico
GSKConsumer
Britannia
JubiliantFoodworks
AgroTechFoodsLtd
TataChemicals
Best
Worst
12
Food
Table1:MajorfoodcompaniesinIndia(asperFY11)
Player
Dabur
Keybrands
DaburChyawanprash,Hajmola,Real,Active,
Burrst,GlucoseD,Hommade,Lemoneez,
Capsico,Honey
Segment
health,beverages,cooking
aids
Category
RevenueINRbn(food)
chyawanprash,digestives,fruitjuice,energydrinks,tomatopuree,coconut
6.8
milk,lemonade,cookingpastegarlictomatopuree,honey,mustardoil,rose
syrup
HUL
RedLabel,Bru,BrookeBond,TajMahal,3
Roses,Kissan,Knorr,KwalityWall's,Lipton,
Modern
beverages,staples,dairy,
bakery,readytocook
tea,coffee,healthdrinks,salt,flour,icecream,creamalternatives,bread,
ketchup,jam,soup,noodles,pasta,readytocookIndiancuisinepaneer,
chicken,channa;Chinesecuisinemanchurian,schezuan
34.7
ITC
KitchensofIndia,AashirvaadAtta,Aashirvaad
Salt,SunfeastDarkFantasy,SunfeastGlucose,
SunfeastPasta,SunfeastYippee!,Minto,
Candyman,BingoMadAngles
readytocook,readytoeat,
frozenfood,staples,bakery,
confectionery,snacks
readytocookpaneer,dal,mirch,chicken,biryani,curries,masalamixes,
desserts;pasta,noodles,cookingsauces,frozenfood,flour,salt,spices,
readytoeatidli,dosa,desserts,biscuits,healthbiscuits,premiumbiscuits,
mint,toffees,chips,saltysnacks
28.9
Marico
Nestle
SaffolaGold,Arise,Oats,SaltPlus
Nescafe,Maggi,KitKat,Munch,Milkybar,Polo,
Everyday,Milkmaid,Neslac,Actiplus,Bhuna
Jeera,NestleMilk,Noodletz
Staples,breakfastcereals
dairy,beverages,readyto
cook,readytoeat,chocolates,
confectionery
Edibleoils,rice,oats,flour,salt
coffee,tea,chocolates,confectionery,milk,milkwhiteners,maltedfoods,
ghee,dahi,condensedmilk,babyfood,noodles,pasta,ketchup,spices,
readytocooksoup
5.0
62.6
PepsiCo
Pepsi,7UP,Gatorade,Nimbooz,Slice,Tropicana, beverages,chips,saltysnacks
Aquafina,Lays,Kurkure,LaherNamkeen,
QuakerOats,Aliva,UncleChips
carbonateddrinks,fruitjuice,lemonade,healthdrinks,bottledwater,tea,
oats,snacks,chips,healthysnackfoods
N.A.
Kraft
DairyMilk,Perk,5Star,Bournville,Eclairs,
Gems,BournVita,Tang,Oreo,Halls,Bubbaloo
chocolate,beverages,biscuits,
confectionery
chocolate,maltedfooddrinks,powdereddrinks,biscuits,candy,gum
25.0
Britannia
Tiger,GoodDay,Bourbon,5050,PureMagic,
Treat,NutriChoice,TimePass,CrunchCake,
DailyFresh,HealthyStart,MilkMan
bakery,chips,breakfastcereal,
readytoeat,dairy
biscuits,cookies,digestivebiscuits,oats,cakes,milk,flavouredmilk,dahi,
dairywhiteners,ghee,cheese,butter,bread;readytoeatupma,poha
42.1
ParleProducts
ParleG,Monaco,Hide&Seek,KrackJack,2020, bakery,chips,saltysnacks,
DigestiveMarie,Melody,MangoBite,Poppins, confectionery
MonacoSmartChips,Fulltoss
Biscuits,digestivebiscuits,cookies,confectionery,snacks,chips
59.8
ParleAgro
Frooti,LMN,Appy,Saint,Grappo,Bailley,Hippo, beverages,snacks,
Buttercup
confectionery
AmulMilk,AmulCheese,AmulGhee,AmulKool, dairyproducts,chocolates,
AmulMastDahi,Sagar,AmulGhee,Amulya,
desserts
Nutramul,AmulShrikhand,MithaiMate,
Fundoo
Horlicks,Boost,Maltova,Viva,Foodles,
beverages,noodles,bakery,
Lucozade,GopikaGhee
dairyproducts
Sundrop,ActII,HealthyWorld,Crystal,10min Staples,readytocook
Yummeals
lemonade,fruitjuice,chips,snacks,bottledwater,confectionerysweets
N.A.
milk,flavouredmilk,milkpowders,ghee,butter,butteralternatives,cheese,
coldcoffee,icecream,dahi,paneer,maltedfooddrinks,condensedmilk,
desserts,chocolates,cream
97.7
maltedfooddrinks,healthdrinks,instantnoodles,biscuits,ghee
23.1
Amul
GSKconsumer
AgroTechFoods
CocaCola
ZydusWellness
Unibic
beverages
CocaCola,ThumsUp,Sprite,Maaza,Minuit
MaidPulpyOrange,MinuitMaidNimbuFresh,
MinuitMaidJuice,Nestea,Kinley,Burn,Georgia
Gold
SugarFree,Nutralite
sugarsubstitutes,butter
alternatives
AnzacCookies,Jamz,OatmealDigestive,Kiss
bakery
Edibleoil,Popcorn,healthycookingoil,chocolatepudding,butter
alternatives,peanutbutter,frozenfood;readytocookgreenpeas
Carbonateddrinks,bottledwater,lemonade,fruitjuices,powdereddrinks,
healthdrinks,tea,coffee,energydrinks
sugarsubstitutes,butteralternatives
7.2
N.A.
2.9
biscuits,digestivebiscuits,cookies
0.6
Heinz
HeinzTomatoKetchup,Complan,GluconD,
Sampriti
beverages,dairyproducts,
bakery
ketchup,ghee,powdereddrinks,maltedfooddrinks,healthdrinks,biscuits,
babyfood
Hershey's
MahaLacto,Jumpin,GodrejCookliteOil
confectionery,beverages,
staples
confectionery,fruitdrink,edibleoil
N.A.
3.6
13
Food
Table2:FoodsegmentsKeydatapoints
Current
Proj.5
size
year
Proj.10
(INR
5year value 10year yearvalue
bn) CAGR(%) (INRbn) CAGR(%) (INRbn)
25 12.0 44 10.0 65
Segment
PackagedSalt
WheatFlour
1,000
8.0
1,469
6.0
1,791
Rice
1,000
7.0
1,403
6.0
1,791
Spices
400
8.0
588
6.0
716
EdibleOil
900
7.0
1,262
6.0
1,612
Healthycookingoils
10
16.0
21
14.0
37
Noodle
18
20.0
45
17.0
87
Pasta
25.0
28.0
12
Oats
1.5
28.0
25.0
14
Cornflakes
25.0
15
23.0
40
120
20.0
299
18.0
628
Companies
TataChemicals
ITC
Marico
ITC
ShaktiBhog
HUL
Pillsbury
LTfoodsltd
KohinoorFoods
LakshmiEnergy
KRBL
Marico
MDH
MTRFoods
EverestSpices
DSGroup
KSOils
AgroTech
Cargill
AdaniWilmar
RuchiSoya
Marico
AgroTech
Brands
TataSalt
AashirvaadSalt
SaffolaSalt
Aashirvaad
Shaktibhog
Annapurna
Pillsbury
Daawat
Kohinoor
RoyalBrilliance
IndiaGate
Saffola
MDH
MTR
Everest
Catch
Kalash,DoubleSher,KSGold
Sundrop
NatureFresh,Gemini
Fortune,KingsOil,Fryola
Nutrela,Mahakosh,RuchiGold
Saffola
Sundrop
Nestle
HUL
GSK
ITC
NissinFoods
Nestle
ITC
HUL
FutureGroup
BambinoAgro
Maggi
Knorr
Foodles
SunfeastYipee
TopRamen
MaggiNutriliciousPazzta
SunfeastPasta
Knorrsoupypasta
TastyTreat
BambinoPasta
PepsiCo
Bagrry
Marico
Kellogg's
Britannia
Kellogg's
MohanMeakin
FutureGroup
Haldiram
ConAgra
Pepsico
Venkatraman
ITC
Quaker
Bagrry'sOats
SaffolaOats
HearttoHeart
HealthyStart
Kellogg's
Mohan
TastyTreat
Haldiram
David
Kurkure,LeharNamkeen
Peppy
Bingo
InstantFood
Breakfastcereal
SaltySnacks
14
Food
Proj.5
Current
Proj.10
year
size
(INR
30 22.0 81 20.0 186
Segment
Chips
Readytoeat
Readytocook
4
15
18.0
25.0
9
46
20.0
28.0
25
177
Ketchup
18.0
11
16.0
22
Pickles
17
15.0
34
13.0
58
Biscuit
126
15.0
253
13.0
428
Confectionery
41
16.0
86
14.0
152
Chocolate
25
20.0
62
18.0
131
milk
1,610
8.0
2,366
6.0
2,883
whiteners
123
17.0
270
15.0
498
Ghee
yogurt
426
245
8.0
20.0
626
610
6.0
18.0
763
1,282
butter
228
10.0
367
8.0
492
cheese
10
15.0
20
14.0
37
icecream
35
18.0
80
16.0
154
Other
300
14.0
578
12.0
932
Companies
PepsiCo
BalajiWafers
ITC
Haldiram
ParleProducts
PrakashSnacks
MTR
ITC
Futuregroup
Agrotech
Nestle
HUL
Heinz
DesaiBrothers
CavinKare
ParleProducts
Britannia
ITC
PerfettivanMelle
ITC
Candico
ParleProducts
Cadbury
Nestle
Cadbury
Nestle
Brands
Lays,UncleChips
Balajinamkeen
Bingo
Haldiram
Parle'sWafers
YellowDiamond
MTR
KitchensofIndia
TastyTreat
Sundrop10minYummeals
Maggi
Kissan
HeinzKetchup
Mother'sRecipe
RuchiPickles,Chinni'sPickles
ParleG,ParleMarie,Hide&Seek
Tiger,GoodDay,5050
Sunfeast
Alpenliebe,CenterShock,
HappydentWhite
MintO
LocoPoco
Poppins,MangoBite
Eclairs
Eclairs
DairyMilk,Perk,Gems,5Star
KitKat,Munch,Milkybar
Amul
ParasDairy
MotherDairy
Nestle
Amul
Nestle
Amul
Amul
Nestle
Britannia
Gowardhan
DanoneIndia
Amul
Britannia
Amul
Britannia
Gowardhan
Amul
HUL
Vadilal Group
MotherDairy
HatsunAgroProducts
Amul
Motherdairy
AmulTaaza
Paras
MotherDairy
NestleMilk
Amulya
Everyday
AmulGhee
AmulMastiDahi
NestleDahi
DailyFreshDahi
GoDahi
DanoneCreamy
AmulButter
MilkmanButter
AmulCheese
CheeseSlice
GoCheese
AmulIceCream
KwalityWalls
Vadilal
MotherDairy
Arun
Amul
MotherDairy
Indiandairyindustry
15
Food
Proj.5
Current
Proj.10
year
size
(INR
430 18.0 984 16.0 1,897
Segment
Restaurant
Companies
Dominos
PizzaHut
McDonalds
KFC
Brands
Dominos
PizzaHut
McDonalds
KFC
NonVegFoods
Meat
300
9.0
462
7.0
590
Eggs
150
8.0
220
6.0
269
Chyawanprash
12.0
10.0
13
ButterAlternatives
25.0
22.0
22
SugarSubstitutes
1.1
20.0
18.0
BabyFood
EnergyDrinks
15
15.0
30
13.0
51
powdered
18.0
14
15.0
24
RTD
HealthDrinks
1.5
1.5
20.0
20.0
4
4
18.0
18.0
8
8
Healthysnackfoods
25.0
20.0
12
DigestiveBiscuitsmarket
25.0
22.0
MaltedFoodDrinks
24
15.0
48
12.0
75
100%FruitJuice
22.0
14
20.0
31
CarbonatedDrinks
60
12.0
106
10.0
156
16
VenkateswaraHatcher Venky'sChicken
SugunaPoultry
SugunaChicken
GodrejAgrovet
RealGood
RajaFarms
Peggs
DreamFarm
FarmFresheggs
Dabur
DaburChyawanprash
Emami
HimaniSonaChandi
ZydusWellness
Nutralite
Amul
DeliciousTableMargarine
ZydusWellness
SugarFree
Wipro
Sweet&Healthy
Merisant
Equal
Boots
Sweetex
Alembic
ZeroCook&Bake
Nestle
Lactogen,Cerelac,Nestum
Heinz
Dabur
Redbull
Amul
HUL
GSK
PepsiCo
PepsiCo
UnitedBiscuits
Britannia
UnitedBiscuits
GSK
Cadbury
Heinz
Dabur
PepsiCo
ParleAgro
HUL
CocaCola
PepsiCo
GluconD
GlucoseD
Redbull
Stamina
KissanFruitJuiceandSoya
Lucozade
Gatorade
Aliva
McVitie's
Nutrichoice
McVitie's
Horlicks
Bournvita
Complan
Real
Tropicana
Saint
Kissan
Cocacola,Sprite,Fanta
Pepsi,7UP,Mirinda
Food
Proj.5
Current
Proj.10
year
size
(INR
4.5 15.0 9 12.0 14
Segment
Powdereddrinks
Lemonades
20.0
18.0
Coffee
30
11.0
51
9.0
71
Instantcoffee 8
25.0
24
20.0
50
Tea
75
12.0
132
10.0
195
Packageddrinkingwater
30
23.0
84
20.0
186
Naturalmineralwater
20.0
18.0
10
Companies
PiomaIndustries
KraftFoods
CocaCola
PepsiCo
CocaCola
ParleAgro
Nestle
HUL
Nestle
HUL
TataGlobalBeverages
HUL
ParleBisleri
PepsiCo
CocaCola
MountEverest
MineralWater
Aava
Brands
Rasna
Tang
FantaFunTimes
Nimbooz
NimbuFresh
LMN
Nescafe
Bru
Nescafe
Bru
TataTea,Tetley
BrookeBond,TajMahal,Lipton
Bisleri
Aquafina
Kinley
Himalayan
Aava
17
Food
Whyfoodswilloutperformnonfoodcategories?
While the low penetration of certain Consumer classes will define the growth levels, we
compare the food and beverage category with personal products (the other fast growing
category)tounderstandwhichcategorywouldoutperform.Ascomparedtootherdeveloped
countries which have reached saturation levels in terms of growth in convenience food
categories,Indiapossessesahugepotentialinbothsegmentsthoughfoodislikelytogrow
faster.Historically,thefoodsegment(3yearCAGRat~19%)hasoutpacednonfood(3year
CAGRat~17%)segment.AccordingtoMr. AntonioHelioWaszyk,MD,NestleIndia,Indians
spend ~36% on food, which translates into ~INR17tn per year (of which only INR2tn is
currentlyprocessed).Processedfood,asperaFICCIreport,islikelytoreach20%oftotalfood
consumption,whichisexpectedtogrowto~INR45tnby2020.
Foodislikelytogrowto~INR45tn
by2020fromcurrentlevelsof
~INR17tn
Processedfoodtosurgeto
~INR9tnby2020fromcurrentlevels
of~INR2tn
Chart1:Spendinglevelsinkeystates(monthlypercapitaexpenditure)
2,321
1,647
1,574
1,238
1,649
1,835
Rural
Kerala
Punjab
Haryana
Chattisgarh
Andhra
899
784
UP
780
1,510
2,413
2,109
1,234
Bihar
(AvgMPCE(INR))
2,238
Urban
0.0
20.0
40.0
60.0
Urban
Rural
80.0
FY00
FY10
(%shareofdurables)
FY00
Chart3:Shareofdurables
FY10
(%shareoffood)
Chart2:Shareoffood
0.0
2.0
Urban
4.0
6.0
8.0
Rural
18
Food
Lowpenetration,higherdisposableincomeandevolvingconsumerhabitswouldensurethat
packaged foods will have sustainable superior growth as compared to other Consumer
categories.
Table3:OverviewofIndiasFMCGmarket
%ChangeinVolume
%ChangeinValue
2009
2010
2009
2010
TotalFMCGMarket
8.1
8.2
13.7
13
Foods
9.7
8.7
13.1
17
NonFoods
5.2
7.4
14.3
8.8
Source:TheNielsenCompany,Edelweissresearch
AllIndia(Urban+Rural)
Foodhasclearlyoutperformed
nonfood
Table4:Performanceofessentialfoodcategories
BabyFoods
MilkFoods
MilkPowders
PackagedAtta
PackagedRice
Packagedfoodgrowingfaster
thantheothercategories
%ChangeinVolume
%ChangeinValue
2009
2010
2009
2010
7.2
1.5
12.9
10.9
9.4
1.3
18.4
12.3
11.2
2.1
17.6
12.3
7.1
0.7
11.1
22.9
49.2
19.7
45.5
31.7
Table5:Performanceofimpulsefoodcategories
Biscuits
Namkeens(SaltySnacks)
Chocolates
%ChangeinVolume
2009
2010
6.3
10.1
18.7
27.7
2
21.8
%ChangeinValue
2009
13.7
18.4
13.9
2010
17.3
29.9
26.1
Table6:Performanceofnonfoodcategories
Washingpowder
Shampoo
ToiletSoap
HairConditioner
HairDye
LiquidSoap
%ChangeinVolume
2009
2010
7.6
13
7.8
9.3
3.8
5.4
31.6
36.4
27.8
20.5
37.5
46.4
%ChangeinValue
2009
20.7
10.7
10.3
33.3
21.3
34.7
2010
5.5
12.5
6.6
37.2
21
48.7
Table7:Performanceofvariouscategories
FoodCategory
Saltysnacks
Refinededibleoil
Vermicelli&noodles
Chocolate
Confectionaryeclairs
2yearvalueCAGR(200911)
55
44
43
42
40
19
Food
Weexpectthatthefoodsegmentwilloutperformthenonfoodcategory.Also,profitability
profile of the food segment is superior to nonfood due to lower competitive intensity (as
penetrationlevelandpercapitaconsumptionareverylow).
Chart4:Foodmoreprofitablethannonfood(EBITDA%)
22.0
19.6
(%)
17.2
14.8
12.4
10.0
FY08
FY09
Food
FY10
FY11
Nonfood
Chart5:ShareofsegmentsinFMCGsalesinCY10
Chart6:ShareofsegmentsinFMCGsalesinCY20E
Others
9%
Others
16%
Food
46%
HPC
39%
Food
52%
HPC
38%
Historically,retailsalesofreadymealsinIndiaandChinagrew26.9%and11.8%respectively
from2003to2008comparedtoameager2.8%intheUSand2.0%intheUK.
20
Food
Chart7:Readymealsaveragegrowthrate
30.0
24.0
(%)
18.0
12.0
Salesgrowthofreadymeals
highestinIndiafromCY03toCY08
6.0
0.0
USA
UK
China
Brazil
Russia
India
Source:USDAEconomicResearchServices,Edelweissresearch
HULsincreasedfocusonfoodscategorybolstersourthesisthatfoodwilloutperformother
Consumercategories.HULsbeverages,foodsandicecreamsbusinessaccountsfor~18%of
saleswhileparentUnileverderives~50%salesfromthesame.Themanagementhasstated
its intention to expand its foothold in the fastgrowing food category. In line with this
strategy, over the past few months, HUL has launched three new productsKissan Nutri
Smart,soybasedjuicesinsomecities,andKissanmayospreads.
Chart8:HULsgrowthinpackagedfoodssuperiortononfoods
25.0
(%growthrate)
20.0
15.0
10.0
5.0
0.0
CY08
CY09
HULFoods
CY10
HULnonfoods
Nestleisspending~INR18bninvestmentplanoverthenexttwoyearsandalsoontheanvilis
second Research and Development (R&D) centre testimony for increasing demand in
packagedfoodsegment.
21
Food
Twomainmacrodriversforpackagedfood
The Indian food industry is poised to grow by a whopping 63.5% from INR7,881bn now to
INR12,889bn in next 5 years and by 137.8% to INR18,741bn in next 10 years, throwing up
hugeopportunitiesforinvestmentacrosstheentirevaluechain.TheIndianfoodindustryisa
significant part of the Indian economy with food constituting about 36% of the consumer
wallet.However,webelievethatthemarketisataninflectionpointasitsprogressionand
inflectionwillbedrivenbyseveralgrowthdriverssuchasurbanisation,demographics,female
workingpopulation,focusonhealthetal.Weexaminefewfactorsthatwouldhelpalterthe
landscapedrastically.
Foodconstitutesabout36%ofthe
consumerwallet
Fig.2:PackagedFooddriver
Demographicprofile
Over300mn
peopleinthe2550
agebracket
Rising
urbanisation
trend
Migrationof
populationfromone
regiontoanother
Increasein
workingwomen
population
Entryofseveral
organisedplayers
Higherdisposable
income
Lowpenetration
andintroduction
ofmassmarket
products
Risingawareness
inthepublicabout
healthand
wellness
Increaseinstress
levelsandhigh
pressureworking
environment
Source:Industry,Edelweissresearch
Thekeydriversforgrowthcanbedividedintotwomainfactors:
ImprovingDemographics
Thecurrentpercapitaexpenditure
onfoodis1/6ththatofChinaand
1/16ththatofUS
An increase in per capita disposable income leading to higher per capita consumption
expenditure on packaged food although overall spends on food is likely to lag overall
expenditureonotherdiscretionaryitem.Thecurrentpercapitaexpenditureonfoodis1/6th
thatofChinaand1/16ththatofUSwithasignificantopportunityforgrowthinthefuture.
Duringthesameperiodtheyouthpopulation(agegroup1525)inIndiaisexpectedtosurge.
Thiswillleadtoanincreasingdemandforfoodproductstomeetdemandsofconvenience,
variety,healthandachangingpalate.EmergenceofTier1andTier2citieswhichwillpresent
a key opportunity for future growth due to rising income, increased awareness and limited
availabilityofproductscurrentlyinthesemarkets.
22
Food
Improvementinbackendinfrastructure
Theimprovementinbackendsupplychain(coldstorage,megafoodparks,contractfarming,
modern trade, GST), entry of more players will drive higher growth of packaged foods and
beveragesmarket.
Wediscussthesetwodriversingreaterdetailbelow:
ImprovingDemographics
Boomingyouthpopulation
With over 300mn people in the 2550 age bracket Indias demographic mix has changed in
thelastfewyearsasmoreandmorepeoplearebeingaddedtotheworkingpopulation.
Chart9:YoungIndiandemographics
100%
10
57
57
58
60
62
63
37
36
34
32
30
28
CY90
CY95
CY00
CY05
CY10
CY15E
80%
60%
40%
~63%ofIndiaspopulation
expectedtobeintheworking
populationagegroupbyCY15
20%
0%
<15years
1560years
>60years
Source:Mckinsey,Edelweissresearch
Chart10:DemographicdividendfavoursIndiamorethanChina
70.0
56.0
(%)
42.0
28.0
Indiasfutureinyounghands
~50%populationsageunder24
years
14.0
0.0
India
Indonesia
Europe
Age24andunder
China
USA
Japan
Age60+
23
Food
Currently,Indiasworkingpopulation(asa%oftotalpopulation)isbelowthatofBRICSand
G6countries.By2025,thiswouldbe~960mn,surpassingsimilarstatisticsofRussiaandG6
countries.
(%oftotalpopulation)
Chart11:%ofworkingpopulation
71.0
68.0
65.0
62.0
59.0
Brazil
China
India
CY40E
CY35E
CY30E
CY25E
CY20E
CY15E
CY10
CY05
CY00
56.0
Russia
Source:GlobalInsightdatabase,Edelweissresearch
Risingurbanisation
Indias rural economy is witnessing a structural change with population migrating to urban
areas in search of jobs and growth opportunities. Moreover, the rise of nonfarm sector in
rural areas is helping the farm sector lower the disguised unemployment. Lower
remuneration in the farm sector and increasing opportunities in the nonfarm space,
particularlyduetovarioussocialsectorschemes,arecausingashiftinoccupation.
Chart12:Shiftinoccupationtowardsnonfarmsector
100.0
(%ofrespondents)
Dependenceonagriincomeis
goingdown
80.0
60.0
40.0
20.0
0.0
CY00
Others
Labour
CY10
Selfemployedinnonagri
Selfemployedinagri
Regularsalary/wages
Source:Edelweisssurvey,NSSOsurvey,MARTKnowledgeCenter,MAXNCAERsurvey
24
Food
64.0
48.0
32.0
Migration
Easycredit
availabilityfor
activity
Govt.
programmes/incenti
ves
Increasingmarket
demand
Lowriskinvolvement
Needformore
incomegeneration
0.0
Decliningprofitability
inpreviousoccup.
16.0
Increasingresources
invillage
(%ofrespondents)
Chart13:Pushandpullfactorsbehindtheshiftinoccupation
80.0
Source:Edelweisssurvey,NSSOsurvey,MARTKnowledgeCenter,MAXNCAERsurvey
Relocationofpopulation
Withmoreandmorepeoplerelocatingtootherpartsofcountryforbetterjobopportunities,
marketforreadytoeat/readytocookispickingup(asrelocationprovidestheconsumerwith
access to regional taste). Such relocation might go up in line with aggressive hiring by IT
companiesforthenextyear.AlsotheincreasingnumberofexpatsmovingtoIndiaforwork
willprovidefilliptopackagedfoodandbeverageindustry.
Table8:GrosshiringforFY12
ITcompaniescontinuehiringto
fueltheservicesector'sgrowth
engine
TCS
Infosys
60,000
45,000
Source:Company,Edelweissresearch
Table9:CampusoffersforFY12
TCS
Infosys
Patni
25
37,000
26,000
3,000
Food
Urbanpopulation,currentlyat~390mn,isexpectedtotouch590mnby2030.Thoughdifficult
toquantify,this,inturn,impliesthatmoreandmorepeoplewoulduseReadytoeat/Ready
tocookfood.
Chart14:Workingpopulation(age1559)asa%ofworld'sworkingpopulation
25.0
20.0
(%)
15.0
10.0
IndiatosurpassChinaintermsof
workingpopulationby2025
5.0
0.0
CY00
CY05
Brazil
CY10
CY15E
China
CY20E
CY25E
India
CY30E
CY35E
CY40E
Russia
26
Food
Chart15:UrbanpopulationinmnIndia
700
560
(mn)
420
280
140
0
CY91
CY01
CY08
CY30E
Chart16:Fivestatesarelikelytobemorethan50%urbanised
UrbanizationrateCY30E
UrbanizationrateCY08
TamilNadu
Maharashtra
Punjab
WestBengal
AndhraPradesh
Jharkhand
Chhattisgarh
Orissa
Bihar
12
31
29
28
28
25
25
24
24
21
18
37
36
44
44
53
TamilNadu
Maharashtra
Punjab
WestBengal
AndhraPradesh
Jharkhand
Chhattisgarh
Orissa
32
31
33
45
40
41
46
58
57
52
67
66
40
26
24
20
17
Bihar
9
Source:IndiaUrbanizationEconometricModel,McKinseyGlobalInstituteanalysis,Edelweissresearch
27
Food
Chart17:Citieswillaccountfornearly70%ofIndia'sGDPby2030
100.0
80.0
46
54
58
69
(%)
60.0
40.0
20.0
54
46
42
31
0.0
CY90
CY01
CY08
Rural
CY30E
Urban
Source:IndiaUrbanizationEconometricModel,McKinsey,Edelweissresearch
Chart18:Indiawilldriveanearfourfoldincreaseinaveragenationalincome
250
(INR'000)
200
150
100
50
0
CY90
Rural
CY00
CY10
AllIndia
CY20E
CY30E
Urban
Source:IndiaUrbanizationEconometricModel,McKinseyGlobalInstituteanalysis,Edelweiss
research
Increaseinworkingwomen
Historically,thejointfamilyarrangementandlowereducationlevelshadensuredthatIndian
women were not involved in full time jobs and their role was limited to taking care of
households. With the increase in nuclear families and education levels, more and more
womenaresteppingoutofhomestoworkinfulltimejobs.
Increaseinnuclearfamiliesand
educationlevelsledtowomen
steppingoutofhomestoworkin
fulltimejobs
28
Food
Chart19:80%ofthepopulationeatsoutatleastonceamonth
Notgone
toeatout
20%
Morethan
12times
13%
Once
10%
10to12
times
14%
2to3
times
25%
7to9
times
11%
Havegone
toeatout
80%
4to6
times
27%
AsurveybyresearchfirmNielsenin21countriesestablishesIndianwomentobethemost
hard pressed for time. In the survey of 6,500 women from both developing and emerging
countries, 87% of the respondents from India said they were pressed for time, providing
tremendous opportunity (especially among women with financial independence and little
spare time) for packaged food players. The stress is forcing women to splash money on
health,vacations,beautyproductsandelectricalappliancesthataregainingagreatercontrol
overtheirlives.ThesurveyalsorevealedthatIndianwomenarethemostoptimisticabout
opportunities for growth with 78% of them being confident of financial stability and better
prospectsofeducationfortheirdaughters.
Higherdisposableincome
Per capita income grew at a CAGR of ~14% between 2001 and 2010 and is expected to
maintainthegrowthtrajectoryforthenexttenyears.AccordingtoHewitt,Indiawillseeone
ofthehighestsalaryhikes(salaryhikesof~13%inFY12higherthan11.7%inFY11and6.6%
inFY10).IndiaisalsotheonlycountryinAsiaPacificwheredoubledigithikesareexpected.
Indiawillhave25%ofworld'stotalworkforcewithpercapitaincome~USD4,100by2025
IndiaLabourreportpublishedbyTeamLeaseServices
Indianwomentobethemosthard
pressedfortime
PercapitaincomegrewataCAGR
of~14%between2001and2010
29
Food
Chart20:Risingaffluencelevels
80.0
60.0
40.0
20.0
0.0
Global(>1000)
Seekers(200500)
Deprived(<90)
CY15E
CY25E
Strivers(5001000)
Aspirers(90200)
80
60
47
40
20
7
0
CY05
CY15E
CY25E
Table10:Numberofmillionaires
HouseholdswithinvestiblefundsexceedingUSD0.1mn
(mn)
%oftotalpopulation
US
31
27
India
3
1.25
China
3
0.75
Source:TNSGlobalAffluentSurvey,Edelweissresearch
Chart21:Asianmiddleclass
100.0
Country
80.0
(%ofpopulation)
CY05
87
(Middleclasshouseholdmn)
100.0
(%)
100
HHincomebracketINR. '000
60.0
40.0
20.0
0.0
Malaysia
Thailand
China
Philippines Vietnam Indonesia
India
Source:AsianDevelopmentBank,Edelweissresearch
30
Food
Chart22:Middleclassbypercapitaspendperday
100%
Indianmiddleclassearnmeager
comparedtoChinaandIndonesia
(%ofpopulation)
80%
60%
40%
20%
0%
China(CY07)
>US$20
US$1020
India(CY05)
US$410
US$24
Indonesia(CY09)
US$1.252
<US$1.25
Indonesia
Malaysia
SouthKorea
Thailand
India
China
(%ofdisposableincome)
Chart23:Asignificantlyhighsavingsrateandlowindebtednessmeansmorespending
40.0
USA
NZ
32.0
Aus
UK
24.0
Malay
Taiwan
16.0
Sing
Korea
8.0
Japan
23
Thai
19
China
17
0.0
India
10
Indo
8
0
97
96
78
71
63
55
49
39
20
40
60
80
Consumercredit/GDP(%)
100
120
Lowpenetration,introductionofmassmarketproducts
Lowpenetrationandlowpercapitadailyconsumptionoffersroomforfurthergrowthinthe
packaged food market. Increasing rural penetration will drive growth in rural areas; while
multipleusagesofproductsofferfurtherupsideinurbanareas.
Improvementinbackendinfrastructure
The poor quality of backend supply chain has restricted the growth of dairy and packaged
foodsmarket.~25%ofthepopulation(inTierI)spendlessthanINR100whenorderingfood
fromoutside.This,inturn,impliesthatthereisstillahugeopportunitytodeliverpackaged
foodatvaluepricepointstocatertomasssegment.
~25%ofthepopulation(inTierI)
spendlessthanINR100when
orderingfoodfromoutside
31
Food
Table11:Averagemonthlyspendsofhouseholdsorderinginfromoutside
TierI
TierII
TierIII
Monthlyspends
(population3mn+) (population13mn)
(population<1mn)
Avg(INR)
671 691 351
uptoRs50
13
13
20
Rs51100
12
13
17
Rs101200
19
17
22
Rs201300
12
11
13
Rs301600
18
23
14
26
23
14
Rs601+
Threereasonswhichhaveheldtheevolutionofbackendsupplychaininclude
a) Highcapexforsettingupcoldstorages
Energyrequirementhasincreased
manyfoldinthelastdecade,
howevertheannualenergy
generationandgrowthratehas
beendismal
b) Supplydemand mismatch of electricity especially in rural/TierII cities. Though the

energy requirement has increased manyfold in the last decade, the annual energy
generationandgrowthratehasbeendismal
8.0
6.4
652
4.8
568
3.2
484
1.6
400
0.0
Energy(BU)
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
(%)
736
FY02
Energygeneration(BU)
Chart24:Energygeneration
820
Growth
c) Highelectricityratesascomparedtotherestoftheworld:Comparedtotheworld,India
hasahighcostofpowerwhichhasdentedsupplychainshencethecostoffinalproducts.
32
Food
Chart25:Comparativeanalysisofpowercost
70
(Noofkwhunits/McBurger)
Indiaspowerefficiencyis
significantlylowerthanother
countries
56
42
28
14
0
US
China
India
France
UK
Through Mega Food parks, the government is creating an infrastructure and ecosystem to
attract entrepreneurs to enable cost efficient manufacturing of Consumer products. The
governmenthasalsochosenpublicprivateparticipation(PPP)modeinthisschemeandhas
keptitsstaketolessthan26%.Moreexpressionsofinterestfor15megafoodparkswouldbe
invited in FY12. Though large Consumer companies are still shying away from participating
due to the long term investment nature of these schemes, we believe that storage space
issueslikesupplysideconstraintwouldbeaddressedinthelongerrun.
MegaFoodparkswouldhelp
improveinfrastructureandsupply
chain
Chart26:ProjectedincreaseinFreezerspace
Table12:ProposedMegaFoodsites
1,500
300
State
Andhra
Pradesh
Jharkhand
240
900
180
600
120
300
(No.of Stores)
1,200
Maharashtra
Assam
60
Uttarakhand
FreezerSpace(Cu.Ft)
FY18
FY17
FY16
FY15
FY14
FY13
FY12
FY11
FeeezerSpace(Cu.Ft)
IncreaseinFreezer Space
No.ofStores
33
Cookingupplans
Anchor(major)Investor
SrinifoodParkpvtLtd(Ravindra
Nalluri)
Ranchi
JharkhandMegaFoodPark(Nitin
Shenoy)
Shirwal
WesternAgriFoodParkPvtLtd
(PradeepChordia)
Nalbari
NorthEastMegaFoodPark(HK
Sharma)
Haridwar
PatanjaliFood&HerbalPark
(BabaRamdev,Acharya
Balkrishna&RajivBansal)
Location
Chittoor
TamilNadu
Dharamapuri
LMJInternationalLTD(agro
commodityexporter,SKJain)
WestBengal
Jangipur
ShivBidi(JakirHussain)&
TemptationFoods(VinitKumar)
Source:Industry,EdelweissResearch
Food
Fig.3:MegaFoodParksplanforFutureGroup
Powering
Entrepreneurs
SourcingFresh
Accesstoproducts
forFVILprivatebrands&
foodbusinesses
Packaging
Processed
Food
Manufacturing
Staples
Logistics
Enhancebusiness
opportunitywithnew
entreprenuers
ColdStorage
HighRoEoninvestment
duetolowcapital
investment
FoodParks
Source:Industry,Edelweissresearch
DanonesmeasuredexpansionplaninIndiaisaclassicalcaseofhighsupplychainconstraints.
Estimated at over INR5bn in the organised sector (10% of total) and with a percapita
consumptionof0.5kg(30kgforEuropeancountries),theIndianyogurtanddahimarketisa
hugeopportunity.YetDanoneisexpandinginameasuredwayasitwantsthebackendcold
chaindistributioninplacesooner.
In absence of price increases, a smart product mix + positioning + supply chain efficiencies
can help offset inflation and boost profitability in the longer run. Consumer companies
strategyistopartiallyabsorbinflation(andlimitpriceincreases)toincreasecustomerbase.
Supplychainefficiencieswillhelpoffsetrestoftheinflation,anddeliverpackagedfoodsasa
valueproportiontoconsumers.
The agrieconomy has been growing at ~23%, leaving sizeable room for expansion. Agri
business in India is deeply underdeveloped. For every USD1 of agricultural output, the
incrementalagribusinessgeneratedinIndiaisonlyUSD1versusUSD2.2inBrazilandUSD12
intheUS.
Danonesmeasuredexpansionplan
inIndiaisaclassicalcaseofhigh
supplychainconstraints
Table13:Potentialforimpactoffoodprocessingacrossthevaluechain
Farming
Procurement
2009
~USD175bn
~USD80bn
2020
~USD375bn
~USD100150bn
Otherimpact
Increaseincomes
Reducewastage
Increasepricerealization
Reducepricevolatility
Processing
~USD40bn
~USD300350bn
Increaseinreliability
Improvementinquality
Consumption
Fortificationandnutrition
Foodsafety
Source:FICCI,Edelweissresearch
Currently, total Indian grains production is ~240 MT. With development in the processing
industry and implementation of advanced techniques, production of grains is expected to
increaseto~300MT.Also,only~12%ofthelandisunderfruitsandvegetablescultivation;
improvementintheirprocessingwillaidtheshifttowardsamoreprofitableproductmix.
Totriplefoodprocessinglevelsto20%by2020,followingisnecessary:
34
Increaseinsecondaryandtertiarymanufacturingcapacitiesfromthecurrent~70MTto
~210MTin2020.
Increase in cold storage capacity from ~25 MT to ~150200 MT and in warehouse

capacityfrom~85MTto~250300MTin2020.
Food
Additionally, 1.7mn skilled manpower will be required including production managers,

engineers,QCandR&D,supplychainandlogistics,regulatoryandlegalexperts.
Chart27:Potentialforfoodprocess
25.0
20.0
Foodprocessinglevelsexpected
tojump3timesin10years.
(%)
15.0
10.0
5.0
0.0
2005
2010E
2020E
Table14:Highprocessinglevelspositivelyimpactingallstakeholders
Farming
2040%increaseinfarmincomes
Procurement
50%reductioninwastagelevels
Processing
~2030mndirectjobs
~6080mnindirectjobs
Consumption
Improvednutritionandfortificationlevels
ContractFarming
Contractfarmingisaforwardagreementbetweenfarmersandbuyersfortheproductionand
supplyoffarmproduceunderacontract,generallyatpredeterminedquantitiesandprices.
Asapartoftheagreement,buyersincertaincasesalsoprovidesupporttofarmersforinputs,
technology and production practices to ensure quality of the produce. In India, contract
farming has slowly gained acceptance among creators in certain areas, facilitated by
structuralreformsinitiatedbythegovernment.
Contractfarminghasslowlygained
acceptance
35
Food
Table15:MajorCompaniesinvolvedincontractfarming
State
Crop
Punjab
Basmati
Basmati,potato,tomatoandchilli
Basmatiandmaize
Barley
Soybean
Tomato&chilli
Marigoldandchilli
Ashwaganda
Coleus
Karnataka
Karnataka,AndhraPradesh,
TamilNadu
MadhyaPradesh
TamilNadu
Maharashtra
Gherkins
Areaunder
acreage
14700
6000
4000
2270
1200
250
4000
700
150
8000
Wheat,maizeandsoybean
Wheat
Maizeandpaddy
Cotton
Cotton
Soybean
Safflowerseeds
N.A
15000
1000
570
260
134800
N.A
Buyer
SatnamOverseas,DDInternational,AmiraFoods
PepsiCoIndiaLtd
SatnamOverseas,MahindraShublabhservices
UnitedBreweriesLtd
ITC
NijjerAgroFoods
AVTNaturalProductsLtd
HimalayaHealthcare
NaturalRemediesPvtLtd
Multiplecompanies
CargillIndiaLtd
HindustanUnilever
BhuviCareLtd
SuperSpinningmills
AppachiCottonCompany
TinnaOils&Chemicals
Marico
Table16:Statewiserules
Stateswhereruleshavebeencompletelyframed
Stateswhereruleshavebeenpartiallyframed
Rajasthan,AndhraPradesh,Maharashtra,Orissa,HimachalPradesh,
Karnataka
Mizoram:onlyforsinglepointlevyofmarketfee
MadhyaPradesh:forcontractfarming&speciallicenceformore
than1market
Haryana:forcontractfarming
Table17:StageofreformsinAPMC(Agricultureproducemarketcommittee)
Status
States/UT
Reformshavetakenplace
AndhraPradesh,ArunachalPradesh,Assam,Goa,Gujarat,Himachal
Pradesh,Tripura,Jharkhand,Karnataka,Maharashtra,Mizoram,
Nagaland,Orissa,Sikkim,RajasthanandUttarakhand
withpartialreforms
Directmarketing
Delhi,Chattisgarh,MadhyaPradesh
Contractfarming
Chattisgarh,MadhyaPradesh,Haryana,PunjabandChandigarh
withnoAPMCAct
Bihar,Kerala,Manipur,Andaman&NicobarIslands,Dadra&Nagar
Haveli,Daman&Diu,Lakshadweep
whereAPMCprovidesforreforms
TamilNadu
36
Food
Chart28:Pricesurgeonaccountoffragmentedsupplychain
9.0
0.48
0.08
0.30
Processorvalue
addition
4.40
Overalltransitcost
5.4
0.46
0.46
Marketyardcess
(Unitprice)
7.2
8.30
0.61
3.6
Pricetoconsumer
Channelcosts
Consumerspaya~54%extraprice
Processormargin
Farmgateprice
0.0
costofcollection
centre
1.8
Source:E&Y,Edelweissresearch
We expect with number of new players entering the market and significant capacity
expansion,competitiontoincreasebuttheplayerwhoknowsflavour,hasgoodtasteandcan
attractappetitecanmeetsuccess.However,innascentmarketslikeIndiacompetitionisnot
necessarilybadfornewbrandswithinthesamecategory.Ifmultiplebrandsareintroducing
similarproductswithpropermarketingsupport,thenewcategoryexperiencesalargershare
ofvoiceinthemindsofIndianconsumers.
Chart29:Significantdifferenceinprocessinglevelsacrossdifferentcategories
80.0
(%)
64.0
48.0
32.0
Grains&pulsesanddairy
processingislargelyunorganised
Organised
Buffalomeat
Poultry&non
buffalomeat
Marine
Dairy
Fruits&
Vegetables
0.0
Grainsand
pulses
16.0
Unorganized
The growth will come from higher penetration and new categories that will cater to these
differenttiers.Mostimportantly,thefrequencyofconsumptionofsomeoftheproductsis
stillverylow,providesahugeopportunity.
37
Food
Streamliningsupplychainandfarmlevelproductivityneedofthehour
The agrisupply chain in India faces several constrains. It involves multiple players such as
farmer,aggregator,commissionagent,wholesalerandretailer,whichresultsinasignificant
priceescalation.Inadequatestoragefacilities resultinsignificantwastage(wastageis~35%
fortomatoes,~30%formangoesand~25%forpotatoes).
Chart30:Intermediariesdriveuppricesby40%
20
16
(INR/KG)
Theendpricerisesdueto
intermediaries,wholesalingand
intermediarieslosses
12
8
Endprice
Essential
losses
Intermediaries
losses
Retailing
Wholesaling
Intermediaries
Farmer
Transport&
packaging
Chart31:Potentialtoreducewastagelevelby75%
25.0
20.0
Intermediariesdriveupcost75%
(%)
15.0
10.0
5.0
0.0
2009,unprocessedtomato
2020,processedtomato
Wastageduetoessentialactivities
Wastageduetointermediariesandpoorharvestinfra
The current warehouse capacity shortage is estimated at ~50 MT compared to an installed

capacity of 85 MT. Lack of infrastructure like power and transport hinders the industry.
Power supply constraints in rural areas and long transportation times due to poor road
infrastructureleadtohighwastage.Lackoforganized,largeplayersintheIndianthirdparty
logistic industry leads to poor service levels with frequent delays and lack of cold
transportation capabilities. FDI will propel investment in infrastructure across the entire
supplychain.
38
Food
The current cold storage capacity is ~24.5 MT, leaving a gap of ~30 MT. This shortfall will
furtherincreaseoverthenextdecade.Outoftheexistingcapacity,~75%isutilizedtostore
potatoes,leavinglessthan1%forotherfruitsandvegetables.Adequatecoldstoragecapacity
willtrimtransitlosses.
Chart32:75%ofcoldstoragespaceismeantforstoringpotatoes
30
(MT)
24
18
12
Improvingcoldstoragefacilities
wouldbenefitothercategories
6
0
Potatoes
Multi
purpose
Meat&fish
Fruits&
vegetables
Others
Total
39
Food
Keytrendswitnessedinfoods
Entryofseveralorganisedplayerstoexpandmarket
Entryofsuchnewplayerswould
justincreasethemarketsize
MNCslikeDanoneandGSKConsumerarehighlyfocusedonIndia,launchingnewproductsto
increasetheirportfolios.DanoneisgettingaggressiveindairysectorwhileGSKisfocusingon
noodles and cookie segments. In addition, several companies have recently announced the
intentiontoexpandfoodportfolioinIndia,including:
Delmonte
Cargill(I)
HUL
Nestle
MotherDairy
Amul
ITC
Danone
Entryofsuchnewplayerswouldjustincreasethemarketsizeinsteadofcannibalisingexisting
consumers. We have seen this recently for Nestls Maggi where the entry of several big
playerslikeITCandGSKConsumerhelpedinincreasingthemarketsizeofpackagedfoods.
Moderntradetodrivediscretionarysegment
TheModerntraderetailformat
bringslowerpricestothe
consumersanddriveshigher
consumption
Chart33:OrganisedRetail
Retail is a catalyst for consumption which in turn drives the economy. The Modern trade
retail format brings lower prices to the consumers and drives higher consumption, hence
making a clear case for the existence of the Modern Trade. Modern trade provides an
opportunity for new entrants and new products to get quick visibility and reach across
consumers thus enabling consumers to make more informed choices. Though current
contribution from organised retail is small, but it is increasing gradually across categories,
mostnotablyinpersonalcareandpackagedfoodscategory.
Chart34:ShareofModern&TraditionalRetail
(USDbn)
750
Others
600
Food&Grocery
450
Furniture&Furnishing
Electronics
300
Beauty&Wellness
150
0
Clothing&Fashion
CY05
Modern
CY09
CY10
Traditional
CY15E
Modern
20
40
60
80
(%)
Traditional
100
Source:IndiaRetailReport,2009,Edelweissresearch
40
Food
GSTcouldbeagamechangerforlargercompanies
GSTisabiggergamechangerthanFDIinmultibrandretailbecauseeverybodywillbeona
levelplaying field. In India, the warehousing and distribution network is not geared to the
fulfillmentofcustomerdemandsatoptimalcosts.Mostfoodcompaniesoperatewithatleast
onedistributioncenterorcarryingandforwardingagents(CFA)ineachstate,wheretheysell
their merchandise, to avoid interstate taxes.Indian companies use the services of 25 to 50
warehouses at the national level, which is a very high number compared to developed
economies(lessthanfive).TheGSTisacomprehensivevalueaddedtax(VAT)ongoodsand
services. GST is collected on valueadded goods and services at each stage of the state or
purchaseinthesupplychainthroughataxcreditmechanism.
Companieswillbeableto
optimizelogisticsanddistribution
costs
Distributionnetworkemergingasakeyentrybarrier
Theconsumerisalsohighlysensitivetoeasyavailabilityofproductsatnearbystoresas53%
oftherespondentswerestronglysensitivetothesame,findsoursurvey.
Chart35:Retailreachkeyfactorforconsumeracceptance
100%
80%
60%
40%
StronglySensitive
MildlySensitive
Promotional
Offfers
Price
Convenient
toCook
Brand
EasyAvailability
AtStores
Quality
0%
Health
Consiousness
20%
Indifferent
Most Consumer companies (HUL, ITC, GSK, Agro Tech, Emami, Nestle and Agro Tech) are
focusing on improving their distribution networks to gain more market access thereby
bolsteringgrowth.However,muchmoreneedstobedone.Onesuchinitiative,MegaFood
parks by the government is aimed at creating infrastructure and ecosystem to attract
entrepreneursintocostefficientmanufacturingofConsumerproducts.However,highcapex
requirement for setting up cold storages and shortage in power are major hindrances in
rampingupthesupplychain.LargeConsumercompaniesarestillshyingawayfrominvesting
because of the long term nature of these schemes. We believe this initiative will address
storagespaceissueslikesupplysideconstraintsinthelongrun.Supplychainefficiencieswill
help offset rest of the inflation, and deliver packaged foods as a value proportion to
consumers.
Highcapexamajorhindrancesin
rampingupthesupplychainfor
Consumercompanies
JVsgettingmorerelevantandprompt
Recently many international food companies are entering into JVs with Indian firms to
explore on the existing opportunities in the foods category. Jubilant entered into JV with
DunkinDonuts,TataGlobalbeveragespartnering withStarbucks,GodrejwithTysonFoods,
PepsisassociationwithTataGlobalBeveragesforbottledwaterandwithUnileverforicetea
41
Food
and many more. This provides winwin situation to both the partners as Indian players get
accesstoexpertise,technologyandbrandofforeignpartnerandforeignplayergetaccessto
hugemarketanditsdistributionnetwork.
MNCsbetterplacedinsegmentswhichinvolvesimportofrawmaterials
Edibleoilcategory,dependentheavilyforrawmaterialsonimports,hasseensurgeofM&A
activitieswithmajorMNCcompaniesacquiringregionalcompaniesespeciallyatlowerend.In
March2011,CargillIncboughtthepremiumsunflowerbrandSweekarfromMaricoinadeal
worthoverINR2bn.InNovember2010,theUSbasedfirmboughttheRathvanaspatibrand
from AgroTech, reportedly for INR1.2bn. Another multinational and Swissbased Glencore
hit the headlines on the possible takeover of K.S. Oils, based at Morena, Madhya Pradesh.
Also, Archer Daniels Midland Company (ADM) acquired two oilseeds processing facilities
earlier this month from Geepee Agri Pvt Ltd at Kota, Rajasthan and Akola, Maharashtra.
These processing facilities are in addition to ADM's recent purchase of the entire stake in
Tinna Oils that has facilities to process soyabean and sunflower in Latur (Maharashtra),
soyabean and sunseed processing unit at Dharwad (Karnataka). The USbased firm also
boughttheprocessingfacilitiesofMadhurAgroinNagpur.
Thereason,webelieve,isthatMNCscanhavebenefitsofscaleandsourcingbenefitsasIndia
imports eight million tonnes of vegetable oils a year with crude palm oil alone making six
milliontonnesofit.Thereby,productswhereinsignificantRM/productitselfisimportedwill
seesignificantamountofMNCpresence.Othersuchexampleismaize.
SeveralM&Aactivitiesbeing
witnessedinedibleoilcategory
HighdemandforFoodexperts
Manycompaniesaggressivelylookingtoforayintofastgrowingfoodcategoryareturningto
former business heads of competing organisations for advice and handholding in product
launches,entrystrategies,acquisitionsandnewprojects.WhenHULpoachesbeverageand
snacks foods giant PepsiCo's executive director and vicepresident for innovation, Geetu
Verma, which is marked departure from its preference for homegrown leadership also
highlights the challenges faced by companies to seize Indian consumer palate. Also, when
GlaxoSmithKlineConsumerHealthcare(GSKCH)decidedtoextendtheHorlicksbrandintothe
fragmented INR12.6bn biscuits market two years ago, it sought help from one of the most
accomplished names in the industry. It leaned on the expertise of Sunil Alagh, a former
managingdirectorofBritanniaIndustries,whohadbuilttheBangalorebasedbiscuitmaker's
brandduringhis29yearstint,launchingproductssuchasTigerandforayingintoalliedareas
suchasdairyproducts.Alagh'sinputswerecriticalforGSKCHtogainafootholdinamarketin
whichmultinationalssuchasCadburyKraftaregaininggroundandestablishedplayerssuch
asBritanniaandParlearefightingtoretaintheirshares.
42
Food
ThemesfromFoodsurveyandindustryinteractions
We conducted a Food survey (Refer Annexure IV). From the survey, we found that most
urban youth are getting more and more health conscious and with increasing urbanization
thistrendisexpectedtogainmomentum.Thekeytrendsaregivenbelow:
Changingfoodhabitsduetorisingincome,mobility&workingwomen
Healthsegmenttooutpaceoverallpackagedfoods
`Premiumizationonanoverdrive,findsacceptanceamongconsumers
Wediscussthisindetailbelow:
Changingfoodhabitsduetorisingincome,mobility&workingwomen
Urban India with two unique trendsetters an increasing disposable income and more
womentakingupjobsisexperiencinganewlifestyle.Urbanpopulaceisreadytoexperiment
newerproductcategorieswhichhelpthemreduceeffortsandexcitetheirtastebuds.Thereisa
gradualandsteadyshiftfromhomemadetoreadytocookorreadytoeatfoods.Thiscategory
of homemakers spends an average of INR9,000 per month on grocery, says another industry
survey.Itisimportanttonotethattheseconsumersarealsoopentotryinginnovationsbeitin
yoghurts, probiotic drinks, health bars, chips, readytoeat meals and or bhuna masala. For
example, the premium biscuits category comprising cream, chocolate biscuits and cookies is
growingataphenomenalannualrateof25%to30%(comparedto8%inglucoseanddigestive
segments)duetohigheraffordabilityandchangingtastes.
Thesensitivityofthenewclassofinfluentialconsumerstopriceislowasagainsttheaverage
Indians.Playinganequallybigroleisthemodernretailasitofferstherightenvironmentto
experiment for brands besides educating consumers about new products. From the survey
conductedbyus,itwasevidentthatconsumersareexperimentingmoreoftenandpackaged
foodproductsarewitnessingasurgeindemand.
Premiumbiscuitscategoryisgrowing
ataphenomenalannualrateof25%
to30%comparedto8%inglucose
anddigestivesegments
48.0
36.0
24.0
ReadyToCookIndian
JamsJelliesSpreads
InstantSoups
Popcorn
Pasta
Sauces
SoftDrinks
Noodles
Pack.RiceAttaPulses
CookingAids
PackedIndianSnacks
BreakfastCereals
Icecream
PizzaBurger
Chocolates
Health(FruitJuices)
0.0
BiscuitsChips
12.0
MilkProducts
Salesgrowth(%)
Chart36:Onthefasttrack:HFD,Juice,Biscuits,FastfoodsandNoodles
60.0
43
Food
Readytoexperimentinbreakfast,butprefertraditionaldietforlunchanddinner
Juices, muesli and corn flakes are being steadily warmed to the Indian breakfast tables as
seen in the rapid growth in the packaged breakfast market which has doubled in the last
three years, growing at 30% annually. To capitalize on this fast catching trend, McDonalds
andBaristahavestartedofferingbreakfastmenus.Executivesinmetroswhoprefertoreach
officeearlyactasidealtargetsfortheseplayers.
Fig.4:Increaseinfocusonbreakfastcategorybycompanies
McDonaldsandBaristahavestarted
offeringbreakfastmenus
Source:Company
Chart37:Changeinfrequencyofeatingnonhomemadefoodoverlast5years
Decreased
17%
Increased
Significantly
46%
Increased
Marginally/Rem
ainedSame
37%
44
Food
Oursurveyindicatesthattherearemorepeopleconsumingpackagedbreakfastwithahigher
frequency. Even though the frequency of having lunch and dinner has gone up steadily,
people still prefer traditional homemade food. The reason for this could be the health
consciousnesstagattachedtohomemadefoodthanthepackaged.AsexplainedbyDamodar
Mall (customer director of Future Group) Companies are trying to be chefs, but a woman
wantsthelastmileofcookingtobelongtoherwhichiswhyshedratherhireacook.
Packagedfoodisalifestyle.Naturalandfreshfoodhasalwaysbeenmypreferenceover
packagedfood.Alwaysunpackedfreshfoodispreferredoverpackedfoodirrespectiveofthe
pricesSaidoneoftherespondentsfromoursurvey.
Chart38:Frequencyofeatingfoodnotcookedathome
RelativelyHigher
proportionofmales
eatingoutsidefood
24timesa
week
38%
Male
Morethan4
timesaweek
22%
lessthanoncea
week
40%
Female
ManyIndiasAkeythemedrivingthestrategyofmajorplayers
Indiansarehighlycertainabouttheirtastepreferencesandaspointedoutbythesurvey,57%
of the respondents were strongly driven by taste for the purchase of a product. Taste
preferences vary significantly across cultures and geographies in India as 59% respondents
favoured traditional regional food specialties while 29% sought Western and Chinese fast
foods.
Duetosuchstronginclinationtowardstraditionaltaste,`Indianizationofproductshasbeen
oneofthekeyfocusareasforthesuccessofWesternfastfoodplayerslikeMcDonalds,KFC
andSubwayinIndiawhohavelaunchedproductswithablendofWesternpreparation,but
retaining the traditional Indian taste (e.g. Maharaja Mac, Aloo Tikki burger). The recipe of
McDonalds does not include beef in the Indian market to suit native sensibilities while
McCain Food is test marketing threeminute microwaveable idlis to test native taste buds.
Amazingly,KFChascreatedavegetarianmenuforIndia.Interestingly,Consumercompanies
keep a dual strategy one at the national level and another to counter regional players.
ThoughHULhadRedLabelinitsportfolio,itwasnotabletocountercompetitionfromlocal
players hence Brooke Bond Sehatmand was launched to attract down trading customers.
Heritage brand Ruby was launched in Karnataka while Red Label Dust was maintained in
selected markets. Nestle launched BRU Mild coffee especially for the tea preferring North
Indianmarkets.HencetastepreferencesoftheIndianconsumerremainakeyfocusareaand
animportantdriverofstrategyformulationforfoodcompanies.
MNCsfocusingonIndianizationof
products
KFChascreatedavegetarianmenu
forIndia
45
Food
Longworkinghours,highpressureatworkplaces
Highpressureatwork,aworkingpartnerandrisingstresslevelsinducedbylongerworking
hourscanactasamajorgrowthdriverforthefoodsegment.Benefitsofhigherstresslevels
and higher disposable incomes are clearly visible in the exponential growth of fast food
outlets.
Table18:OutletsinIndia
McDonald's
TacoBell
Domino's
KFC
PizzaHut
FY08
135
NA
182
NA
NA
FY09
NA
NA
241
72
158
FY10
200
2
306
105
171
FY11
216
2
364
114
175
Current
240
2
439
156
216
Table19:OutletsinMetros
McDonald's
domino's
KFC
PizzaHut
Mumbai
40
57
12
19
Delhi
39
42
23
53
Kolkata
Chennai
5
3
21
14
6
18
18
7
Healthsegmenttooutpaceoverallpackagedfoods
Healthandwellnesshavebeenkeyfocusareainthefoodandbeveragesindustryinrecent
years due to an alarming rise in obesity, diabetes and other lifestyle diseases, forcing
companiestointroduceproductsonhealthplank.Manycompaniestoexploitthistrendhas
launched health based products viz. Britannia launched nutrichoice biscuits, Danone
launchingprobioticyogurt,DaburintroducedjuicewithfiberandHULintroduceditwithSoya,
multigrainatta,iodizedsalt,energydrinks.UnibicBiscuitsIndiahasdevelopedchyawanprash
fortifiedcookies,inanefforttograbashareofthemarketinthehealthandwellnessspace.
Also,McDonald'sIndiaplanstolistcaloriecountsofallitsfoodsonmenus.Webelievethat
thedemandfortheseproductsisgoingto outpaceoverallFood Categorygrowth for many
yearstocome.
Healthfoodsisbecominga
priorityformostcompanies
46
Food
Chart39:Chartfromsurveyindicatinghighhealthconsciousness
100.0
(%)
80.0
Indianconsumersprefertaste
overhealth
60.0
40.0
Stronglysensitive
Mildlysensitive
Promotional
Offers
Price
Convenient
toCook
Brand
EasyAvailability
AtStores
Quality
0.0
Health
Consiousness
20.0
Indifferent
Historically, various products based on the wellness plank have tasted reasonable success
whichweexpecttocontinueinthefutureaswell.However,tasteisneversubstitutedfully
forthesakeofhealth.SaffolaZestlaunchedbyMaricohasfailedforthesamereasonnot
beingpalatable.TasteisacriticalelementforIndianconsumerforchoosinganyproductso
muchforthefailureofsugarfreejuicesandicecreamstogainmarketshare.Nowonderthe
fastfoodgiant,McDonald's`doesnotfeeltheneedtointroducehealthierfoodslikesalads
since"theIndianconsumer'shealthhabitshavenotyetevolved".ThepsycheoftheIndian
consumer is best at display onboard full service airlines. Most travellers here are well
educated, come in the age group of 3045 and have high awareness about healthy diets.
However,onenquiries,inflightcrewrevealsthatwhilemosttravellersgobbleupthedessert,
theyinsistonnoncalorificsweetenersfortheirhotbeverages.
Risingawarenessabouthealth,wellness
Indiastillhasalargechunkofpopulationsufferingfromunderweightandmalnutritionhence
Consumer companies have a large market to tap for packaged nutritional products which
promotegrowthanddevelopmentinchildrenandmaintainrequirednutritionlevelsinadults.
Thetablebelowindicatesthatthepenetrationofsuchproductscangoupseveraltimes.
Table20:Childnourishmentpositionbitofconcern
%ofinfantswithlowbirthweight,20052009
Earlyinitiationofbreastfeeding(%),20052009
%ofchildren(20052009)whoare:exclusivelybreastfed(<6months)
%ofchildren(20052009)whoare:breastfedwithcomplementaryfood(69months)
%ofchildren(20052009)whoare:stillbreastfeeding(2023months)
%ofunderfives(20032009)sufferingfrom:underweight(NCHS/WHO),moderate&severe
%ofunderfives(20032009)sufferingfrom:underweight(WHO),moderate&severe
%ofunderfives(20032009)sufferingfrom:underweight(WHO),severe
%ofunderfives(20032009)sufferingfrom:wasting(WHO),moderate&severe
%ofunderfives(20032009)sufferingfrom:stunting(WHO),moderate&severe
VitaminAsupplementationcoveragerate(659months)2009,Fullcoverage(%)
%ofhouseholdsconsumingiodizedsalt,20032009
47
28
41
46
57
77
48
43
16
20
48
66
51
Source:UNICEF,Edelweissresearch
Food
BetterhealthcarefacilitieshaveensuredadeclineindeathrateandlifeexpectancyofIndians.
This,inturn,wouldalsomeanthattherecouldbeanincreaseddemandforhighnutritional
foodproductsandsupplements.
Chart40:Declineincrudedeathrate
18.0
Chart41:Increaseinlifeexpectancy
70.0
56.0
10.8
42.0
(%)
(%)
14.4
7.2
28.0
3.6
14.0
0.0
0.0
CY70
CY90
CY09
CY70
CY90
CY09
Thoughbenefitsofhigherdisposableincomesareclearlyvisibleintheexponentialgrowthof
severalConsumercategories,achangeinthelifestyleandhighpressurejobshavealsoledto
anincreaseinstresslevelsamongtheworkingclass.Otherfactorssuchaschangesineating
habitsandbreakdownofthesocialfabricfurtheraddtostresslevels.
Table21:Increasingstresslevelsleadingtovariouslifestylediseases
~5%ofthepopulationestimatedtohavemorbidobisity
~20%ofIndiansabovetheageof40sufferfrombloodpressure
~11%ofurbanpopulationand3%ofruralpopulation
above15yearsofagehasdiabetes
Over62mnpatientswithheartrelatedailments
60%ofglobalheartpatientswillbefromIndia
FoodhabitsofIndiansarecontributingtocardiovasculardiseasesamongthem.Thesehabits,
however,areundergoingachangewithhealthyfoodgainingmoreandmoreimportanceas
seenbytheexponentialgrowthinhealthfoodssuchasMaricosSaffola.
Table22:Maricokeysegmentgrowth
Keybusiness
Q4FY09
Saffola
5
KayaClinicsandgrowth
No.ofclinics
85
Sales(INRmn)
430
YoYgrowth(%)
52.5
Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12

Q2FY12
Q3FY12
13 22 18 13 18
18
13
14 15 11 15
97
440
25.7
99
490
24.0
100 101 99 101 102 103 105 105 107

440
450
455
624*
620*
691*
627*
662*
750*
10.0 5.0 3.0 28.0 40.0 54.0 24.0 7.0 21.0
* Includes Derma Rx revenues
48
Food
Withtheincreaseindisposableincome,thereisamarkedinclinationtowardshealthfoods.
PepsiCo and CocaCola have introduced 0 cal as well as nonaerated drinks while many
health and probiotic drinks have also made their presence felt in the market. Fast food
chainshavealsojoinedthehealthbandwagonbyintroducingsaladmealsandsaladburgers
alongwithvarioussugarsubstitutes.Also,lowfatsubstitutestosoymilkarealsoavailablefor
the health conscious. For categories perceived as less healthy, 'betterforyou' variants will
succeedwhilefortheperceivedneutralorhealthycategories,functionalvariantswillsucceed.
Someoftherecentintroductionsinclude:
Inthelastthreeyears,healthand
wellnessaccountsfor~55%of
Britanniassales
Consumersindevelopingnations
spendhigheronhealthand
wellness
49
McDonalds and KFC promoting a healthy lifestyle and balanced eating by modifying
menus(introductionofsalads)andintroducingcampaigns
UnileverworkingonasaltreductionstrategyinIndia
PepsiCotoremovesugarydrinksfromschools
CocaColatoincludenutritionalinformationofproductsbyend2011
HUL extended Kissan to Soya Juice in different fruit flavours (first time extension to a
healthplatform)
Kellogg'slaunchedAllBran,a100%wholewheatreadytoeatcerealtargetedatwomen.
Kelloggsaysitsresearchindicatedthatfibreintakesamongstwomenarebetween2530
gramsduringthedaywhereastheyarebetweenoneandtwogramsforbreakfast.Thisis
below the recommended desirable level of 10 grams for a breakfast meal. This has
prompted the company to launch All Bran. Different consumers have different needs
and Kelloggs will launch various need based products after mapping out consumer
needs.
Britannia extended its health biscuit brand, NutriChoice, to the Diabetic Friendly
EssentialsrangeafterestablishingitwiththeHiFibreandMultiGrainranges.Inthelast
three years, health and wellness (H&W) has become a key driver for Britannia and
accountsfor~55%ofsales.
NestlelaunchedbrandextensionssuchasMaggiAttaandMaggiMultigrainznoodles.
Indianconsumersrefusetocompromiseinfoodandhealthandthesehaveemergedas
key categories to register higher spending even in inflationary times, as per Boston
Consulting Group (BCG). The study also highlights that the tendency to trade up in
developingeconomiessuchasIndia(34%),China(38%),Brazil(26%)andRussia(22%)
wasmuchhigherthanthatindevelopedcountriessuchastheUS(17%),theEU(15%)
andJapan(9%).
Food
Fig.5:SaladmenuatSubway
Fig.6:KFCsChanasnackeraidedwithsalad
Fig.7:Britanniaincreasesitsfocusonhealthrelatedproducts
Source:Company
Increaseindisposableincomeaswellashealthawarenesshasalsoledtotheemergence
of specialised food delivery options such as calorie care, magicomeal, etc. These
servicesprovidefreshlycookedcaloriecountedmealsanddeliverfoodatofficeplaces.
India is home to the largest diabetic population globally hence the beverage category
with claims like ''no added sugar'' can attract new consumers. The packaged juice
segmentdisplayedahealthy15%CAGR overthepastfive yearsreflectingthegrowing
demandasconsumersbeginpreferringhealthierbeveragesoveraerateddrinks.
50
Food
Chart42:Importanceoffoodhygiene
100.0
(%Agree)
80.0
BRICnationsmorecautious
towardshygiene
60.0
40.0
20.0
India
Brazil
Mexico
Italy
Taiwan
Argentina
China
France
Spain
Russia
Turkey
Global2010
Egypt
SaudiArabia
Germany
Thailand
Korea
Canada
Poland
Japan
Indonesia
Australia
USA
CzechRepublic
UK
Sewden
0.0
Chart43:ImportanceofBrand
100.0
(%Agree)
80.0
Indianconsumersgivehigh
prioritytobrandname
60.0
40.0
20.0
Taiwan
Canada
France
UK
CzechRep
China
Germany
Spain
Russia
Egypt
Turkey
Mexico
India
0.0
Iliketobuyproductswithprestigiousbrandnames
Ionlybuyproductsandservicesfromatrustedbrand
Source:RoperReportsWorldwide2010,Edelweissresearch
Health and wellness have been the most talkedabout subjects in the food and beverages
industryinrecentyearsduetoanalarmingriseinobesityanddiabetes,forcingcompaniesto
put nutritional information on food packs, stop promoting unhealthy food and introduce
healthier items. But the Indian consumer is yet to go aggressive on healthy food habits.
SugarfreejuicesandicecreamshavenotgainedmarketandfastfoodgiantMcDonald'sdoes
not feel the need to introduce healthier foods like salads in India because "the Indian
consumer'shealthhabitshavenotyetevolved".DespitebeinginIndiaforalmostadecade,
diet colas contribute ~2% to overall cola sales; 100% juices are still lagging behind sugary
ones,andpizzachainslikeDomino'sarebeatingsalestargets.
With the increasing set of serious health conscious consumers in the country, the big
challengewouldbetomaintaintastewhereconsumersclearlydonotlikeanycompromise.
PepsiCoandParleProductshavewithdrawnlowsugar,lowfat'healthier'productsPepsiMax,
MonacoSmartChipsduetopoordemand.SaysParlesGroupProductManagerMayankShah,
51
Food
"thelearningforusfromMonacoSmartChipswasthatconsumersarewillingtocutdownon
frequencyofconsumptionbutwon'tgiveupontaste."
Fig.8:Focusonhealthplank
Source:Company
`Premiumizationoverdrive,findsacceptanceamongconsumers
In India, premiumisation in the Consumer space is not new but has largely been driven by
personal care and household care brands. Categories like antiaging and toothpaste for
sensitive teeth are niche areas which personal care brands have exploited to drive
premiumisation. It is only now that food companies are more actively latching on to the
trend and the reasons are many. Leave aside the rise in disposable income in metros;
changinglifestylesandhealthawarenessaredrivingdemandforbetterqualityfoods.Thusit
is no surprise why mainstream food brands are enhancing their portfolios with renewed
vigour. Hindustan Unilevers coffee brand Bru stepped up its regular brew portfolio by
bringingtomarketBruExotica,asuperpremiumcoffee.HULssoftlauncheslikeSoyajuice
andKissancreamyspreadareatapremiumtocurrentofferings.GlaxoSmithKlinesHorlicks
launchedHorlicksGoldata30percentpremiumtothebasevariant,inselectmarketsacross
India. The smaller premium biscuits segment, comprising cream, chocolate biscuits and
cookiesaregrowingatanannualrateof25%to30%thankstorisingdisposableincomesand
growth in modern retail outlets. Britannia, ITC and GSK are focusing more on non glucose
segment which helps the company to improve profitability. In confectionary, Cadbury is
driving premiumisation through the launch of Cadbury Silk and Bournville. To capitalize on
thistrend,Nestlelaunchedwheat/rice/multigrainnoodles,DanonelaunchedfruitYogurt.Ice
creamsegmentiswitnessingsurgeofpremiumproductsbyHUL,Vadilal.
Changinglifestylesandhealth
awarenessleadingto
premiumization
Nestl India launched Actiplus Probiotic Dahi (yoghurt), priced at ~5% premium to regular
SKU(INR40fora400gmSKU)totargethighershareinthenascentmarketbutfastgrowing
probioticfoodssegment.DanoneIndiaalsoaddedapremiumofferingtoitsyoghurtportfolio
Cremix,pricedat~30%premiumtoregularyoghurtvariants.
From our survey, it was clear that predominantly, consumers are mildly sensitive to price
(65%).Inthecaseofahighinflationscenario,playersinthissegmentcanaffordtopasson
someofthecostincreasestoconsumerswithoutgettingmuchhitonthesales.
52
Food
DelightingthroughmorphingInnovationatfore
ManycompaniesareexperimentingwithFusionofproductslikeBritanniaintroducedChoco
Decker i.e. biscuits mein chocolate or Time Pass (biscuit or rusk or salty snack?). The
companies high on innovation, well established in a particular segment and desire to enter
new segment utilizing its brand salience comes out with fusion of products. HULs soupy
noodles combine soup and noodles thereby creating a different category. With consumers
readytoexperimentwithnewercategory,fusionofproductscanprovidethecompanieswith
decentinitialtrialanddemand.
Fig.9:Biscuitsorchocolate?
Fig.10:Biscuitorruskorsaltysnack?
Pricesensitivity;lowerSKUshavelimitations
Apart from taste, Indian consumers are known for their price sensitivity and that explains
some smart and some equally failed strategies of players. Kitkat suffered a setback in
volumeswhenNestleIndiatookaboldstepofmovingawayfromthetraditionalpricepoints
ofINR2,INR5andINR10.Instead,itstartedexperimentingwithpricepointsofINR7,INR12
andINR14.Atthesametime,Cadburygrewsubstantiallyasitcutthegrammagethoughkept
the price intact. Typically, stockkeeping units (SKUs) at low price points or popular price
points of INR1, INR2, INR5 and INR10 help Consumer companies add new consumers and
drive volumes. These price points have been touted as a huge success in rural markets by
most companies, and even as consumer goods companies have hiked product prices on
largerSKUsandreducedweightonsmallerSKUs,noplayerwantstofiddlewiththelowprice
points, until now. Though low priced SKUs act as volume pullers, beyond certain point
grammagereductionbecomesdifficult.Ininflationaryenvironmentbeingwitnessedcurrently,
thelowpricedunitsbecomeunviable.
Indianconsumersarepricesensitive
53
Food
WhathappenedinChina?
Chinawithdemographics,urbanruraldividesimilartothatofIndiawillprovidegoodinsight
into evolution of food industry in India. The Food Industry in China has evolved into what
couldbecalledthebreedinggroundforIndiawithChinabeingthehometosomeofthebig
playersintheindustry.
In China, expenditure on foods and beverages stands at ~33% of the total consumer
expenditureduring2008visvis36%inIndia.
InChina,expenditureonfoodsand
beveragesstandsat~33%ofthe
totalconsumerexpenditureduring
2008visvis36%inIndia
Chart44:SplitinspendsinChina
Others
19%
Food&non
alcoholic
beverages
33%
Miscellaneous
goods&services
3%
Education
6%
Leisure&
recreation
3%
Communications
11%
Clothing&
footwear
9%
Healthgoods&
Transport medicalservices
3%
8%
Household
goods&services
5%
Source:EuromonitorInternational,Edelweissresearch
Chart45:SalesofPackagedFoodbySector,2003
Confectio
nery
9%
Bakery
products
Others
15%
37%
Chart46:SalesofPackagedFoodbySector,2008
Confectio
nery
Bakery
7%
products
13%
Others
37%
Dairy
products
18%
Dairy
products
14%
Dried
processed
food
9%
Noodles
8%
Sweetand
savoury
snacks
8%
Dried
processed
food
10%
Noodles
8%
Sweetand
savoury
snacks
7%
Source:EuromonitorInternational,Edelweissresearch
54
Food
In2010,inChinapackagedfoodsrecordedahighervaluegrowththanthatof2009.Over
the20032008 periodthecategorygrewat11.5%CAGR.Withincreasingindisposable
income, shrinkage in average household size, enrichment in lifestyle consumer
enthusiasmisupbeatinpackagedfoodswhichofferconvenienceandeasyaccessibility.
Change in consumer behavior coupled with expansion in distribution channels has
created a good opportunity for packaged food players in China to continue their
expansion,throughprovidinghighqualityproductstoChineseconsumers.
Intermsofretailvaluegrowthin20032008period,babyfoodproductsgrewataCAGR
of ~21% and dairy products and ready meals grew at ~17% CAGR each. In terms of
volumegrowth,oilsandfatsledthewaywithoverallgrowthof111.6%overthe200308
periodandhadacompoundannualgrowthrate(CAGR)of16.2%.Nexttofollowwere
soup(12.5%CAGR),driedprocessedfood(10.6%CAGR),andreadymeals(10%CAGR).
Packagedfoodcategorygrewat
11.5%CAGRover200308
Table23:ConsumptionofpleasureorientatedF&Bbyvolume(mnlitres)inChina
CAGR
CAGR
CY09
(CY0009)
(CY0609)
14,190
9.7
8.5
1,230
5.2
2.3
2,624 14.8
12.7
477
7.2
5.1
Source:Datamonitor,Edelweissresearch
Consumption of pleasure oriented foods namely, cookies, carbohydrates, icecream,

hasseenagrowingtrend.
Market
Carbohydrates
Cookies
IceCream
Wine
Chinesearebrandconsciousbut
notbrandloyal
55
CY00
6,363
849
799
270
CY06
11,098
1,151
1,832
411
Increasingconsumerdisposableincomesandrisingconsumerconfidencetogetherwith
the ongoing efforts from packaged food players, consumers have increased their
purchases of packaged food products, particularly for health and wellness or premium
productsclaimingtoofferextrabenefitsorfunctionality.
Chinese over the time have moved from accepting basic features to demanding value
added customized products, even if it comes at a cost. So MNCs who earlier stripped
downtheirexistingproductstobasicsfaceanentryhitchastheseofferingsareunable
to match consumers new expectations. Also companies that relied on lowcost, low
qualityofferingsarelosingonaccountofshiftinvalue.Thishashoweverbeenbeneficial
forcompaniesthathavedifferentiatednicheproducts.
Retailerstodifferentiatethemselvesandtowintheincreasinglyhealthconscioustarget
audience are focusing on health and wellness concept. Dairy and baby food players
focusedonaddressingthesafetyandnutritionalfeaturesoftheirownproducts,suchas
organic, the traditional Chinese medicine (TCM) concept, and functional benefits.
Confectionery players, on the other hand, such as Mars, stated its Dove Xinsui dark
chocolate contained higher cocoa and lower fat, while sauces and dressing players
Foshan Haitian and Lee Kum Kee launched betterforyou soybased sauces featuring
lowsalt.Thesetrendssupportedgoodvaluegrowthoftheoverallpackagedfoodmarket
in2010
Chinesearebrandconsciousbutnotbrandloyal.23%ofshoppersinChinawouldgoout
oftheirwaytobuyfromstoresthatofferedthebestprices,comparedwith18%inthe
UnitedStatesand12%inJapan.Whilequalityremainsacriticalconsideration,valueis
themostimportantone.
Food
Consumers do not approve of outstretching their budget; when they up trade in a

particular category they down trade in less compelling categories. More than 70% of
tradeupdemandfordiningoutand50%foralcoholcomefromwhitecollarmenwho
wanttoimprovetheirstandingwithclientsorcolleaguesandtradedownonpersonal
careandpackagedfoodandsnackingproductstobalancetheiroverallspending.
Cross category promotions is the new buzzword which helps to influence purchase in
categoriesrelatedtotheonesconsumerstargetforuptrading.Forinstanceconsumers
whouptradeinentertainmentmayshowasimilartrendinalcoholconsumption.Sothis
providesanopportunityforalcoholvendorstoteamupwithpubs,restaurantsetc.
Likeinmostdevelopednations,theconsumerpurchasingpatternismovingtodeclining
shopping frequencies with larger basket sizes. The number of weekly purchasing trips
fellfrom0.6in2008to0.5in2010;theaveragebasketsizerosefrom18.42renminbiin
2008to24.10renminbiin2010.Thiscanbemainlyattributedtoincreasingpopularityof
modernretailformats.Asqualityoflifeimproves,timebecomesmorevaluable.
In 2011, domestic companies continued to lead Chinas packaged food sales, with
Mengniu and Yili ranked first and second respectively. Shineway, Hangzhou Wahaha,
Bright Dairy & Food and Want Want Group were all within the top ten players.
MultinationalswereinaweakerplaceinpackagedfoodsalesinwithNestlandMarsat
the9thand10thpositions.
Modernretailformatsaregaining
popularityinChina
Table24:ChinaPackagedFoodCompanyShares
Rank Company
Value(%)
1
2
3
4
5
6
7
8
9
10
InnerMongoliaMengniuDairy
Industry(Group)CoLtd
InnerMongoliaYiliIndustrialGroup
CoLtd
KuokOils&GrainsPteLtd(KOG)
TingHsinInternationalGroup
ShinewayGroup
HangzhouWahahaGroup
WantWantGroup
BrightFood(Group)CoLtd
MarsInc
NestlSA
%top10
25.4
Artisanal(%)
7.1
4.5
4.1
3.3
2.9
2.8
2.1
1.8
1.6
1.2
1.1
In China, where diabetes, cancer and other chronic illnesses are on the rise, people are
growing more healthconsciouscreatingafastgrowingmarketforcompaniessellinghealth
foods. Food giants such as Nestl and PepsiCo have begun introducing foods that have a
traditionalChinesefolkmedicinetwist.
In 2009, sales of wellness foods and beverages in China had increased 28% from five
yearsearliertoUSD1.5bn,drivenbytheelderlyandwomen,accordingtoEuromonitor
Nestl is investing USD0.5bn globally over ten years to develop foods with health
benefits.ItiscurrentlytestingfiveoftheminChina
PepsiColaunchedQuakerHerbalOatmealwhileCocaColaishopingtoattractcustomers
concernedabouttheirhealthwithitsVitaminwater
56
Food
MNCcompaniestoremainveryaggressive
Multinational F&B companies were always fascinated by the Indian growth story, primarily
ledbythefavourabledemographicprofileasseenbytheearlyentryofPepsiCo,Coke,Nestle
and Cadbury. However, progressively more companies have become aggressive, initiating
meaningful investments in the domestic market (Conagra via Agro Tech, Kraft tasting good
success post Oreos entry via Cadbury, Nestle investing in capacity addition and HUL
savouring its focus on foods segment). These investments though at nascent stage will
eventuallysetthebaseforthenextlegofgrowth.Mostleadingplayersareadoptingamore
localised business model, including India specific products (KFC selling vegetarian products,
pizzassellingtandoorivariantsetc)andawellspreadoutdistributionnetwork.Therearebig
gaps in products between MNC Consumer companies and their Indian unit. We have
analysedthegapinthetablebelow.WeexpectNestle,HUL,AgroTech,Pepsi,Kraft,Kelloggs
andReckitttobeattheforefrontonnewlaunchesinthecomingdecade.
Mostleadingplayersareadoptinga
morelocalisedbusinessmodel
Table25:ExistingopportunitiesforMNCs
Company ProductsinIndia
Parent
HUL
Tea,coffee,flour,salt,ketchup, Unilever
jam,soup,noodle,pasta,ice
cream,bread,healthdrinks;
readytocooksoup,Indian&
Chinesecuisine,cream
alternatives
GSKCH
Agrotech
Maltedfooddrinks,health
GSK
drinks,biscuits,instant
noodles
Conagra
Edibleoil,popcorn,healthy
cookingoil,chocolatepudding,
peanutbutteralternatives,
frozenfood;readytocook
greenpeas
PortfolioofParent
Margarines,milkdrink,
yoghurts,oliveoil,vinegar,
creamalternatives,cheese
spreads,icecream,dressings,
ketchup,mayonnaise,frozen
foods,icedtea,healthdrinks,
rangeofweightmanagement
products,readytocook
chicken,Italiancuisine,soup
Gap
Margarines,milkdrink,
yoghurts,oliveoil,vinegar,
cheesespreads,dressings,
frozenfoods,mayonnaise,
rangeofweightmanagement
products,readytocook
chicken,nonveg
Healthdrinks,maltedfood
drinks,fruitdrinks
Fruitdrinks
Frozenfood,ketchup,snacks,
eggwhites,healthfoods,
tomatopaste,childrenfood,
popcorn,whippedcream,
chocolatepudding,edibleoil,
cookingoil,margarine,
mustardspread,peanutbutter,
flourproducts,Frenchfries,
roastedsunflowerseeds,
maltedfooddrinks;readyto
cook,readytoeatchicken,
ham,pasta,pizza
Ketchup,snacks,eggwhites,
healthfoods,tomatopaste,
childrenfood,whippedcream,
margarine,mustardspread,
flourproducts,Frenchfries,
roastedsunflowerseeds,
maltedfooddrinks;readyto
cook,readytoeatchicken,
ham,pasta,pizza
57
Food
Parent
NestleSA
NestleIndiaMilk,milkwhiteners,malted
foods,ghee,dahi,condensed
milk,babyfood,coffee,tea,
noodles,pasta,ketchup,spices,
chocolates,confectionery,
readytocooksoup
PortfolioofParent
Babyfood,bottledwater,
cornflakes,oats,chocolates,
confectionery,coffee,tea,
desserts,frozenfoodsnonveg,
sandwiches;cream,icecream,
juice,maltedfoods,noodles,
pasta,healthdrinksreadyto
cook,readytoeatnonveg,
gravy,soup,pasta
Gap
bottledwater,cornflakes,oats,
desserts,cream,icecream,
juice,healthdrinks;readyto
cook,readytoeatnonveg,
gravy;frozenfoodnonveg,
sandwiches
PepsiCo
Carbonateddrinks,bottled
water,lemonade,fruitjuices,
tea,oats,saltysnacks,chips,
healthdrinks,healthysnack
food
Carbonateddrinks,oats,
cornflakes,riceflakes,coffee,
healthdrinks,lemonade,tea,
fruitjuice,pasta,saltysnacks,
chips,popcorn,bottledwater,
readytodrink(energydrinks)
cornflakes,riceflakes,pasta,
popcorn,readytodrink(energy
drinks)
CocoCola
Carbonateddrinks,bottled
CocaCola
water,lemonade,fruitjuices,
powdereddrinks,healthdrinks,
tea,coffee,readytodrink
(energydrinks)
Carbonateddrinks,health
drinks,fruitjuices,tea,coffee,
bottledwater,lemonade,milk,
readytodrink(energydrinks)
milk
Kraft
chocolates,maltedfoods,
powdereddrinks,biscuits,
confectionery
Kraft
cottagecheese,sourcream,
cookies,cheese,fruitjuice,
coffee,tea,snacks,frozen
foods,readytodrink(energy
drinks),saltysnacks,desserts,
whippedcream,dressing
Danone
yogurt
Danone
chocolates,biscuits,
confectionery,cottagecheese,
sourcream,cookies,cheese,
fruitjuice,coffee,tea,snacks,
frozenfoods,readytodrink
(energydrinks),maltedfoods,
saltysnacks,desserts,
powdereddrinks,whipped
Milk,yogurt,babyfoods,
bottledwater,desserts
confectionery
Perfettivanconfectionery,chips
Heinz
PepsiCo
Perfettivan
ketchup,ghee,powdereddrinks, Heinz
maltedfooddrinks,biscuits,
babyfood,healthdrinks
Hershey's confectionery,fruitdrink,
edibleoil
Unibic
biscuits,digestivebiscuits,
cookies
Unibic
Milk,babyfoods,bottledwater,
desserts
ketchup,babyfoods,frozen
food,readytocook,readyto
eatchicken,starters,soup,
salsa,pasta,bakedbeans
frozenfood,readytocook,
readytoeatchicken,starters,
soup,salsa,pasta,bakedbeans
chocolates,confectionery,milk,
biscuits
biscuits,chips,snacks,healthy
snacks,digestivebiscuits
chocolates,milk,biscuits
chips,snacks
58
Food
Company
Kellogg's
ProductsinIndia
Cornflakes,oats
Parent
Kellogg's
PortfolioofParent
cornflakes,riceflakes,health
drinks,healthbars,flavoured
milk,desserts,cookies,snacks,
chips,frozenfoods,readyto
cook,readytoEathotdogs,
breakfasts
Gap
riceflakes,healthdrinks,
flavouredmilk,desserts,
cookies,snacks,chips,frozen
foods,readytocook,readyto
eathotdogs,breakfasts
DrOetker Mayonnaise,differentcuisine
sauces,syrups,peanutbutter,
breakfastcornflakes,oats;
readytocookcake
DrOetker
flavorings,breakfast
cornflakes,oats;bakedfoods,
snacks,cuisinesauces,frozen
foodsvegetables,pizza;ready
tocookpizza,pie,pasta,cake,
organicmix,mashedpotatoes,
jellymix
flavorings,bakedfoods,
snacks,frozenfoods
vegetables,pizza;readytocook
pizza,pie,pasta,organicmix,
mashedpotatoes,jellymix
Domino's
Domino's
starters,pizzas,pastas,
sandwich,chicken,desserts,
beverages
Pizza,calzone,pasta,pizza
dough,chicken,starters,
beveragesaerateddrinks
sandwich,calzone
Burger,wrap,saladburger,
Frenchfries,chicken,salad
bowl,breakfastmeals,yogurt,
icecream,beverages,cookies,
milkshakes,coldcoffee,
aerateddrinks,fruitplate,
juice,applepie
chicken,saladbowl,yogurt,
cookies,fruitplate,juice,apple
pie
chicken,pie,burger,wrap,rice,
icecream,chocolatecake,
cookies,mashedpotato,pasta,
bakedbeans,corn,potato
wedges,aerateddrinks
pie,mashedpotato,pasta,
bakedbeans,potatowedges
coffee,flavouredcoffee,
chocolatebeverages,espresso,
coldcoffee,fruitjuice,milk,
flavouredmilk,tea,icedtea,
greentea,lemontea,flavoured
tea,milkshakes,bottleddrinks,
desserts;bakerymuffins,bagel,
cookies,cake,doughnut;
breakfastwrap,sandwich,
salads;icecream,yogurt,
creamcheese
coffee,flavouredcoffee,
chocolatebeverages,espresso,
coldcoffee,fruitjuice,milk,
flavouredmilk,tea,icedtea,
greentea,lemontea,flavoured
tea,milkshakes,bottleddrinks,
desserts;bakerymuffins,bagel,
cookies,cake,doughnut;
breakfastwrap,sandwich,
salads;icecream,yogurt,
creamcheese
starters,pizzas,pastas,
calzone,desserts,chicken,
beverages
Pizzahut pizza,beveragesmocktails,
shakes,aerateddrinks,soup,
salad,pasta,icecreams,
desserts
McDonalds Burger,wrap,saladburger,
Frenchfries,puff,potato
wedges,aerateddrinks,ice
cream,breakfastburgers,
milkshakes,coldcoffee
KFC
Pizzahut
McDonalds
burger,Frenchfries,rice,
KFC
flavouredcurry,chicken,wrap,
aerateddrinks,milkshakes,
butteredcorn,icecream,
chocolatecake
Starbucks
Starbucks
59
pizzadough
Food
DunkinDonuts
Parent
DunkinDonuts
PortfolioofParent
applepie,bagel,breakfast,
sandwiches,cookies,hash
brown,muffins,breadsticks,
juice,coffee,coldcoffee,
milkshakes,tea,icedtea,
chocolatemilk
Gap
applepie,bagel,breakfast,
sandwiches,cookies,hash
brown,muffins,breadsticks,
juice,coffee,coldcoffee,
milkshakes,tea,icedtea,
chocolatemilk
Subway
sandwich,fatfreesandwich,
breakfastsandwich,salad,
cookies,aerateddrinks,cold
coffee,icedtea,pastry
Subway
sandwich,fatfreesandwich,
breakfastsandwich,salad,
muffin,chips,cookies,aerated
drinks,coldcoffee,icedtea,
juice,apple,milk,yogurt
muffin,chips,juice,apple,milk,
yogurt
McCain
Foods
frozenfoodFrenchfries,aloo
tikki,wedges,nuggets,burger
patty,RiceIdli
McCainFoods
Cargill
edibleoil,mustardoil,olive
oil,healthycookingoil
Cargill
frozenfoodFrenchfries,spiral
fries,rosti,patties,sweet
potato,onionrings,cheese
sticks,bakedpotato,pizza,
peas,carrots,desserts
edibleoil,salt,freshmeat,
frozenmeat,mayonnaise,olive
oil,saladdressing,sugar
substitutes,chocolates,frozen
foodturkey,chicken
frozenfoodspiralfries,rosti,
patties,sweetpotato,onion
rings,cheesesticks,baked
potato,pizza,peas,carrots,
desserts
salt,freshmeat,frozenmeat,
mayonnaise,saladdressing,
sugarsubstitutes,chocolates,
frozenfoodturkey,chicken
General
Mills
flour,vermicelli,cream,healthy GeneralMills
bars,icecream,mixescake,
custard,desserts,readytocook
corn
flour,breakfastcereals,ice
cream,snacks,yogurt,cream,
mixescake,cookie,bread,
muffin,biscuit,desserts;ready
toeatsalad;readytocook
potato,biscuit,pasta,meat,
Chinese,soup;frozenfood
puddings,dough,pizza,fruits,
vegetables
breakfastcereals,snacks,
yogurt,mixescookie,bread,
muffin,biscuit;readytoeat
salad;readytocookpotato,
biscuit,pasta,meat,Chinese,
soup;frozenfoodpuddings,
dough,pizza,fruits,vegetables
mustardoil,saltalternatives,
flovouredsauce,snackspotato
chips,friedonions
mustardoil,saltalternatives,
flovouredsauce,snackspotato
chips,friedonions
Reckitt
Benckiser
Reckitt
Benckiser
60
Food
Weexpectbigopportunitiesinthesefoodsegments
Staples: The ~INR3325bn category is one of the largest categories. Packaged part of this is
expected to grow at a healthy rate of ~18%. It can be further classified into packaged salt,
packagedwheat,packagedrice,packagedspicesandedibleoil.
Snacks:Thisincludesbiscuits,namkeen,noodles,pasta,chocolates,confectionaries,Readyto
eat(RTE),upma,pohaetc.ThesnackfoodmarketinIndiaisestimatedtobeworthINR409bn
growingat18%yearly.
Milk and milk derivatives: Indian dairy industry stands at around INR3500bn with the
unorganizedsegmentdominating80%ofit.
Beverages: Total size is ~INR193bn. India accounts for approximately 10% of the global
beverage consumption, being the third largest market in the world after United States and
China.Mainreasonsforgrowthare:increasingpopulationanddisposableincomes.Around
120bnlitresofbeveragesareconsumedbyIndianseveryyear,ofwhichonly5%comesfrom
thepackagedsegment.Thusthereliesanimmensegrowthopportunity.
Bottled water: The bottled water segment is estimated to be worth INR30bn. There are
about200bottledmineralwaterbrandsinIndiaandnearly80%ofthemarelocal.Threekey
playerswhodominatetheIndianbottledwatermarketareParlewithBisleri,CocaColaIndia
withKinleyandPepsiCoIndiaHoldingswithAquafina.
HealthFood:ThissegmentislikelytoseeoneofthehighestgrowthlevelsintheentireFood
segment.IthasmanysubsegmentslikeChyawanprash,Butteralternatives,healthycooking
oils,sugarsubstitutes,energydrinks,Healthdrinks,HealthysnacksandHighfiberbeverages.
Nonvegetarianfood:ThepoultrymarketinIndiacomprisesofthreemaincategories:meat,
eggs and processed value added products. Organised sector dominates the poultry market
(meat and egg comprise 95% of this segment) with a share of 70%. With INR300bn, meat
segmentdominatesthemarketwhileeggsmarketstandsatINR150bninsize.
Restaurants: The total restaurant industry in India is ~INR430bn, comprising two distinct
segments:theorganizedandtheunorganized.Theindustryhasshownagrowthrateof56%
perannumwiththeorganizedsectorestimatedatINR85bnandgrowingatanannualrateof
2025%.Thechangingperceptionsoftherichandtheuppermiddleclasswithariseintheir
Foodstodowell.
Weanalyzethisingreaterdetailbelow:
61
Food
Staples
Staplesformamajorchunkofconsumersdailyconsumptionandcanbeclassifiedinto
packagedsalt,packagedwheatflour,packagedrice,spicesandedibleoil.Thiscategory
requires low processing, makes less margins and is a high volume business. Since
technologyrequirementisfewer,itisstilldominatedbyunorganizedplayers.However,
we are witnessing an increasing shift towards brands as consumers are getting more
healthandqualityconscious.
Table26:SnapshotStaples
Current
Proj.5yr
Proj.10yr
size(INR
5year value(INR
10year value(INR
Segment
bn) CAGR(%)
bn) CAGR(%)
bn)
PackagedSalt 25 12.0 44 10.0 65
WheatFlour
1,000
8.0
1,469
6.0
1,791
Rice
1,000
7.0
1,403
6.0
1,791
Spices
400
8.0
588
6.0
716
EdibleOil
900
7.0
1,262
6.0
1,612
Companies
TataChemicals
ITC
Marico
ITC
ShaktiBhog
HUL
Pillsbury
LTfoodsltd
KohinoorFoods
LakshmiEnergy
KRBL
Marico
MDH
MTRFoods
EverestSpices
DSGroup
KSOils
AgroTech
Cargill
AdaniWilmar
Brands
TataSalt
AashirvaadSalt
SaffolaSalt
Aashirvaad
Shaktibhog
Annapurna
Pillsbury
Daawat
Kohinoor
RoyalBrilliance
IndiaGate
Saffola
MDH
MTR
Everest
Catch
Kalash,DoubleSher,KSGold
Sundrop
NatureFresh,Gemini
Fortune,KingsOil,Fryola
PackagedSalt
Marketsize:thebrandedsaltmarketinIndiaisINR25bn.
Main players: Tata Salt from Tata Chemicals dominates the branded salt category,
followedbyITC.MaricohasanichepresencethroughSaffolaSalt.
62
Food
Chart47:Marketshare
Others
28%
Tata
62%
ITC
10%
Wheat flour: Branded wheat flour accounts for only 4% of the total market. Main players
includeAashirvaad(50%+share),Shaktibhog,AnnapurnaandPillsbury.
Packagedrice
Marketsize:Withabrandedmarketof~INR5bn,Indiaisthesecondlargestproducerof
riceintheworldafterChina.Riceisgrownbothinsummeraswellasinwinterinmajor
producing states such as West Bengal, Uttar Pradesh, Andhra Pradesh, Punjab, Tamil
Nadu,Bihar,Orissa,Assam,KarnatakaandHaryana.
Growth:PackagedricehasbeengrowingataCAGRof~30%overthepastfouryears.
Main players: LT Foods Ltd, Kohinoor Foods Ltd, Lakshmi Energy and KRBL Ltd. Marico
toohasenteredthissegment.
Table27:Organisedriceplayers
YearofIncorporation
MillingCapacity(MT/Annum)
MajorBrand
%basmati
%nonbasmati
%domestic
%exports
Bestfoodgroup
1998
600,000
Noor
100
0
68
32
KRBL
1889
975,000
IndiaGate
89
11
42
58
REIAgroLtd
1994
515,000
Kasauti
95
5
20
80
LTFoods
1965
190,000
Daawat
100
0
40
60
KohinoorFoods
1976
300,000
Kohinoor
100
0
45
55
AllcategoriesarebasedonFY10
MillingCapacityisconsideredtheassumptionof20hrand250dayswithintheworkingyearcycle
Spices
63
Marketsize:Currentlyestimatedat~INR400bn.
Branded market at around INR55bn is extremely fragmented and includes national,

regional and local players with instore brands. In the branded segment, MDH is the
leader with a 7% market share. Catch brand of Spices commands a 34% share while
MTR,Everestandinstorebrandshaveashareof35%each.
Food
Chart48:Totalspicemarket
Branded
14%
Unbranded
86%
EdibleOil
Marketsize:At~INR900bnoutofwhichthebrandededibleoilmarketis~INR200bn
Palmandsoyoilsconstitutemorethan95%oftotaledibleoilimports
Although penetration is high, share of brands is low. The penetration of edible oil in
urbanandruralmarketis98%and95%respectively
Per capita consumption: At 12.7 kg, the domestic per capital consumption is on an
upward trend but is well below the world average of 20 kg thus providing growth
opportunities.
Brandedoilsegmentisannuallygrowingattherateof20%.Majorplayersintheedible
oilsegmentareMarico,KSOil,AgroTech,CargillandAdaniWilmar.Inthepremiumend
ofhealthyedibleoilcategory,Saffolaleadsthemarket.
Chart49:PerCapitaConsumption
12.0
(Kg/annum)
9.6
8.6
8.9
10.3 10.6
9.8 10.1
9.5
11.1 11.1 11.4 11.2

10
10.3
7.2
4.8
2.4
0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
64
Food
Dal
Pulsesaredominantinthenon
brandedform
Lessthan1mntonnesofdalcomeunderthebrandedsegmentoutofthetotalmarket
sizeofaround20mntonnes.
Indiafacesademandsupplygapinpulses.Theannualsupplyofpulsesis~15mntonnes,
whereasthedemandexceeds18mntonnes,thuscreatingadependenceonimports.
PulsesareinshortsupplyinIndia;henceasignificantpartismetthroughimports,which
areofadifferentquality.
Alargeconsumerbaseandahighannualdemandgrowthispromptingmanycompanies
toexpandtheiragriculturalproductsportfoliowithbrandedpulses.
Safetyandhygienereasonsarelikelytoattractmoreconsumers.
Thesemiurbanandruralareasarelikelytotaketimetoacceptbrandedpulses.
Main players Future Group, Reliance Retail, ITC, Tata Chemicals, Adani Wilmar and
LakshmiEnergyFoods.
Snacks
This includes biscuits, namkeen, noodles, pasta, chocolates, confectionaries, Ready to eat
(RTE), upma, poha etc. The salty snack food market in India is estimated to be worth
INR120bnwiththebrandedsnackmarketatINR50bnandgrowingat1520%yearly.
ModernizationandurbanizationaredrivingaseachangeinthelifestyleofIndianconsumers.
Withmorepeoplelivingawayfromhome,increaseinthenumberofworkingwomenandrise
insinglememberhouseholds,theconveniencefoodsmarkethasgainedhugepopularityof
late.
Theconveniencefoodmarketcanbebroadlyclassifiedintonoodles(instantfoodsegment),
breakfast cereals, savouries (namkeens, chips etc.) and soups. Despite the presence of
Nestle, ITC, HUL, Pepsi, MTR, Kohinoor Foods and Haldirams and variety of products, the
marketisstillatanascentstagesincetheIndianconsumeriswillingtospendonsnacksthat
offer convenience, variety and health. The convenience foods market faces two key
challenges:lackofvalidatedqualitystandardsandtheassociation(bymanyconsumers)that
itisjunkfood.Playersarerisingtothesechallengesandtryingtoreformulatethesesnacksby
usinghealthyfatandoil,wholegrains,fibersandsodiumalternatives.
Thosewhoforgetthepastaarecondemnedtoreheatit~Anonymous
65
Food
Table28:Snapshotsnacks
Segment
Biscuit
Currentsize 5year
Proj.5yr 10year
Proj.10yr
(INRbn) CAGR(%) value(INRbn) CAGR(%) value(INRbn)
126 15.0 253 13.0 428
SaltySnacks
120
20.0
299
18.0
628
Chips
30
22.0
81
20.0
186
InstantFood
Noodle
18
20.0
45
17.0
87
25.0
28.0
12
Pasta
Companies
ParleProducts
Britannia
ITC
Brands
ParleG,ParleMarie,Hide&Seek
Tiger,GoodDay,5050
Sunfeast
Haldiram
ConAgra
Pepsico
Venkatraman
ITC
PepsiCo
BalajiWafers
ITC
Haldiram
ParleProducts
PrakashSnacks
Haldiram
David
Kurkure,LeharNamkeen
Peppy
Bingo
Lays,UncleChips
Balajinamkeen
Bingo
Haldiram
Parle'sWafers
YellowDiamond
Nestle
HUL
GSK
ITC
NissinFoods
Nestle
ITC
HUL
FutureGroup
Maggi
Knorr
Foodles
SunfeastYipee
TopRamen
MaggiNutriliciousPazzta
SunfeastPasta
Knorrsoupypasta
TastyTreat
BambinoAgro
BambinoPasta
PepsiCo
Bagrry
Marico
Kellogg's
Britannia
Kellogg's
MohanMeakin
FutureGroup
MTR
ITC
Futuregroup
Agrotech
Nestle
HUL
Heinz
Quaker
Bagrry'sOats
SaffolaOats
HearttoHeart
HealthyStart
Kellogg's
Mohan
TastyTreat
MTR
KitchensofIndia
TastyTreat
Sundrop10minYummeals
Maggi
Kissan
HeinzKetchup
DesaiBrothers
CavinKare
PerfettivanMelle
ITC
Candico
ParleProducts
Cadbury
Nestle
Cadbury
Nestle
Mother'sRecipe
RuchiPickles,Chinni'sPickles
Alpenliebe,CenterShock,HappydentWhite
MintO
LocoPoco
Poppins,MangoBite
Eclairs
Eclairs
DairyMilk,Perk,Gems,5Star
KitKat,Munch,Milkybar
Breakfastcereal
Oats
1.5
28.0
25.0
14
Cornflakes
25.0
15
23.0
40
Readytoeat
4
Readytocook 15
18.0
25.0
9
46
20.0
28.0
25
177
Ketchup
18.0
11
16.0
22
Pickles
17
15.0
34
13.0
58
Confectionery 41
16.0
86
14.0
152
Chocolate
20.0
62
18.0
131
25
66
Food
Biscuits
BiscuitsmarketsizeisINR126bnandisthelargestbrandedconsumersegment.
ThepercapitaconsumptionofbiscuitsinIndiais1.5kgperyear.
Thepenetrationofbiscuitsinurbanandruralmarketis85%and55%respectively.
McVitie's, launched a year back, now claims a 20% share of the INR1bn digestives
category,growingatarapidrateof40%.ParleandBritanniaarealsopresent.
Main categories of biscuits: Glucose, Marie, Sweet, Salty, Cream and Milk. Glucose biscuits
accounts for ~30% of the total market value with Parle G dominating with ~60% share,
followed by Britannia and ITC. In the nonGlucose, Britannia is strong. Most players except
Parle are focusing on nonglucose segment which is growing faster, showing the
Premiumizationeffect.Britanniahasforayedintodiabeticfriendlyproducts.
Chart50:Biscuitmarket
140
126.6
112.1
(INRbn)
112
98.3
84
56
28
0
FY0809
FY0910
Thebiscuitmarket
FY1011
The Indian biscuit industry is dominated by major brands like Parle, Britannia and ITC
Sunfeast. Also the category has strong regional brands such as Priya Gold, Cremica, Dukes,
Anmol, Biskfarm, Rose, Sobisco, etc. GSK too is expanding its presence in biscuits under
Horlicksbrand.
67
Food
Chart51:Marketshare
201011
200910
Others
16%
Others
18%
Anmol
4%
Priyagold
5%
Anmol
4%
Priyagold
5%
Parle
40%
Parle
42%
ITC
8%
ITC
8%
Britannia
25%
Britannia
25%
Chart52:BiscuitconsumptioninIndia
East
28%
South
24%
North
25%
West
23%
Saltysnacks/Savouries
The salty snack food market in India is estimated to be worth INR120bn including the
branded snack segment of ~INR50bn, growing at 1520% yearly. The INR70bn unorganised
sectorisgrowingat78%.Munchingbetweenmealsiscommoninthecountrywithavariety
of snacks offered in mindboggling regional specialities gaining national acceptance.
According to an Apeda (Agricultural and Processed Food Products Export Development
Authority)survey,thereareabout1,000snacksitemsand300typesofsavouriessoldinthe
country.Saltysnacksarerapidlyreplacinghomemadesavouriesinbothbigandsmallcities.
As per a survey conducted by electronics payments company VISA on mystery spending or

cashspentbutwhichcannotbeaccountedbyconsumers,Indiansspendthesecondhighest
onsnacks.TheaveragemysteryspendingperweekofyoungIndiansintheagegroupof18to
24yearsstoodatINR383ofwhichalmost36%wasforsnacks.Thetotalspendingperyear
onsnacksforonepersonthusstandsataroundINR7,000.
68
Food
AsperACNielsen,theCAGRforsnacksintheruralmarketoverthelasttwoyearsstoodat
26.7% as against 13.2% in urban areas. Though contribution of rural areas is ~ 35%, it is
growing much faster than urban markets. Large part of the market is dominated by
unorganizedlocalplayers.
This segment includes chips/crisps, extruded snacks, nuts, popcorn, and mixtures. The well
knownnamesinthissegmentareHaldiram,ConAgra,PepsiCosKurkure,CheetosandLeher,
ITCsBingo,VenkatramanFoodSpecialityLtdsPeppy,SenorPepitotortillachipsandPiknik.
Chips
Chipsisthesinglebiggestiteminthesnacksandsavourycategoryandhasseenthehighest
interest from larger players. ITCs launched Bingo to compete with PepsiCo (Frito Lays,
marketshare:58%;brands:Lays,Kurkure,AlivaandUncleChipps.)WhileBingohasgrown
through some innovative products and advertising/ promotion, taking its share of the
INR30bnmarketto9%,FritoLayshasretaliatedwithitsnewrangeofIndiansnacks.Parletoo
has entered the market aggressively. In fact, Pepsi expanded the organised snacks market
since1995whentherewereonlyfewplayerslikeHaldiramandAmritAgro.WhenPepsiCo
launchedKurkurein1999,itbecamearunawaysuccess.
In2000,FritoLayIndia,adivisionofPepsiCoIndia,acquiredtheUncleChippsbrandaddingto
its success. Aliva marks Pepsis creation of yet another segment; blending ingredients and
texturesfrombiscuitsandflavoursfromnamkeensandpositioningitasahealthiersnacking
option.Thenextbigleaphappenedin2007whenITClaunchedBingowhichbroughtflavours
familiar to Indian taste buds. Next major launches were Parle Agros Hippo and Parle
ProductsSmartChipsin2009.
Table29:MarketshareChips
SnacksMakers
FritoLayIndia
BalajiNamkeen
ITC
Haldiram
ParleProducts
PrakashSancks
Marketshare(%)
Mar11
Mar08
58.0
66.0
14.0
13.0
9.0
11.0
5.0
3.0
5.0
0.0
4.0
2.0
%Change
(8.0)
1.0
(2.0)
2.0
5.0
2.0
Offeringper
INR10Pack*
28
55
36
55
30
45
Source:TheNielsenco,Edelweissresearch
*Weightingram
Instantfood
The instant food segment mainly consists of noodles and pastas. The noodles market is
around INR18bn with Nestls Maggi dominating the market. Other players in the noodles
market are HUL with Knorr, Glaxo SmithKline with Foodles, ITC with Sunfeast Yipee and
NissinFoodswithTopRamen.
69
Food
Chart53:Noodlemarketshare
GSK
3%
HUL
2%
Chart54:Pastamarketshare
others
3%
Indonissin others
3%
7%
ITC
5%
ITC
27%
Nestle
70%
nestle
80%
Thoughatanascentstage,thepastamarketisaroundINR1bnwithNestleleadingthemarket
with70%share,faraheadofITCsSunfeastPasta(27%).Nestlebecamethefastestleaderin
pasta,ridingonthestrengthofMaggibrandanditslargeproductportfolio.
Breakfastcereal
ThetotalmarketofINR6.5bn(withKelloggsIndialeadingwithamassive~65%share)canbe
dividedintotwomaincategories:oatsandcornflakes.Muesliisalsoatypeofcerealthough
withasmallmarketwhileoatsis~23%ofthetotalbreakfastcerealsmarketwithashareof
~INR1.5bn, growing at ~40% per annum. Cornflakes market is growing at 20% per annum.
Oats are more popular in South India while cornflakes generally sell better in metros.
RecentlyMaricoandBritanniahaveenteredoats.
Keyplayers
Oats: PepsiCos Quaker Oats, Bagrrys Oats, Maricos Saffola Oats, Kelloggs Heart to
Heartoats,BritanniasHealthyStart
Cornflakes:Kelloggsisthedominantplayerincornflakeswith~65%sharewhileMohan
MeakinwithitsMohanbrandisstrongintheNorth.MostretailersincludingPantaloon
(Tasty Treat cornflakes) and Birla Retail (Feasters) have private labels which are doing
fairlywell.
Trends
WeexpectNestleIndiatolaunchbreakfastcerealsinIndiafollowedbyHUL.HeinzIndia
wouldenterthebreakfastcerealmarketbyintroducingComplanNutriBowlMuesli.
70
Food
Chart55:Marketshare
100.0
35
80.0
(%)
60.0
40.0
65
20.0
0.0
Marketshare(%)
Kellogg's
Others
ReadytoEat/ReadytoCook
TheRTEmarketinIndiaisinitsnascentstageandiswortharoundINR4bn,buthasahuge
potential. The ReadytoCook market is estimated at around INR15bn. With the changing
socioeconomic pattern and increasing number of working couples, the concept of
convenience food is fast becoming popular in India for saving time and effort. As this
segment extends shelflife, making products available off the market shelves, demand has
beenrisingatagoodpace.Thereisenoughlatentmarketpotentialwaitingtobeexploited
through developmental efforts. This segment is growing at ~25% CAGR. Factors helping
growth would be cold chain development, disintermediation, streamlining of taxation,
economies of scale on the supply side, coupled with increasing disposable incomes,
diminishingculinaryskillsandtherisingneedforconvenienceonthedemandside.
ReadtoEattoremainniche,willlagReadytoCook:Indianwomanwantstoretaincontrol
overthekitchenandtaste.Whileshewouldusecookingaidsandmasalas,sheislesslikelyto
buyreadytoeatmeals.So ReadytoEatwillbe nichesegmentcateringtobachelorsand
students.AccordingtoSanjaySharma,CEO,MTRFoods,Indianwomanwantsproductsthat
enable her and not replace her. That's a critical thing food marketers in India need to
understand.AsexplainedbyDamodarMall,customerdirectorofFutureGroupCompanies
aretryingtobechefs,butawomanwantsthelastmileofcookingtobelongtoherwhichis
whyshedratherhireacook.
Theconveniencefoodcouldbeclassifiedintotwocategories:
1.
Shelfstableconveniencefood
2. Frozenconveniencefood
Shelfstableconveniencefoodisfurtherclassifiedas:
71
ReadytoEat (RTE): Idlis, dosas, pav bhaji, meat products like precooked sausages,
ham, chicken products, curries, chapattis, rice, vegetables like aloo chole, navratan
kurma,channamasalaetc.
Food
ReadytoCook:Instantmixeslikecakemixes,gulabjamun mix,faloodamix, icecream

mix,jellymix,puddingmixetc.
Fig.11:MTRReadytoeatproducts
Source:Company
Majorplayers
MTRFoodsisthemarketleader,havingcaptured53%ofmarketshare.
ThroughKitchensofIndia,ITCpresentsReadytoEat,ReadytoCookpackagedfoods.
TheFutureGroupispresent onlyintheReadytoCooksegmentundertheTastyTreat
brand.
Chart56:Marketshare
Others
47%
MTRFoods
53%
72
Food
Frozenfood
MotherDairyisusingitsicecreamcartsforaninterestingexperimentdistributingitsSafal
peas. It will also soon move beyond peas, corn and mixed vegetables and offer a whole
basketoffrozensnacks,includingbutteredandsaltedcorncobs,cheesecutletsandFrench
fries.ThereareotherplayerslikeGodrejTysonFoods'Yummiezbrand;CanadianFrenchfries
giantMcCainandIndiaEquityPartners'Sumerubrand.Thissegmentisnowdoingwellonthe
backofnewproducts,betterinfrastructure,jointpromotionswithmodernretailandhigher
consumer acceptance. Convenience and the outofhome experience is a trigger. As more
Indianseatoutandtrytoreplicateitathome,frozenfoodsissettoexplode.Withtwonew
Yummiez offerings, Dilli Aloo Chaat and Seekh Kabab, Godrej Tyson Foods has recently
launched typical restaurant or street food items that are difficult to be made at home as
potatoesneedtobecoatedwithchutneysandseasonings.GodrejTysonFoodsisinnovating
on56frozenproductsatitsBangaloreR&DLab.McCain,afterwooingIndianswithitsfrozen
potato offerings has gone in for a local twist by recently launching frozen idlis in the Delhi
market.IndiaEquityPartnersboughtouttheTatagroupcontrolledInnovativeFoods,which
retails the Sumeru brand of frozen paranthas, peas and sea food products. Competition in
this segment at the national brand level is from Yummiez, Venky's, McCain and Mother
Dairy'sSafal.
AsperMcCain'sMDMrK.S.Narayanan,ManagingDirector,inthelastfewyears,consumers
inIndiahavegonethroughadramatictransformationinlifestylebymovingfromtraditional
spending on food and groceries to lifestyle and convenience foods, driving home
consumptionoffrozenitems.Thekeychallengeinexpansionintotier2and3townsisthe
shortage of power for which, the solution lies in smaller packs. Mother Dairy is looking at
launchingsingleusepacks100gmsachetsofpeastoaddressthepowerissue.MotherDairy
sells10,000tonnesofSafalpeasyearlyandsaysitisthemarketleaderinconsumerpacks.
The branded frozen foods category is estimated at INR10bn and growing at 2025 per cent
perannum.
Ketchup
With the growing patterns of fast food consumption in the country, the need for ketchup
withacurrentmarketsizeofINR5bnisalsoincreasing.Fastfoodsandketchupsaredirectly
proportional to one another. According to a recent survey (conducted by Down to Earth),
IndiansspendaboutINR44.49bnayearinfastfoodcenters.Thusketchuphasseenasimilar
riseindemandinlinewith fastfoods.Thepenetrationofketchupinurbanmarketsis15%
withalowerpenetrationinruralareas.
Mainplayers
ThetopketchupbrandsinIndiaareMaggi,KissanandHeinz.
There are also a host of local ketchup brands that account for the rest of the market
shareoftheketchupindustryinIndia.
Pickles
Marketsize
The pickles market in India is worth ~INR17bn of which organized market is around
INR5bn.Themarketishighlyfragmentedanddominatedbylocalplayers.
73
Food
Chart57:Totalpicklemarket
Organized
27%
Unorganized
73%
Confectionery
Theconfectionerysectorincludeschocolateslikeclairsandtoffees,sugarconfectionery
orhardboiledcandies,lollipops,mintsandlozenges,bubblegumsandcerealbars.
The Indian confectionery market has a size of INR41bn (nonchocolate). The chocolate
marketisworthINR25bn.
Thismarketislargelyconsumedinurbanareaswitha73%skewtourbanmarketsanda
27% to rural markets. The penetration of chocolates in urban and rural market is 28%
and7%respectively.
ThemajorconfectionerycompaniesinIndiaareCadbury(DairyMilk,Perks,Gems,5Star
celebrations, Bytes, Dairy Milk Eclairs, Eclairs Crunch, Halls, Bubbaloo Bubblegum),
Nestle (Kit Kat, Kit Kat Chunky, Munch, Munch Pop Choc and Milkybar Crispy Wafer),
Parle Products (Poppins, Mango Bite), Parle Agro (Simply Imlee), ITC (MintO), Perfetti
van Melle (Centre Shock, Happydent White, Alpenliebe, Big Babol, Chloromint and
Cofitos) and Candico (Loco Poco). Perfetti van Melle has 30% market share whereas
Parle15%.
Table30:Marketshare
Product
Hardboiledcandy
clairsandtoffees
Gums,mintsandlozenges
Digestivecandiesandlollipops
Marketshare(%)
18.0
18.0
13.0
2.0
74
Food
Chocolates
ThechocolatemarketinIndiais~INR25bn65%ofitisconsumedinurbanareas.TheIndian
confectionery market is highly concentrated (top four players have ~80% share) and
dominated by MNCs like Cadbury (now Kraft), Perfetti Van Melle, Nestl and Mars. Indias
percapita(yearly)consumptionofchocolatesisjust~54gmincomparisontothe10.5kgin
the US and 10 kg in UK. India might have a low per capita chocolate, but it is not low in
termsofconsumptionofsweets.ChocolatesareincreasinglyreplacingIndiansweetsasgift
itemsduringfestivals.Companiesarecapitalizingonthistrendbyintroducingchocolategift
packsforfestivalssuchasDiwali,RakshaBandhanetc.Chocolategiftsofferconveniencein
terms of packaging and shelf life. Cadbury (now Kraft) has ad campaign Shubh Aarambh
(meaningGoodBeginning)topromotethechocolateasthesubstituteofsweets,bankingon
theIndiantraditionofhavingsomethingsweetsbeforeeveryauspiciousoccasion.
Fig.12:Consumptionpyramid
Highlyinfluencedbyhealth,
premiumandvalueaddproducts
Knackforexperimenting,notprices
consciousbutbrandconscious
Rich
Consuming
class&climbers
Pricessensitive,brandhoppers
Aspirants&
Destitutes
Sugarfreeproducts,Bournvitta,
Cadburysilk
KitKat,Munch,DairyMilk
Cadburyshots,xxxx
Table34:Marketshareformwise
Form
Bars/moulded
Counts
Assortedchocolates
Pannedchocolates
Eclairs
Marketshare(%)
3540
30.0
20.0
10.0
5.0
Chart58:Marketsharecompanywise
Others
10%
Nestle
20%
Cadbury
70%
75
Food
Milk,milkderivatives
India is the world leader in milk production. Its Indian dairy industry is worth ~INR3500bn
with the unorganized market accounting for ~80%. Contribution from various categories
Liquid milk INR1610bn, INR426bn from ghee, INR245bn from yogurt, INR123bn from milk
powder, INR228bn from butter, INR10bn from cheese, INR35bn from ice cream and
INR300bnfromotherproducts.
Table31:Snapshotdairy
Currentsize
5year Proj.5yrvalue
10year
Proj.10yr
Segment
(INRbn) CAGR(%)
(INRbn) CAGR(%) value(INRbn)
Indiandairyindustry
milk
1,610 8.0 2,366 6.0 2,883
whiteners
123
17.0
270
15.0
498
Ghee
yogurt
426
245
8.0
20.0
626
610
6.0
18.0
763
1,282
butter
228
10.0
367
8.0
492
cheese
10
15.0
20
14.0
37
icecream
35
18.0
80
16.0
154
Other
300
14.0
578
12.0
932
Companies
Brands
Amul
ParasDairy
MotherDairy
Nestle
Amul
Nestle
Amul
Amul
Nestle
Britannia
Gowardhan
DanoneIndia
Amul
Britannia
Amul
Britannia
Gowardhan
Amul
HUL
VadilalGroup
MotherDairy
HatsunAgroProducts
Amul
Motherdairy
AmulTaaza
Paras
MotherDairy
NestleMilk
Amulya
Everyday
AmulGhee
AmulMastiDahi
NestleDahi
DailyFreshDahi
GoDahi
DanoneCreamy
AmulButter
MilkmanButter
AmulCheese
CheeseSlice
GoCheese
AmulIceCream
KwalityWalls
Vadilal
MotherDairy
Arun
Amul
MotherDairy
Fluidmilk
76
India is the world leader in milk production but demand is growing faster than supply
leadingtohighinflationinmilkprices.
This is because of a huge base of around 11mn farmers organised into about 0.1 mn
VillageDairyCooperativeSocieties.
TheIndiandairymarketiscurrentlygrowingatanannualgrowthrateof7%.
Theorganizedsectorstillremainssmallatabout20%ofthediaryindustrywhereasthe
unorganizedsectorcontrolsabout80%
AccordingtoNDDBthedairycooperativenetworkincludes177milkunionsoperatingin
over 346 districts and covering 133,349 village level societies is owned by around
13.9mnfarmermembersofwhich3.9mnwerewomen
Food
ITC plans to enter the country's fastgrowing domestic dairy business by building a dairy in
Bihar.ITCchairmanY.C.DeveshwarsaidthatfirstproductsatthesiteinMungerwouldbe
skimmedmilkpowderandgheefollowedbylonglifemilk,refrigeratedmilk,cheese,butter
andmilkchocolates.ITCiscurrentlyrunningamilkenhancementprogrammewith500,000
cattleinMunger.
Danone on its part has acquired Wockhardt's nutrition business and brands such as Farex,
Dexolac,NusobeeandProtinex.
Marketsize:
ThebrandedmilkmarketinIndiaisaroundINR400bn.
Mainpayers
ThemilkmarketinIndiadoesnothavemanystrongbrands
Amulenjoysahealthymarketshareof26%inbrandedmilkcategory.
OthersincludeParas,MotherDairy,Britannia,Gowardhan,Nestle,Aarey,Gokul,Vadilal
etc.
Growth
Thedemandformilkhasincreasedinurbanareasdespitepricehikes.
Packagedmilkhasbeengrowingat24%annually
Trends
Increasingpreferenceforbrandeddairyproducts.
Growingfocusonhealthandnutrientsinurbanmarket
Dairywhiteners
These are liquid or granular substances intended to substitute for milk or cream as an
additivetocoffeeorotherbeverages.
Marketsize
ThedairywhitenerstotalmarketsizeisaroundINR123bn.
MainPlayers
ThemainplayersincludeNestle,Amul,MotherDairy,Britannia,DynamixDiary,Sterling
Agro,HaryanaMilkFoods,ModernDairy
Amulenjoysahealthymarketshareof45%throughitsbrandAmulya.
Penetration
Thepenetrationofmilkpowderinurbanandruralmarketis7%and3%respectively.
Yogurt
77
Marketsize:TheIndianpackagedyogurtmarketisaround0.1mntonneperannumwith
theorganisedpartoftheindustryat~10%.SizeofpackagedyoghurtisINR5bn.
Food
Main players: Amul Dahi (Masti brand), Nestle, Britannia, Gowardhan (Go) and Chitale
Dairy. It is also available in loose form at local mithai stores, often extremely sour.
RecententrantisDanone.
Per capita consumption: The percapita consumption in India is at 0.5 kgs while in
Europeancountriestheaverageisaround30kgs
Growth: The yogurt industry is growing at a healthy rate of 1520% annually the
organisedmarketgrowingatabout20%.Thereisplentyofroomforgrowthinmetros.
Butter
Amulenjoysleadershippositionacrosssegments~90%marketshareinbrandedbutter.
Majorplayers:Amul,Britannia,Nandini,AavinandMotherDairy
Cheese
Amul's valueformoney pricing strategy has assisted the brand in strengthening its
volumesharefrom72%to83%duringtheperiod.
According to the data, the volume share of Go, a relatively new brand in the market
fromGowardhan,hasgoneupfrom1%to3%.Goisalsoaggressivelypushingitsproduct
inmodernretailformatstoresthroughdiscountsandheavymargins.
Chart59:Marketshare
Gowardhan
3.0%
Others
5.7%
Britannia
8.3%
Amul
83.0%
78
Food
Icecreams
The growth in the ~INR35bn Indian ice cream industry has been primarily due to a strong
distribution network and a good cold chain infrastructure. The market can be divided into
brandedandthegreyorunbranded.Thebrandedmarketiscurrentlyisvaluedat~INR15bn.
Thegreymarketconsistsofsmalllocalplayersandcottageindustry.Percapitaconsumption
of ice cream in India is about 300 ml as compared to the world average of 2.3 liters per
annum.Thepenetrationoficecreaminurbanandruralmarketis25%and9%respectively.
HULreportedsalesofINR2720mnfromFrozenDessertsandIceCreaminFY11.
Chart60:Marketshare
Others
24%
Amul
38%
Arun
4%
MotherDairy
8%
Vadilal
12%
Kwality
14%
79
Food
Beverages
India accounts for approximately 10% of the global beverage consumption, being the third
largest market in the world after United States and China. Main reasons for growth are:
increasing population and disposable incomes. Around 120 bn litres of beverages are
consumedbyIndianseveryyear,ofwhichonly5%comesfromthepackagedsegment.Thus
thereliesanimmensegrowthopportunity.
Table32:Snapshotbeverages
Proj.5 10year Proj.10
Current
CAGR yrvalue
size(INR
5year yrvalue
(%) (INRbn)
bn) CAGR(%) (INRbn)
5 22.0 14 20.0 31
Companies
Dabur
Brands
Real
Carbonated
Drinks
60 12.0 106 10.0 156
PepsiCo
ParleAgro
HUL
CocaCola
Tropicana
Saint
Kissan
Cocacola,Sprite,Fanta
PepsiCo
Pepsi,7UP,Mirinda
Powdered
drinks
4.5 15.0 9 12.0 14
Pioma
Industries
KraftFoods
CocaCola
Rasna
Segment
100%Fruit
Juice
Tang
FantaFunTimes
EnergyDrinks
powdered
6 18.0 14 15.0 24
RTD
2 20.0 4 18.0 8
2 20.0 4 18.0 8
HealthDrinks
Lemonades
1 20.0 2 18.0 5
Coffee
30 11.0 51 9.0 71
Instantcoffee
Tea
8 25.0 24 20.0 50
75 12.0 132 10.0 195
Heinz
Dabur
Redbull
Amul
HUL
GSK
PepsiCo
PepsiCo
CocaCola
ParleAgro
Nestle
HUL
Nestle
HUL
TataGlobal
Beverages
HUL
GluconD
GlucoseD
Redbull
Stamina
KissanFruitJuiceand
Soya
Lucozade
Gatorade
Nimbooz
NimbuFresh
LMN
Nescafe
Bru
Nescafe
Bru
TataTea,Tetley
BrookeBond,Taj
Mahal,Lipton
80
Food
Thepercapitaconsumptionofbeverageinvariouscountriesisshownbelow:
(Basedon250mlofafinishedbeverage)
Chart61:Percapitaconsumption
worldwide
indonesia
russia
brazil
china
India
0
50
2010
100
2000
150
200
250
1990
Thisdatashowsthegrowthpotentialinthismarket.
Themaincategoriesintheindustryinclude:
Fig.13:Beveragesclassification
Nonalcoholic
beverages
Fruitjuice
beverages
Carbonated
drinks
Powdered
drinks
Energy
drinks
Fruitjuice
Readytodrink
Nectar
Powdered
Healthbased
drinks
Tea/coffee
Lemonades
Fruitdrinks
81
Food
Fruitjuices
Thissegmentincludes
FruitjuiceslikePepsiCosTropicana
NectarslikeDabursReal
FruitdrinkslikeFrootiandSlice
All these are real, reconstituted from fruit pulps or concentrates. They only differ in pulp
content:juiceshaveover85%,nectarshaveabout20to80%andfruitdrinkshavelessthan
20%.
Thetotalmarketin100%fruitjuiceisaboutINR5bn
Thepercapitaconsumptionisverylowatonly20ml.(Chinahasaconsumptionlevelof
1500ml).
Inthefruitjuicesegmentcomprisingfruitjuicesandnectars,majorplayersareDabur(Real),
PepsiCo(Tropicana)andParleAgro(Saint).OthersplayersincludeSuryaFoods,MotherDairy,
LadakhFoods,Piomaindustries,DelMonteandHUL.
Chart62:Marketshare
ParleAgro
8%
Others
7%
Dabur
50%
Pepsico
35%
ThefruitdrinksegmentisdominatedbyParleAgrosFrootiwhichhas7075%marketshare
whileothertwohotsellersarePepsiCosSliceandCocaColasMaaza.
Dabur has introduced its Burrst Fizz brand in South India and has plans to introduce it in
North India next summer. The fruitbased carbonated drink segment has a market size of
INR2bn with products like Parle Agro's Appy Fizz, Pepsi's Nimbooz and CocaCola's Minute
MaidNimbuFreshhavingastrongpresence.
82
Food
Carbonateddrinks
TheIndiancarbonatedindustryisworthINR60bn
Theconsumptionpatternisseentobeskewedtowardsurbanpopulationwiththeurban
marketsharebeing75%ofthetotalsoftdrinksmarket.
The consumption is seen to be the highest in summer season with 25mn crates being
consumed per month as compared to only 15mn crates being consumed per month
duringtherestoftheyear.
The dominant players in this sector are CocaCola and PepsiCo which together have a
marketshareofmorethan90%
The penetration of carbonated drinks in urban and rural market is 37% and 12%
respectively.
Chart63:Consumption
Rural
24%
Urban
76%
Powdereddrinks
ThebrandedpowderedmarketisINR4.5bn
Thissectoramountstoonly1%ofthetotalbeveragemarket
Themarketisgrowingatarateof20%perannum
Percapitaconsumptionisjust34glasses
Theorangeflavouristhelargestsegmentinthepowdereddrinkindustry
Thereisonedominantplayerinthiscategory;Rasnawhichcontrols~90%ofthetotalmarket.
SecondinlineisKraftFoodsTangwhichhasbeeninthemarketforaboutthreeyearsbut
has been unable to give competition to Rasna. CocaCola has entered the market for the
secondtimewithFantafuntimesafterfailureofitsSunfillsbrand.
83
Food
Energydrinks
ThetotalenergymarketistothetuneofINR7.5bn
Totalsalesisof1.5mncases(of24canseach)perannum
ThemarketispredictedtogrowatCAGRof29%duringthe200912period
Themarketcanbedividedintoreadytodrinkandpowdered
ThepowderedmarketdominatestheenergydrinksegmentwithINR6bnwhileReadyto
drinkenjoystheremainingINR1.5bn
GluconDbyHeinz,themarketleaderinthepowdereddrinkssegment,enjoysamarket
shareof55%,followedbyDaburwith25%share
Red Bull leads the readytodrink segment with a share of more than 50% followed by
Powerhousewhichhasashareof22%
Fig.14:Classificationofenergydrinks
z GluconDfromHeinz
Powdered
drinks
z GlucosebyDabur
z RasanaGlucoseDbyRasna
z GlucovitabyWipro
zRedbulls
zPowerhouse
Readytodrink
zRomanovred
zCloud9
zSoBe
zBurn
zSJXXX
Lemonades
Ofthetotaljuicemarket,lemonisthemostpreferredflavourinIndiawitha49%market
share
AnnualconsumptionoflemonadesisaroundINR1bn
Majorbrands:Threeplayersnamely,PepsiCosNimbooz,ParleAgrosLMNandCokesNimbu
fresh.
Coffee
Marketsize
84
TheorganizedcoffeemarketinIndiaisaroundINR20bn.
ThetotaldomesticcoffeeconsumptionisINR30bn.
Food
Chart64:Production
315,000
(MT)
300,000
285,000
270,000
255,000
240,000
0203 0304 0405 0506 0607 0708 0809 0910 1011
Production
Consumption
AspertheIndianCoffeeBoard,domesticcoffeeconsumptionisincreasing56%annually,
partlyduetoexpansionofthecoffeecafcultureandthespreadofthecoffeedrinking
habitthroughoutIndia,evenintonontraditionalcoffeedrinkingregionsinthenorth.
Chart65:Consumption
125,000
(MT)
100,000
75,000
50,000
25,000
0
2001 2002 2003 2004 2005 2006 2007 2008
2009 2010E
Consumption
The per capita consumption of coffee is about 600 gm in India compared to 10 kg in

Austriaandcloseto56kginUnitedStates.
Penetration:Thepenetrationofcoffeeinurbanandruralmarketis23%and8%respectively.
Mainplayers
85
MainplayersintheorganizedsegmentareNestlsNescafeandHULsBru.
Food
Instantcoffee
Instantcoffeeisabeveragederivedfrombrewedcoffeebeans.
ThetotalinstantcoffeemarketisaroundINR8bnoutofwhichINR3bnisorganized.
Tea
TeaisanessentialitemofdomesticconsumptionandisthemajorbeverageinIndia.
Tea is also considered as the cheapest beverage amongst the beverages available in
India.
IndiaistheworldslargestteaproducerandthethirdlargestexporterafterSriLankaand
Kenya.
Marketsize
Thebrandedteamarketis~INR75bn.TheteamarketsizeinIndiais~980mnkilograms
annually,outofwhich150180mnkgisexported.Themarketsizeforvendingicedteais
aroundINR0.3bn.
Mainplayers
Two main players in the branded tea segment are Tata Global and HUL. Other key
playersareWaghBakri,DuncanTeaetc.
ConsumptionofteainIndia
Indiawiththeirhugepopulationandgrowingincomelevelsaremakingamajorimpact
ontheriseinworldteaconsumption.
ThepercapitateaconsumptioninIndiais0.75kg.
Chart66:Consumption
900
(Gram/head)
720
540
360
180
0
2000
Domesticconsumption
2004
2008
PerCapitaConsumption
Marketpenetration
Thepenetrationofteainurbanandruralmarketsis92%and82%respectively.
86
Food
Bottledwater
ThebottledwatersegmentisestimatedtobeworthINR30bn.Thereareabout200bottled
mineral water brands in India and nearly 80% of them are local brands. Three key players
mainly dominate the Indian bottled water market; Parles Bisleri, CocaColas Kinley and
PepsisAquafina.
Table33:Snapshotbottledwater
Segment
Packageddrinkingwater
Current
size(INR
5year yrvalue
CAGR yrvalue
bn) CAGR(%) (INRbn)
(%) (INRbn)
30 23.0 84 20.0 186
Naturalmineralwater
20.0
18.0
10
Companies
ParleBisleri
PepsiCo
CocaCola
MountEverest
MineralWater
Aava
Brands
Bisleri
Aquafina
Kinley
Himalayan
Aava
Mountingnumberofcasesofwaterbornediseases,increasingwaterpollution,growing
urbanization, rising scarcity of pure and safe water etc. have boosted demand for
bottledwater.
Making ofbottledwaterhasbecomeacottageindustrytasknowadaysinthecountry.
MostofthecitiesandevensmalltownsofIndiahavebottledwatermanufacturers.
Scarcity of potable and wholesome water at railway stations, tourist spots and role of
tourismcorporationsetc.havealsoaddedtothegrowth.
Consumption
ConsumptionofbottledwaterinIndiaislinkedtothelevelofprosperityinthedifferent
regions.
The Western region accounts for 40% of the market while the Eastern region has just
10%.
However,bottlingplantsareconcentratedintheSouthernregionoftheapproximately
1,200bottlingwaterplantsinIndia,600areinTamilNadu.
Bottledwatermarketcomprisesoftwosegments:
Packageddrinkingwater:Waterfromanysourcewhichistreatedforconsumption.
Naturalmineralwater:Drawnfromanaturalundergroundsource.
Packagedwater
87
ThepackagedwaterindustryisworthINR22bn.
Thereareabout200bottledmineralwaterbrandsinIndiaandnearly80%ofthemare
localbrands.
Making ofbottledwaterhasbecomeacottageindustrytasknowadaysinthecountry.
MostofthecitiesandevensmalltownsofIndiahavebottledwatermanufacturers.
Food
Chart67:Marketshare
75.0
(%)
60.0
45.0
30.0
15.0
0.0
Bisleri
Aquafina
Kinley
In addition to these international players like Cococola and Pepsico, there are also
national players like Indian Railways, SKN Breweries, Mohan Meakins, Kingfisher,
Manikchand,MountEverest,etc.
Thismarketisexpectedtogrowata30%rateinthenext7years.In2010therevenue
generatedbythismarketwasoverUSD250mn.
Naturalmineralwater
Forthenaturalmineralwater,90%ofsalescomefrominstitutionsand10%fromretails.
Marketsize
This segment of the bottled water market is worth INR2bn and growing at a CAGR of
20%.
Mainplayers
Innaturalmineralwater,thereareveryfewcompanieslikeHimalayan,Aava,andEvian.
50%ofthemarketiscapturedbyHimalayan.
88
Food
HealthFoods
ThissegmentislikelytoseeoneofthehighestgrowthlevelsintheentireFoodsegment.It
has many subsegments like Chyawanprash, Butter alternatives, healthy cooking oils, sugar
substitutes,energydrinks,Healthdrinks,HealthysnacksandHighfiberbeverages.
Table34:SnapshotHealthFoods
Current
size(INR
5year yrvalue
CAGR yrvalue
bn) CAGR(%) (INRbn)
(%) (INRbn)
5 12.0 9 10.0 13
Segment
Chyawanprash
Butter
Alternatives
Healthycooking
Companies
3 25.0 9 22.0 22
Brands
DaburChyawanprash
HimaniSonaChandi
Nutralite
10 16.0 21 14.0 37
DeliciousTable
Margarine
Saffola
Marico
AgroTech
Sugar
Substitutes
1.1 20.0 3 18.0 6
BabyFood
15 15.0 30 13.0 51
Sundrop
SugarFree
Sweet&Healthy
Equal
Sweetex
ZeroCook&Bake
Lactogen,Cerelac,
Nestum
EnergyDrinks
powdered
6 18.0 14 15.0 24
RTD
HealthDrinks
1.5 20.0 4 18.0 8

1.5 20.0 4 18.0 8
Healthysnack
2 25.0 6 20.0 12
GluconD
GlucoseD
Redbull
Stamina
KissanFruitJuiceand
Soya
Lucozade
Gatorade
Aliva
Digestive
Biscuitsmarket
1 25.0 3 22.0 7
McVitie's
Nutrichoice
MaltedFood
24 15.0 48 12.0 75
McVitie's
Horlicks
5 22.0 14 20.0 31
Bournvita
Complan
Real
100%Fruit
Juice
Tropicana
Saint
Kissan
89
Food
Chyawanprash
Chyawanprashisatraditionalpolyherbalformulation,preparedaccordingtoanancient
Ayurvedic formula. It is widely used as a tonic, rejuvenator anabolic and memory
enhancer.
Itisperceivedasahealthsupplementfortheyoungandtheelderly.
Marketsize
Themarketisgrowingsignificantlyoverthepastfewyearsaspeoplearebecomingmore
healthconscious.
ChyawanprashisanINR5bnmarketcurrently.
Mainplayers
DaburChyawanprashistheleaderinthechyawanprashcategorywithamarketshareof
~70%.
Emami,throughitsHimaniSonaChandiChyawanprash,has~22%marketshare.
OtherplayersincludeRanbaxy,Baidyanathandlocals.
Chart68:Marketshare
Others
8%
Emami
22%
Dabur
70%
Penetration
Chyawanprashpenetrationcontinuestobelowataround45%.
Future
Theproductismuchmoreaccessibleduetomoderntradeanditssaliencehasgrown.
ButterAlternatives
Butteralternativesarehealthiersubstitutestobutter.
Theycanalsobeusedasabreadspreadandforculinaryapplicationsaswell.
90
Food
Marketsize
ThemarketforbutteralternativesissmallatunderINR3bn.
Mainplayers
ZydusWellnessisthemarketleaderinthissegmentwithitsproductNutralite.
AmulandHULhaverecentlyenteredthissegment.
Marketshare
ZydusWellnesshas~70%shareofthe"butteralternative"market.
Chart69:Marketshare
Amul&others
30%
ZydusNutralite
70%
Trends
Withobesity,cardiovasculardiseases,diabetesandotherlifestylediseasesemergingas
greatest challenges in urban India, it has become imperative to alter or introduce
productsthatprovidehealthiersolutions.
Margarine also continues to remain a popular substitute for butter among restaurants
anddhabaswhichutilizethislowcostingredienttogivea"butterlike"taste.
Thepercapitaconsumptionandmarketpenetrationofbutteralternativesisverylow.
Healthycookingoils
Thissegmentisworth~INR10bnandhastwomainplayers,MaricosSaffolaandAgroTechs
Sundrop.
Saffola
TheflagshipbrandofMaricoisworthINR5bn
The focus primarily is on health and wellness with Saffola edible oil as its foremost
product(INR4.75bnmarketsizeand52%marketshare)
91
Food
Table35:Saffolavolumegrowth
(%)
Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12
Q2FY12
Q3FY12
5 13 22 18 13 18
18
13
14 15 11 15
Marico is leveraging this strong health brand by launching various health based food
productsunderSaffola.
Saffolaoatsiswellreceivedbythecostumerandshowinggoodtractioninthecategory
dominatedbyanMNC(Kelloggs).
Saffola Arise (Packaged low cholesterol rice) has met with some success and the
companyisconfidentofitsfutureprospects.
SaffolaZest(saltybakedsnack)launchedbyMaricotopenetratefastgrowingsnacking
industrywaswithdrawnfromthemarketduetopoorconsumerresponse.
Sugarsubstitutes
The increasing incidence of obesity and the consequent growing calorie consciousness
hassparkedoffagrowingconsumerbaseforlowcalorieproducts.
Higher incidence of lifestyle diseases like cholesterol, obesity, etc. has given rise to a
correspondingawarenessforcalorieconsciousnessamongsturbanindividuals.
Marketsize:ThesizeofthesugarsubstitutecategoryisrapidlyincreasingfromINR0.6bnin
2007toINR1.1bnin2011,largelylimitedtourbancenters.
Chart70:Marketsize
1,250
1,000
(INRmn)
Keybusiness
Saffola
750
1,100
500
250
600
0
2007
2011
MainPlayers
92
Zydus Wellness is the market leader in India with 86% share, and has two bluechip
productsSugarFreeGoldandSugarFreeNatura.
Other players are Wipro's Sweet & Healthy, Merisant's Equal, Boots Sweetex and
Alembic'sZeroCook&Bakewithacombinedmarketshareof14%.
Food
Chart71:Marketshare
Others
14%
Zydus
86%
Futuregrowth
The annual growth rate for sugar substitutes or artificial sweeteners is about 1520%
whichmaypickupeverypassingyear.
Indiaisnowbecomingahugemarketforsugarsubstitutesandsugarlessproducts.
Babyfood
MostofthetopbabyfoodbrandsinIndiaareknownforprovidingtherightamountof
nutritiontobabies.
Prescribedbymostpaediatricians,theseproductsaregenerallygiventothechildafter
he/shecompletes12months.
Marketsize
TheglobalannualbabyfoodmarketisestimatedatUSD31bn,accordingtoIBFAN.
TheIndianmarketisestimatedtobearoundINR15bn.
Penetration:
Penetration of the infantfood category is below 10% as products are very expensive
henceunaffordabletoalargesectionofconsumers.
Mainplayers
93
The undisputed leader in the Indian baby food market is Nestle (85% share) with its
Lactogenbeingthetopbrand.NestlealsoproducesahostofotherbrandslikeCerelac
andNestum.
SomeofthePopularIndianbabyfoodandcerealbrandsare:
Nestle(manufacturesLactogen,CerelacandNestum)
Nusobee
Farex
Food
Chart72:Marketshare
Others
15%
Nestle
85%
Growth
Growth is expected to be driven by Indian womens increasing reliance on packaged

babyfoodintheforecastperiod.
Energydrinks
ThetotalenergymarketisofthesizeINR7.5bn
Totalsalesisof1.5mncases(of24canseach)perannum
Themarketcanbedividedintoreadytodrinkandpowdered
ThepowderedmarketdominatestheenergydrinksegmentwithINR6bnwhilereadyto
drinkenjoystheremainingINR1.5bn
GluconDbyHeinz,themarketleaderinthepowdereddrinkssegment,enjoysamarket
shareof55%followedbyDaburwitha25%share
Red Bull leads the readytodrink segment with a share of more than 50% followed by
Powerhousewith22%
Fig.15:Energydrinksclassification
z GluconDfromHeinz
Powdered
drinks
z GlucosebyDabur
z RasanaGlucoseDbyRasna
z GlucovitabyWipro
zRedbulls
zPowerhouse
Readytodrink
zRomanovred
zCloud9
zSoBe
zBurn
zSJXXX
94
Food
Healthdrinks
Themarketisstillinitsnascentstage,butisbeingpeggedatINR1.5bn,lucrativeenoughfor
manyplayers.
AmulhasenteredthemarketwithStamina
PepsiCosisotonicformulationGatorade
GSKsisotonicformulationLucozade
KissanFruitJuiceandSoyalaunchedbyHULisamixtureoftasteandhealth
XXXEnergyDrinkslaunchedMinusitshealthdrinkinJanuary2011
Caldris28willlaunchtwohealthdrinksinIndiablack28andwhite28soon.
Consumerfoodanddrinkschoicesarenowdrivennotonlybytaste,nutritionandpricebut
also by core values and lifestyle aspirations. Within the wellness trend, consumers are
looking to food and drinks to provide them with physical, mental, emotional and spiritual
healthwhetherornottheyaresufferingfromaparticularillnessorcondition.
Healthysnackfoods(Biscuits,bakedchips/snacks)
HealthysnacksmarketstandsatINR2bn
Ithasagrowthof25%perannum
MainplayersarePepsiCoandUnitedBiscuits(McVitie's)
Products like Saffola Zest (Marico) and Monaco Smart Chips (Parle) have not met with
success.
Table36:Healthysnacks
Brand
Aliva
Hippo
MyMy
Company
Pepsico
ParleAgro
DawaatFoods
Healthbenefitoffered
Richinwheat,Baked
Bakedchipswithlowfatandhighwheatcontent
Ricechipsenrichedwithmultigrainnutrients
Digestivebiscuitsmarket
95
ThedigestivebiscuitsmarketstandsatINR1bn
Themarketisgrowingatahealthyrateof40%perannum
The main players in the market are Britannia, with its Nutrichoice brand and Mrs
Bectors Cremica Digestive biscuits. United Biscuitss McVities, a late entrant in this
segment,enjoysa20%marketshare.
Food
Maltedfooddrinks
Thesizeofmaltedfooddrinksis~INR24bnandGSKConsumerdominatesthissegment
with~70%marketshare.
Overall penetration of the category is ~20%; 50% urban penetration and 5% rural
penetration
PenetrationisskewedtowardsSouthernandEasternIndiawhereoverallpenetrationis
~35%asagainst~15%inNorthernandWesternIndia
ThemarketisdominatedbyGSKsHorlicksandBoostbrandswithacombinedshareof
~70%.
OtherplayersincludeCadburyandHeinz
Chart73:Marketshare
Heinz
10%
others
3%
Cadbury
16%
GSK
71%
ThedominanceofGSKhascreatedanentrybarrier,evidentfromwithdrawalofquitea
fewbrandslikeMilo(Nestle),Amaze(HUL)andChyawanJunior(Dabur)
Nonvegetarianfood
The poultry market in India comprises of three main categories: meat, eggs and processed
value added products. Organised sector dominates the poultry market (meat and egg
comprise 95% of this segment) with a share of 70%. With INR300bn, meat segment
dominatesthemarketwhileeggsmarketstandsatINR150bninsize.
96
Food
Table37:SnapshotNonVegFoods
Segment
NonVegFoods
Meat
Eggs
Currentsize
5year Proj.5yrvalue
10year
Proj.10yr
(INRbn) CAGR(%)
(INRbn) CAGR(%) value(INRbn)
300
150
9.0
462
8.0
220
7.0
6.0
590
269
Companies
Brands
Venkateswara
Hatcheries
SugunaPoultry
GodrejAgrovet
RajaFarms
DreamFarm
Venky'sChicken
SugunaChicken
RealGood
Peggs
FarmFresheggs
Fig.16:NonVegetarianfoodsplit
Poultrymarket
INR470bn
Freshsegment
(95%)
MeatINR300bn
Processed
segment(5%)
EggsINR150bn
97
ThevalueaddedcategoryisataverynascentstageinIndiaandcomprisesonly5%of
thetotalpoultrymarketthatstandsatINR470bn.Thisisverylowascomparedtomany
othercountrieswhereprocessedmarkethasashareofabout20%.
The processed category mainly supplies to QSRs (quick service restaurants) and
institutionalbuyerslikebighotelchains.Theretailclientelebaseissmallascustomers
preferfreshmeattopackagedmeat.
The main players in the poultry market are Venkateswara Hatcheries, Suguna Poultry
FarmsLtdandGodrejAgrovetLtd.
Futuregrowth:themeatsegmentisexpectedtogrowat1518%CAGRwhilegrowthin
theeggcategoryisestimatedat57%CAGR.
Poultryfarmsarejumpingintobrandedeggs:Duetotheincreasingbrandconsciousness
and points of sale available at retail stores in larger cities, poultry farms have started
selling branded eggs. Their USP is that these branded eggs are produced in a clean,
hygienicenvironment.PunjabsRajpurabasedRajaFarmsPvtLtdandKarnal(Haryana)
basedKansal&KansalAgroFarmshaveforayedintobrandedeggs.Theysupplybranded
eggs to organized retail like BhartiWalmart and easyday stores. These eggs have a
highervitaminandmineralcontentand,itisalsofreefromodour(incaseoforganic).
Food
TheIndianpoultryindustryneedstorampupduetorisingdomesticdemandforbroiler
meat (likely to grow at ~18% CAGR) while that of eggs is likely to grow at 57% CAGR
overthenextfewyearsasperICRA.
Restaurantindustry
The total restaurant industry in India is ~INR430bn, comprising two distinct segments: the
organized and the unorganized. The industry has shown a growth rate of 56% per annum
with the organized sector estimated at INR85bn and growing at an annual rate of 2025%.
The changing perceptions of the rich and the upper middle class with a rise in their
Foodstodowell.
Chart74:Restaurantindustry
Organised
20%
Unorganised
80%
Table38:Snapshotrestaurant
Segment
Restaurant
Current
Proj.5yr
Proj.10yr
size(INR
5year value(INR
10year value(INR
bn) CAGR(%)
bn) CAGR(%)
bn)
430 18.0 984 16.0 1,897
Companies
Dominos
PizzaHut
McDonalds
KFC
Brands
Dominos
PizzaHut
McDonalds
KFC
Theorganizedsectormainlyconsistsof:
98
Finediningrestaurants
Casualdiningrestaurants
Barsandlounges
Quickservicerestaurants
Foodcourts
Cafes
Kiosks
Food
ThegrowthinthesectorcanbeattributedtothechangeinfoodhabitsoftheurbanIndian
consumerwhosestandardoflivinghasimprovedandsohasthespendingpower.
Table39:Changingfoodhabits
Changeinfoodhabitsoverthelastcoupleofyears
Becomemorehealthconsciousnow,regardingfoodconsumed
Eatmorejunkfoodnow
Eatlessoftenatroadsideeatingjointsorcarts
Eatmorefoodnow
Eatout,athotelsmoreoftennow
Eatwesterncuisinemoreoftennow
(%)
51.0
15.0
15.0
14.0
5.0
5.0
Source:TechnopakResearch,Edelweissresearch
Many international chains want to enter India including Burger King, Applebees, CKE
Restaurants (brands Hardee's and Carl's Jr.), British noodles chain Wagamama, Carluccio's
andChinesechainPFChang's.WiththeresoundingsuccessofPizzabusinessinIndia,many
more pizza chains such as Pizzeria Uno, Donatos, Famous Famiglia, Little Caesar's, Round
Tablepizza,SpanishbrandTelePizzaandPizzaExpresstoowanttosetupshopshere.India's
increasing appetite for outside food and a rapid jump in the number of doubleincome
familiesarehelpingquickservicerestaurants,casualdiningandfinedininggrowsharply.Also
in the current slowdown though the usage of 5star outlets might decline, eating out at
valueformoneyplacesorfoodcourtsinmallscontinuestogrowrobustly.
In larger cities, choices for entertainment and leisure are limited to shopping, movies or
eating out. In a recent survey, nearly 63% of the participants in Mumbai said they eat out,
followed by Bangalore and New Delhi at 53% and 44% respectively. This trend is getting
replicated even in smaller cities like Ahmedabad where 85% respondents eat out while in
Kochi;thenumberis59%(asperTargetGroupIndexdatafor2010).Morethanhalfofthese
consumers eat out 23 times a month. As per IRS, ~2.1 mn people have joined the list of
doubleincomehomesbetweenJuly2010andJune2011.
PizzaHutisallsettoservewineandbeeratitsoutletsacrossthecountryafterpilottesting
inDelhiandBangalorewhichfurtheraddstoattractionsforconsumers.
99
Food
InvestorshaveahugeappetiteforFoodcompanies
Increasing food consumption and the disposable incomes of Indian consumers have
acceleratedthegrowthoffoodsectormakingitattractiveforPEinvestors.Inthepast3years
morethan20dealsworthINR26bnhavetakenplace;andtwoIPOofmajorfoodcompanies
which were both oversubscribed and opened at the upper price band. The budding
enthusiasmofPEinvestorswillhelpthesectortoproliferateatahigherpace.
Inthepast3yearsmorethan20
dealsworthINR26bnhavetaken
place
Table40:RisinginterestofPEfundsinfoodcompanies
PEfund
Company
Blackstone
REI(Basmatiexporter)
CarlyleGroup
TirumalaMilkProducts
DarbyOverseasInvestment CafCoffeeDay
GlobalEmergingMarkets BakersCircle
(GEM)
Foodcategory
Dealsize(inMn)
Rice
2,835
Milk
1,035
QSRcoffeeshop
1,125
supplierofdoughand 80
desserts
HleionVenturePartners,
FootprintVenturesand
salarpuriagroup
MastKalandar(restaurant
chains)
restaurant
ICICIVenture
DevyaniInternational
fastfoods
Indianequitypartners
(IEP)
SagarRatnaHotels
KKR
NewSilkRoute
NineRiversCapital
RaboBank
RaboBank
RaboEquityAdvisors
SAIFPartner
NA
Remarks
pickedupaminoritystake
took34%stakeinthecompany;
helpedtosetupanewfacilityat
Uttarakhand
Date
2010
Jun10
2011
throughafew
years
popularNorthIndianQSRownedby
SpringLeafRetail
2010
2,520
ownsandrunsPizzaHut,KFCand
CostaCoffeeoutletsinIndia
2011
hotel
1,800
boughtcontrollingstake;fundwill
beusedtoopen200moreoutlets
andrevampexisting70restaurants
inNorth
CoffeeDayHolding
CoffeeDayHolding
GlobalAgriSystem
LTFoods
DawaatFoods
GlobalGreenCompany
SpecialityRestaurants
QSRcoffeeshop
QSRcoffeeshop
agrilogistics
exporterofpackaged
rice
vegetables
restaurant
3,375
3,375
315
250
250
450
900
SAIFPartner
SivaVentures
SivaVentures
StandardCharteredPE
StandardCharteredPE
Manpasandbeverages
RuchiSoya
KSOils
CoffeeDayHolding
BushFoodsOverseas
juices
oils
oils
QSRcoffeeshop
rice
450
2,205
2,475
2,250
1,125
TVSCapital
OmPizzasandEatsPvtLtd
snackspizza
495
VentureEast
IPO
GoliVadaPav
JubiliantFoodworks
snacksvadapav
pizza
212
3,292
IPO
RajOilMills
oils
1,140
IPOfor0.95croresharesissuedat
upperpricebandofINR120;
oversubscribed1.24times
Aug09
JVbetweenMcCormick
KohinoorFoods
rice
5,000
McCormickandKohinoorhave
entereda85:15JVtosetupnew
facilityatHaryana.Further
investmentinRTEfoodsislikelyin
nearfuture
Sep11
27%stake
14%stake
ownerofMainlandChinaandOh!
Calcutta
juicemfgandmarketingco
processesandsellsBasmatirice
Aug11
Mar10
Mar10
Mar10
2010
2010
Mar10
2011
Sep11
2010
2010
Mar10
Aug11
Indianfranchiseeofint'nchainof
PapaJohn'sPizza,Chili'sGrill&
Bar,andTheGreatKababFactory
IPOfor2.27croresharesissuedat
upperpricebandofINR145;
oversubscribed31times
2011
Aug11
Feb11
100
Food
Supplychainandpackagingkeyforsustainedgrowth
The poor quality of backend supply chain has restricted the growth of dairy and packaged
foodsmarket.AccordingtoJFLdata,~25%ofthepopulation(inTierI)spendlessthanINR100
whenorderingfoodfromoutside.This,inturn,impliesthatthereisstillahugeopportunity
todeliverpackagedfoodatvaluepricepointstocatertomasssegment.
Chart41:Averagemonthlyspendsofhouseholdsorderinginfromoutside
Monthlyspends
Avg(INR)
%Distribution
uptoRs50
Rs51100
Rs101200
Rs201300
Rs301600
Rs601+
TierI
TierII
TierIII
(population3mn+)
(population13mn)
(population<1mn)
671 691 351
13
12
19
12
18
26
13
13
17
11
23
23
20
17
22
13
14
14
Threereasonswhichhaveheldtheevolutionofbackendsupplychaininclude
a) Highcapexforsettingupcoldstorages
b) Supplydemand mismatch of electricity especially in rural/TierII cities. Though the
energy requirement has increased manyfold in the last decade, the annual energy
generationandgrowthratehasbeendismal
Chart75:Annualenergygenerationandgrowthrate
820
8.0
6.4
652
4.8
568
3.2
484
1.6
400
0.0
Energy(BU)
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
(%)
736
FY02
Energygeneration(BU)
Energyrequirementhasincreased
manyfoldinthelastdecade
Growth
c) Highelectricityratesascomparedtotherestoftheworld:Comparedtotheworld,India
hasahighcostofpowerwhichhasdentedsupplychainshencethecostoffinalproducts.
101
Food
(Noofkwhunits/McBurger)
Chart76:Indiahashighcostofpower
70
Governmentisencouraging
investmentinbackend
infrastructure
56
42
28
14
0
US
China
India
France
UK
Through Mega Food parks, the government is creating an infrastructure and ecosystem to
attract entrepreneurs to enable cost efficient manufacturing of Consumer products. The
governmenthasalsochosenpublicprivateparticipation(PPP)modeinthisschemeandhas
keptitsstaketolessthan26%.Moreexpressionsofinterestfor15megafoodparkswouldbe
invited in FY12. Though large Consumer companies are still shying away from participating
due to the long term investment nature of these schemes, we believe that storage space
issueslikesupplysideconstraintwouldbeaddressedinthelongerrun.
Chart77:ProjectedincreaseinFreezerspace
1,500
Table42:ProposedMegaFoodsites
300
State
AndhraPradesh
1,200
240
900
180
600
120
300
60
(No.of Stores)
FeeezerSpace(Cu.Ft)
IncreaseinFreezer Space
Jharkhand
Maharashtra
Assam
Uttarakhand
0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
FreezerSpace(Cu.Ft)
CookingUpPlans
Location
Anchor(major)Investor
Chittoor
SrinifoodParkpvtLtd
(RavindraNalluri)
Ranchi
JharkhandMegaFoodPark
(NitinShenoy)
Shirwal
WesternAgriFoodParkPvtLtd
(PradeepChordia)
Nalbari
NorthEastMegaFoodPark(HK
Sharma)
Haridwar
PatanjaliFood&HerbalPark
(BabaRamdev,Acharya
Balkrishna&RajivBansal)
TamilNadu
Dharamapuri
LMJInternationalLTD(agro
commodityexporter,SKJain)
WestBengal
Jangipur
ShivBidi(JakirHussain)&
TemptationFoods(Vinit
Kumar)
No.ofStores
102
Food
Fig17:MegaFoodParksplanforFutureGroup
Powering
Entrepreneurs
SourcingFresh
Packaging
Processed
Food
Manufacturing
Staples
Logistics
ColdStorage
FoodParks
Accesstoproducts
forFVILprivatebrands&
foodbusinesses
Enhancebusiness
opportunitywithnew
entreprenuers
HighRoEoninvestment
duetolowcapital
investment
DanonesmeasuredexpansionplaninIndiaisaclassicalcaseofhighsupplychainconstraints.
Estimated at over INR5bn in the organised sector (10% of total) and with a percapita
consumptionof0.5kg(30kgforEuropeancountries),theIndianyogurtanddahimarketisa
hugeopportunity.YetDanoneisexpandinginameasuredwayasitwantsthebackendcold
chaindistributioninplacesooner.
Another interesting example is how Vadilal Industries survived the price war and cost
inflationeraof19932003whenAmullaunchedapricewarofferingicecreams80%cheaper.
Tocountercompetitionandmaintainprofitability,itdidthefollowing:
Vadilaltookvariousinitiativesto
surviveagainstmarketleader
Amul
Improvedoperationalefficiencies,investedintechnologyandstrengthenedsupplychain
todelivergoodsprofitablyinmarketplace
Adspendswereslashedto3%ofsalesfrom8%earlier.WhileVadilalwasnotseenon
hoardingsorTVcommercials,thecompanyworkedsilentlytogrowthebrand
Reduced product prices to INR10 (for 110 ml cone) from INR1518 earlier to counter
Amulsoffer
RecentlyBaskinRobbinstheINR800mnpremiumicecreambrandannouncedthatitwould
sustainpricesintimesofcommoditydriveninflation,andisbettingoncostsavingmeasures
such as buying huge volumes of commodities in advance to offset the cost inflation. Input
costinflationhasresultedininnovationinpackagingtherebycuttingdowncosts.
Someofthepackaginginnovationsinclude:
Packaginginitiativesseenakeyto
reducecostsmidstrisinginflation
TetraPakIndiasayswhenthenormwasfordairiestooffermilkinhalflitreandone
litrepacks,weofferedourcustomersa200mlalternativeintheTFA(tetrafinoaseptic)
pouchshaped format. Tetra Pak India has a 90% share in packaged fruits and juices
segment,introducedsmaller6065mland100110mlpackofferingsforbrandssuchas
ParleAgro'sFrooti.
Jindal Polyfilms whose clients include HUL and Colgate has reduced the thickness of
packagingmaterialforproductssuchassoapsfrom12micronsto8microns.According
tothecompany,"packaginglooksalmostthesameandconsumerswouldn'tevenrealize
suchassmallchange,butitsasubstantial1015%costsavingforcompanies".
NoidabasedpackagingfirmUflex"istryingtouselessofpolyesterandsubstituteitwith
polyfilmsthatarerelativelycheaper.
103
Food
ParleProducts,thecountry'slargestbiscuitmaker,isplayingwiththesizeofcartonsto
savefurthercosts
In absence of price increases, a smart product mix + positioning + supply chain efficiencies
can help offset inflation and boost profitability in the longer run. Consumer companies
strategyistopartiallyabsorbinflation(andlimitpriceincreases)toincreasecustomerbase.
Supplychainefficiencieswillhelpoffsetrestoftheinflation,anddeliverpackagedfoodsasa
valueproportiontoconsumers.
Govtinitiativesprovidefillip
TheMinistryofFoodProcessingIndustries,thecentralagencycateringtothedevelopment
offoodprocessingsectorinIndia,isfocusedonincreasingtheindustrytothreetimesofthe
presentsizeandthecountrysshareinglobalfoodtradeto3%,asperitsVision2015action
plan. The ministries of Agriculture and Ministry of Food Processing Industries are together
takingstepsinthisdirectionwiththefoodprocessingsectorbeingdeclaredaprioritysector.
In order to enhance the FDI inflow into the food processing sector, food parks are being
establishedandthegovernmentisextendingitsassistanceforthesuccessfulimplementation
of the scheme. Schemes for the upgradation of quality of street food are also being
introduced to ensure the hygiene. The union budget has also allocated schemes and tax
incentivestobooststorageofagriculturalfoodproduce.Variousschemeshavebeenputup
in place to make the cold storage infrastructure more robust and upgrade the food
processingindustrythroughqualityassurance,modernizationandpromotionalactivities.
AforeigncompanycanstartoperationsinIndiaasanIndianunitbybeingincorporated
undertheCompaniesAct,1956throughajointventureorwhollyownedsubsidiariesor
evenasaforeigncompanythroughaliaisonoffice,projectofficeorbranchoffice.
FDIofupto100%equityinIndianfoodandbeveragescompaniesispermittedthrough
the automatic approval with no need for an industrial license. Exception to this are
industriesproducingalcoholicbeveragesandproductsthatarereservedforsmallscale
sectors, like pickles, bread, pastry, hard boiled sugar candy, rapeseed oil, mustard oil,
sesame oil, groundnut oil, processed spices other than spice oil and oleoresin spices,
Tapiocasagoandflour.
Even for above reserved items, a foreign equity ownership of 24% is allowed beyond
whichanindustriallicensewithamandatoryexportobligationof50%wouldberequired.
Agro based industries that are 100% exportoriented are allowed to sell up to 50% of
theirproduceinthedomesticmarketaswell.SuchUnitsarepermittedtoimportcapital
goodsandrawmaterialsat0%importduty.
In order to boost FDI in this sector, Mega Food Parks are being established 30 such
parkshavebeenplannedforthe11thFiveyearPlanoutofwhich15areinitiallybeingset
up.ThegovernmenthasapprovedINR0.5bn worthofgrant foreverypark.Foodparks
will facilitate the use of capital intensive units like warehouses, cold storage and R&D
facilitiesbyfoodandbeveragecompanies.
CentralExciseDutyiscompletelyexemptedforfruitsandvegetableproducts.
As per FY11 budget, specific equipments for preservation, storage or processing of

apiary,horticultural,dairy,poultry,aquaticandmarineproduceandmeatproductshave
beengivencompleteexemptionfromexciseduty.
OpeningupofFDIinIndianfood
andbeveragescompanieshas
largelyhelpedthesector
Govt.keepsafocusonhygieneto
ensureproperqualityoffood
104
Food
AsapartoftheinitiativeProjectImportstatus,customsdutyataconcessionalrateof
5%hasbeengrantedtocoldstorageunitsforpreservationorstorage.
In order to ensure the hygiene and quality of food being consumed in the streets, the
MinistryhasformulatedanUpgradationofQualityofStreetFoodscheme.
TheconceptofSafeFoodTownshasbeenproposedthatwouldprovideanidentityto
the street food vendors and open up avenues for their economic betterment and
simultaneouslycatertotheupgradationofthequalityoffoodbeingserved.
FoodStreets are proposed to be developed that would be tourist attraction centers

wherelocalethnicdisheswouldbeavailable.
Modernization of abattoir scheme was launched in 200809 with the objective of

modernization of existing abattoirs and establishment of modern ones in order to
ensurehygienicslaughteringofanimals,wastemanagementandsafety.
PackaginglawsandrelevantregulationsinIndia
Thenewlawwouldnegatively
affectaffordabilityandthereby
overallsales
Packaged Commodities Rules 2011 stipulates 19 consumer products (15 food related
products) to be sold in specific pack sizes. This will not only make the popular price point
conceptdifficulttoimplement,butalsocurtailthegrammagereductionleverthatcompanies
usetotackleinflation,leavingthemwithnooptionbuttoraiseprices.Weexpectthenorm
toimpactconsumergoodscompaniesastheIndianconsumerisfarmoresensitivetoprice
points than to grammage, thereby impacting not only revenues but also profitability of
companies. The new packaging legislation would impact food categories like biscuits, milk
powder,teaandcoffeewhichinturnwouldaffectaffordabilityandtherebyoverallsales.
105
Food
Table43:PackagingSKUGuidelinesforfoodproducts
Sr.No. Commodities
Quantitiesinwhichtobepacked
1
Babyfood
100g,200g,300g,400g,500g,600,g,700g,800g,900g,1kg,2kg,5kgand10
kg.
2
Weaningfood.
100g,200g,300g,400g,500g,600g,700g,800g,900g,1kg,2kg,5kgand10kg.
3
Biscuits
25g,50g,75g,100g,150g,200g,250g,300gandthereafterinmultiplesof100g
upto1kg.
Breadincludingbrownbreadbut
excludingbun.
100gandthereafterinofmultiples100g.
Uncannedpackagesofbutterand
margarine
25g,50g,100g,200g,500g,1kg,2kg,5kg,andthereafterinmultiplesof5
kg.
Cerealsandpulses
100g,200g,500g,1kg,2kg,5kgandthereaftermultiplesof5kg
7
8
Coffee
Tea
25g,50g,100g,200g,250g,500g,1kgandthereafterinmultiplesof1kg.
25g,50g,100g,125g250g,500g,1kgandthereafterinmultiplesof1kg.
Materialswhichmaybeconstituted
orreconstitutedasbeverages.
25g,50g,100g,200g,500g,1kgandthereafterinmultiplesof1kg.
10
EdibleoilsVanaspati,ghee,butter
oil
50g,100g,200g,500g,1kg,2kg,3kg,5kgandthereafterinmultiplesof5kg
Ifnetquantityisdeclaredbyvolumethesamenumberinmillilitersorliters,as
thecasemaybe.Ifthenetquantityisdeclaredbyvolume,thentheequivalent
quantityintermsofmasstobedeclaredinbracketsinsamesizeof
letters/numerals
11
Milkpowder.
Below50gnorestriction,50g,100g,200g,500g,1kgandthereafterin
multiplesof500g.
12
Rice(powdered),flour,atta,rawa
andsuji.
100g,200g,500g,1kg,2kg,5kgandthereafterinmultiplesof5kg.
13
Salt
Below50ginmultiplesof10g,50g,100g,200g,500g,750g,1kg,2kg,5kgand
thereafterinmultiplesof5kg.
14
Aeratedsoftdrinks,nonalcoholic
beverages.
65ml(fruitbaseddrinksonly),100ml,125ml(fruitbaseddrinksonly),150ml,
200ml,250ml,300ml,330ml(incansonly),500ml,750ml,1litre,1.5litre,2
litre,3litre,4litreand5litre.
15
Mineralwateranddrinkingwater
100ml,150ml,200ml,250ml,300ml,500ml,750ml,1litre,1.5litre,2litre,
3litre,4litreand5litre.
Source:Ministryofconsumeraffair,foodandpublicdistribution,Edelweissresearch
Packaginglawshelpprotect
consumerinterest
Packaging of food products in India are primarily covered under the Standards of Weights
andMeasuresAct(SWMA),PreventionofFoodAdulterationAct(PFA),FruitProductsOrder
(FPO),MeatFoodProductsOrder(MFPO),EdibleOilPackagingOrderandAgmarkrules.
TheSWMAmakesitmandatorytodeclarespecificationsliketheidentityofthecommodity,
netquantityandsalepriceandnamesofmanufacturer,packeranddistributors.Itmandates
thedeclarationofnetquantityinanyadvertisementwheretheretailpriceofthecommodity
isstated.
106
Food
ThePreventionofFoodAdulterationActspecifiesthenormsregardingadulteratedfoodand
prohibitsitsmanufacturing,storageandsalewithamandatoryimprisonmentforaminimum
ofthreemonths.Italsospecifiesthepackagingandstoragerequirementstoensurethatthe
fooddoesnotgetadulteratedbythepackagingmaterial.
FPO and MFPO are concerned with regulations for fruit and vegetable products including
synthetic beverages and meat products respectively. In addition to regulations related to
licensingandproperdisplayofspecifications,theuseofmisleadingstatementsisprohibited.
Advertisingregulations
Severalrestrictionshavebeenput
onadvertisingfood&beverages
Fewproductadsdiscontinuedas
contentwasfoundtobe
misleading
Advertising Standards Council of India (ASCI) is the regulatory body for controlling the
advertisement contentinIndia.Inearly2010,variousadditionswere incorporatedintothe
advertisement code that included the food and beverages segment. It prohibits
advertisements from displaying changes in personal characteristics like intelligence and
physicalability,unlesssubstantiatedscientifically.Also,productswithhealthandnutritional
benefitclaimsarerequiredtobeaccompaniedwithscientificsubstantiation.Showingoffers
for excessive consumption and advertisements with misleading representations are
prohibited.
Some of the recent interventions by ASCI with respect to advertisements in food and
beveragessegmentarelistedhere:
Lastyear,anadvertisementLMNjuicebyParleAgrowasdiscontinuedasitwassaidto
beportrayinganAfricannationalinbadlight.
In April 2010, a TVC of Nestle India Limited was discontinued as it showed an obese
aged gentleman, eating a burger in conjunction with a claim, Make India Healthy,
whichwasjudgedbyASCItobemisleading.
Advertisement content on leaflets and on the website of Supreme Food Industries

(MeriiBoy Ice Cream) were modified as the comparison between MeriiBoy Ice Cream
andMediumFatFrozendessertwasfoundtobeunfairandmisleading.
InAugust2010,aTVConDaburPudinHaraLemonFizzwasmodifiedasitsclaimofnot
containinganychemicalswasfoundtobemisleading.
ATVCbyCocaColaIndiaPvt.LtdonitscarbonatedbeveragedrinkSpritewaswithdrawn
sinceJuly2010asitwasfoundtocateringtostereotypesaboutAfricanswhichareracist.
In October 2010, Parle Products Pvt. Ltd. had to substantiate its claim of the worlds
largestsellingbiscuitbrandwithaproofbyACNeilsonresearchdata.
For CocaColas promotional offer on Thumbs up which said, a Suzuki bike to be won
hourly and a grand prize of Suzuki, the advertiser was advised to publish the main
resultsinleadingnewspapers.
Heinz India Pvt. Ltd. had aired a TVC for its product Complan, claiming that Children
takingComplanarefoundtogrowtallerby3centimetersascomparedtononComplan
drinkers.Ithadtoprovideresultsofanindependentscientificresearchtosubstantiate
claims.(May2009)
HeinzIndiaLtdwasaskedtomodifyitsclaimofNewComplanMemoryhelpsin4signs
ofBrainDevelopmentastheclaimwasbasedonstudydoneonComplanandtherefore
misleading.
107
Food
IndiaPledge
SeveralMNCshavecome
togetherforrestrictingunhealthy
food
Onthelines oftheEuropean UnionPledge, sevenIndian multinational foodandbeverages

majorshaveplannedtointroduceIndiaPledgewhichwouldbesetguidelinesforrestricting
unhealthy food. These include Hindustan Unilever, CocaCola, PepsiCo, Nestle, Kelloggs,
Mars and General Mills who would publish their commitments on the website and provide
frameworksforhealthydietsforanactivelifestyle.
Accordingtorecentmediareports,undertheIndiaPledge,participatingcompanieswillmake
individualcommitments onfoodandbeverageadvertisingtochildrenand willdevelopand
publishacompanyactionplan,subjecttomonitoringandreview.
Companies would not air any advertisement to children under the age of 12. Additionally,
they would not engage in any commercial communication related to food and beverage
productsinprimaryschools.IndependentmonitoringofadvertisementcommitmentonTV,
printandInternetinadditiontotheexistingAdvertisingStandardsCouncilofIndiacodefor
selfregulationinadvertisingisproposedtobeimplemented.
Such a pledge has already been implemented in 11 countries like US, Canada, Australia,
Thailand,SouthAfricaandBrazil.
108
Food
Casestudy
NestleandBritanniaAllarenotequal
The Indian processed food industry is on a high growth trajectory with multiple growth
drivers in place including low penetration levels, rising income levels, urbanisation, and
changing lifestyle. The demand of these food products are going to continue for multiple
yearstocome,resultingingoodupsideforstakeholders.
WelookatacasestudyofNestleandBritanniaIndustries,whichbothhaveregisteredgood
toplinegrowthinlastfiveyearsacrosstheirproductcategories,aidedbygooddemandofits
productportfolio.
130
FY06
FY10
80
FY09
0
FY08
105
FY07
80
FY10
160
155
FY07
(Index)
240
FY06
4yearCAGR17.4%
180
FY09
4yearCAGR36.4%
320
(Index)
BritanniaDairy4yearCAGR17.4%
205
FY08
Chart78:BritanniaBread,CakeandRusk
400
180
166
144
100
CY09
CY05
100
CY08
122
CY07
140
CY06
4yearCAGR19.0%
CY07
(Index)
220
CY09
188
4yearCAGR27.7%
CY05
(Index)
260
NestleChocolateandconfectionery
210
CY06
Chart79:NestlePrepareddishesandcookingaid
300
CY08
109
Food
However,notallfoodcompaniesareequali.e.noteverycompanyhasbeenabletocrackthe
model right. Though Nestle has been successful to improve ROCE of its overall business,
BritanniahasmostlystruggledtoimprovetheROCEoftheunderlyingbusiness.
34.0
(%)
10.0
FY06
CY10
100.0
CY09
18.0
CY08
118.0
CY07
26.0
CY06
136.0
FY10
154.0
FY09
42.0
(%)
172.0
FY08
Chart81:BritanniaROCE
50.0
FY07
Chart80:NestleROCE
190.0
Weattributethistothefollowing
Parentsbackup
Nestleaheadofcompetitorsin
theF&Bspace
Nestlwithestablishedbrandsacrossfoodcategoriesisexpectedtobeamajorbeneficiary
ofthisgrowth.ItisincreasinglyfocusingtoexpandintoTierIIandTierIIIcitiesbyintroducing
stockkeeping units (SKUs) below INR10. Also, the company has effectively leveraged its
recentinnovations/renovationpositionedonhealthandwellnessplatformfromtheparents
portfoliotogainincrementalsalesinIndia.
Diversifiedproductportfolio
NestlehaswellestablishedbrandsincludingMaggi,Nescafe,Lactogen,KitKat,andMilkmaid
withleadershippositionincorecategorieslikebabyfoods,instantnoodlesandinstantcoffee.
NestleenjoysadistinctadvantageovercompetitorsintheF&Bspaceonaccountofitsstrong
focus on developing products around the nutrition, health and wellness and a culture of
renovationandinnovationinitsofferingsbackedbythestrongparentsupport.
Improvingcapex,backendsourcingofkeyrawmaterialslikemilk
Nestlehasacceleratedthecapex
activities
Nestle plans to significantly step up capex over the next few years to meet the growing
demand for its products, launch new ones and maintain the market leadership (existing
plantsareoperatingatmaximumcapacity).Thecompanyisinvestinginbrownfieldprojects
in Karnataka (INR3.6bn) for noodles to expand capacity, Goa (INR5bn) for expansion in
confectionary,Punjab(INR2bn)forchocolates,andHaryana(INR6bn)foraGreenfieldproject
and Himachal Pradesh (INR45bn) for chocolate and noodles greenfield project. It plans to
invest~INR18bnoverthenexttwoyears.ThecompanyhassetupitsfirstfactoryatMoga,
Punjabtodevelopbackendsourcinglikemilkproduction.Overtheyears,Nestlhassetup
seven factories across the country and is now involved in manufacturing and marketing a
rangeofqualityproducts.
110
Food
Britanniaspresenceincategorieswithintensecompetition
BiscuitbeingawellpenetratedsegmentwithpresenceofplayerslikeParle,ITC,etc.hinders
the growth as well as profitability of Britannia whereas Nestle completely dominates the
category in which it is present (Maggi has 80% market share). Though few players have
enteredthesegmentbutithasnotimpactedthevolumesofNestlewhichisnowpresentin
lesspenetratedcategorieslikechocolateanddairyproducts.
HealthandWellnesscategoryNoCompromiseontaste
Indiansnevercompromiseon
taste
Afewhealthyproductshavebeen
withdrawn
Health and wellness have been the most talked about subject in the food and beverages
industry in recent years due to an alarming rise in obesity, diabetes and other lifestyle
diseases, forcing companies to put nutritional information on food packs, stop promoting
unhealthy food and introduce healthier items. We believe that the demand for these
products is going to outpace food category growth for multiple years to come. Historically,
various products based on wellness plank have tasted credible success and we expect it to
continueinthefuture.
However, taste has always been the clinching factor for Indian consumers. The fact that
sugarfreejuicesandicecreamshavenotgainedmarketandfastfoodgiantMcDonald'sdoes
not feel the need to introduce healthier foods like salads in India because "the Indian
consumer's health habits have not yet evolved" is a testimony to this argument. Despite
being in India for almost a decade, diet colas contribute less than 2% to overall cola sales
while100%juicesstilllagbehindsugaryonesbyawidemarginandpizzachainslikeDomino's
are beating sales targets. Though we acknowledge the emergence of health conscious
consumers in the country, the big challenge still remains to maintain taste where fewer
consumerswouldwantacompromise.
F&B firms like PepsiCo and Parle Products have withdrawn lowsugar, lowfat 'healthier'
products,PepsiMax,MonacoSmartChipsetcduetopoordemand."Thelearningforusin
the case of Monaco Smart Chips was that consumers would cut down on frequency of
consumption, but not at the cost of taste," says Parle Products Group Product Manager
MayankShah.
LowpricedwarriorsNeedtostraddleallpricepointstogainmarketshare
Price still holds the key as you can see from Lays losing market share in chips due to low
pricedstrategyofnewentrants.
Table44:Marketshare
SnacksMakers
FritoLayIndia
BalajiNamkeen
ITC
Haldiram
ParleProducts
PrakashSancks
Marketshare(%)
Mar11
Mar08
58.0
66.0
14.0
13.0
9.0
11.0
5.0
3.0
5.0
0.0
4.0
2.0
%Change
(8.0)
1.0
(2.0)
2.0
5.0
2.0
Offeringper
INR10Pack*
28
55
36
55
30
45
Source:TheNielsenCo,Edelweissresearch
*Weightingram
111
Food
Historically, Lays, which dominated the branded chips market, lost the market share when
ITC made a big bang launch of Bingo (in 2007) with frenzy advertisements, retail tieups,
regionalflavoursanddistributionmuscle.However,sincethenbothITCandLayslostsome
marketsharetonewentrants,BalajiNamkeen,HaldiramandPrakashSnackswhoeffectively
played with the low priced strategy against them. To counter this, PepsiCo plans to launch
'Lehar',anewpotatochipsbrandthatis40%cheaperthanitsflagshipLays.Parle,however,
gainedmarketsharepurelyonthebackofitsstrongdistributionnetwork.
112
Food
KeyRisks
Inflationrisk
Abovetrend growth in domestic private consumption has been the primary driving force
behindtheeconomicexpansioninrecentyears.However,thereareconcernsthatelevated
inflationandrisinginterestratesmaymeaningfullydentprivateconsumptionhencegrowth
ofthepackagedfoodsmarket.
Webelievethebroadbaseddemanddestructionisunlikelybecause:
Ouranalysisofthepasttwodecadesdidnotyieldanyconclusiveevidenceofelevated
inflationhurtingconsumptiondemandsignificantly
Thelinkbetweeninterestratesandconsumptionislargelylimitedtofewcategoriesof
products in urban areas (where some moderation is likely) while in rural areas, the
governments social sector spending will continue to support incomes and thereby
consumption.
Weexpecttheinflationtoaverage7.5%8%inFY12notaveryhighlevelinitselfand
certainlylowerthanthe~9.3%averageinFY11
Chart82:Previoushighinflationphase
Chart83:Realdepositratesstillbelowtrend
6.0
9.6
4.0
7.2
2.0
WPI
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY01
FY11
FY10
FY09
FY08
FY07
FY06
(4.0)
FY05
0
FY04
(2.0)
FY03
2.4
FY02
0.0
FY01
4.8
FY02
(%)
(%)
12
Realrate
Overall,whileamildmoderationinprivateconsumptionislikelyfollowingthehighinflation,
wedonotforeseeabroadbasedslowdown.
Availabilityofkeyrawmaterials
Whiletheglobalpopulationexpanded85%inthepastfourdecades,consumptionofedible
oils increased almost nine fold as incomes rose, people moved to cities and demand for
processed foods jumped. Vegetable oils are used in everything from mayonnaise to candy
bars as well as soaps, cosmetics and fuels. US Department of Agriculture (USDA) estimates
that stockpiles of edible oils are dropping to a threedecade low and that the combined
113
Food
stocks of nine oils will plunge 25% to 9.39 mn metric tonnes in FY12 or about 23 days of
demand,thefewestsince1974.
Brandequityrisk
Recently a raid was carried in Dabur Nepal factory as juices manufactured in November
2010 carried stickers with the manufacturing date as January 2011, according to the
CommissionforInvestigationoftheAbuseofAuthority(CIAA).WiththeIndianconsumption
story at an inflection point, we believe there is a serious risk to the overall growth of
packagedfoodsindustryifsuchclaimsresurface.
Technology,skilldevelopment,andplantproductivity
Lackofinfrastructureandmeager
creditaccessabignegativeaspect
In India, farmer incomes are adversely impacted by low productivity and poor price
valuations,leadingtolowincomes.Butselectinterventions,likeviaprivateplayers,hasled
to ~3040% surge in income/acre through higher productivity and better price realizations.
Also, lack of sufficient storage facilities forces farmers to sell their produce early without
waiting for better market prices. Poor access to credit makes it difficult to implement new
technology.
Significant investment in skill development for food processing, R&D and technology, and
logistics are required to enhance productivity and competitiveness. In addition, a right
balanceoflargeandsmallscaleunitsisrequiredtodrivescaleandefficiency.
Reducinginconsistenciesbetweencentreandstatelawsandregulations
MPScouldleadtoademand
supplymismatch
The system of Minimum Support Prices (MSP) could lead to price distortions, encouraging
farmers to produce products quo ting highest MSP rather than those most needed by the
market. This could lead to a demandsupply mismatch. In addition, due to the Agriculture
ProduceMarketingCommissionAct(APMCAct)whichdiffersacrossstatesandrestrictsthe
numberofmarketplayersinseveralstates,privatesectorprocessorsandretailersareunable
tointegratetheirenterprisesdirectlywithfarmers.
The current processing capacity is highly fragmented and subscale with two thirds of the
players in the unorganized or small scale sector. Projects eligible for government assistance
schemes orsubsidy aresmall,which has ledtohighlydisjointedprocessing market forstaple
productssuchasricewithover150,000processingunitsthroughoutthecountry.Asupportive
regulatoryenvironmentiscrucialtocatapultgrowthofthefoodprocessingindustry.
Table45:Foodprocessingindustry
Industry
Nonprocessed
Dairyproducts
Unprocessedmilk
Fruits&vegetables
Grains&pulses
Meat
Marineproducts
Directlyconsumedrawfruits&
vegetables
Seeds,animalfodder
Nonprocessedmeatsoldin
localmarkets
Nonprocessedfishsoldinlocal
markets
Primaryprocessed
Cut,cleaned,packedvegetables
andfruits
Milledrice,flouringwheatat
smallchakkis
Nonprocessedmeatsoldin
localmarkets
Nonprocessedfishsoldinlocal
markets
Secondaryandtertiaryprocessed
Packagedmilk,cheese,butter,
icecream,readymadecurd
Jam,pickles,juices,sauce
Biscuits,flakes,bread
Preservedmeat,readytoeat
packagedmeat
Preservedandpackagedfish
114
COMPANYUPDATE
Food
DABUR
Cashinginonhealthandwellness
IndiaEquityResearch|Food
Dabursuninterruptedfocusonhealthandwellnesspresentshumungous
growth opportunities in food categories (contributing ~30% to revenue).
Beingthemarketleaderinmostcategories(juices,chyawanprash,honey,
digestives), the company is in an enviable position to enjoy exponential
growth. With Dabur facing severe competition (in shampoo, hair oil,
toothpaste) and slowdown in volume growth, foods to provide reprieve
andhelpaccelerategrowth.MaintainBUY.
Healthandwellness:Primaryfocus
WhileDaburalreadyhasinitsfoldasmatteringoffoodproducts(contributing~30%to
top line) such as Real fruit juice, Hommade cooking pastes, honey and other
convenience food products, not to mention its blockbuster Chyawanprash, it is now
eyeing a bigger opportunity in foods. The companys major brands are undisputed
leaders with ~69% market share in Chyawanprash (11% CAGR), honey 50% market
share(15%CAGR),glucose25%marketshareanddigestiveHajmola55%marketshare.
Real:Nextgrowthdriver;competitiveintensityinfruitjuiceswells
Thefastgrowingfruitjuicesegment(growingat~17%)isdominatedbyRealwhichhas
cornered 50% market share. In 2010, Dabur launched fibrebased juice in the Real
category, corroborating the companys health and wellness focus, thereby catering to
higherendofthevaluechainandimprovingmarginprofile.However,apartfromfruit
juices, no major product has been launched in the past two years in F&B. Recently,
multinational majors like Coke, Pepsi and HUL have entered Daburs core category of
fruitjuices,threateningitsdominanceinthesegment.
EDELWEISS4DRATING
AbsoluteRating
RatingRelativetoSector
RiskRatingRelativetoSector
SectorRelativetomarket
MARKETDATA(R:DABU.BO,B:DABURIN)
CMP
: INR98
TargetPrice
: INR120
52weekrange(INR)
: 122/90
Shareinissue(mn)
: 1,742.1
Mcap(INRbn/USDmn)
: 171/3,439
Avg.DailyVol.BSE/NSE(000) : 1,581.1
SHAREHOLDINGPATTERN(%)
Others
6.5%
FIIs
19.1%
MFs,FIs&
Banks
5.7%
Promoters*
68.7%
* Promoters pledged shares

(% of share in issue)
Outlookandvaluations:Cautious;maintainBUY
PRICEPERFORMANCE(%)
Continousslowdownindomesticvolumegrowthoverthepastfewquartersisacause
ofconcern.However,weareextremelypositiveonthecompanyshealthandwellness
focus.WemaintainBUYrecommendationwithSectorOutperformerrating.
Stock
1month
5.7
3months
4.3
12months 12.3
Financials
YeartoMarch
Revenues(INRmn)
Rev.growth(%)
EBITDA(INRmn)
Netprofit(INRmn)
Sharesoutstanding(mn)
DilutedEPS(INR)
EPSgrowth(%)
DilutedP/E(x)
EV/EBITDA(x)
ROAE(%)
FY11
41,045
20.2
7,625
5,686
1,740
3.3
12.7
30.2
22.9
51.2
FY12E
51,414
25.3
8,729
6,244
1,741
3.6
9.8
27.5
19.5
42.3
EdelweissResearchisalsoavailableonwww.edelresearch.com,
115
BloombergEDEL<GO>,ThomsonFirstCall,ReutersandFactset.
FY13E
59,961
16.6
10,449
7,594
1,741
4.4
21.6
22.6
16.0
40.3
FY14E
70,060
16.8
12,576
9,387
1,741
5.4
23.6
18.3
12.9
39.4
BUY
Outperformer
Medium
Equalweight
Nifty
11.0
3.1
3.0
0.1
EWConsumer
GoodsIndex
2.0
(2.1)
30.8
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
Food
FinancialStatements
Incomestatement
YeartoMarch
Netrevenue
OtheroperatingIncome
Totaloperatingincome
Costofmaterials
Grossprofit
Employeecosts
Advertisement&salescosts
Others
EBITDA
Depreciation
EBIT
Otherincome
EBITincl.otherincome
Netinterest&Financecharges
PBT
Provisionfortaxation
CorePAT
Minorityinterest
ProfitaftertaxafterMinorityInterest&Associate
Equitysharesoutstanding(mn)
EPS(INR)basic
Dilutedshares(mn)
EPS(INR)fullydiluted
CEPS(INR)
DPS
Dividendpayoutratio(%)
FY10
33,905
238
34,143
15,507
18,636
2,847
4,935
4,383
6,470
503
5,968
244
6,211
202
6,009
985
5,024
8
5,032
1,734
2.9
1,741
2.9
3.2
1.0
34.5
(INRmn)
FY11
FY12E
FY13E
FY14E
40,774
51,103
59,603
69,648
271
311
358
412
41,045
51,414
59,961
70,060
19,053
25,515
29,485
34,082
21,992
25,899
30,476
35,978
3,222
4,088
4,828
5,642
5,346
6,260
7,301
8,706
5,799
6,822
7,897
9,054
7,625
8,729
10,449
12,575.9
624
844
928
993
7,001
7,885
9,521
11,583
381
490
528
680
7,382
8,375
10,049
12,263
303
604
551
523
7,079
7,771
9,498
11,740
1,390
1,523
1,900
2,348
5,689
6,248
7,598
9,392
(3)
(4)
(4)
(5)
5,686
6,244
7,594
9,387
1,740
1,741
1,741
1,741
3.3 3.6 4.4 5.4
1,750
1,750
1,750
1,750
3.3 3.6 4.3 5.4
3.6 4.1 4.9 6.0
1.2
1.3
1.5
1.9
35.2
35.2
35.2
35.2
Commonsizemetrics(%)
YeartoMarch
Costofmaterials
Employeecosts
Advertising&salescosts
Othergeneralexpenditure
Depreciation
Netinterestexpenditure
EBITDAmargin
EBITmargin
Netprofitmargin
FY10
45.4
8.3
14.5
12.8
1.5
0.6
19.0
17.5
14.7
FY11
46.4
7.9
13.0
14.1
1.5
0.7
18.6
17.1
13.9
FY12E
49.6
8.0
12.2
13.3
1.6
1.2
17.0
15.3
12.2
FY13E
49.2
8.1
12.2
13.2
1.5
0.9
17.4
15.9
12.7
FY14E
48.6
8.1
12.4
12.9
1.4
0.7
18.0
16.5
13.4
Growthmetrics(%)
YeartoMarch
Revenues
EBITDA
PBT
Netprofit
EPS
FY10
20.9
33.5
35.1
28.6
16.9
FY11
20.2
17.9
17.8
13.2
12.7
FY12E
25.3
14.5
9.8
9.8
9.8
FY13E
16.6
19.7
22.2
21.6
21.6
FY14E
16.8
20.4
23.6
23.6
23.6
116
Food
Balancesheet
Ason31stMarch
Sharecapital
Reserves
Shareholders'funds
Minority
Securedloans
Unsecuredloans
Borrowings
Deferredtaxliability
Sourcesoffunds
Grossblock
Lessdepreciation
Netfixedassets
Capitalworkinprogress
Investments
Currentassets
Inventories
Sundrydebtors
Cashandbankbalance
Loansandadvances
Currentliabilities
Liabilities
Provisions
Workingcapital
Miscexpenditure
Usesoffunds
BV(INR)
FY10
869
8,485
9,354
38
702
1,091
1,793
107
11,291
9,857
3,391
6,466
301
2,641
11,058
4,262
1,198
1,923
3,674
9,202
4,669
4,533
1,855
27
11,291
5.4
FY11
1,741
12,170
13,911
41
703
9,807
10,510
189
24,651
19,338
4,351
14,987
430
4,274
18,525
7,085
3,555
2,724
5,161
14,576
7,141
7,435
3,950
1,010
24,651
8.0
FY12E
1,741
15,858
17,599
44
4,505
5,506
10,010
189
27,843
20,838
5,194
15,643
400
4,274
21,503
7,097
2,965
6,281
5,161
14,989
7,554
7,435
6,515
1,010
27,843
10.1
FY13E
1,741
20,344
22,084
49
4,280
5,231
9,510
189
31,832
22,338
6,122
16,215
350
4,274
26,193
8,261
3,441
9,330
5,161
16,210
8,775
7,435
9,982
1,010
31,832
12.7
(INRmn)
FY14E
1,741
25,888
27,628
54
4,055
4,956
9,010
189
36,882
23,838
7,115
16,722
300
4,274
32,214
9,634
4,002
13,416
5,161
17,639
10,204
7,435
14,575
1,010
36,882
15.9
Freecashflow
YeartoMarch
Netprofit
Add:Noncashcharge
Depreciation
Others
Grosscashflow
Less:ChangesinWC
Cashfromoperations
Less:Capex
Freecashflow
FY10
5,032
697
503
194
5,729
(127)
5,857
1,865
3,991
FY11
5,686
931
624
307
6,616
2,708
3,908
9,480
(5,572)
FY12E
6,244
1,452
844
608
7,696
(992)
8,687
1,470
7,217
FY13E
7,594
1,483
928
555
9,077
419
8,658
1,450
7,208
(INRmn)
FY14E
9,387
1,521
993
528
10,908
505
10,403
1,450
8,953
Cashflowmetric
YeartoMarch
Operatingcashflow
Financingcashflow
Investingcashflow
Changeincash
Capex
Dividendspaid
FY10
FY11
FY12E
FY13E
FY14E
5,857
3,908
8,687
8,658
10,403
(2,740)
6,086
(3,660)
(4,159)
(4,866)
(1,037)
(11,114)
(1,470)
(1,450)
(1,450)
2,080
(1,119)
3,557
3,049
4,087
(1,865) (9,480) (1,470) (1,450) (1,450)
(2,031)
(2,328)
(2,556)
(3,109)
(3,843)
117
Food
Ratios
YeartoMarch
ROAE(%)
ROACE(%)
Debtordays
Inventorydays
Payabledays
Cashconversioncycle(days)
Currentratio
Debt/EBITDA
Debt/Equity
Adjusteddebt/equity
Interestcoverage(x)
FY10
57.6
75.6
16
43
61
(2)
1.2
0.3
0.2
0.2
29.5
FY11
51.2
48.2
21
51
64
8
1.3
1.4
0.8
0.8
23.1
FY12E
42.3
35.9
21
51
65
7
1.4
1.1
0.6
0.6
13.0
Operatingratios
YeartoMarch
Totalassetturnover
Fixedassetturnover
Equityturnover
FY10
3.1
6.0
3.9
FY11
2.3
3.8
3.5
FY12E
FY13E
FY14E
2.0 2.0 2.0
3.4 3.8 4.3
3.3 3.0 2.8
Dupontanalysis
YeartoMarch
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
FY10
14.7
3.1
1.3
57.8
FY11
13.9
2.3
1.6
51.2
FY12E
12.1
2.0
1.8
42.3
FY13E
12.7
2.0
1.6
40.3
FY14E
13.4
2.0
1.4
39.4
Valuationparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
FY10
2.9
16.9
3.2
34.1
18.2
4.9
25.9
1.0
FY11
3.3
12.7
3.6
30.2
12.3
4.3
22.9
1.2
FY12E
3.6
9.8
4.1
27.5
9.7
3.3
19.5
1.3
FY13E
4.3
21.6
4.9
22.6
7.7
2.8
16.0
1.6
FY14E
5.4
23.6
6.0
18.3
6.2
2.3
12.9
1.9
118
FY13E
FY14E
40.3
39.4
37.2
38.5
21
21
51
50
65
65
7
7
1.6 1.8
0.9 0.7
0.4 0.3
0.4 0.3
17.3 22.1
COMPANYPROFILE
Food
GSKCONSUMER
GrowthDNA
GSKConsumers(GSK)strongbrandequityinunderpenetratedandhigh
growthhealthfooddrinks(HFD)categoryrendersitalucrativeplayinthe
consumer goods space. Its sustained dominance in the segment amidst
intense competition is primarily due to undivided focus on product line,
continuous innovation and expansion of distribution network. We are
cautiously optimistic about GSKs strategy of venturing into other fast
growingfoodandbeveragescategories.However,keyrisk/concerncould
be its inability to meaningfully scale up new segments like noodles and
oats.MaintainBUY.
BrandHorlicksundisputedleaderinmaltedhealthmilksegment
GSKistheundisputeddominantplayerinthefastgrowingunderpenetrateddomestic
malted health drink segment (~70% market share) with Horlicks, Boost, Maltova and
Viva. Its key brands Horlicks and Boost have posted impressive double digit sales
growth(~20%CAGR)overthepastfiveyears.NewHorlicksvariants,ridinghighonthe
brand,havealsofoundfavourwithconsumers(contributes~20%toHorlicksstopline).
EDELWEISS4DRATING
AbsoluteRating
MARKETDATA(R:GLSM.BO,B:SKBIN)
CMP
: INR2,644
TargetPrice
: INR2,900
52weekrange(INR)
: 2,700/1,972
Shareinissue(mn)
: 42.1
Mcap(INRbn/USDmn)
: 112/2,240
Avg.DailyVol.BSE/NSE(000) : 19.1
Others
24.9%
Promoters*
43.2%
Innovatingandreinvigoratingofferingstocaptureconsumerpie
The company, leveraging its strong brand equity, has ventured into biscuits, noodles,
and oats in line with its strategy of developing products in the health and wellness
segment.ItisalsoexpandingdistributioninNorth&WestwherethepresenceofGSKis
limited and provides a huge growth opportunity (North & West contributes ~15% to
sales and likely to reach 20%25% in the next 4 years. Auxiliary income from the OTC
segmentisexpectedtoberobustonthebackofnewlaunches.
BUY
Performer
Medium
Equalweight
FIIs
15.1%
MFs,FIs&
Banks
16.8%

NIL
PRICEPERFORMANCE(%)
Outlookandvaluations:Upbeat;maintainBUY
Continued dominance in MFD, firm demand across most categories, calibrated price
hikesandnewlaunchesarelongtermpositives.Also,waningoffoodinflationislikely
tobenefitthecompany.WemaintainBUY/SectorPerformer.
Financials
YeartoDecember
Revenues(INRmn)
Rev.growth(%)
EBITDA(INRmn)
Netprofit(INRmn)
DilutedEPS(INR)
EPSgrowth(%)
DilutedP/E(x)
EV/EBITDA(x)
ROAE(%)
CY10
23,061
20.0
4,365
2,999
42
71.3
28.8
37.1
23.2
32.8
CY11
26,855
16.5
5,101
3,552
42
84.5
18.5
31.3
19.6
34.6
119
CY12E
31,795
18.4
6,050
4,241
42
100.8
19.4
26.2
16.2
34.3
CY13E
37,567
18.2
7,113
5,011
42
119.2
18.2
22.2
13.4
33.8
Stock
1month
3.9
3months
1.3
12months 26.4
Nifty
11.0
3.1
3.0
EWConsumer
GoodsIndex
2.0
(2.1)
30.8
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
Food
FinancialStatements
Incomestatement
YeartoDecember
Netrevenues
Otheroperatingincome
TotalOperatingincome
Costofmaterials
Grossprofit
Employeecosts
Others
EBITDA
Depreciation
EBIT
Otherincome
PBT
CorePAT
ProfitaftertaxafterMin.Int.&Associate
EPS(INR)basic
Dilutedshares(mn)
CEPS(INR)
DPS
(INRmn)
CY12E
CY13E
31,795
37,567
937
1,031
32,732
38,597
11,977
14,109
20,756
24,488
3,100
3,663
5,246
6,198
6,359
7,513
6,050
7,113
521
589
5,530
6,524
837
994
6,367
7,518
36
38
6,330
7,480
2,089
2,468
4,241
5,011
4,241
5,011
42
42
100.8 119.2
42
42
100.8 119.2
63.6 74.5
40
48
40
40
CY09
19,215
557
19,772
7,140
12,632
2,007
2,675
4,327
3,623
420
3,203
376
3,579
41
3,539
1,211
2,328
2,328
42
55.4
42
55.4
36.6
18
33
CY10
23,061
624
23,685
8,649
15,036
2,297
3,706
4,668
4,365
397
3,968
576
4,544
26
4,518
1,520
2,999
2,999
42
71.3
42
71.3
44.6
50
70
CY11
26,855
852
27,707
10,227
17,479
2,584
4,373
5,421
5,101
460
4,642
796
5,437
35
5,403
1,851
3,552
3,552
42
84.5
42
84.5
51.4
34
40
YeartoDecember
Costofmaterials
Employeecosts
Depreciation
EBITDAmargin
EBITmargin
Netprofitmargin
CY09
36.1
10.2
13.5
21.9
2.1
0.2
18.3
16.2
11.8
CY10
36.5
9.7
15.6
19.7
1.7
0.1
18.4
16.8
12.7
CY11
36.9
9.3
15.8
19.6
1.7
0.1
18.4
16.8
12.8
CY12E
36.6
9.5
16.0
19.4
1.6
0.1
18.5
16.9
13.0
CY13E
36.6
9.5
16.1
19.5
1.5
0.1
18.4
16.9
13.0
Growthmetrics(%)
YeartoDecember
Revenues
EBITDA
PBT
Netprofit
EPS
CY09
24.6
32.1
23.9
23.6
23.6
CY10
20.0
20.5
27.7
28.8
28.8
CY11
16.5
16.9
19.6
18.5
18.5
CY12E
18.4
18.6
17.2
19.4
19.4
CY13E
18.2
17.6
18.2
18.2
18.2
120
Food
Balancesheet
Ason31stDecember
Sharecapital
Reserves
Shareholders'funds
Sourcesoffunds
Grossblock
Lessdepreciation
Netfixedassets
Investments
Currentassets
Inventories
Sundrydebtors
Cashandbankbalance
OtherCurrentAsset
Loansandadvances
Currentliabilities
Liabilities
Provisions
Workingcapital
Miscexpenditure
Usesoffunds
BV(INR)
CY09
421
8,630
9,051
9,051
5,585
3,640
1,945
378
0
11,729
2,660
314
8,198
220
338
5,111
3,753
1,358
6,618
110
9,051
215
CY10
421
9,180
9,600
9,600
5,990
3,967
2,023
1,083
0
14,231
3,120
505
9,761
344
501
8,004
4,704
3,300
6,227
267
9,600
228
CY11E
421
11,070
11,490
11,490
7,090
4,427
2,663
983
0
15,831
3,358
469
11,158
344
501
8,254
4,954
3,300
7,577
267
11,490
273
CY12E
421
13,326
13,746
13,746
8,090
4,948
3,142
883
0
18,609
3,967
547
13,249
344
501
9,155
5,854
3,300
9,454
267
13,746
327
(INRmn)
CY13E
421
15,992
16,412
16,412
8,990
5,537
3,453
663
0
22,246
4,677
636
16,088
344
501
10,217
6,916
3,300
12,029
267
16,412
390
Freecashflow
YeartoDecember
Netprofit
Add:Noncashcharge
Depreciation
Others
Grosscashflow
Less:ChangesinWC
Cashfromoperations
Less:Capex
Freecashflow
CY09
2,328
(96)
420
(517)
2,231
1,481
3,712
409
3,303
CY10
2,999
(201)
397
(598)
2,798
299
3,097
1,110
1,986
CY11E
3,552
494
460
35
4,047
48
4,094
1,000
3,094
CY12E
4,241
557
521
36
4,798
214
5,012
900
4,112
(INRmn)
CY13E
5,011
627
589
38
5,639
263
5,902
680
5,222
Cashflowmetric
YeartoDecember
Operatingcashflow
Financingcashflow
Investingcashflow
Changeincash
Capex
Dividendspaid
CY09
CY10
CY11E
CY12E
CY13E
4,002
3,262
4,094
5,012
5,902
(296)
(905)
(1,697)
(2,021)
(2,384)
(216)
(1,110)
(1,000)
(900)
(680)
3,491
1,247
1,397
2,091
2,839
(409) (1,110) (1,000) (900) (680)
(886)
(2,452)
(1,662)
(1,985)
(2,345)
121
Food
Ratios
YeartoDecember
ROAE(%)
ROACE(%)
Debtordays
Inventorydays
Payabledays
Currentratio
CY09
CY10
CY11E
CY12E
CY13E
28.1
32.8
34.6
34.3
33.8
38.3
42.6
44.0
43.8
43.3
7
6
6
6
6
52
46
46
46
45
71
80
80
80
80
(12)
(28)
(28)
(28)
(29)
2.3 1.8 1.9 2.0 2.2
Operatingratios
YeartoDecember
Totalassetturnover
Fixedassetturnover
Equityturnover
CY09
2.4
9.5
2.3
CY10
2.5
11.6
2.5
CY11E
CY12E
CY13E
2.6 2.6 2.6
11.5 11.0 11.4
2.5 2.5 2.5
Dupontanalysis
YeartoDecember
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
CY09
11.8
2.4
1.0
28.1
CY10
12.7
2.5
1.0
32.8
CY11E
12.8
2.6
1.0
34.6
CY12E
13.0
2.6
1.0
34.3
CY13E
13.0
2.6
1.0
33.8
Valuationparameters
YeartoDecember
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
CY09
55.4
23.6
36.6
47.8
12.3
5.4
28.4
0.7
CY10
71.3
28.8
44.6
37.1
11.6
4.4
23.2
1.9
CY11E
84.5
18.5
51.4
31.3
9.7
3.7
19.6
1.3
CY12E
100.8
19.4
63.6
26.2
8.1
3.1
16.2
1.5
CY13E
119.2
18.2
74.5
22.2
6.8
2.5
13.4
1.8
122
COMPANYUPDATE
Food
HINDUSTANUNILEVER
Revitalisinggrowth
Hindustan Unilevers (HUL) beverages, foods, and ice creams business

accountsfor~18%ofsaleswhileparentUnileverderives~50%salesfrom
thesame.Managementintendstoexpanditsfootholdinthefastgrowing
food category. We are enthused by HULs continued focus on
differentiated offerings and presence across price points in the food
segment. We believe the company will enhance focus on new product
launchesandmarketsharegaininexistingcategories.MaintainBUY.
Foods:Keytofuturegrowth
Growth in HULs soaps & detergents has been sluggish due to high penetration and
competitive intensity. In contrast, the companys food business (includes packaged
foods, beverages, ice creams, etc.) grew at 16% in FY11 and contributed 18% to the
companysrevenue.AsperMr.PaulPolman,ChiefExecutiveOfficer,Unilever,inorder
to double turnover, food business in India will have to grow at a much faster clip,
indicatingthecompanysincreasedfocusonthecategory.
EDELWEISS4DRATING
AbsoluteRating
BUY
Outperformer
Low
Equalweight
MARKETDATA(R:HLL.BO,B:HUVRIN)
CMP
: INR393
TargetPrice
: INR415
52weekrange(INR)
: 420/264
Shareinissue(mn)
: 2,161.0
Mcap(INRbn/USDmn)
: 849/17,019
Revitalisingoldproducts,launchingnewofferingstoenhanceshare
Aspartofitsstrategytofocusonthefastgrowingfoodsbusiness,HULhasintroduced
Kissancreamyspread,KissanNutrismartandfruitjuice.Also,itsicecreamportfoliois
beingrevitalizedwithexoticlaunchestograbthepremiumsegment.Knorr,Unilevers
largest brand, has met the companys internal benchmark. Knorrs soups, sauces and
cooking aids have also performed well. It has tied up with the Future Group in the
breads segment. Further, to gain direct interface with end consumers to boost brand
HULhasopenedBruWorldCafeoutletsandSwirlParlors(~130).
Others
17.4%
FIIs
18.7%
Promoters*
52.5%
MFs,FIs&
Banks
11.4%

NIL
PRICEPERFORMANCE(%)
Outlookandvaluations:Bright;maintainBUY
Thecompanywillfocusonjudiciouspricehikes,enhancingmarketshareandproduct
innovation to counter competition. We maintain BUY recommendation. On relative
returnbasis,thestockisratedSectorOutperformer.
Financials
YeartoMarch
Revenues(INRmn)
Rev.growth(%)
EBITDA(INRmn)
Netprofit(INRmn)
DilutedEPS(INR)
EPSgrowth(%)
DilutedP/E(x)
EV/EBITDA(x)
ROAE(%)
FY11
196,910
10.8
23,771
22,961
2,180
9.8
1.7
40.0
34.8
79.8
FY11
226,246
14.9
30,142
26,864
2,161
12.0
22.3
32.7
26.9
83.6
FY13E
258,264
14.2
35,004
30,252
2,161
14.0
16.5
28.1
22.9
77.2
FY14E
292,293
13.2
41,142
35,458
2,161
16.4
17.2
24.0
19.2
73.0
1month
3months
12months
Stock
(2.0)
(1.4)
43.8
Nifty
11.0
3.1
3.0
EWConsumer
GoodsIndex
2.0
(2.1)
30.8
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
123
Food
FinancialStatements
Incomestatement
YeartoMarch
Netrevenues
Costofmaterials
Grossprofit
Employeecosts
Others
EBITDA
Depreciation
EBIT
Otherincome
PBT
CorePAT
Extraordinaryitems(netoftax)
Minorityinterest
EPS(INR)basic
Dilutedshares(mn)
CEPS(INR)
DPS
(INRmn)
FY10
FY11
FY12E
FY13E
FY14E
177,643
196,910
226,246
258,264
292,293
90,115
102,386
120,990
134,805
151,040
87,528
94,524
105,256
123,459
141,253
9,709
10,102
11,765
14,205
16,076
24,230
27,965
26,584
32,283
36,537
27,829
32,687
36,765
41,968
47,498
25,759
23,771
30,142
35,004
41,142
1,919
2,293
2,366
2,627
2,888
23,840
21,478
27,776
32,377
38,255
3,440
5,893
5,951
6,915
7,799
27,279
27,371
33,728
39,292
46,053
75
10
4
4
4
27,205
27,361
33,724
39,288
46,049
6,153
5,919
7,756
9,036
10,591
21,052
21,442
25,967
30,252
35,458
594
1,624
897
0
0
(80)
(106)
0
0
0
21,566
22,961
26,864
30,252
35,458
2,180
2,180
2,161
2,161
2,161
9.7 9.8 12.0 14.0 16.4
2,180
2,183
2,161
2,161
2,161
9.7 9.8 12.0 14.0 16.4
10.5 10.9 13.1 15.2 17.7
6.5
6.5
7.6
8.6
10.1
65.7 61.4 61.4 61.4 61.4
YeartoMarch
Costofmaterials
Employeecosts
Depreciation
EBITDAmargin
EBITmargin
Netprofitmargin
FY10
50.7
5.5
13.6
15.7
1.1
14.5
13.4
11.9
FY11
52.0
5.1
14.2
16.6
1.2
12.1
10.9
10.9
Growthmetrics(%)
YeartoMarch
Revenues
EBITDA
PBT
Netprofit
EPS
FY10
48.0
41.4
40.9
40.8
40.7
FY11
FY12E
FY13E
FY14E
10.8
14.9
14.2
13.2
(7.7)
26.8
16.1
17.5
0.6
23.3
16.5
17.2
1.9
21.1
16.5
17.2
1.7 22.3 16.5 17.2
FY12E
FY13E
FY14E
53.5
52.2
51.7
5.2
5.5
5.5
11.8
12.5
12.5
16.3
16.3
16.3
1.0
1.0
1.0
13.3
13.6
14.1
12.3
12.5
13.1
11.5 11.7 12.1
124
Food
Balancesheet
Ason31stMarch
Sharecapital
Reserves
Minority
Shareholders'funds
Securedloans
Unsecuredloans
Borrowings
Sourcesoffunds
Grossblock
Lessdepreciation
Netfixedassets
Investments
DeferredtaxassetNET
Currentassets
Inventories
Sundrydebtors
Cashandbankbalance
OtherCurrentAsset
Loansandadvances
Currentliabilities
Liabilities
Provisions
Workingcapital
Usesoffunds
BV(INR)
FY10
2,182
24,508
105
26,794
105
4
108
26,902
36,672
14,529
22,144
2,800
12,244
2,482
55,393
22,264
6,917
20,124
193
5,895
68,160
53,522
14,638
(12,767)
26,902
12
FY11
2,160
24,934
146
27,239
0
27
27
27,266
38,541
16,307
22,235
2,997
11,885
2,070
63,169
28,738
9,549
17,873
378
6,632
75,089
61,730
13,359
(11,920)
27,266
12
FY12E
2,160
32,587
146
34,892
25
1
27
34,919
43,041
18,673
24,369
3,100
11,885
2,070
72,178
29,238
9,397
26,533
378
6,632
78,682
65,323
13,359
(6,505)
34,919
16
FY13E
2,160
41,205
146
43,510
25
1
27
43,537
47,541
21,300
26,242
3,300
11,885
2,070
87,829
33,305
10,656
36,858
378
6,632
87,789
74,430
13,359
40
43,537
20
(INRmn)
FY14E
2,160
51,306
146
53,611
25
1
27
53,638
52,041
24,188
27,854
3,500
11,885
2,070
105,486
37,613
11,981
48,882
378
6,632
97,156
83,797
13,359
8,329
53,638
25
Freecashflow
YeartoMarch
Netprofit
Add:Noncashcharge
Depreciation
Others
Grosscashflow
Less:ChangesinWC
Cashfromoperations
Less:Capex
Freecashflow
FY10
21,566
1,480
1,919
(440)
23,046
(12,428)
35,474
7,081
28,392.6
FY11
22,961
785
2,293
(1,508)
23,745
898
22,848
1,869
20,978.6
FY12E
26,864
1,473
2,366
(893)
28,337
(3,141)
31,478
4,500
26,978.1
FY13E
30,252
2,631
2,627
4
32,883
(3,581)
36,464
4,500
31,963.5
(INRmn)
FY14E
35,458
2,892
2,888
4
38,350
(3,535)
41,885
4,500
37,384.6
Cashflowmetric
YeartoMarch
Operatingcashflow
Financingcashflow
Investingcashflow
Changeincash
Capex
Dividendspaid
FY10
FY11
FY12E
FY13E
FY14E
35,474
22,848
31,478
36,464
41,885
(20,872)
(16,512)
(18,318)
(21,638)
(25,361)
(16,449)
(1,509)
(4,500)
(4,500)
(4,500)
(1,847)
4,827
8,660
10,326
12,024
(7,081) (1,869) (4,500) (4,500) (4,500)
(16,564) (16,420) (19,211) (21,634) (25,357)
125
Food
Ratios
YeartoMarch
ROAE(%)
ROACE(%)
Debtordays
Inventorydays
Payabledays
Currentratio
Interestcoverage(x)
FY10
FY11
FY12E
FY13E
FY14E
140.1
79.8
83.6
77.2
73.0
219.9
143.0
144.6
118.4
104.2
13
15
15
15
15
49
47
47
47
47
116
121
122
122
122
(54)
(59)
(59)
(60)
(60)
0.8 0.8 0.9 1.0 1.1
319.1 2,126.5 6,961.5 8,114.5 9,587.6
Operatingratios
YeartoMarch
Totalassetturnover
Fixedassetturnover
Equityturnover
FY10
10.1
12.9
11.6
FY11
7.3
8.9
7.3
FY12E
FY13E
FY14E
7.3 6.6 6.0
9.7 10.2 10.8
7.3 6.6 6.0
Dupontanalysis
YeartoMarch
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
FY10
12.1
10.1
1.1
140.1
FY11
10.9
7.3
1.0
79.8
FY12E
11.5
7.3
1.0
83.6
FY13E
11.7
6.6
1.0
77.2
FY14E
12.1
6.0
1.0
73.0
Valuationparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
FY10
9.7
40.0
10.5
40.7
32.0
4.6
32.0
1.7
FY11
9.8
1.7
10.9
40.0
31.5
4.2
34.8
1.6
FY12E
12.0
22.3
13.1
32.7
24.4
3.6
26.9
1.9
FY13E
14.0
16.5
15.2
28.1
19.5
3.1
22.9
2.2
FY14E
16.4
17.2
17.7
24.0
15.9
2.7
19.2
2.6
126
COMPANYUPDATE
Food
ITC
Innovationledgrowth
ITChasbeenoneofthebestconsumercompaniesintermsofcreationof
new brands and successful entry in new categories. The company is
extremely aggressive in promoting products, indicating its seriousness
and focus on the food segment. We are enthused by ITCs extensive
distribution reach and increasing focus on the premium end, which has
superiormargins.MaintainBUY.
Packagedfood:Thenextbigopportunity
ITC is present across segments (biscuits, staples, salty snacks, confectionary, etc).
Overallfoodssegmenthasbrokenevenandcontributes~10%tonetsales.Consumer
business leverages on skills of agri sourcing, ITC Welcomgroups specialist cuisine &
bakery,consumerdistributionsynergiesandITCR&DCentre,Bengaluru.
Moresuccessesthanfailure;widedistributionchaingivesanedge
Key successes: Salty snacks (Bingo is No.2 player), confectionaries (Candyman and
Minto are market leaders), biscuits (Sunfeast is No. 3 player), staples (Aashirwad has
more than 50% market share). ITC has been able to achieve this by the right product
mix,aggressiveadbudgets,andinnovativedistributionstrategy.Weareenthusedwith
the performance of noodles, although Nestle has upstaged ITC in pasta. It plans to
enter milk, chewing gum and many more segments over the coming years. Most
segments are facing intense competition from various local players and MNCs.
However,duetolowpenetration(~45%)andurbanization,packagedfoodscanprove
to be the next growth driver for ITC. Also, the company can leverage its cigarette
businessdistributionchaintogetanedgeovercompetitors.
Outlookandvaluations:Positive;maintainBUY
WeareconfidentofITCspricingpowerandinelasticnatureofcigarettedemand.Also,
we are extremely positive on its consumer business with the foods business already
havingbrokeneven.WereiterateBUY/SectorOutperformer.
Financials
YeartoMarch
FY11
FY12E
FY13E
FY14E
Revenues(INRmn)
222,737
257,319
291,833
335,983
Rev.growth(%)
16.4
15.5
13.4
15.1
EBITDA(INRmn)
74,077
86,040
98,502
112,939
Netprofit(INRmn)
50,179
60,237
69,303
80,423
7,570
7,738
7,738
7,738
DilutedEPS(INR)
6.7
7.9
9.0
10.5
EPSgrowth(%)
20.4
18.5
15.0
16.0
DilutedP/E(x)
30.8
26.0
22.6
19.5
EV/EBITDA(x)
19.9
17.5
15.1
13.1
ROAE(%)
33.2
35.7
37.2
38.6
EDELWEISS4DRATING
AbsoluteRating
BUY
Outperformer
Low
Equalweight
MARKETDATA(R:ITC.BO,B:ITCIN)
CMP
: INR204
TargetPrice
: INR220
52weekrange(INR)
: 216/150
Shareinissue(mn)
: 7,796.2
Mcap(INRbn/USDmn)
: 1,590/32,039
MFs,FIs&
Banks
34.8%
Others
48.9%
FIIs
16.3%

NIL
PRICEPERFORMANCE(%)
1month
3months
12months
Stock
(0.7)
(3.9)
32.4
Nifty
11.0
3.1
3.0
EWConsumer
GoodsIndex
2.0
(2.1)
30.8
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
127
Food
FinancialStatements
Incomestatement
YeartoMarch
Grossrevenue
Exciseduties
Netrevenues
Costofmaterials
Grossprofit
Manufacturingandoperatingexpenses
Employeecosts
EBITDA
Depreciation
EBIT
Otherincome
PBT
CorePAT
Minorityinterest
Associate
Profitaftertaxafterminorityinterest&associate
EPS(INR)basic
Dilutedshares(mn)
CEPS(INR)
DPS
(INRmn)
FY10
FY11
FY12E
FY13E
FY14E
276,247
320,782
370,587
420,293
483,878
84,888
98,046
113,269
128,461
147,895
191,359
222,737
257,319
291,833
335,983
69,870
81,184
95,593
107,347
123,884
121,489
141,553
161,726
184,486
212,099
38,137
43,691
49,148
55,448
63,837
14,660
17,240
19,591
21,926
25,243
5,449
6,546
6,948
8,609
10,079
63,243
74,077
86,040
98,502
112,939
6,439
6,991
7,372
8,447
9,227
56,804
67,086
78,668
90,056
103,712
6,303
7,765
10,942
12,837
15,552
63,107
74,851
89,610
102,892
119,264
62,459
74,349
89,125
102,526
118,968
20,349
23,655
28,356
32,619
37,850
42,110
50,694
60,769
69,907
81,118
(488)
(611)
(643)
(730)
(840)
62
96
111
126
145
41,684
50,179
60,237
69,303
80,423
7,570
7,570
7,738
7,738
7,738
5.6
6.7
7.9
9.0
10.5
7,651
7,651
7,738
7,738
7,738
5.5 6.6 7.9 9.03 10.5
6.4 7.6 8.8 10.1 11.7
5.5 4.5 5.1 5.4 6.2
91.6
68.6
65.0
60.0
60.0
23%
YeartoMarch
Costofmaterials
Employeecosts
Depreciation
EBITDAmargin
EBITmargin
Netprofitmargin
FY10
36.5
7.7
2.8
19.9
3.4
0.3
33.0
29.7
22.0
FY11
36.4
7.7
2.9
19.6
3.1
0.2
33.3
30.1
22.8
FY12E
37.1
7.6
2.7
19.1
2.9
0.2
33.4
30.6
23.6
FY13E
36.8
7.5
3.0
19.0
2.9
0.1
33.8
30.9
24.0
FY14E
36.9
7.5
3.0
19.0
2.7
0.1
33.6
30.9
24.1
Growthmetrics(%)
YeartoMarch
Revenues
EBITDA
PBT
Netprofit
EPS
FY10
11.4
11.0
6.6
5.6
5.1
FY11
16.4
17.1
19.0
20.4
20.4
FY12E
15.5
16.2
19.9
19.9
18.5
FY13E
13.4
14.5
15.0
15.0
15.0
FY14E
15.1
14.7
16.0
16.0
16.0
128
Food
Balancesheet
Ason31stMarch
Sharecapital
Reserves
Shareholders'funds
Minority
Securedloans
Unsecuredloans
Borrowings
Sourcesoffunds
Grossblock
Lessdepreciation
Netfixedassets
Investments
Currentassets
Inventories
Sundrydebtors
Cashandbankbalance
Othercurrentasset
Loansandadvances
Currentliabilities
Liabilities
Provisions
Workingcapital
Miscexpenditure
Usesoffunds
BV(INR)
FY10
3,818
140,765
144,583
1,264
10
1,098
1,108
7,806
154,760
129,927
42,128
87,800
10,177
50,005
90,016
50,920
10,100
13,486
3,057
12,453
83,239
37,371
45,868
6,777
2
154,760
19
FY11
7,738
156,882
164,621
1,408
251
995
1,246
7,981
175,255
139,935
48,440
91,495
13,623
48,678
109,625
57,331
11,017
24,269
3,665
13,344
88,168
46,683
41,485
21,458
1
175,255
22
FY12E
7,738
171,603
179,341
2,051
21
1,025
1,046
7,981
190,419
154,935
55,811
99,123
14,143
48,678
118,426
62,459
12,127
26,831
3,665
13,344
89,953
48,468
41,485
28,473
1
190,419
23
FY13E
7,738
192,567
200,305
2,781
17
829
846
7,981
211,912
169,935
64,258
105,677
14,643
48,678
139,159
70,756
13,674
37,720
3,665
13,344
96,246
54,762
41,485
42,913
1
211,912
26
(INRmn)
FY14E
7,738
216,895
224,633
3,621
13
633
646
7,981
236,880
184,935
73,484
111,450
14,943
48,678
166,531
81,369
15,651
52,503
3,665
13,344
104,724
63,239
41,485
61,807
1
236,880
29
Freecashflow
YeartoMarch
Netprofit
Add:Noncashcharge
Depreciation
Others
Grosscashflow
Less:ChangesinWC
Cashfromoperations
Less:Capex
Freecashflow
FY10
41,684
7,513
6,439
1,074
49,197
17
49,180
14,421
34,758
FY11
50,179
8,008
6,991
1,017
58,187
(1,984)
60,171
10,007
50,164
FY12E
60,237
8,390
7,372
1,018
68,627
4,453
64,174
15,521
48,654
FY13E
69,303
9,416
8,447
970
78,720
3,551
75,168
15,500
59,668
(INRmn)
FY14E
80,423
10,218
9,227
991
90,640
4,111
86,529
15,300
71,229
Cashflowmetric
YeartoMarch
Operatingcashflow
Financingcashflow
Investingcashflow
Changeincash
Capex
Dividendspaid
FY10
FY11
FY12E
FY13E
FY14E
49,180
60,171
64,174
75,168
86,529
(45,940)
(40,394)
(46,091)
(48,779)
(56,446)
(39,356)
(8,681)
(15,521)
(15,500)
(15,300)
(36,115)
11,096
2,562
10,889
14,783
(14,421) (10,007) (15,521) (15,500) (15,300)
(44,533)
(40,030)
(45,516)
(48,339)
(56,095)
129
Food
Ratios
YeartoMarch
ROAE(%)
ROACE(%)
Debtordays
Inventorydays
Payabledays
Currentratio
FY10
25.5
38.6
17
94
99
12
1.1
FY11
33.2
58.0
17
89
103
3
1.2
FY12E
FY13E
FY14E
35.7
37.2
38.6
58.6
59.1
59.0
17
17
17
89
88
88
103
103
103
3
2
2
1.3 1.4 1.6
Operatingratios
YeartoMarch
Totalassetturnover
Fixedassetturnover
Equityturnover
FY10
1.2
1.9
1.2
FY11
1.3
2.5
1.4
FY12E
FY13E
FY14E
1.4 1.5 1.5
2.7 2.8 3.1
1.5 1.5 1.6
Dupontanalysis
YeartoMarch
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
FY10
22.3
1.2
1.1
25.5
FY11
23.0
1.3
1.1
33.2
FY12E
23.9
1.4
1.1
35.7
FY13E
24.2
1.5
1.1
37.2
FY14E
24.4
1.5
1.1
38.6
Valuationparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
FY10
5.5
5.1
6.4
37.0
10.7
7.7
23.4
2.7
FY11
6.6
20.4
7.6
30.8
9.4
6.6
19.9
2.2
FY12E
7.9
18.5
8.8
26.0
8.8
5.8
17.5
2.5
FY13E
9.0
15.0
10.1
22.6
7.9
5.1
15.1
2.6
FY14E
10.5
16.0
11.7
19.5
7.0
4.4
13.1
3.1
130
COMPANYUPDATE
Food
JUBILANTFOODWORKS
DunkinDonutstohelpgainfoothold
JubiliantFoodworks(JFL)hasestablishedstrongbrandequityinthepizza
space on back of specialized menu to suit Indian palate, continuous
innovation,intensepromotionalactivityandaggressiverolloutstrategy.
It has well captured changing Indian demographics. Going forward it
needsto watch outforbuddingcompetitionfrom thelikes of Pizza Hut,
KFCandMcDonalds.Currentlyourmidcapteamcoversthecompanyand
theyhaveREDUCEratingonthestock.
Demographicsplay
JFL is a play on changing Indian demographics which are increasingly getting skewed
towardsyoungerandworkingpopulationwithlargeproportionofwomen.Inaddition,
theincreasedurbanizationandhigherdisposableincomesareleadingtoneedforquick
servicerestaurantslikeDominosandMcDonalds.
EDELWEISSRATING
AbsoluteRating
InvestmentCharacteristics
REDUCE
Growth
MARKETDATA(R:JUBI.BO,B:JUBIIN)
CMP
: INR1,028
TargetPrice
: INR700
52weekrange(INR)
: 1,050/469
Shareinissue(mn)
: 64.9
Mcap(INRbn/USDmn)
: 67/1,345
Highgrowthbackedbystrongbrand
Thecompanyruns439storesandplanstodoublestorenumberinthenextfiveyears.
This is leading to top line growth of about 47.5% CAGR and bottom line for about
109.5%forpastthreeyearsduetomarginexpansion.Jubilanthascreatedstrongbrand
name in India with product and promotional innovation. With the 30 min and the
Hungry Kya campaign, the company has positioned pizza as a meal which can be
delivered quickly. The brand value is further enhanced due to tie up with Dunkin
Donuts (well known breakfast chain in the United States). It plans to open 25 to 30
DunkinDonutsstoresinthreeyears.
Others
5.8%
FIIs
35.9%
Promoters*
57.7%
MFs,FIs&
Banks
0.6%
Risingcompetitiveintensity
FY10
4,239
51.0
666
330
64
5.3
320.0
195.5
47.6
NIL
PRICEPERFORMANCE(%)
We expect competition to increase as other organised players (Pizza Hut, KFC,

McDonalds)enhancetheirpresenceintier2cities.Wealsobelieveduetothelimited
potentialofnumberofstoresinasmalltown,returnswillbedilutivegoingforward.
Financials
YeartoMarch
Revenue(INRmn)
Growth(%)
EBIDTA(INRmn)
Netprofit(INRmn)
Shareoutstanding(mn)
EPS(INR)
EPSgrowth(%)
DilutedP/E(x)
ROAE(%)
FY11
6,781
59.9
1,196
717
65
11.0
108.4
93.8
46.9
FY12E
FY13E
10,194 14,088
50.3 38.2
1,869 2,589
988 1,397
65 65
15.6 22.0
41.9 41.2
66.1 46.8
43.5 42.0
Sensex
1month
10.0
3months
3.8
12months (2.4)
Stock
18.2
39.8
211.8
Stockover
Sensex
8.2
36.0
214.1
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
131
Food
FinancialStatements
Incomestatement
YeartoMarch
Incomefromoperations
Totaloperatingexpenses
Rawmaterial
Employeecosts
Manufacturingandotherexpenses
EBITDA
Depreciationandamortisation
EBIT
Interest
Totalotherincome
Profitbeforetax
Provisionfortax
CoreProfit
Extraordinaryincome/(loss)
Profitaftertax
ProfitAfterMinorityInterest
EPS(INR)basic
Dilutedshares(mn)
EPS(INR)diluted
Dividendpershare(INR)
Dividendpayout(%)
FY11
6,781
5,584
1,706
1,355
2,523
1,196
293
903
3
22
922
204
717
717
717
64
11.2
65
11.0
FY12E
10,194
8,325
2,497
2,039
3,789
1,869
388
1,480
24
1,505
487
1,018
(30)
988
988
64
15.8
65
15.6
1.00
7.6
FY13E
14,088
11,499
3,452
2,803
5,244
2,589
497
2,091
34
2,126
688
1,437
(40)
1,397
1,397
64
22.4
65
22.0
2.00
10.8
(INRmn)
FY14E
18,804
15,317
4,644
3,742
6,931
3,486
624
2,862
54
2,916
962
1,954
1,954
1,954
64
30.4
65
29.9
3.50
13.5
FY10
84.3
24.8
19.0
40.5
5.7
2.2
15.7
7.9
FY11
82.4
25.2
20.0
37.2
4.3
0.1
17.6
10.6
FY12E
81.7
24.5
20.0
37.2
3.8
0.0
18.3
10.0
FY13E
81.6
24.5
19.9
37.2
3.5
18.4
10.2
FY14E
81.5
24.7
19.9
36.9
3.3
18.5
10.4
FY10
51.0
97.3
314.3
358.7
320.0
FY11
59.9
79.6
175.2
114.7
108.4
FY12E
50.3
56.2
63.3
41.9
41.9
FY13E
38.2
38.5
41.2
41.2
41.2
FY14E
33.5
34.7
37.2
35.9
35.9
FY10
4,239
3,573
1,050
805
1,719
666
243
423
91
4
335
1
334
(4)
330
330
64
5.3
64
5.3
Commonsizemetricsas%ofnetrevenues
YeartoMarch
Operatingexpenses
Rawmaterials
Employeecosts
Manufacturingandotherexpenses
Interestexpenditure
EBITDAmargins
Netprofitmargins
Growthmetrics(%)
YeartoMarch
Revenues
EBITDA
PBT
Corenetprofit
EPS
132
Food
Balancesheet
Ason31stMarch
Equitycapital
Reserves&surplus
Shareholdersfunds
Securedloans
Sourcesoffunds
Grossblock
Depreciation
Netblock
CapitalworkInprogress
Investments
Inventories
Sundrydebtors
Cashandbankbalances
Loansandadvances
Totalcurrentassets
Currentliabilities
Totalcurrentliabilities&provisions
Netcurrentassets
Deferredtax(net)
Usesoffunds
Bookvaluepershare(BV)(INR)
FY10
648
526
1,174
86
1,260
2,276
872
1,403
26
0
71
29
70
362
533
702
702
(169)
1,260
18
Freecashflow
YeartoMarch
Netprofit
Depreciation
Others
Grosscashflow
Less:Changesinworkingcapital
Operatingcashflow
Less:Capex
Freecashflow
(INRmn)
FY10
FY11
FY12E
FY13E
FY14E
330 717 988 1,397 1,954
243 293 388 497 624
59 14 (24) (34) (54)
632 1,025 1,352 1,860 2,524
(157) (262) (112) (101) (174)
789 1,288 1,464 1,962 2,698
521 716 976 1,094 1,268
269 571 488 868 1,429
Cashflowmetrics
YeartoMarch
Operatingcashflow
Financingcashflow
Investingcashflow
Netcashflow
Capex
FY10
789
(229)
(523)
37
(521)
133
FY11
645
1,269
1,914
1,914
2,904
1,103
1,801
44
205
142
45
90
698
984
1,150
1,150
(167)
31
1,914
29
FY11
1,288
(67)
(1,199)
22
(716)
FY12E
645
2,181
2,827
2,827
3,880
1,491
2,390
44
305
160
70
427
826
1,491
1,433
1,433
58
31
2,827
44
FY12E
1,464
(75)
(1,052)
337
(976)
FY13E
645
3,428
4,073
4,073
4,974
1,988
2,986
44
605
221
96
879
1,001
2,205
1,797
1,797
408
31
4,073
63
FY13E
1,962
(151)
(1,359)
452
(1,094)
(INRmn)
FY14E
645
5,118
5,764
5,764
6,242
2,612
3,630
44
1,105
294
129
1,599
1,213
3,243
2,289
2,289
955
31
5,764
89
FY14E
2,698
(264)
(1,714)
720
(1,268)
Food
Ratios
YeartoMarch
ROAE(%)
ROACE(%)
Inventory(days)
Debtors(days)
Payable(days)
Cashconversioncycle
Currentratio
Debt/EBITDA
Interestcover(x)
Fixedassetsturnover(x)
Totalassetturnover(x)
Equityturnover(x)
Debt/Equity(x)
Adjusteddebt/Equity
FY10
47.6
36.6
6
2
58
(50)
0.8
0.1
4.6
3.4
3.7
6.0
0.1
0.1
FY11
46.9
60.8
7
2
61
(52)
0.9
264.0
4.2
4.3
4.4
FY12E
43.5
70.0
7
2
57
(48)
1.0
FY13E
42.0
69.8
6
2
51
(43)
1.2
FY14E
40.0
70.4
6
2
49
(40)
1.4
4.9
4.3
4.3
5.2
4.1
4.1
5.7
3.8
3.8
Dupontanalysis
YeartoMarch
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
FY10
7.9
3.7
1.6
47.6
FY11
10.6
4.3
1.0
46.9
FY12E
FY13E
FY14E
10.0 10.2 10.4
4.3 4.1 3.8
1.0 1.0 1.0
43.5 42.0 40.0
Valuationparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
EV/EBITDA(x)+1yrforward
Dividendyield(%)
FY10
5.3
320.0
9.1
195.5
55.6
15.4
98.1
54.6
FY11
11.0
108.4
15.7
93.8
35.1
9.7
55.0
35.2
FY12E
15.6
41.9
21.9
66.1
23.6
6.4
35.0
25.3
0.1
134
FY13E
22.0
41.2
30.1
46.8
16.3
4.6
25.0
18.5
0.2
FY14E
29.9
35.9
40.1
34.4
11.5
3.4
18.2
14.3
0.3
COMPANYUPDATE
Food
MARICOINDUSTRIES
Packingahealthypunch
MaricoIndustries(Marico),themarketleaderinhealthyedibleoilspace,
isawellestablishedbrandinthehealthandwellnessspace.Ridinghigh
onthepopularityofitsflagshipbrandSaffola,thecompanyhasextended
into various food categories like salt, rice and oats. It expects packaged
foodtocontribute25%toSaffola,fromthecurrent5%,overthenextfive
years.Weremainenthusedbyits undividedfocusongrowingconsumer
baseandmaintainBUY.
Marketleaderinedibleoil;Saffolaenjoysdominantmarketshare
Saffola, Maricos flagship brand, dominates the cooking oil space with 52% market
share. Being premiumend refined edible oil it has higher pricing power and margins,
(contributes16%tototaldomesticrevenue).Thecompany,asexpected,divestedlower
margin Sweekar brand. And, with more people getting health conscious, Saffola is
expectedtopostrobustgrowthintheedibleoilsegment.
Focusonhealthandwellness
Saffola has, over the years, become wellentrenched in the minds of consumers as a
healthandwellnessbrand.Thisledtothecompanyextendingthisbrandnametoother
offerings in the packaged foods category like oats and rice (Arise). Snacks (Zest),
however, did not do well. It first started with Saffola low sodium salt and atta for
diabetics, which did reasonably well. This was followed by Saffola Arise, a low calorie
and low carbohydrate packaged rice brand and Saffola oats. So far, the response has
beengoodandaccordingtocompanysourcesthereareagoodnumberofinstancesof
repeatpurchasesforArise.Oatstoohaspostedstronggrowth.
EDELWEISS4DRATING
AbsoluteRating
BUY
Outperformer
Medium
Equalweight
MARKETDATA(R:MRCO.BO,B:MRCOIN)
CMP
: INR162
TargetPrice
: INR185
52weekrange(INR)
: 172/112
Shareinissue(mn)
: 614.8
Mcap(INRbn/USDmn)
: 100/2,007
Others
6.6%
FIIs
25.8%
MFs,FIs&
Banks
4.9%
Promoters*
62.8%

NIL
Outlookandvaluations:Positive;maintainBUY
Marico is eyeing growth through low unit packs (LUPs), rural markets, focus on non
coconuthairoilandnewproductinitiativesinthefoodsegmentunderSaffola.Kayas
domestic business, we believe is an overhang in the near term. Hence, we maintain
BUY/SOrecommendationonthestock.
Financials
YeartoMarch
FY11
FY12E
FY13E
FY14E
Revenues(INRmn)
31,283
40,365
45,996
54,650
Rev.growth(%)
17.6
29.0
14.0
18.8
EBITDA(INRmn)
4,098
4,824
5,887
7,050
Netprofit(INRmn)
2,865
3,191
3,972
4,822
613
614
614
614
DilutedEPS(INR)
4.7
5.2
6.5
7.8
EPSgrowth(%)
22.4
11.6
24.5
21.4
DilutedP/E(x)
34.7
31.1
25.0
20.6
EV/EBITDA(x)
25.3
21.1
16.8
13.5
ROAE(%)
30.3
30.5
29.6
28.3
135
PRICEPERFORMANCE(%)
Stock
1month
7.8
3months
8.6
12months 42.6
Nifty
11.0
3.1
3.0
EWConsumer
GoodsIndex
2.0
(2.1)
30.8
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
Food
FinancialStatements
Income statement
(INR mn)
Year to March
Net revenues
FY10
FY11
FY12E
FY13E
Mar09
Mar10
Mar11
Mar12
FY14E
Mar13
26,608
31,283
40,365
45,996
54,650
C ost of materials
12,616
16,179
21,595
24,102
28,418
Gross profit
13,992
15,104
18,770
21,894
26,232
Employee costs
1,901
2,304
2,947
3,312
3,880
Advertisement & sales costs
3,511
3,460
4,440
5,106
6,148
Others
4,828
5,243
6,559
7,589
9,154
EBITDA
3,751
4,098
4,824
5,887
7,050
601
708
723
890
1,077
3,151
3,390
4,101
4,998
5,972
183
279
378
441
497
3,333
3,669
4,478
5,439
6,469
Depreciation
EBIT
Other income
EBIT incl. other income
Net interest & Finance charges
PBT
Provision for taxation
C ore PAT
257
393
405
370
315
3,077
3,275
4,073
5,070
6,154
643
850
815
1,014
1,231
2,433
4,924
2,426
3,259
4,056
Extraordinary items (net of tax)
(98)
489
Minority interest
(19)
(50)
Profit after tax after Minority Interest & Associate

Equity shares outstanding (mn)
(67)
(84)
(102)
2,317
2,865
3,191
3,972
4,822
609
613
614
614
614
EPS (INR) basic
3.8
4.7
5.2
6.5
7.8
Diluted shares (mn)
609
615
614
614
614
EPS (INR) fully diluted
3.8
4.7
5.2
6.5
7.8
C EPS (INR)
5.0
5.1
6.5
8.0
9.8
14.2
15.0
15.0
15.0
4.70
5.20
6.60
7.00
DPS
Dividend payout ratio (%)
17.4
Common size metrics (%)
-1%
Year to March
C ost of materials
Employee costs
0%
-2%
12%
FY10
FY11
FY12E
FY13E
FY14E
47.4
51.7
53.5
52.4
52.0
7.1
7.4
7.3
7.2
7.1
Advertising & sales costs
13.2
11.1
11.0
11.1
11.3
Other general expenditure
18.1
16.8
16.3
16.5
16.8
Depreciation
2.3
2.3
1.8
1.9
2.0
Net interest expenditure
1.0
1.3
1.0
0.8
0.6
EBITDA margin
14.1
13.1
12.0
12.8
12.9
EBIT margin
11.8
10.8
10.2
10.9
10.9
8.7
9.2
7.9
8.6
8.8
FY14E
Net profit margin

Growth metrics (%)
Year to March
FY10
FY11
FY12E
FY13E
Revenues
11.4
17.6
29.0
14.0
18.8
EBITDA
23.4
9.2
17.7
22.1
19.7
PBT
25.7
6.5
24.4
24.5
21.4
Net profit
22.8
23.7
11.4
24.5
21.4
EPS
22.7
22.4
11.6
24.5
21.4
136
Food
Balance sheet
(INR mn)
As on 31st March
FY10
FY11
FY12E
FY13E
609
614
614
614
614
Reserves
5,930
8,540
11,174
14,453
18,433
Shareholders' funds
6,540
9,155
11,789
15,067
19,047
125
219
286
370
472
1,142
4,250
3,023
2,573
2,123
Share capital
Minority
Secured loans
FY14E
Unsecured loans
3,317
3,468
3,695
3,145
2,595
Borrowings
4,459
7,718
6,718
5,718
4,718
Deferred tax liability
(616)
Sources of funds
(301)
(301)
(301)
(301)
10,507
16,791
18,492
20,854
23,936
Gross block
5,292
7,615
8,445
9,345
10,245
Less depreciation
2,424
3,366
4,088
4,978
6,055
Net fixed assets
2,868
4,250
4,357
4,367
4,190
C apital work in progress
1,129
646
620
600
575
850
3,976
3,976
3,976
3,976
Asset Held for disposal

Goodwill
Investments
Current assets
827
890
890
890
890
8,970
12,203
14,616
17,627
21,957
Inventories
4,448
6,011
6,737
7,664
9,091
Sundry debtors
1,507
1,880
2,174
2,464
2,913
C ash and bank balance
1,115
2,131
3,524
5,317
7,772
Loans and advances
1,900
2,181
2,181
2,181
2,181
C urrent liabilities
4,136
5,175
5,968
6,607
7,653
Liabilities
3,369
4,098
4,891
5,530
6,576
768
1,077
1,077
1,077
1,077
Working capital
4,833
7,028
8,648
11,020
14,304
Uses of funds
10,507
16,791
18,492
20,854
23,936
10.7
14.9
19.2
24.5
31.0
Year to March
FY10
FY11
FY12E
FY13E
FY14E
Net profit
2,317
2,865
3,191
3,972
4,822
Provisions
BV (INR)
Free cash flow
(INR mn)
Add: Non cash charge
974
662
1,195
1,343
1,494
Depreciation
601
708
723
890
1,077
Others
374
(46)
473
453
416
4,387
5,315
6,316
Gross cash flow

Less:C hanges in WC
C ash from operations
Less: C apex
Free cash flow
3,291
3,527
867
1,207
227
578
830
2,424
2,320
4,159
4,736
5,486
723
2,323
1,701
(3)
804
880
875
3,355
3,856
4,611
FY12E
FY13E
FY14E
Cash flow metric

Year to March
FY10
Operating cash flow
2,061
2,285
4,159
4,736
5,486
Financing cash flow
281
2,757
(1,962)
(2,063)
(2,156)
Investing cash flow
(2,114)
C hange in cash
229
FY11
(4,045)
997
(804)
1,393
(880)
1,793
(875)
2,454
C apex
(723)
(2,323)
(804)
(880)
(875)
Dividends paid
(470)
(472)
(557)
(694)
(842)
137
Food
Ratios
Year to March
FY10
FY11
FY12E
FY13E
FY14E
ROAE (%)
43.6
30.3
30.5
29.6
28.3
ROAC E (%)
36.6
26.5
24.5
26.6
27.8
Debtor days
18
20
20
20
19
Inventory days
54
61
61
61
61
Payable days
49
50
50
50
50
C ash conversion cycle (days)
23
31
30
30
30
C urrent ratio
2.2
2.4
2.4
2.7
2.9
0.7
Debt/EBITDA
1.2
1.9
1.4
1.0
Debt/Equity
0.7
0.8
0.6
0.4
0.2
Adjusted debt/equity
0.7
0.8
0.6
0.4
0.2
12.3
8.6
10.1
13.5
19.0
FY10
FY11
FY12E
FY13E
FY14E
2.9
2.3
2.3
2.3
2.4
Interest coverage (x)

Operating ratios
Year to March
Total asset turnover
Fixed asset turnover
9.9
8.8
9.4
10.5
12.8
Equity turnover
4.8
4.0
3.9
3.4
3.2
FY10
FY11
FY12E
FY13E
FY14E
9.1
7.6
7.9
8.6
8.8
Du pont analysis
Year to March
NP margin (%)
Total assets turnover
2.9
2.3
2.3
2.3
2.4
Leverage multiplier
1.6
1.7
1.7
1.5
1.3
43.6
30.3
30.5
29.6
28.3
FY14E
7.8
21.4
9.8
20.6
5.2
1.7
13.5
0.7
ROAE (%)
Valuationparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
138
FY10
FY11
FY12E
FY13E
3.8
22.7
5.0
42.5
15.1
3.8
26.9
0.4
4.7
22.4
5.1
34.7
10.8
3.3
25.3
0.4
5.2
11.6
6.5
31.1
8.4
2.5
21.1
0.5
6.5
24.5
8.0
25.0
6.6
2.1
16.8
0.6
COMPANYUPDATE
Food
NESTLE
Wellbaked
Nestle is consistently posting robust growth in spite of rising food

inflationandwebelievethemomentumwillcontinueincomingquarters
with increased focus on new product launches. We are extremely
optimisticaboutitsstrategyinprocessedfoodtobakeanewcakerather
than launching me too products to get a small market share. We are
enthused by Nestls leadership in most categories it is present in, high
pricingpower,amdcontinuousfocusoninnovation.MaintainHOLD.
Allsegmentsinfinefettle;volumerobustdespitepricehikes
NestlehaspostedrobustgrowthwithrevenueCAGRof 20%inthepastfiveyearson
backofphenomenalperformanceofitsleadingbrands(Magginoodles,Kitkat,Cerelac,
Milkmaid,Nescafe)andsuccessofnewbrands(Maggipasta,Nesvita,Munch).Despite
highfoodinflation,thecompanymanagedtoreportrobustvolumegrowth.Itsstrategy
ofbakingalargercakeistoexpandcategoriesandnotjustfocusonmarketshare.This
is evident from huge success of pasta and new noodle variants. With packaged foods
highly
underpenetrated and launch of new innovative products and envious success
recordofthecompanyweareoptimisticonitspotential.

Highercapexcycletoaddresscapacityconstraint
The company is planning to significantly step up capex (INR20bn) over the next two
three years. On cards is capex for brownfield projects at Karnataka (INR3.6bn) for
noodles,Goa(INR5bn)forexpansioninconfectionary,Punjab(INR2bn)forchocolates,
and Haryana (INR6bn) for greenfield expansion, Himachal Pradesh (INR45bn) for
chocolatesandnoodlesgreenfieldproject.

Outlookandvaluations:Goingstrong;maintainHOLD
WeareenthusedbyNestlsplanforhighercapextomeetthegrowingdemandforits
products
and launch new products. The company has posted buoyant sales growth
consistentlyinspiteofhighfoodinflationanditisthebestplayonpackagedfood.We
maintainHOLD/SectorPerformerrecommendation/rating.
Financials
CY10
CY11
CY12E
CY13E
YeartoDecember
Revenues(INRmn)
62,547 74,908 91,172 110,414
Rev.growth(%)
21.9 19.8 21.7 21.1
EBITDA(INRmn)
Netprofit(INRmn)
DilutedEPS(INR)
EPSgrowth(%)
DilutedP/E(x)
EV/EBITDA(x)
ROAE(%)
12,497
8,554
96
88.7
18.9
48.1
32.6
119.1
15,528
9,616
96
99.7
12.4
42.8
26.4
96.1
139
19,247
11,772
96
122.1
22.4
35.0
21.4
89.0
23,537
14,228
96
147.6
20.9
28.9
17.5
83.0
EDELWEISS4DRATING
AbsoluteRating
HOLD
Performer
Low
Equalweight
MARKETDATA(R:NEST.BO,B:NESTIN)
CMP
: INR4,270
TargetPrice
: INR4,700
52weekrange(INR)
: 4,549/3,160
Shareinissue(mn)
: 96.4
Mcap(INRbn/USDmn)
: 412/8,294
Others
18.3%
FIIs
10.9%
Promoters*
62.8%
MFs,FIs&
Banks
8.0%

NIL
PRICEPERFORMANCE(%)
Stock
1month
4.5
3months (2.5)
12months 33.9
Nifty
11.0
3.1
3.0
EWConsumer
GoodsIndex
2.0
(2.1)
30.8
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
Food
FinancialStatements
Incomestatement
YeartoDecember
Netrevenues
Costofmaterials
Grossprofit
Employeecosts
Others
EBITDA
Depreciation
EBIT
Otherincome
Provisionforcontingencies
PBT
CorePAT
EPS(INR)basic
Dilutedshares(mn)
CEPS(INR)
DPS
(INRmn)
CY12E
CY13E
91,172
110,414
43,342
51,544
47,830
58,869
6,701
8,281
21,881
27,051
19,247
23,537
2,028
2,628
17,219
20,909
555
619
469
469
17,306
21,058
120
135
17,186
20,923
5,413
6,695
11,772
14,228
11,772
14,228
96
96
122.1 147.6
96
96
122.1 147.6
143.1 174.8
73
89
60
60
CY09
51,294
24,484
26,810
4,324
12,141
10,345
1,216
9,129
378
323
9,830
14
9,816
2,620
7,196
7,196
96
74.6
96
74.6
87.3
49
71
CY10
62,547
30,556
31,992
4,334
15,161
12,497
1,278
11,219
427
184
11,829
11
11,818
3,264
8,554
8,554
96
88.7
96
88.7
102.0
49
57
CY11
74,908
35,894
39,015
5,465
18,022
15,528
1,637
13,891
509
469
13,930
51
13,879
4,264
9,616
9,616
96
99.7
96
99.7
116.7
60
60
YeartoDecember
Costofmaterials
Employeecosts
Depreciation
EBITDAmargin
EBITmargin
Netprofitmargin
CY09
47.7
8.4
0.0
23.7
2.4
0.0
20.2
17.8
14.0
CY10
48.9
6.9
0.0
24.2
2.0
0.0
20.0
17.9
13.7
CY11
47.9
7.3
0.0
24.1
2.2
0.1
20.7
18.5
12.8
CY12E
47.5
7.4
0.0
24.0
2.2
0.1
21.1
18.9
12.9
CY13E
46.7
7.5
0.0
24.5
2.4
0.1
21.3
18.9
12.9
Growthmetrics(%)
YeartoDecember
Revenues
EBITDA
PBT
Netprofit
EPS
CY09
18.6
19.8
22.2
27.5
27.5
CY10
21.9
20.8
20.4
18.9
18.9
CY11
19.8
24.3
17.4
12.4
12.4
CY12E
21.7
24.0
23.8
22.4
22.4
CY13E
21.1
22.3
21.7
20.9
20.9
140
Food
Balancesheet
Ason31stDecember
Sharecapital
Reserves
Shareholders'funds
Securedloans
Unsecuredloans
Borrowings
Sourcesoffunds
Grossblock
Lessdepreciation
Netfixedassets
Investments
Currentassets
Inventories
Sundrydebtors
Cashandbankbalance
Loansandadvances
Currentliabilities
Liabilities
Provisions
Workingcapital
Usesoffunds
BV(INR)
CY09
964
4,848
5,813
0
0
0
320
6,133
16,408
7,446
8,962
796
2,033
8,566
4,987
642
1,556
1,380
14,224
5,876
8,348
(5,658)
6,133
60
CY10
964
7,590
8,554
0
0
0
333
8,887
18,547
8,420
10,127
3,489
1,507
10,460
5,760
633
2,553
1,514
16,696
7,617
9,079
(6,236)
8,887
89
CY11E
964
10,484
11,448
450
550
1,000
333
12,781
26,297
10,057
16,240
2,500
1,507
9,634
6,415
743
962
1,514
17,099
8,020
9,079
(7,466)
12,781
119
CY12E
964
14,028
14,992
675
825
1,500
333
16,825
33,797
12,085
21,712
1,500
1,507
10,919
7,783
879
743
1,514
18,813
9,734
9,079
(7,894)
16,825
155
(INRmn)
CY13E
964
18,310
19,274
900
1,100
2,000
333
21,607
41,297
14,713
26,584
1,000
1,507
13,377
9,395
1,034
1,434
1,514
20,861
11,781
9,079
(7,483)
21,607
200
Freecashflow
YeartoDecember
Netprofit
Add:Noncashcharge
Depreciation
Others
Grosscashflow
Less:ChangesinWC
Cashfromoperations
Less:Capex
Freecashflow
CY09
7,196
907
1,216
(309)
8,103
15
8,088
2,064
6,024
CY10
8,554
1,105
1,278
(173)
9,659
(978)
10,636
4,832
5,804
CY11E
9,616
2,157
1,637
520
11,773
362
11,411
6,761
4,650
CY12E
11,772
2,617
2,028
589
14,389
(210)
14,599
6,500
8,099
(INRmn)
CY13E
14,228
3,232
2,628
604
17,460
(280)
17,740
7,000
10,740
Cashflowmetric
YeartoDecember
Operatingcashflow
Financingcashflow
Investingcashflow
Changeincash
Capex
Dividendspaid
CY09
CY10
CY11E
CY12E
CY13E
9,268
10,368
10,942
14,130
17,271
(5,413)
(5,438)
(5,772)
(7,849)
(9,580)
(2,552)
(4,459)
(6,761)
(6,500)
(7,000)
1,303
471
(1,591)
(219)
691
(2,064) (4,832) (6,761) (6,500) (7,000)
(5,471)
(5,448)
(6,721)
(8,229)
(9,945)
141
Food
Ratios
YeartoDecember
ROAE(%)
ROACE(%)
Debtordays
Inventorydays
Payabledays
Currentratio
CY09
CY10
CY11E
CY12E
CY13E
136.5
119.1
96.1
89.0
83.0
206.0
195.5
148.9
129.5
118.1
4
4
4
4
3
33
31
31
31
31
49
49
49
49
49
(12)
(14)
(14)
(15)
(15)
0.6 0.6 0.6 0.6 0.6
Operatingratios
YeartoDecember
Totalassetturnover
Fixedassetturnover
Equityturnover
CY09
9.1
6.2
9.7
CY10
8.3
6.6
8.7
CY11E
CY12E
CY13E
6.9 6.2 5.7
5.7 4.8 4.6
7.5 6.9 6.4
Dupontanalysis
YeartoDecember
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
CY09
14.0
9.1
1.1
136.5
CY10
13.7
8.3
1.0
119.1
CY11E
12.8
6.9
1.1
96.1
CY12E
12.9
6.2
1.1
89.0
CY13E
12.9
5.7
1.1
83.0
Valuationparameters
YeartoDecember
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
CY09
74.6
27.5
87.3
57.2
70.8
8.0
39.5
1.1
CY10
88.7
18.9
102.0
48.1
48.1
6.5
32.6
1.1
CY11E
99.7
12.4
116.7
42.8
36.0
5.5
26.4
1.4
CY12E
122.1
22.4
143.1
35.0
27.5
4.5
21.4
1.7
CY13E
147.6
20.9
174.8
28.9
21.4
3.7
17.5
2.1
142
COMPANYUPDATE
Food
PANTALOONRETAIL
Food,thenewfocus
IndiaEquityResearch|Retail
Pantaloon Retail (PRIL), the largest retailer in the country, stands to

benefit from the wide range of private labels under its umbrella which
providecheaperoptionstoconsumersfightinghighinflationarypressure.
ThecompanyplanstoincreasecontributionfromFoodBazaartoreduce
thenumberofinventorydays.MaintainHOLD.
Turningfocusonfoodsduetohighinventoryturnover
ContributionofFoodBazaartototalPRILsalesissettoincreasefrom~35%currentlyto
~50% in the next fourfive years. The company has increased focus on this category
because of higher inventory turns (1518 turns) compared to fashion (23 turns),
negative working capital and bestinclass sales/sq ft (~INR14,000). This, in turn, will
ensuresustainedinternalaccrualsandlowerdependencyondebt.
Presenceacrosscategories;privatelabelsprovidecheaperoption
PRILhasprivatelabelbrandsacrosscategorieswithbrandFresh&Pureindairy,Tasty
Treat cereals, Golden Harvest spices, Ektaa and Punya edible oils. Also, the company
haslaunchedvarioushomegrownrecipessuchaspavbhajimasalaandlemonpickles.It
is present in packaged food products under brands Chings Secret (Chinese cuisine),
Smith&Jones(Continentalcuisine),MamaMaria(Italiancuisine),Raji(Indianreadyto
cook)andKaengThai(Thaicuisine).Thereisintensecompetitionfromnationalbrands
aswellasMNCsinmostsegments.However,asprivatelabelsprovidecheaperoptions
we believe the food segment in PRIL can capitalize in the current high inflation
environment.Also,moderntradecurrentlycontributesmerely~6%tototalFMCGsales
whichgoingaheadwillimproveanddirectlybenefitPRILsprivatelabels.
EDELWEISS4DRATING
AbsoluteRating
HOLD
Underperformer
High
Equalweight
MARKETDATA(R:PART.BO,B:PFIN)
CMP
: INR190
TargetPrice
: INR205
52weekrange(INR)
: 364/125
Shareinissue(mn)
: 207.5
Mcap(INRbn/USDmn)
: 39/794
Others
6.0%
FIIs
14.9%
MFs,FIs&
Banks
19.4%
Promoters*
59.7%

29.6
Outlookandvaluations:Positive;maintainHOLD
WearebullishonPRILgivenitsfocusoncalibratedprofitablegrowth,robustexpansion
plansandsharpcorrectioninstockprice.Thekeyrisksarehighdebtlevelanddelayin
restructuring.WehaveHOLD/SectorUnderperformer.
Financials
YeartoJune
FY10
FY11
FY12E
FY13E
Revenues(INRmn)
89,261
110,123
123,045
143,988
Rev.growth(%)
40.8
23.4
11.7
17.0
EBITDA(INRmn)
8,191
9,600
10,779
12,829
Netprofit(INRmn)
2,302
1,897
1,222
1,526
206
217
217
217
DilutedEPS(INR)
11.8
8.7
5.6
7.0
EPSgrowth(%)
59.7
(25.9)
(35.6)
24.9
DilutedP/E(x)
14.9
20.1
31.2
25.0
EV/EBITDA(x)
9.4
11.6
11.0
9.9
ROAE(%)
9.0
6.3
3.8
4.6
*Nosrepresentcoreretailbusiness(PRIL+FVRL)
143
PRICEPERFORMANCE(%)
Stock
1month
29.1
3months
1.5
12months (20.3)
Nifty
11.0
3.1
3.0
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
EWRetail
Index
8.7
(3.9)
2.0
Food
FinancialStatements
Incomestatement
YeartoJune
Netrevenues
Costofmaterials
Grossprofit
Employeecosts
Electricityexpenses
Rentandleaseexpenses
Others
EBITDA
Depreciation
EBIT
Otherincome
PBT
CorePAT
Extraordinaryitems(netoftax)
EPS(INR)basic
Dilutedshares(mn)
CEPS(INR)
DPS
FY09
63,417
44,300
19,118
2,743
1,142
990
5,066
2,493
6,684
1,401
5,283
61
5,344
3,182
2,162
757
1,405
0
1,405
190
7.4
190
7.4
14.7
1
9.5
(INRmn)
FY12E
FY13E
123,045
143,988
87,239
101,872
35,806
42,117
5,340
6,393
2,707
3,168
2,215
2,592
9,351
10,799
5,414
6,335
10,779
12,829
3,395
4,182
7,384
8,647
324
307
7,708
8,955
5,885
6,677
1,823
2,278
602
752
1,222
1,526
0
0
1,222
1,526
217
217
5.6 7.0
217.1
217
5.6 7.0
21.3 26.3
1
1
11.0
11.0
FY10
FY11
89,261
110,123
63,549
79,010
25,712
31,113
3,940
4,883
2,126
2,485
1,308
1,831
6,315
7,474
3,833
4,840
8,191
9,600
2,123
2,675
6,068
6,925
857
208
6,925
7,133
3,913
4,288
3,013
2,845
582
948
2,431
1,897
(129)
0
2,302
1,897
206
217
11.8 8.7
206
217
11.8 8.7
22.1 21.1
1
1
11.0
10.7
YeartoJune
Costofmaterials
Employeecosts
Rentandleaseexpenses
Depreciation
EBITDAmargin
Netprofitmargin
FY09
69.9
4.3
1.8
8.0
3.9
2.2
5.0
10.5
2.2
FY10*
71.2
4.4
2.4
7.1
4.3
2.4
4.4
9.2
2.7
FY11E*
71.7
4.4
2.3
6.8
4.4
2.4
3.9
8.7
1.7
FY12E*
70.9
4.3
2.2
7.6
4.4
2.8
4.8
8.8
1.0
FY13E*
70.8
4.4
2.2
7.5
4.4
2.9
4.6
8.9
1.1
Growthmetrics(%)
YeartoJune
Revenues
EBITDA
PBT
Netprofit
EPS
FY09
25.6
45.1
10.5
11.5
(6.6)
FY10
40.8
22.6
39.4
73.0
59.7
FY11
23.4
17.2
(5.6)
(22.0)
(25.9)
FY12E
11.7
12.3
(35.9)
(35.6)
(35.6)
FY13E
17.0
19.0
24.9
24.9
24.9
144
Food
Balancesheet
Ason30thJune
Sharecapital
Reserves
Shareholders'funds
Minority
Securedloans
Unsecuredloans
Borrowings
Sourcesoffunds
Grossblock
Lessdepreciation
Netfixedassets
Investments
Currentassets
Inventories
Sundrydebtors
Cashandbankbalance
Othercurrentasset
Loansandadvances
Currentliabilities
Liabilities
Provisions
Workingcapital
Miscexpenditure
Usesoffunds
BV(INR)
FY09
1,076
23,947
25,023
3,846
32,860
5,723
38,583
40
67,491
25,945
3,936
22,009
4,297
8,978
46,231
21,913
3,066
2,025
122
19,106
14,049
13,519
530
32,182
25
67,491
131
FY10
1,108
27,656
28,764
3,183
32,571
10,949
43,520
1,102
76,569
30,868
4,400
26,468
3,044
9,098
58,467
24,912
3,914
2,865
157
26,620
20,508
19,706
802
37,959
0
76,569
140
FY11
1,818
29,602
31,420
3,313
55,397
23,065
78,461
1,555
114,749
40,260
6,787
33,473
3,446
12,967
93,287
36,791
5,298
5,520
402
45,275
28,424
26,721
1,702
64,863
0
114,749
145
FY12E
1,818
30,666
32,484
3,313
37,558
45,904
83,461
1,555
120,813
50,260
10,182
40,079
3,000
12,967
91,076
37,082
5,113
3,204
402
45,275
26,309
24,606
1,702
64,767
0
120,813
150
(INRmn)
FY13E
1,818
31,996
33,813
3,313
41,608
50,854
92,461
1,555
131,143
61,260
14,364
46,897
2,750
12,967
99,014
43,354
5,944
4,039
402
45,275
30,485
28,783
1,702
68,529
0
131,143
156
Freecashflow
YeartoJune
Netprofit
Add:Noncashcharge
Depreciation
Others
Grosscashflow
Less:ChangesinWC
Cashfromoperations
Less:Capex
Freecashflow
FY09
1,405
4,583
1,401
3,182
5,988
2,405
3,583
7,135
(3,552)
FY10
2,302
7,328
2,123
5,205
9,630
(2,339)
11,969
4,923
7,046
FY11
1,897
6,964
2,675
4,288
8,860
6,248
2,612
9,392
(6,780)
FY12E
1,222
9,279
3,395
5,885
10,501
2,221
8,280
9,555
(1,274)
(INRmn)
FY13E
1,526
10,859
4,182
6,677
12,385
2,926
9,459
10,750
(1,291)
Cashflowmetric
YeartoJune
Operatingcashflow
Financingcashflow
Investingcashflow
Changeincash
Capex
Dividendspaid
FY09
FY10
FY11
FY12E
FY13E
(1,726)
2,512
(10,873)
8,280
9,459
9,630
2,806
30,216
(1,042)
2,127
(9,532)
(4,479)
(16,687)
(9,555)
(10,750)
(1,628)
839
2,656
(2,316)
835
(7,135) (4,923) (9,392) (9,555) (10,750)
(156)
(296)
(255)
(157)
(196)
145
Food
Ratios
YeartoJune
ROAE(%)
ROACE(%)
Debtordays
Inventorydays
Payabledays
Currentratio
Debt/EBITDA
Debt/Equity
Adjusteddebt/equity
Interestcoverage(x)
FY09
5.9
10.0
17
114
81
51
3.3
5.8
1.5
1.5
1.7
FY10
9.0
9.6
14
96
75
35
2.9
5.3
1.5
1.5
1.6
FY11
6.3
8.2
15
102
84
33
3.3
8.2
2.5
2.5
1.6
FY12E
FY13E
3.8
4.6
7.0
7.7
15
15
110
110
80
80
45
45
3.5 3.2
7.7 7.2
2.6 2.7
2.6 2.7
1.3 1.3
Operatingratios
YeartoMarch
Totalassetturnover
Fixedassetturnover
Equityturnover
FY09
1.0
3.3
2.7
FY10
1.2
3.7
3.3
FY11
1.2
3.7
3.7
FY12E
FY13E
1.0 1.1
3.3 3.3
3.9 4.3
Dupontanalysis
YeartoMarch
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
FY09
2.2
1.0
2.6
5.9
FY10
2.7
1.2
2.7
9.0
FY11
1.7
1.2
3.2
6.3
FY12E
1.0
1.0
3.7
3.8
FY13E
1.1
1.1
3.8
4.6
Valuationparameters
YeartoJune
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
FY09
7.4
(6.6)
14.7
23.8
1.3
1.1
10.5
0.4
FY10
11.8
59.7
22.1
14.9
1.3
0.9
9.4
0.7
FY11
8.7
(25.9)
21.1
20.1
1.2
1.0
11.6
0.5
FY12E
5.6
(35.6)
21.3
31.2
1.2
1.0
11.0
0.4
FY13E
7.0
24.9
26.3
25.0
1.1
0.9
9.9
0.4
146
COMPANYPROFILE
Food
AGROTECHFOODS
WelloiledtomakeACTstronger
AgroTechFoods(ATF)hasastrongpresenceinhealthyedibleoilbusiness
through its brand Sundrop. Also, the company is constantly focusing on
high margin packaged food category (ACT II popcorn, peanut butter,
chocolatepudding,conveniencefoodsetc).Revenuesharefromfoodshas
swollenfrom2%inFY07to17%inFY11andislikelytofurthercatapultto
50%ofsalesoverthelongterm.Also,duetoitsaffiliationwithConAgra
(bought ITC stake to become ATFs majority owner) we expect the
companytoenterintonewercategoriesthatConAgraispresentin.
Marginimprovementkeyfocus
Aspartofitslongtermmarginimprovementstrategy,ATFalsosolditsRathbrandto
Cargill.Currently,ATFsgrossandPATmargins,at30.0%and6.2%,respectively,arefar
low compared to peers, as it is highly dependent on the lowmargin refined oil
business. However, the company intends to expand its packaged food business and
launch new products with gross margins above 30% with an intent to expand gross
marginto40%overthelongterm.
EDELWEISSRATING
AbsoluteRating
MARKETDATA(R:AGRO.BO,B:ATFLIN)
CMP
: INR429
TargetPrice
: NotRated
52weekrange(INR)
: 483/294
Shareinissue(mn)
: 24.4
Mcap(INRbn/USDmn)
: 11/211
Others
37.2%
Packagedfoodstodrivegrowth
Promoters*
51.8%
Oflate,ATFisdiversifyingintohighmarginconvenience/packagedfoods.Itspackaged
food products like ACT II popcorn, peanut butter, chocolate pudding, etc., have gross
marginsexceeding35%.ActIIlaunchedmanyIndiacentrictastesforpopcorns.Italso
launchedreadytocookconveniencefoods.Thecompanyis,however,cautiousofMNC
competitionandhasaclearstrategyofnotgoingformetooproducts.
NotRated
FIIs
8.5%
MFs,FIs&
Banks
2.5%

ParentprovidesproducttechnologyandR&Dsupport
ATFisanaffiliateofConAgrawhichprovidestheformertechnologyandR&Dsupport,
usingwhichitplanstointroduce/testmarketonetwonewvalueaddedprocessedfood
products every year. The latters business strategy will be to customize ConAgras
internationalproductstosuitIndianneedsandlaunchtheminthedomesticmarket.
Financials
YeartoDecember
Revenues(INRmn)
Rev.growth(%)
EBITDA(INRmn)
Netprofit(INRmn)
EPS(INR)
EPSgrowth(%)
DilutedP/E(x)
EV/EBITDA(x)
ROAE(%)
FY08
10,084
(2.9)
217
163
24
6.7
2.7
64.3
44.6
15.7
FY09
7,736
(23.3)
155
208
24
8.6
28.3
50.1
66.4
17.2
FY10
6,496
(16.0)
225
245
24
10.1
17.8
42.6
42.5
17.5
147
FY11
7,187
10.6
275
318
24
13.1
29.6
32.8
34.8
19.4
NIL
PRICEPERFORMANCE(%)
Sensex
1month
10.0
3months
3.8
12months (2.4)
Stock
7.4
7.0
44.7
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
Stockover
Sensex
(2.6)
3.2
47.1
Food
FinancialStatements
Incomestatement
YeartoMarch
Directcosts
Employeecosts
Otherexpenses
EBITDA
EBIT
Interestexpenses
Otherincome
Profitbeforetax
Provisionfortax
Coreprofit
Extraordinaryitems
Profitaftertax
PATafterminorityinterest
Adjustednetprofit
EPS(INR)diluted
Dilutedequityshares(mn)
Taxrate(%)
FY07
10,382
9,130
184
943
10,257
124
22
102
28
121
195
34
161
3
158
158
158
6
24.4
17.4
FY08
10,084
8,802
223
842
9,867
217
24
193
13
33
213
51
163
163
163
163
7
24.4
23.8
FY09
7,736
6,052
288
1,241
7,581
155
24
130
5
111
236
68
168
(40)
208
208
208
9
24.4
28.7
FY10
6,496
4,294
263
1,714
6,270
225
30
195
4
140
331
80
251
6
245
245
245
10
24.4
24.1
(INRmn)
FY11
7,187
5,271
320
1,320
6,912
275
46
229
1
69
297
153
144
(174)
318
318
318
13
24.4
51.6
YeartoMarch
Operatingexpenses
DepreciationandAmortization
Interestexpenditure
EBITDAmargins
Netprofitmargins
FY07
98.8
0.2
0.3
1.2
1.5
FY08
97.8
0.2
0.1
2.2
1.6
FY09
98.0
0.3
0.1
2.0
2.7
FY10
96.5
0.5
0.1
3.5
3.8
FY11
96.2
0.6
0.0
3.8
4.4
Growthmetrics(%)
YeartoMarch
Revenues
EBITDA
PBT
Netprofit
EPS
FY07
8.8
459.2
1,050.7
476.8
28.1
FY08
(2.9)
74.6
9.5
1.0
2.7
FY09
(23.3)
(28.6)
10.7
3.5
28.3
FY10
(16.0)
45.4
40.2
49.4
17.8
FY11
10.6
22.1
(10.3)
(42.8)
29.6
148
Food
Balancesheet
Ason31stMarch
Equitycapital
Reserves&surplus
Shareholdersfunds
Securedloans
Borrowings
Sourcesoffunds
Grossblock
Depreciation
Netblock
Totalfixedassets
Inventories
Sundrydebtors
Cashandequivalents
Othercurrentassets
Totalcurrentassets
Sundrycreditorsandothers
Provisions
TotalCL&provisions
Netcurrentassets
Netdeferredtax
MiscExpensesnotwrittenoff
Usesoffunds
AdjustedBVpershare(INR)
Freecashflow
YeartoMarch
Netprofit
Depreciation
Deferredtax
Others
Grosscashflow
Less:ChangesinWC
Operatingcashflow
Less:Capex
Freecashflow
149
FY07
244
713
956
124
124
1,080
544
213
331
2
333
626
377
155
269
1,427
723
18
741
686
60
1
1,080
39
FY08
244
875
1,119
113
113
1,232
566
228
337
2
339
745
345
165
298
1,552
686
10
697
856
36
1,232
46
FY09
244
1,055
1,299
1,299
589
221
368
7
375
436
159
877
235
1,707
745
56
801
907
17
1,299
53
FY07
158
22
1
69
251
214
37
16
21
FY08
163
24
18
51
255
170
85
30
55
FY09
208
24
25
681
939
51
888
55
832
FY10
244
1,264
1,507
1,507
602
192
410
124
534
574
178
890
279
1,921
896
66
962
959
14
1,507
62
(INRmn)
FY11
244
1,532
1,776
1,776
698
202
496
185
681
674
351
448
513
1,986
855
67
922
1,063
32
1,776
73
FY10
245
30
38
(121)
192
53
140
72
67
(INRmn)
FY11
318
46
(18)
(666)
(320)
104
(424)
132
(556)
Food
Profitability&liquidityratios
YeartoMarch
ROAE(%)(onadjustedprofits)
ROACE(%)
Inventorydays
Debtorsdays
Payabledays
Cashconversioncycle
Currentratio
Debt/EBITDA
Interestcoverage
Fixedassetst/o(x)
Debt/equity
FY07
18.0
10.4
89
13
31
71
1.9
1.0
3.7
31.1
0.1
FY08
15.7
16.7
114
13
29
98
2.2
0.5
15.0
30.2
0.1
FY09
17.2
10.3
142
12
43
111
2.1
24.3
21.9
FY10
17.5
13.9
172
9
70
111
2.0
55.7
16.7
FY11
19.4
13.9
173
13
61
126
2.2
170.9
15.9
Valuationsparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(X)
FY07
6.5
28.1
7.6
66.0
10.9
1.0
83.8
FY08
6.7
2.7
8.4
64.3
9.3
1.0
44.6
FY09
8.6
28.3
8.9
50.1
8.0
1.3
66.4
FY10
10.1
17.8
13.1
42.6
6.9
1.5
42.5
FY11
13.1
29.6
7.1
32.8
5.9
1.3
34.8
150
COMPANYPROFILE
Food
BRITANNIAINDUSTRIES
Biscuitking
Britannia Industries (Britannia), the biscuit market leader has diversified

into other high growth potential segmentsdairy, bakery and RTE. We
arepositiveonentryintotheseuntappedcategorieswhichmayleadthe
companytothegrowthpath.However,duetointensecompetitionfrom
MNCs,marketdynamicsneedtobecautiouslywatched.
Marketleaderinbiscuits
EDELWEISSRATING
AbsoluteRating
NotRated
Britanniaispresentacrossvariouspricepointsandcategories(glucose,marie,cream,
salty) under brands Tiger, Bourbon, 5050, and Good day. The company recently
launchedTreatOinthepremiumcategory.Itreportedstrong20%plussalesgrowthfor
six consecutive quarters. The company is focusing on premium portfolio and has
recentlylaunchedNutrichoiceMultigrainThinsandNutrichoiceMultigrainRoasty.
MARKETDATA(R:BRIT.BO,B:BRITIN)
CMP
: INR486
TargetPrice
: NotRated
52weekrange(INR)
: 501/324
Shareinissue(mn)
: 119.5
Mcap(INRbn/USDmn)
: 58/1,170
Nonbiscuitsportfolioshowingexuberance
The company is diversifying away from highly penetrated category of biscuits as it is
facing intense competition from local players and MNCs. Nonbiscuits portfolio
includingdairy,bread,cakesandruskisgrowingatafasterclipandpostedtotalsalesof
INR9bninFY11.Thecompanyhasreasonablepresenceinthedairysegment(dahi,milk,
cheese, flavored milk, butter, ghee) and bakery products. Also, Britannia, keeping in
viewthehealthandwellnessplank,hasenteredvarioussnackingoptionswhichinclude
diabeticfriendlybiscuits,breakfastcereals,BritanniaHealthyStart,adeliciousrangeof
readytocook breakfast mixes including pohas, upmas, oats and porridges. However,
due to intense competition from MNCs in oats and entry into untested territory like
upma/pohaetc.,itwouldbeprudenttowaitbeforecomingtoafinalconclusion.
Others
19.1%
FIIs
17.3%
Promoters*
51.0%
MFs,FIs&
Banks
12.6%
NIL
PRICEPERFORMANCE(%)
Irrationalcompetitionkeyconcern
Competitiveintensityinbiscuitsfromlocalplayersishigh~450biscuitmanufacturers,
with 68 companies with >0.05% market share. Management believes introduction of
GSTwillbenefitBritanniaasitwillensurealevelplayingfield.
Financials
YeartoMarch
Netsales
Rev.growth(%)
EBITDA
PAT
DilutedEPS(INR)
EPSgrowth(%)
DilutedP/E(x)
EV/EBITDA(x)
ROAE(%)
FY08
27,763
22.5
2,352
1,690
120
14.9
72.4
32.7
24.2
28.1
FY09
34,212
23.2
2,380
1,252
120
12.7
(14.6)
38.3
23.7
21.4
FY10
37,729
10.3
1,629
1,338
120
8.6
(31.9)
56.2
37.2
20.6
FY11
46,052
22.1
2,349
1,342
120
11.3
30.2
43.2
25.4
44.1
Sensex
1month
10.0
3months
3.8
12months (2.4)
Stock
8.9
1.0
40.2
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
151
Stockover
Sensex
(1.1)
(2.8)
42.6
Food
FinancialStatements
Incomestatement
YeartoMarch
Directcosts
Employeecosts
Advertisingandpromotion
Otherexpenditure
EBITDA
EBIT
Interestexpenses
Otherincome
Profitbeforetax
Provisionfortax
Profitaftertax
Extraordinaryitems
Profitafterextraordinaryitems
MinorityInterest
ShareinprofitofAssociate
Coreprofit
EPS(INR)diluted
Dilutedequityshares(mn)
Dividendpayout(%)
Taxrate(%)
FY07
22,663
14,540
793
6,023
6,816
1,306
260
1,047
117
288
1,218
113
1,105
54
1,051
1,051
9
120
39.9
9.3
FY08
27,763
16,929
1,263
FY09
34,212
21,191
1,587
FY10
37,729
24,115
1,645
3,010
7,219 9,054 7,331
8,481 10,641 11,986
2,352 2,380 1,629
394 659 582
1,959 1,721 1,046
186 326 235
334 387 582
2,107 1,782 1,394
416 530 56
1,690 1,252 1,338
(75) (180) 307
1,765 1,432 1,031
(9) (80) 1
0 2 2
1,774 1,515 1,032
15 13 9
120 120 120
28.4 73.8 67.5
19.8 29.7 4.0
(INRmn)
FY11
46,052
30,254
1,802
3,352
8,295
13,449
2,349
649
1,700
478
649
1,871
529
1,342
1,342
(1)
1
1,343
11
120
67.2
28.3
YeartoMarch
Operatingexpenses
DepreciationandAmortization
Interestexpenditure
EBITDAmargins
Netprofitmargins
FY07
30.1
1.1
0.5
5.8
4.6
FY08
30.5
1.4
0.7
8.5
6.4
FY09
31.1
1.9
1.0
7.0
4.4
FY10
31.8
1.5
0.6
4.3
2.7
FY11
29.2
1.4
1.0
5.1
2.9
Growthmetrics(%)
YeartoMarch
Revenues
EBITDA
PBT
Netprofit
EPS
FY07
32.1
(32.9)
(37.8)
(25.7)
(28.1)
FY08
22.5
80.1
72.9
68.8
72.4
FY09
23.2
1.2
(15.4)
(14.6)
(14.6)
FY10
10.3
(31.6)
(21.8)
(31.9)
(31.9)
FY11
22.1
44.2
34.2
30.2
30.2
152
Food
Balancesheet
Ason31stMarch
Equitycapital
Reserves&surplus
Shareholdersfunds
MinorityInterest
Securedloans
Unsecuredloans
Borrowings
Sourcesoffunds
Grossblock
Depreciation
Netblock
Totalfixedassets
Investments
Inventories
Sundrydebtors
Cashandequivalents
Othercurrentassets
LoansandAdvances
TotalCurrentAssets
Sundrycreditorsandothers
Provisions
TotalCL&provisions
Netcurrentassets
Miscellaneousexpenditurenotwrittenoff
Netdeferredtax
Usesoffunds
AdjustedBVpershare(INR)
Freecashflow
YeartoMarch
Netprofit
Depreciation
Deferredtax
Others
Grosscashflow
Less:ChangesinWC
Operatingcashflow
Less:Capex
Freecashflow
FY07
239
5,481
5,720
103
79
1,490
1,570
7,392
6,820
3,198
3,622
164
3,786
2,908
2,367
567
547
2
872
4,355
2,989
935
3,924
431
256
12
7,392
48
FY07
1,051
260
(29)
1,290
1,520
266
1,254
3,666
(2,412)
153
FY08
239
6,683
6,922
102
316
2,407
2,723
9,747
7,603
3,612
3,991
101
4,092
3,398
3,293
690
535
132
1,358
6,008
2,960
1,057
4,017
1,991
240
25
9,747
58
FY08
1,774
394
(12)
(952)
(571)
(1,262)
691
782
(92)
(INRmn)
FY11
239
3,021
3,260
21
4,333
1,855
6,188
9,469
10,546
5,498
5,048
134
5,183
3,885
3,470
810
769
121
2,129
7,299
4,586
2,253
6,839
459
(57)
9,469
27
FY09
239
6,975
7,214
37
645
2,058
2,703
9,954
9,216
4,511
4,705
63
4,768
3,773
2,887
740
688
137
1,655
6,107
3,348
1,517
4,865
1,242
270
(99)
9,954
60
FY10
239
2,589
2,828
22
5,205
1,364
6,570
9,419
10,105
5,112
4,993
102
5,095
3,664
3,042
733
427
134
1,977
6,313
3,840
1,874
5,714
599
61
9,419
24
FY09
1,515
659
128
2,294
3,081
578
2,503
1,614
889
(INRmn)
FY10
FY11
1,032 1,343
582 649
(160) 118
2,692 2,587
3,114 3,354
736 594
2,378 2,760
889 441
1,489 2,319
Food
Profitability&liquidityratios
YeartoMarch
ROAE(%)(onadjustedprofits)
ROACE(%)
Inventorydays
Debtorsdays
Payabledays
Cashconversioncycle
Currentratio
Debt/EBITDA
Interestcoverage
Fixedassetst/o(x)
Debt/equity
FY07
18.8
32.4
34
6
66
(25)
1.1
1.2
9.0
9.0
0.3
FY08
28.1
36.2
37
8
64
(19)
1.5
1.2
10.5
7.3
0.4
FY09
21.4
27.5
33
8
54
(14)
1.3
1.1
5.3
7.9
0.4
FY10
20.6
17.5
29
7
54
(19)
1.1
4.0
4.5
7.8
2.3
FY11
44.1
30.0
26
6
51
(19)
1.1
2.6
3.6
9.2
1.9
Valuationsparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS
DilutedP/E(x)
Price/BV(x)
EV/Sales(x)
EV/EBITDA(X)
FY07
8.6
(28.1)
10.7
56.4
10.2
2.5
43.0
FY08
14.9
72.4
18.0
32.7
8.4
2.0
24.2
FY09
12.7
(14.6)
19.3
38.3
8.0
1.6
23.7
FY10
8.6
(31.9)
12.2
56.2
20.5
1.6
37.2
FY11
11.3
30.2
17.7
43.2
17.8
1.3
25.4
154
COMPANYPROFILE
Food
TATACHEMICALS
Leaderinpackagedsalt
IndiaEquityResearch|Miscellaneous
TataChemicalssustaineddominanceinthepackagedsaltcategory(62%
market share) despite stiff competition from Annapurna salt (HUL) and
Saffolasalt(Marico)speaksvolumesofthecompanysbrandequity.We
arebullishonitsentryintopackageddalcategoryasitwillbenefitfrom
existing wide distribution network of traditional kirana stores and large
formatfoodmalls.Overall,thecompanysfoodcategorylooksgoodfrom
alongtermperspective.
Wellplacedinpackagedsalt
ThecompanyisapioneerandmarketleaderintheIndianbrandediodizedsaltsegment
throughitspioneeringbrandTataSalt.Thecompanyismarketleaderwith62%market
shareinpackagedsalt.Itacquired100%stakeinBritishSalt(inDec2010)forGBP93mn
toprovidefortherawmaterialrequirementofBMGL.Also,throughtheacquisitionof
BritishSalt,TataChemicalshassecuredlongtermbrinesupplyandalsoopportunityto
expandintoUK'sfoodsegment.
EDELWEISS4DRATING
AbsoluteRating
NotRated
MARKETDATA(R:TTCH.BO,B:TTCHIN)
CMP
: INR352
TargetPrice
: NotRated
52weekrange(INR)
: 392/287
Shareinissue(mn)
: 254.8
Mcap(INRbn/USDmn)
: 90/1,806
Launchedwaterpurifier;backedbyinnovation
Tata Chemicals launched "Tata Swach", a water purifier that does not require
electricity.Atthesametimeit,isuserfriendlyandaffordabletargetedatallsegments
and classes from villages to middle class urban homes. It was initially launched in
MaharashtraandKarnataka,butisnowavailablein12states.Thecompanytargetsto
sellabout1mnunitsannuallybyFY12.
Others
24.3%
Promoters*
31.2%
FIIs
31.1%
MFs,FIs&
Banks
13.4%
Newlaunchestoleverageestablisheddistributionnetwork
Under 'ishakti Dals', Tata Chemicals launched four varieties of pulses i.e., chana,
moong,turanduradinvariousSKUs.Thecompanyplanstoleverageitsexistingwide
distributionnetworkoftraditionalkiranastoresandlargeformatfoodmallstomarket
thedals.
Financials
YeartoMarch
Netrevenues(INRmn)
Revenuegrowth(%)
EBITDA(INRmn)
Coreprofit(INRmn)
EPS(INR)
EPSgrowth(%)
P/E(x)
EV/EBITDA(x)
ROAE(%)
FY08
60,232
3.7
10,410
4,755
234
20.3
(13.6)
17.3
11.5
15.1
FY09
122,577
103.5
18,634
9,705
236
36.4
79.6
9.6
6.8
20.2
FY10
95,438
(22.1)
18,374
8,693
244
30.8
(15.4)
11.4
6.4
15.8
155
FY11
110,602
15.9
18,368
8,562
255
26.0
(15.7)
13.5
7.0
13.1

NIL
PRICEPERFORMANCE(%)
Sensex
1month
10.0
3months
3.8
12months (2.4)
Stock
9.6
14.2
15.5
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
Stockover
Sensex
(0.4)
10.4
17.9
Food
FinancialStatements
Incomestatement
YeartoMarch
Netrevenues
Rawmaterialcosts
Grossprofit
Employeeexpenses
Otherexpenses
Operatingexpenses
Totalexpenditure
EBITDA
Depreciation&amortisation
EBIT
Interestexpense
Otherincome
Profitbeforetax
Provisionfortax
Coreprofit
Extraordinary/Priorperioditems
Profitaftertax
Minorityinterest
Profitafterminorityinterest
EPS(INR)basic
Dilutedshares(mn)
EPS(INR)diluted
CEPS
DPS
Dividendpayout(%)
FY07
58,096
23,606
34,490
3,519
20,904
24,424
48,030
10,067
2,739
7,328
824
953
7,457
2,401
5,056
24
5,080
5,080
215
23.5
215
23.5
36.5
8.0
33.8
FY08
60,232
22,970
37,261
4,809
22,043
26,852
49,822
10,410
3,138
7,271
1,365
964
6,870
2,115
4,755
4,889
9,644
9,644
234
20.3
234
20.3
32.8
9.0
20.8
FY09
122,577
60,694
61,882
8,672
34,577
43,249
103,943
18,634
4,226
14,407
3,953
826
11,280
1,575
9,705
(2,107)
7,598
1,117
6,481
235
36.5
236
36.4
49.3
9.0
38.1
FY10
95,438
34,407
61,031
7,462
35,195
42,656
77,064
18,374
4,468
13,907
3,932
811
10,786
2,093
8,693
(1,457)
7,236
1,177
6,059
243
30.9
244
30.8
47.1
9.0
60.2
(INRmn)
FY11
110,602
44,523
66,079
8,465
39,247
47,711
92,234
18,368
4,511
13,857
3,508
962
11,311
2,749
8,562
(101)
8,461
1,926
6,535
255
26.0
255
26.0
42.8
10.0
60.0
Commonsizemetrics(%netrevenues)
YeartoMarch
Costofgoodssold
Operatingexpenses
EBITDAmargins
Depreciation&amortisation
Interest
Netprofitmargin
FY07
40.6
42.0
17.3
4.7
1.4
8.7
FY08
38.1
44.6
17.3
5.2
2.3
7.9
FY09
49.5
35.3
15.2
3.4
3.2
7.9
FY10
36.1
44.7
19.3
4.7
4.1
9.1
FY11
40.3
43.1
16.6
4.1
3.2
7.7
Growthmetrics(%)
YeartoMarch
Revenues
EBITDA
PBT
Netprofit
EPS
FY07
44.0
33.9
24.2
18.0
18.0
FY08
3.7
3.4
(7.9)
(6.0)
(13.6)
FY09
103.5
79.0
64.2
104.1
79.6
FY10
(22.1)
(1.4)
(4.4)
(10.4)
(15.4)
FY11
15.9
(0.0)
4.9
(1.5)
(15.7)
156
Food
Balancesheet
Ason31stMarch
Totalequitycapital
Reserves&surplus
Shareholder'sequity
Securedloans
Unsecuredloans
Totaldebt
Deferredtaxliability(net)
Deferredcapitalgrant
Minorityinterest
Sourcesoffunds
Grossfixedassets
Accumulateddepreciation
Netfixedassets
Totalfixedassets
Investments
Inventories
Accountsreceivable
Cashandcashequivalents
Loansandadvances
Currentassets
Currentliabilities
Provisions
Currentliabilities&provisions
Netcurrentassets
Goodwill
Foreigncurrencytranslationdifference
Usesoffunds
Bookvaluepershare(INR)
FY07
2,152
23,567
25,718
8,621
10,021
18,642
2,337
211
46,908
57,823
29,558
28,264
2,296
30,561
7,753
6,352
9,665
1,545
2,582
20,143
11,485
7,733
19,217
926
7,632
46,908
120
FY08
2,341
34,844
37,185
6,432
41,635
48,067
2,695
148
423
88,517
63,268
32,216
31,052
2,660
33,712
4,174
9,302
11,999
6,767
6,200
34,269
19,336
10,800
30,136
4,133
46,492
88,517
159
FY09
2,352
45,346
47,698
8,413
54,425
62,838
125
90
1,522
112,273
70,148
37,303
32,845
4,740
37,585
8,698
12,761
16,358
9,899
5,554
44,571
24,994
12,173
37,167
7,404
56,213
2,374
112,273
203
FY10
2,433
44,731
47,164
18,389
31,549
49,937
139
43
3,501
100,784
74,722
41,597
33,125
5,184
38,310
5,576
9,587
11,111
11,589
5,373
37,660
21,021
13,067
34,088
3,572
53,247
79
100,784
194
(INRmn)
FY11
2,548
51,969
54,516
26,568
30,430
56,997
45
4,065
115,623
87,282
49,468
37,814
7,091
44,905
4,479
11,456
13,654
13,450
7,819
46,379
23,263
13,201
36,464
9,915
56,324
115,623
214
Freecashflow
YeartoMarch
Netprofit
Add:Depreciation
Add:Interestandothernoncashitems
Grosscashflow
Less:Changesinworkingcapital
Operatingcashflow
Less:Capex
Freecashflow
FY07
5,080
2,739
(267)
7,552
1,599
9,151
5,204
3,948
FY08
9,644
3,138
(4,792)
7,991
816
8,806
2,445
6,361
FY09
6,481
4,226
6,413
17,121
(6,842)
10,279
7,331
2,947
FY10
6,059
4,468
5,796
16,323
3,522
19,845
5,885
13,960
FY11
6,535
4,511
2,834
13,880
(4,286)
9,594
5,932
3,663
Cashflowmetrics
YeartoMarch
Operatingcashflow
Financingcashflow
Investingcashflow
Netcashflow
Capex
Dividendspaid
FY07
9,151
(2,300)
(6,536)
316
(5,204)
(1,716)
FY08
8,806
29,542
(33,467)
4,881
(2,445)
(2,010)
FY09
10,279
(916)
(6,849)
2,514
(7,331)
(2,472)
FY10
19,845
(14,027)
(4,377)
1,441
(5,885)
(3,645)
FY11
9,594
3,610
(12,033)
1,172
(5,932)
(3,918)
157
Food
Profitabilityratios
YeartoMarch
ROACE(%)
ROAE(%)
ROA(%)
Currentratio
Receivables(days)
Inventory(days)
Payables(days)
Debtequity(x)
Debt/EBITDA
Adjusteddebt/Equity
Longtermdebt/Capitalemployed(%)
Totaldebt/Capitalemployed(%)
Interestcoverage(x)
FY07
19.1
21.2
11.2
1.0
54
103
155
2
0.7
1.9
0.7
39.7
85.7
8.9
FY08
11.8
15.1
7.0
1.1
66
124
245
(55)
1.3
4.6
1.3
54.3
91.4
5.3
FY09
15.3
20.2
9.7
1.2
42
66
133
(25)
1.3
3.4
1.3
56.0
89.2
3.6
FY10
14.0
15.8
8.2
1.1
53
119
244
(73)
1.1
2.7
1.1
49.5
83.5
3.5
FY11
13.4
13.1
7.9
1.3
41
86
182
(54)
1.0
3.1
1.0
49.3
80.9
3.9
Operatingratios(x)
YeartoMarch
Totalassetturnover
Fixedassetturnover
Equityturnover
FY07
1.3
2.3
2.4
FY08
0.9
2.0
1.9
FY09
1.2
3.8
2.9
FY10
0.9
2.9
2.0
FY11
1.0
3.1
2.2
Dupontanalysis
YeartoMarch
NPmargin(%)
Totalassetsturnover
Leveragemultiplier
ROAE(%)
FY07
8.7
1.3
1.9
21.2
FY08
7.9
0.9
2.2
15.1
FY09
7.0
1.2
2.4
20.2
FY10
7.9
0.9
2.2
15.8
FY11
6.0
1.0
2.1
13.1
Valuationparameters
YeartoMarch
DilutedEPS(INR)
YoYgrowth(%)
CEPS(INR)
DilutedP/E(x)
P/BV(x)
EV/Sales(x)
EV/EBITDA(x)
Dividendyield(%)
FY07
23.5
18.0
36.5
15.0
2.9
1.5
8.4
2.3
FY08
20.3
(13.6)
32.8
17.3
2.2
2.0
11.5
2.6
FY09
36.4
79.6
49.3
9.6
1.7
1.0
6.8
2.6
FY10
30.8
(15.4)
47.1
11.4
1.8
1.2
6.4
2.6
FY11
26.0
(15.7)
42.8
13.5
1.6
1.2
7.0
2.8
158
Food
UNLISTEDCOMPANIES
159
Food
THISPAGEISINTENTIONALLYLEFTBLANK
160
COMPANYPROFILE
Food
AMUL
TheWhiteRevolutionpersists
OurView
Amuliswellplacedintermsofdistributionreach,brandrecall,productrangeandraw
material sourcing in the dairy category. Being market leader in most categories it is
presentin,thecompanyisinanenviablepositiontoenjoyexponentialgrowthofthe
foodsegment.Byexpandingitsruralreachandincreasedfocusonhealthandwellness
Amulissettoachieveitstargetofthreefoldincreaseintoplineby2020.
AboutCompany/Promoter
The Gujarat Cooperative Milk Marketing Federation, Anand (GCMMF), is the largest
foodproductsmarketingorganisationofIndia.ItistheapexorganizationoftheDairy
Cooperatives of Gujarat. It is an institution created by milk producers to primarily
safeguardtheirinteresteconomically,sociallyaswellasdemocratically.Inthecaseof
GCMMF, the surplus is ploughed back to farmers through district unions as well as
villagesocieties.
AmulisthelargestfoodbrandinIndiaandworld'slargestpouchedmilkbrandwithan
annual turnover of INR97.74bn in FY11. Besides India, Amul has entered overseas
markets such as Mauritius, UAE, US, Bangladesh, Australia, China, Singapore, Hong
Kong and a few South African countries. Though its efforts to enter the Japanese
marketin1994didnotsucceed,ithasnowlaidoutfreshplanstoreenterthemarket.
OtherpotentialmarketsbeingconsideredincludeSriLanka.
The company enjoys ~90% market share in butter and 45% market share in dairy
whitener. It also enjoys 26% share in the INR400bn packaged milk market and has
emerged the largest milk selling brand in all major metro markets of Delhi, Mumbai,
KolkataandAhmedabad.Outofthetotalaverageof9.3mnlitresofmilkprocureddaily,
GCMMFsells3.4mnlitresoutsideGujarat.
AmulrecentlylaunchedtwoQSRsinAhmedabadofferingawiderangeofdelectables
likesandwiches,dosa,burgers,pavbhaji.Theyalsohouseacafesellingwiderangeof
dairyproducts.Amulplanstotakeitscountto10byFY12end.
Products
Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul
Chocolates, Amul Shrikhand, Amul Ice Cream, Nutramul, Amul Milk and Amulya have
made Amul a leading food brand in India. After probiotic icecream, the company
launched an all natural probiotic vitamins fortified flavoured yogurt under the brand
Flaavyo. With the launch of Amul Flaavyo, the company hopes to transform the
consumption habits of Indian households to a tasty, healthy and nutritional option in
theformofprobioticyogurt,whichcanbeconsumedeitheratthebreakfasttableoras
healthdessertoronthego.
161
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
Food
Productsuccess/failures
Attempts to get into pizza did not yield the desired results. However, as per management,
AmulPizzaswereneverintroducedasafoodcategory.Throughpizza,thecompanywanted
tosellmozzarellacheese.
Branding
Amul has never spent more than 1% on brand building, unlike other consumer companies
whichspend615%.Aspermanagement,thecompanycannotdosobecauseproductcosting
gets affected and the valueformoney proposition is lost. However, Amuls billboard ads
(OOH)areextremelythoughtprovokingandhavebecomearage.
Amul seems to have got the taste of global events. After having sponsored Netherlands'
cricket team in the ICC Cricket World Cup 2011, the "Taste of India' was also the official
partnerofSwitzerlandheadquarteredSauberF1teamattheinauguralIndianGrandPrix.
Competition
ItcompeteswithHULsKwalityWallsinicecream,NDDB'sMotherDairyinicecream,liquid
milk,dahiandbutter,BritanniaandNestleindahiandBritanniaandGowardhanincheese.
Distribution
Currently,Amulhas3,200distributorscomparedtoParags60andBritannias700.
RegionalPresence/Stronghold
PanIndia.
FuturePlans
GMCCFistargetingINR300bnsalesby2020,athreefoldjumpfromthecurrent~INR100bn.
There is lot of scope in the dairy industry considering the company is handling only 3% of
Indiastotalorganisedmilkproduction.By2020,thecompanyplanstoprocure20mnlitres
ofmilkeveryday,upfromthecurrent9.2mnlitres.
By expanding its rural reach, GCMMF expects to clock 20% growth in nonmilk categories
which have an annual turnover of INR55bn. In a strategic move aimed at grabbing a larger
share of the growing demand for milk in the country, Amuls parent GCMMF has gone
beyonditsGujaratboundaryandprocuredmilkfromotherstatesaswell.Overthepastfew
months,GCMMFhasprocured78%ofmilkfromMaharashtra,WestBengal,Bihar,Haryana
andRajasthan.
Amul to double its retail outlets panIndia: It will double its retail outlets panIndia from
5,000to10,000by2012.
Matrix
1.
PenetrationlevelsHigh
2.
BrandsalienceHigh
3.
ChallengefromMNC/regionalcompetitionHigh
4.
ProductmixHigh
5.
DistributionreachHigh
6.
AppetiteforadbudgetLow
162
COMPANYPROFILE
7.
Food
BAGRRYSINDIA
Wholesomegrowth
OurView
Time pressure, growing health consciousness, increasing number of nuclear families,
andthegrowthofmoderntradeareallmakinghealthfoodcategorypopular.Also,with
growingawarenessinsmallercitiestoo,BaggrysIndia(Baggrys)iswellplacedinthis
categoryoffood.
Bagrryswassetupin1986andbeganmanufacturinganddistributinghighfibrehealth
foodsin1991underbrandsWheatexandOatex.Aboutfouryearslater,thecompany
introduced its own muesli and granola bars under the umbrella brand Bagrry's. Since
then,BagrryshasbeenoneoftheleadingbrandsofhealthfoodsinIndia.Thecompany
manufactures and markets a wide range of highfibre breakfast cereals and health
foods which are wholesome and nutritious. It supplies to leading companies such as
GSK, Britannia, Cookieman Foods, Herbalife International, HUL and ITC. IN FY10, the
companypostedrevenueofINR450mnandPATofINR110mn.Oatproductscontribute
60%tothecompanystopline.
Category
Oats,muesli,cornflakes,barn.
Products
White Oats, Chewy Oats, Crunchy Muesli, SoHealthy Muesli, Barn Added Cornflakes,
OatBarn.
Branding
ThecompanyactivelymarketsitsproductsthroughTVadsandprintmedia.
Competition
Kellogg,PepsiCo,GSK,Nestle,DrOetker,Marico,Britannia,ITCandMTRFoods.
Distribution
Productsareavailableinmorethan130citiesandtownsacrossIndiaandneighboring
countrieslikeNepalandBhutan.
FuturePlans
Thefirm'sexpansionplansincludeathirdgreenfieldplantinGhaziabadforINR150mn,
which is expected to start production by early 2012, and is likely to double the
production of oats and muesli. Its existing plants are in Delhi and Himachal Pradesh.
Baggrysisevaluatingproposalstoacquiresmallerbrandsintheethnicfoodsspace.
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
163
Food
Matrix
1.
PenetrationlevelsLow
2.
BrandsalienceMedium
3.
4.
ProductmixLow
5.
DistributionreachLow
6.
164
COMPANYPROFILE
Food
BISLERI
Naturalbornleader
OurView
Thegrowingnumberofcasesofwaterbornedisease,risingwaterpollution,increasing
urbanization,scarcityofpureandsafewateretc.,hasmadethebottledwaterbusiness
lucrative.Thus,byincreasingfocusonsafetycoupledwithenteringthenichemarketof
natural mountain water, we believe Bisleri is well positioned to maintain its market
leaderposition.
BisleriwasoriginallyanItaliancompanycreatedbyFeliceBisleri,whofirstbroughtthe
idea of selling bottled water in India. Bisleri then was introduced in Mumbai in glass
bottlesintwovarietiesbubbly&stillin1965.ParleboughtoverBisleri(India)in1969
andstartedbottlingwateringlassbottlesunderthebrandnameBisleri.Later,inearly
1980s,ParleswitchedovertoPVCnonreturnablebottlesandfinallyadvancedtoPET
containers. In 1993, the group sold its carbonated drink brands like Thums Up, Gold
SpotandLimcatoCocaColaforINR4,000mn.In2003,Bisleriannounceditsventureto
Europe.ThecompanylaunchedVedicaNaturalMountainwaterin2010.
Currently,brandBislerihasbecomeahouseholdnameandissopopularinIndiathatit
isusedasgenericnameforbottledwater.
Category
Packageddrinkingwater,naturalmineralwater,soda.
Products
BisleriMineralWater,BisleriSoda,VedicaNaturalMountainWater.
Branding
BislerihasgenerallymarketeditsproductsthroughTVads.Recently,ithasrolledouta
new ad campaign that carries the message 'Stay Protected'. The campaign marks the
first time the brand has taken to animation in its communication. In January 2010,
Bisleriembracedanewlookbyintroducingacelebrationpack.Theideawastoposition
itasabrandforalloccasions,asonethatcouldconnectwithconsumersatallpointsin
time. Back in 2008, the brand, in the face of competition, claimed its position as 'the
original mountain water', with a film that touched upon spirituality. It carried the
tagline'Thesweettasteofpurity'.Yearsback,ithadconveyedthemessage'PlaySafe'
through a naughty and suggestive campaign. The current film marks a completely
differentwayofstatingasimilarmessage.
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
165
Food
Competition
Bisleri faces competition from CocaColas Kinley, Pepsis Aquafina and Parle Agros Bailley;
butdominatesthemineralwatercategorywithamarketshareof~60%.
Thecompanyhas17ownedplants,33copackers,11franchiseesandawidedistributionand
retailnetworkpanIndia.Bislericurrentlyreaches200,000outletswithinthecountry.
FuturePlans
BisleriisgearinguptoenterretailtradewithitsBisleriShoppes,whichhavealreadybeen
testlaunchedinBengaluru.
Itplanstoopen500BisleriShoppeswhichwouldgetlaunchedpanIndiawithalmost100in
Mumbaialone.Thesewouldberunbyfranchises.
Also,thecompanyislookingatenteringMiddleEastcountriesandisconsideringsettingup
moremanufacturingfacilitiesoutsideIndiatocatertotheoverseasmarket.
Matrix
1.
PenetrationlevelsMedium
2.
BrandsalienceHigh
3.
ChallengefromMNC/regionalcompetitionMedium
4.
ProductmixLow
5.
6.
AppetiteforadbudgetHigh
166
COMPANYPROFILE
Food
BLUEFOODS
Growingappetite
OurView
We believe lifestyle changes and demography provide immense growth opportunities
in dining in India. With foreign cuisine gaining popularity among urban dwellers, the
presenceofBlueFoodsacrosscategoriesspanningavarietyofcuisinesinfusesuswith
confidenceinapromisingfutureforthearrayofwellknownrestaurantsithasunderits
belt.
BlueFoodswasincorporatedinSeptember2000andisoneoftheearlymoversinthe
largelyunorganizedIndianrestaurantsector.ItcommencedoperationsinMumbaiand
thenestablishedascalablenationalpresence.BlueFoodsdominatesmorethan250000
sqftofthefinediningbusinesswithitsleadbrandsSpaghettikitchen,CopperChimney,
GelatoItaliano,ChinatownbyNoodleBar,TheCoffeeBeanandTeaLeaf,BombayBlue,
FoodTalk,Penne,andSpoon.
Branding
ThebrandhassuccessfulallianceswithleadingconglomerateslikeShoppersStop,DLF,
UnitechandtheFutureGroup.
Price
BlueFoodscaterstoadiversemixofcustomersthroughawiderangeofofferingswith
pricepointsrangingfromvalueformoneytomoreexpensivefinediningoptions.
Competition
Itsvariousbrandsfacecompetitionfromdiversebrandsintheirrespectivecategories.
However,duetobrandrecognitiontheystandoutandcontinuetobepopular.
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
167
Food
BlueFoodsoperatesthroughmorethan100outletsacrossIndiaandservesmorethan1mn
customerspermonth.
Table49:Presenceacrosscategories
Brand
Spaghettikitchen
Copperchimney
Category
Italiancuisine
NorthIndiancuisine
GelatoItaliano
Icecreams
ChinatownbyNoodleBar
TheCoffeeBeanandTeaLeaf
BombayBlue
FoodTalk
Penne
Spoon
Chinesecuisine
Coffeeshop
Multicuisine
Multicuisinefoodcourt
Italiancuisine
Multicuisinefoodcourt
Regions
Gurgaon,Delhi,Kolkata,Mumbai
Bangalore,Mumbai
Thane,Gaziabad,Delhi,Gurgaon,Noida,Pune,
Hyderabad,Mumbai,Kolkata,Bangalore
Mumbai,Hyderabad
Mumbai,Delhi,Kolkata,Hyderabad
Mumbai,Bangalore,Hyderabad
Kolkata,Delhi
Mumbai
Mumbai,Bangalore,Delhi
FuturePlans
Thecompanysexpansionmaphasanaggressivestrategicrolloutplan,whichaimstoinitiate
many more restaurants, Gelato parlors and food courts across India in the next 1218
months.
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixHigh
5.
6.
168
COMPANYPROFILE
Food
CADBURY/KRAFT
Kraftingthesuccessladder
OurView
Cadbury India (Cadbury) is one of the finest food companies of India. It has strong
brand equity, distribution and product range. Also, with Krafts product range now
available, we expect it to make strong gains in nonchocolate segments. Sales have
surged ~40% YoY between January and September 2011 while CY10 growth was 30%
YoY. Much of these sales are coming from its flagship legacy brands such as Cadbury
DairyMilk,whichgrew39%in2010and40%in9mCY11.KraftsownbrandsOreoand
Tang will be new drivers. Beverages, too, are clearly becoming a strategic bet with
Bournvita getting relaunched. Currently, Kraft is present in four out of its five key
categoriesbarringcoffee.Itplanstofocusonthebiscuits,chocolates,gumandcandy
categoriesinIndia.
Cadbury is a fully owned subsidy of Kraft Foods. The combination of Kraft Foods and
Cadburycreatesaglobalpowerhouseinsnacks,confectioneryandquickmeals.With
annual revenue of approximately USD50bn, the combined company is the world's
second largest food company, making delicious products for billions of consumers in
morethan160countries.ForCadbury,whichownsbrandssuchasCadbury'sDairyMilk
andBournville, Indiahasprovedtobeone of itsmostresilientmarkets.TheINR20bn
Cadbury's massive distribution network of an estimated 1.2mn will throw up a sea of
opportunities.
Category
Chocolates,biscuits,healthdrink,chewinggum.
Products
CadburyDairyMilk,Bournvita,5Star,Perk,Bournville,Silk,Celebrations,Halls,clairs,
TangandOreo.
Branding
CadburyiswellknownbrandandissynonymouswithchocolateinIndia.Thecompany
duringtheCricketWorldCupaggressivelyinvestedinOreolaunch.
Competition
GSKConsumer,Nestle,Britannia,ITC,Parle,Perfetti.
Distribution
Cadbury'smassivedistributionnetworkof~1.2mn.
PanIndia.
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
169
Food
FuturePlans
Cadbury(subsidiaryofKraftFoods)enteredintothebiscuitssegmentthroughlaunchofOreo
brand from the global portfolio of its parent. The company will use its wide distribution
network to market and sell the product to garner higher share of fast growing premium
biscuit market. Our channel checks indicate that Oreo has done well. The company can
launchmoreproductsfromKraftsstableinIndia.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductmixHigh
5.
6.
170
COMPANYPROFILE
Food
CALORIECARE
Betonhealthandwellness
OurView
We are optimistic about the need based business model of caloriecounted meal
deliverybasedonconsultationwithdietician.Keychallenge,webelieve,isscalability.
CalorieCareisIndiasfirstevercaloriecountedmealdeliveryservice.Itdeliversfreshly
cooked, caloriecounted meals that help one stick to a regular, healthy eating habit. It
deliverscustomizedmealsforindividualsandalsoprovideshealthycateringoptionsto
corporate offices. A dedicated team of chefs and dieticians have created a large
collectionofcaloriecountedrecipesspanningIndian,EuropeanandOrientalcuisinesto
ensurethatmealsarenotjusthealthy,butalsotastyanddelightfulintheirvariety.
Category
Tiffins/Healthymeals.
Branding
Calorie Care entered into a joint venture with Sterling Biotech, a company launching
healthy malls. It also runs health food cafes at select gyms in Mumbai. Both these
activities, however, yield more in terms of visibility and brand awareness than any
substantialrevenues.
Competition
Homecookedfood,restaurants.
Mumbai.
FuturePlans
Gettingintostrategicpartnership.
Sofar,businesshasgrownpurelybywordofmouth.However,nowitneedsadvertising,
asalesforcetomarketitandallthemusclealargeorganisationcanprovidetotakeitto
thenextlevel.
Expandtootherregions(Delhi,Bengaluru).
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
171
Food
Matrix
1.
2.
BrandsalienceLow
3.
ChallengefromMNC/regionalcompetitionLow
4.
ProductmixMedium
5.
6.
172
COMPANYPROFILE
Food
CAPITALFOODS
Frozendelight
OurView
WeareupbeataboutCapitalFoodsbeingabletomakeastrongpresenceinthefrozen
foodmarketonthebackofstrongpublicityandhugepotentialinthesegment.
Capital Foods manufactures processed foods. It markets its products under three
brandsChingsSecret,Smith&JonesandSwad.FutureVenturesIndiaholds43.76%
ofitsequitysharecapitalwhilethebalanceisheldbythepromoterMr.AjayGupta.The
companysmanufacturingfacilitiesarelocatedatNasik,KandlaandVapi.Italsohasa
strong international tie up to distribute products among the Indian diaspora. The
companyearnsmajorityoftherevenuefromexports.
Category
Instantnoodles,spices,sauces,ketchup,frozenfood,readytoeat,readytocook.
Products
ChingsSecret,Smith&Jones,KaengThai,"Swad"frozensnacksincludingNorthIndian
cuisine,SouthIndiancuisine,vegetables,fruitsandsnacks.
Branding
The company focuses on TV advertisement and print media to promote its products.
Backin2010,NestlesentalegalnoticetoCapitalFoodsoveranadspoof.
Competition
The company faces high competition from food majors like Nestle, Heinz, Agro Tech
food,McCain,MTR,etc.
ProductscatertothehigherendcategoryandarepopularintierIcities.
FuturePlans
ThecompanyissettingupamegafoodparkatTumkurinKarnataka.Workonthefirst
phaseofthefoodparkhasalreadystarted.Inthenextthreeyears,thecompanywillbe
enteringawholenewrangeofcategorieslikebeverages,spicesandarangeoffrozen
foods.Itwillalsoenterfourmoreoverseasmarketssoon.Inaddition,thecompanyalso
has new facilities coming up at Vapi (Gujarat) and in Andhra Pradesh. Revenues for
FY12 expected to be INR2,700mn and likely to jump sharply in FY13 after
commissioningthesecondproductionlineofinstantnoodles.
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Food
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixMedium
5.
DistributionreachMedium
6.
AppetiteforadbudgetMedium
174
COMPANYPROFILE
Food
COCACOLAINDIA
Focusonruraltopropelsales
OurView
CocaCola India (Coke) has enjoyed 20 successive quarters of growth in India, despite
pricehikes,competitionandunfavourableweatherconditions.Presenceinbeverages,
bottledwaterandstrongparentageprovidesthecompanywithcompetitiveedge.We
are positive on the company due to its extremely strong brand recall and focus on
expansioninruralIndia,evidentfromlaunchofpowdereddrink'FantaFunTaste'.
CocaCola, the corporation nourishing the global community with the worlds largest
selling soft drink concentrates since 1886, returned to India in 1993 after a 16year
hiatus,givinganewthumbsuptotheIndiansoftdrinkmarket.Inthesameyear,the
company took over ownership of the nations top softdrink brand and bottling
network.Indianoperationscomprise50bottlingoperations,25ownedbythecompany
andanother25byfranchisees.Besides,anetworkof21contractpackersmanufactures
arangeofproductsforthecompany.
Category
Carbonatedbeverages,packagedwater,fruitjuice,coffee.
Products
CocaCola,ThumsUp,Sprite,Fanta,Limca,MinuteMaidPulpyOrange,Maaza,Kinley,
Georgia.CocaColaIndiahasenteredthedairysegmentbylaunchingamangoandmilk
baseddrinkMaazaMilkyDelite(testmarketinginKolkata).
It pulled the plug on its Sunfill brand in powder drink six years ago as it failed to
competewithRasnawhichisstillthemarketleaderatanextremelylowpricepointof
INR5.
Branding
Coke invests in sports properties to promote healthy, active lifestyles. The company
alsoinvestsinpassionssuchasmoviesandmusic.CokelaunchedCokeStudioformusic
activation. It will continue to look at different properties to promote brands. The
companyprimarilyreliesonstarpackedadcampaigns.
Competition
Pepsi,ParleAgro,CCD.
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Food
FuturePlans
In the past one year, Coke has made several launches in the noncarbonated segment
energy drink Burn, fruitbased drinks Minute Maid Nimbu Fresh, Minute Maid Apple and
Minute Maid Mixed Fruit, and milkbased mango drink Maaza Milky Delite. In November
2010,ithadlaunchedreadytodrinkicedteaundertheNesteabrand(jointventurebetween
CocaColaandNestletosellanddistributereadytodrinkicedteatobedissolvedinIndiaand
someothermarketssoon).
CocaCola India is clearly looking to grow the contribution from noncarbonated drinks,
wherePepsiCoisalsobuildingsignificantpresence.ThecompanyisreenteringtheINR4.5bn
brandedpowderedreadytodrinkmarketafteritpulledtheplugonitsSunfillbrandsixyears
ago. Interestingly, the global beverage maker has chosen the INR5 price point to make a
comeback to the space dominated by homegrown brand Rasna. The company will hitch a
rideonitsorangesoftdrinkbrand,Fanta,foritsreturn.It,however,planstotestmarketthe
productbeforegoingpanIndia.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductmixMedium
5.
6.
176
COMPANYPROFILE
Food
CREMICA
Cremedelacreme
OurView
TheCremicaGrouphasestablisheditselfasafoodproducts conglomerateandisfast
becomingahouseholdnameinIndia.BeingawellrecognisedbrandinNorthIndiawith
its well established retail network and manufacturing capabilities coupled with an
enormousclientbase,webelieveCremicaiswellplacedinthegrowingfoodspace.
Incorporatedin1978asasmallenterprisebyMrs.Bectorthreedecadesagoas50:50
jointventurewiththeQuakerOatsCompanyofUSA(QuakerOatsCompanywithdrew
from the JV in FY00), Cremica Group is into manufacturing and sales of value added
processed foods with an annual sales figure of INR4,000mn in FY11 (expected to be
INR7,000mn for FY12), growing at 30% per annum. It sells its products in export
marketsandindomesticmarkettoinstitutionalandretailcustomers.Majorcustomers
include McDonalds, Big Bazaar, Spencer, Sodexho, Taj Group, Jet Airways, Indian
Airlines, Barista, Caf Coffee Day, Pizza Hut, Domino's and Papa Johns. The company
also exports its products to Australia, US, Korea, and Uganda. As of March 2011,
promoterfamilyhad78%stakeandbalance22%washeldbyafinancialinvestor.
Category
Cremica manufactures high quality biscuits, ketch up, mayonnaise, bread, ice cream,
saladdressing,readytocook,readytoeat,snacks,andconfectioneries.
Products
Cremica Salties, Orange Cream, Deit Marie, Cremica Tomato Ketchup, Vegetarian
Mayonnaise,SujiRusk,SoftServeMix,CremicaMatarPaneer,RozanaMasala,Moong
Dalsnacks.
Branding
Resorts to television advertisement, print media, hoardings on roads and railway
stations.
Competition
Nestle,HUL,Britannia,HeinzandDr.Oetker.
Distribution
Distribution network consists of more than 20 depots with 1,400 plus distributors
acrossthecountry.
Cremica largely marks its presence in North India. The company hopes to spread its
wingsinotherpartsofthecountry.
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Food
FuturePlans
Cremicaisplanningtolaunchaninitialpublicofferin2012throughwhichitplanstoexpand
in the readytoeat market in the country byenhancing capacity. It projects biscuit sales to
grow~1820%YoYinFY13andcondimentssalestogrow2526%YoY.
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixHigh
5.
6.
178
COMPANYPROFILE
Food
DANONE
Betonhealth
OurView
Danone is a new entrant in the dairy category. It faces stiff competition from co
operativeslikeAmulwhichcornerthelionsshareofthemarketwithagrassrootlevel
distribution system. On the other hand are national players like Britannia and Nestle
whichhaveastrongcustomerconnect.However,DanonecanacquireorenterintoJV
tooffsetthedisadvantage.Also,thecompanyisbanking onitsproductinnovationto
makeanimpactwithconsciousefforttolaunchproductsunderthehealthandnutrition
label. We are positive on the valueadded dairy product market in India and like
Danonesfocusondifferentiatedproductsandwellnessplank.
Danone is a Fortune 500 company and one of the most successful healthy food
companies in the world. With 160 plants and ~80,000 employees, the company has
presenceinallfivecontinentsandover120countries.In2009,itrecordedEUR15bnin
sales. It enjoys leadership in four businessesfresh dairy products, water, baby
nutritionandmedicalnutrition.
Danone, which is already present in fortified plain and flavoured yogurts in India,
recentlylaunchedCremixyogurtatthepremiumendandFundoozatthemassendwith
aviewtostraddlethepyramid.
Categorypresence
The packaged yogurt market in India is ~60,000 tonnes and growing at a healthy 15
20%annually.
Products
Danoneflavouredyogurts(Strawberry,MangoandVanilla)andplaindahi.
Branding
Danone has drawn up a marketing communication campaign that includes sampling
sessions, outdoor, print advertising and TV commercials to be aired across leading
channels of Pune and Mumbai. It is repositioning packaged yogurt as a standalone
breakfastoptionorhealthdessert.
Competition
AbneeshRoy
Dahi by Amul (Masti), Nestle, Britannia, Gowardhan (Go) in addition to local biggie
ChitaleDairy.Ofcourseonecanbuydahiloosefromthelocalstore,butqualitycould
beanissue.
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Food
Mumbai,Hyderabad,BengaluruandPune.
FuturePlans
Planstolaunchotherproductsfromparentsstable.
Matrix
1.
2.
BrandsalienceLow
3.
4.
ProductmixLow
5.
6.
180
COMPANYPROFILE
Food
DR.OETKER
Foodretailingtohelpbuildmomentum
OurView
TheIndianbreakfastmarkethasevolvedconsiderablyinthepastfewyears.Traditional
breakfast options are slowly moving towards the weekend menu. Indians in big cities
have a good appetite for foreign food whether it is Italian or Mexican or any other
worldcuisine.Withfoodretailingballooningintoasignificantandprofitablesector,we
arepositiveonDr.Oetker.
ThecompanywasfoundedbyDr.AugustOetkerin1891.TheOetkerGroupisoneof
Germanyslargestfullyprivatelyowneddiversifiedindustrialgroupswithaturnoverof
EUR7.7bn and 23,000 employees and with a substantial interest in the food sector
(EUR1.9bn) with about 300 different products. Other business sectors of the group
includebeer,banking,logistics,winesandspirits.
In India, Dr. Oetker has launched baking mixes, dessert mixes and frozen pizza. In
December 2008, it completed the acquisition of Delhibased Fun Foods for INR1.1bn
(USD2.2mn). Fun Foods manufactures packaged food products including mayonnaise
and sandwich spreads. It operates manufacturing facilities in Rajasthan and
UttarakhandanddistributesitsproductsthroughoutIndia.
Categorypresence
Mayonnaise,differentcuisinesauces,syrups,peanutbutter,breakfastcornflakes,oats,
RTCcakes.
Products
Fun Food Classic mayonnaise, Vitalis muesli, Fun Food chocolate dessert topping, Fun
Foodegglesscakemix.
Branding
The company reaches out to the target audience by regularly participating in exhibits
andfairsinmetrocities.Recently,Dr.OetkerVitalismuesliwaslaunchedbyrenowned
BollywoodactorGiselliMonteiroalongwithMr.OliverMirza,ManagingDirector.Post
the launch of Vitalis Crunchy Muesli, Dr. Oetker has started a print advertising
campaigninDelhiNCR,beingoneofthemostdevelopedmarketsinIndia.
Competition
Kelloggs,BagrysIndia,Hersheys,Pillsbury.
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Food
RegionalPresence/stronghold
Presentinsupermarketsinmajorcities.
FuturePlans
TheDr.OetkerGroupaimstoachievesalesofINR1.75bn(currentlyINR830mn)ofitsIndian
unit by 2015 and will launch products in new categories to achieve that target. These may
includefrozenfood,beer(Radeberger)andwine(FurstvonMetternich,AdamHenkell).
Itisalsoplanningtoexpanditsproductioncapacityandwillopenanewmanufacturingplant
inRajasthanby2013andtrytoboostitsoveralldistributionnetwork.
Dr. Oetker is now scouting for food companies down South. It is typically looking at small,
familyownedcompaniesmakingnonIndianfoodstuffsincategoriessuchasspreads,sauces,
dessertpowdersorevenbreakfastcerealssuchasmuesli,anddonotexporttheirofferings.
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixMedium
5.
6.
182
COMPANYPROFILE
Food
DSGROUP(CATCHMASALA)
Wellplacedtocatchthespice
OurView
We are optimistic about the huge opportunity cooking aids and spices provide. DS
Groups Catch is a well known brand in spices. Cashflows from tobacco and mouth
refreshmentbusinesseswillenablethecompanytofurtherinvestinnewproductsand
promotions,raisingourconfidenceonitsprospects.
The Dharampal Satyapal Group (DS Group) is ~INR18.6bn diversified conglomerate
credited with several innovations over the past eight decades. It has further
consolidated its position in the past five years through successful venture into
diversifiedsectorslikeF&B,packaging,hospitality,rubberthreadandotherbusinesses.
SomeofthepopularbrandsownedbytheGrouptodayareCatchspringwater,Catch
flavouredwater,Catchreadytoeatsnacks,Catchspices,PassPass,Rajnigandha(anon
tobaccopanmasala),Baba,andTulsi.
Category
Snacks,spices,beverages,mouthfresheners,tobacco.
Products
Catch spring water, Catch flavoured water, Catch readytoeat snacks, Catch spices,
PassPass,Rajnigandha,Baba,Tulsi.
Branding
Juhi Chawla endorses Catch Masala. The company is focused on belowtheline
activitiesandispromotingCatchatfivestarhotels,topnotchcaterersandrestaurants.
Competition
MDH,MTR,Everest,Easterncondiments,Cookme,ITC.
Widespreadnationalreachacross28states,1.6mnoutlets.
FuturePlans
FoodistobeamajorverticalfortheDSGroupinthenextfiveyears.Catchwilllauncha
lineofblends,freshgrinds,sprinklersandseasoningspicestoappealtopeoplefrom
differentculturesandregions.
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Food
ThestrategywillbetomakeCatchapanIndiaplayerwithmoreregionalblends,launchfresh
grindstocatertourbantastes,expandthedealernetworkandupgradeproductionfacilities.
Thecompanywantstoextendthebusinesstonewcategorieswithfruitjuicebeingthelikely
category.
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixMedium
5.
6.
184
COMPANYPROFILE
Food
EVERESTSPICES
Spiceking
OurView
We are optimistic about the huge opportunity the spices market provides as the
branded market is around 14% of the total market. Being Indias largest selling spice
brandsincethepast45years,webelieveEverestSpices(Everest)haspositioneditself
welltotapthisgrowingmarket.
EverestisanIndianmanufacturer,distributorandexporterofgroundspicesandspice
mixturesunderthebrandEverest.ItisIndia'slargestspicesbrandforthepast45years
based in Mumbai and is promoted by Mr. Vadilal Shah. It is estimated to be used at
~20mnhouseholds.Thebrandhasadistributionnetworkofmorethan400,000outlets
in more than 1,000 towns across India. As popular Indian cuisine is increasingly
becomingtherageofoverseaspalates,EverestMasalaisexportedtocountrieslikethe
US,MiddleEast,Singapore,Australia,NewZealand,EastAfricaandothercountries.The
company has won many prestigious awards including Superbrand (thrice200304,
200607and200910).
Category
Spices,Herbalbeautycare.
Products
Exotic blended spices, pure ground spices, natural health care, table top sprinklers,
herbalbeautycare.
Branding
ThecompanyfocusesonuseofTVadsandprintmediabranditsproducts.
Competition
MDH,MTR,Catch,EasternCondiments,Cookme,ITC.
Everesthaveastrongdistributionnetworkofmorethan400,000outletsinmorethan
1,000townsacrossIndia,henceavailablepanIndia.
FuturePlans
Thecompanywillinvestcapitaltoexpandpresenceininternationalmarkets.
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Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductmixLow
5.
6.
186
COMPANYPROFILE
HALDIRAMS
Food
Goingbeyondethnicsnackfoods
OurView
Haldiramoffersarangeofnamkeensandmithais,besidesavarietyofpackagedsnacks
as well as simple vegetarian meals which suits Indian tastes. It has major expansion
plans drawn up for both domestic and international markets. Although it has only
regionalpresenceinIndia,thecompanyislookingtoexpandinthecomingyears.
Haldirams was founded in 1937 by Mr. Shivkisan Agrawal, as retail sweets and
namkeensshopinBikaner(Rajasthan).
Today, Haldirams products in Delhi and the NCR are sold under the brand name of
Haldiram,inKolkatatheyaresoldunderthebrandHaldiramBhujiawalawhileproducts
intheNagpurregionaresoldunderthebrandHaldiram'sNagpur.Theseproductsdo
notcompetewitheachanother.ThoughtheyusethesameHaldirambrandname,with
differentlogostyles,allthreefirmstracetheiroriginstoBikanerinRajasthan.
Haldirams is a familiar sight on shelves across the US, UK and the Middle East. It
occupies considerable shelf space at prominent supermarkets the world over. From
traditional Indian sweets and savouries to the more international chips, cookies, nuts
andsherbets,thecompanysproductsarefastcapturingpeoplesimagination,making
it possible to aim for deep penetration in the Middle East, East Europe and parts of
NorthAfrica.
Category
Snacks,savouries,sweets,readytoeat.
Products
Namkeens,sweets,chips,frozenfoods,cookies,sherbets,minutekhana,papads,pani
puri, bhel puri, boletos, takatak, whoopies, royal temptations, Gujarati snacks, South
Indiansnacks.
Branding
Haldirams has tied up with Profile Advertising, which designs attractive posters and
brochurestofacilitatethebrand.Visualmerchandisingofshowroomsandretailoutlets
isenhancedbydisplayingproductsonspecialracks.Throughthesestrategies,Haldiram
isposingatoughfighttoitscompetitorswhichincludenotonlyAgarwals,Nathusand
Bikanerwala,butalsotointernationalfoodchains.
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Food
Competition
PepsiCo,ITC,BalajiNamkeen,Parle,Bikanerwala,VenkatramanaFoodSpecialities,Conagra
Foods,PrakashSnacks.
HaldiramManufacturingfocusesonmarketsintheNorthwithitsbaseinthenationalcapital.
Haldiram Foods has its headquarters at Nagpur and caters to the West and the South, and
HaldiramBhujiawalahasitshubatKolkataandservestheEast.
FuturePlans
Itplanstohaveatleast3restaurantsintheoverseasmarketby2011end.Thecompanyis
scouting for properties in the UK, US, Canada, Fiji and Mauritius. By opening restaurants
overseas,thecompanynotonlywantstotapthediaspora,butisalsolookingatcateringto
thegrowingdemandforIndianfooditemsamonglocalpopulation.
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductMixMedium
5.
6.
188
COMPANYPROFILE
Food
JSMCORPORATION
Nichepalate
OurView
India is one of the fastestgrowing branded restaurant markets in the world and the
foodsegmentandcasualdiningisoneofthehighestgrowthindustriesinthecountry.
Asconsumptionislowandconsumerscontinuouslyupgradingfromstreetfoodandfast
foodtotheaffordablecasualdiningrestaurantsegment,webelievethereisimmense
potentialinthissegmentforexpansionandplayerslikeJSMCorporationstandtogain.
Established in 2004, JSM Corporation was a partnership between noted restaurateurs
JaySinghandSanjayMahtani.Thegroupisengagedinthebusinessofsettingupand
operating restaurants, bars and food courts across India. They have the exclusive
masterfranchiseeforHardRockCaf,CaliforniaPizzaKitchenandTraderVic'sallover
thecountry.
Itoperates12outletsacross4brandsHardRockCaf,CaliforniaPizzaKitchen,Pitstop
andShiros.Currently,ithasanemployeebaseof~1,200+.
Category
Quickservicerestaurant,pizzaandcaf.
Branding
JSM Corporation caters to a niche market. The company looks at cultural ways to
promote its restaurants like musicrelated events to promote the Hard Rock Caf
outlets.
Competition
ThecompanyfaceshighcompetitionfromPizzaHutandDominosandfromotherquick
servicerestaurantsacrossIndia.
Currently, JSM Corporation has few brand outlets; all of them in metros. As the
companywasestablishedrecently,theprimarytargetmarketwouldremainmetrosin
thecomingfewyearsaswell.
FuturePlans
Thegroupisplanningtoaddanother5moreHardRockCafoutletsin2012.Itisalso
looking to introduce another restaurant brand to Indian foodies: Trader Vic's, a
Polynesian restaurant chain, and Mai Tai, a line of premium lounge bars. It will also
expanditsAsianrestaurantcumloungebrandShiro.ThegroupwillalsoexpandtoSri
Lanka.
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Food
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixMedium
5.
6.
190
COMPANYPROFILE
Food
JUMBOKING
Givingvadapavanationalflavour
OurView
Vada Pav (popularly known as Indian burger) is a staple street food and has high
popularity. We are upbeat about Jumboking Foods (Jumbo King) providing variety of
vadapavinhygienicenvironmentateconomicprices.
Jumbo King was founded by an MBA couple Dheeraj and Reeta Gupta in 2001. They
wereinspiredbywesternmodelandappliedittoIndianfood.JumboKingbelievesthat
the common man has a right to get hygienic food at an affordable price. It has ~43
operationalstores,majorityinMumbaiandafewinGujarat(AhmedabadandBaroda).
Itserves40,000customersinadayacrossitsstores.
Categorypresence
Vadapavandbeverages.
Jumbo King has four vada pav recipes, viz., Butter, Cheese, Grill and Brown Bread.
Further,itaddsflavoursandoffersabout16varietiesofvadapav.Forinstance,butter
rangeoffersButterJumboKing,ButterGrillJumboKing,ButterCholleJumboKingand
ButterSchezwanJumboKing.Mostoftheseexperimentshavedonewellinthemarket.
Branding
Resortstohoardingsonroadsandrailwaystations.
Competition
Everyone in the foods and snacks business can be considered as competition which
includesmultinationalchains,UdipirestaurantsandalsothelowpriceIndianRailways
cateringservice.However,McDonaldscomesclosestintermsofthesellingproposition
vadapavbeingtheIndianburger.But,therealcompetitorforJumboKingcurrentlyis
notMcDonalds,butvadapavstallsontheroadside.
Jumbo King has 38 outlets in Mumbai and Thane (20 selfowned and 18 franchises).
Thiscomparedto20,000vadapavstallsisonlyabout2%marketshareofthebusiness
in Mumbai. It has strong penetration in Mumbai with outlets at almost all railway
stations.Thecompanyclaimstohaveregistered50%growthrateperyear.Italsohas5
outletsinGujarat.
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Food
FuturePlans
JumboKingplanstotakeitsoutletcountto100acrossMumbaiinthenext23years.Itplans
toaddanewrecipe,PaneerJumboKing,inthecomingmonths.
Matrix
1.
PenetrationlevelsHighinMumbai
2.
BrandsalienceHighinMumbai
3.
4.
ProductmixLow
5.
DistributionreachMediuminMumbai
6.
192
COMPANYPROFILE
Food
KFCINDIA
Yummydelight
OurView
Puttingbehindviolentprotestsagainstitsentryinthemid1990s,KFCIndia(KFC)has
thrivedonthegrowingfascinationforfastfoodamongtheIndianmiddleclass.Ithas
beatenPizzaHutasthelargestsellingfastfoodchainofYum!RestaurantsinIndiadue
toanambitiousexpansionstrategy.Weremainenthusedonitsgrowthtrajectory.
Yum!Brands,basedinLouisville,Ky.,istheworld'slargestrestaurantcompanyinterms
of system restaurants with nearly 38,000 restaurants in over 110 countries and
territoriesandmorethan1mnassociates.Yum!isrankedNo.214ontheFortune500
List and generated more than USD11bn revenue in 2010. The company's brands KFC,
PizzaHutandTacoBellaregloballeadersofthechicken,pizzaandMexicanstylefood
categories.
KFCenteredIndiain1995andhasestablisheditspresencein16citieswithcloseto156
restaurants.
Category
KFCspecializesinchicken.Alsoservesbeverages,burgers,ricemeals,vegetariansnacks
anddesserts.
Products
KFC entered India in 1995 and has been in midst of controversies since then. The
regulatory authorities found that KFC's chickens did not adhere to the Prevention of
FoodAdulterationAct,1954.Chickenscontainednearlythreetimesmoremonosodium
glutamate(popularlyknownasMSG,aflavorenhancingingredient)allowedbytheAct.
Sincethelate1990s,itfacedsevereprotestsbyPeopleforEthicalTreatmentofAnimals
(PETA),ananimalrightsprotectionorganization.PETAaccusedKFCofcrueltytowards
chickensandreleasedavideotapeshowingtheilltreatmentofbirdsinKFC'spoultry
farms.
Branding
Useselectronicmediaandprinttoestablishastrongbrand.
Competition
FacesmajorcompetitionfromMcDonaldsandlagsbehindintermsofpopularity.
AbneeshRoy
+912266203141
KFCisaggressivelypresentinmetros(43%ofitsoutletsin4metrocities).However,itis
alsoincreasingpresenceinTierI&IIcities.
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Food
FuturePlans
KFC plans to open 500 outlets in India by 2015 primarily in bigger cities in states of
Maharashtra,TamilNadu,Orissa,UttarPradeshandRajasthan.IthasinvestedUSD100mntill
CY11end.PlansareafoottoinvestanotherUSD120mn.
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixMedium
5.
6.
194
COMPANYPROFILE
Food
LITTLEITALY
BringingItalytoIndia
OurView
WebelieveIndiasincreasingappetiteforoutsidefoodandarapidjumpinthenumber
of doubleincome families provide immense growth opportunities in dining in the
country. We are enthused by Little Italys superior and authentic Italian food quality
andambience.
LittleItaly,erstwhileLaPizzeria,wasstartedasafamilybusinessinPunein1988by
Mr. Raj Mehta. After establishing its stronghold in Pune, the brand was launched in
Mumbaiin1995andsoonafterspreadelsewhereinthecountry.Thebrandcurrently
servesmorethan26outletsacross17majorcitiesinIndia.
ThecompanysUSPisitsunflinchingqualityandauthenticityofItalianfoodatvaluefor
money.
CategoryPresence
Italiancuisine.
Competition
LittleItalyfacescompetitionfromallplayersinthefoodandbeveragesector,especially
those serving Italian cuisine. Though its market penetration is low, Little Italy
distinguishesitselfbybeingahighendbrand.
ThecompanyhasstrongpresenceintheWest,especiallyinPuneandMumbai.
FuturePlans
The company will invest close to INR0.5bn in FY12 to open ~1520 restaurants at
Nagpur, Nashik, New Delhi, NCR and Kochi and enter international markets of South
East Asia, UK and Gulf with 46 outlets. The outlets will be a mix of franchise and
ownershipmodel(50:50).
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixHigh(inItaliancuisine)
5.
6.
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Food
196
COMPANYPROFILE
Food
McDONALDS
Replicatingglobalsuccess
OurView
Eating on the move/shorter meal times is leading to rise in more convenience foods.
Withatleastonemainmeal(weekdaylunch)inurbancenterslikelytobecomemore
conveniencedriven,McDonalds,withitsstrongbrandrecall,arrayofproducts,wide
reachduetolargenumberofoutletsandaffordablepricemenuisthebestplayinquick
servicerestaurants.
McDonalds is the world's leading food service retailer with more than 31,000
restaurantsin119countriesservingmorethan50mncustomerseachday.InIndia,itis
ajointventurecompanymanagedbytwoIndians.WhileMr.AmitJatia,MD,Hardcastle
Restaurants,ownsandspearheadsMcDonaldsinWest&SouthIndia,intheNorth&
East India it is owned and managed by Mr. Vikram Bakshi's Connaught Plaza
Restaurants.McDonaldsIndiahasatotalof~235outletsacrossthecountry.
Categorypresence
Burgers,wraps,fries,beverages,desserts,sideorders.
McDonald'shasdevelopedamenuespeciallyforIndiawithvegetarianselectionstosuit
Indian tastes and culture. In line with its respect for local culture, India is the first
countryintheworldwhereMcDonald'sdoesnotofferanybeeforporkitems.Also,in
India, only vegetable oil is used as a cooking medium. These initiatives propelled
McDonaldsasthemostfavouredconvenientfooddestinationinIndia.
Branding
TheUSPofMcDonald'sisquality,service,cleanliness&valueformoneywhichmeansit
is focused on high quality products, served quickly in a clean environment at an
affordableprice.
Itspromotionsaremainlythroughtheelectronicmedia.
Supplychain
McDonald'sIndiasourcesalmostallitsproductsfromwithinthecountry.Forthis,ithas
developed local Indian businesses, which can supply it the highest quality products
requiredforIndianoperations.FreshlettuceissourcedfromPune,Delhi,Nainitaland
Ooty; cheese from Dynamix Dairies, Baramati, Maharashtra; fresh buns from Mrs.
BectorFoods,Phillaur,Punjab&Khopoli,Maharashtra;saucefromMrs.BectorFoods,
Phillaur, Punjab; chicken patties, vegetable patties, and veg.pizza McPuff from Vista
Processed Foods, Taloja, Maharashtra. Dairy products are sourced from Amrit Food,
Ghaziabad,UP.AllsuppliersareHACCPcertified.
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Competition
McDonald'scompeteswithotherUSrivalssuchasYumBrandsandDominosPizzaandlocal
playerslikeJumbokingFoods.However, itistheleaderinservingburgers.Subway,famous
for its fresh foot long sandwiches, considers McDonalds its competitor, though it is less
popularintheIndianmarket.
Delhi and Mumbai are the two biggest markets for the company in terms of sales, while
HyderabadandBengaluruarealsofastcatchingup.
FuturePlans
McDonalds India plans to double its presence in the next three years from its current 235
restaurants.ThefranchiseewillinvestUSD0.11bninIndiaoverthenextthreetofouryears.
ItsjointsintheSouth&WestplantoinvestINR5bntodoublethenetworkto250restaurants
overthenextthreeyears.
Mr.VikramBakshi,MD,McDonaldsIndia(NorthandEast),saiditsgoalistodoublesalesin
thenextthreeyears.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductmixMedium
5.
6.
198
COMPANYPROFILE
Food
MIRAHGROUP
Tinglingtastebuds
OurView
MirahGroup,throughMirahHospitality,hasbeenabletocreateagoodUSPacrossits
brands by positioning itself as a speciality chain of restaurants. We believe lifestyle
changesandrisingdisposableincomesprovideimmensegrowthopportunityindining
inIndia.
Commencedin1986,theMirahGroupisanINR15bndiversifiedbusinesshousepresent
in hospitality, real estate development, travel, computer education, wind energy
generation, textiles and international trading. It has a strong presence in the
restaurantsspacethroughRajdhani,FalafelChain,FineDine,ManchesterUnitedCaf,
CafMangii,MadOverDonutsandPalette.Rajdhanichaincurrentlyhas52outletsin
16citiesandalsohaspresenceinDubaiandOman.FalafelChainwasacquiredinSept
2009andisconfinedtoMumbai(9outlets),thoughitislookingatnewmarketssuchas
BengaluruandPune.PaletteisMirahHospitalitysfoodcourtbrand.
Category
Dining,quickservicerestaurants,desserts,sportsbar.
Products
Through the various chain of restaurants, it offers various cuisines including Indian,
Lebanese,Thai,etc.
Competition
Majorcompetitionfromquickservicerestaurants.
Mirah Hospitality is primarily focused around Tier I cities. However, the company is
eagertospreaditspresencetosmallercitiesaswell.
FuturePlans
The company will invest INR1,000mn in 2012 to grow the F&B brands and look to
acquire some more chains. It plans to open three more Manchester United Caf Bars
andtakethecountoftheRajdhanichainoutletsto60byCY12end.
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Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixHigh
5.
6.
200
COMPANYPROFILE
Food
MOTHERDAIRY
Diversificationtohelpfightcompetition
OurView
The Indian dairy industry is still in infancy with major contribution coming from milk.
However, change in consumer preference (led by affluence, changing taste) to value
added and convenient products provide immense opportunities for Mother Dairy.
MotherDairy,awellrecognisedbrandinNorthIndia,withitsestablishedretailnetwork
andmanufacturingcapabilitiesiswellplacedtocapturethegrowingvalueaddeddairy
segment.
Mother Dairy is an USD1bn company set up in 1974 under the Operation Flood
Programme. It is now a wholly owned company of the National Dairy Development
Board(NDDB).AnISOcertifiedcompany,italsohasCertificateofApprovalfromExport
Inspection Council of India. The company markets ~2.8mn liters of milk daily in the
markets of Delhi, Haryana, Kolkata, Punjab, Rajasthan, Uttaranchal, Uttar Pradesh,
Maharashtra, Andhra Pradesh, and Gujarat. It has ~14,000 retail outlets and 845
exclusiveoutlets.
CategoryPresence
The companys products include milk, ice creams, ghee, butter, cheese, dahi, lassi,
flavoured milk, and dairy whitener. It also markets edible oils, fruits, vegetables and
juices,andsellsfrozenvegetables.TheINR4,400croredairyandvegetablescompany
will soon move beyond peas, corn and mixed vegetables and offer a whole basket of
frozensnacks,includingbutteredandsaltedcorncobs,cheesecutletsandFrenchfries.
Branding
Thecompanyhasacorporatetaglinesehatkesaathwhichhelpsitconnectwiththe
psycheofthecommonman.Ituseselectronicandprintmediaforbranding.
Inthecoming months,thecompanyisplanningtoreconfigureitsmarketingsetupby
movingtowardsmicromarketing,i.e.,itplanstostockonlyrelevantproductsinspecific
markets.Underanupcomingretailinitiative,thecompanyisplanning500retailstores
tobecalled'Gaurav'outlets(smallformatretailstores).ThesewillstockonlyMother
Dairyproducts.
Competition
ItsbiggestcompetitoristheGujaratCooperativeMilkMarketingFederation(GCMMF)
that markets Amul. In CY10, Amul beat Mother Dairy in the branded packaged milk,
MotherDairysprimarybusiness.
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Food
It offers its products in Delhi, Haryana, Kolkata, Punjab, Rajasthan, Uttaranchal, Uttar
Pradesh, Maharashtra, Andhra Pradesh, and Gujarat. However, it is most popular in Delhi
whereithas66%marketshareinthebrandedsectorandsells2.7mnlitersofmilkdailyinthe
INR5bn milk market. While Delhi is its fortress, Mumbai is the attack market and Kolkata
growthmarket.
FuturePlans
Thecompanyplanstoopen100additionalstoresinthenationalcapitalregion(NCR)inthe
nextoneyear.ByFY15,itwantstoalmostdoublerevenuesandheadcounttoINR100bnand
9,000,respectively.HeavilyfocusedonNCR(whichcontributes75%torevenue),ithopesto
expand to India's top 2030 cities with major focus on South and West and generate 35%
revenuesoutsideNCR.
Matrix
1.
PenetrationlevelsHighinNCR,moderateinotherstates
2.
BrandsalienceHigh
3.
ChallengefromregionalcompetitionHigh
4.
ProductmixHigh
5.
6.
202
COMPANYPROFILE
Food
MTRFOODS
Wellplacedtocaptureabigpie
OurView
MTRFoods(MTR)isthemarketleaderinthereadytocooksegmentandastrongbrand
in South India. Also, it exports a wide range of packaged and readytoeat foods to
countrieswithalargenumberofIndians.Wearealsoenthusedbyitsplantoenterthe
breakfast menu and snacks segment which we expect to grow faster in the next few
yearsduetourbanizationandriseinworkingwomen.MTRiswellplacedtocapturea
bigpieofthismarket.
MTR is an Indian manufacturer of processed vegetarian food products such as ready
meals, ready mixes, spices and condiments. The companys domestic market is South
India and is amongst the top five processed food manufacturers in the country. It
manufactures,marketsandexportsawiderangeofpackagedfoodstoglobalmarkets
that include US, UK, Australia, New Zealand, Malaysia, Singapore, UAE, Japan and
Oman.MTRwasboughtover byNorwegian majorOrklain 2007.Whilespicesremain
the largest contributor (35%) to revenue of the INR2.5bn food major, the company is
readyinganewrecipetoboostitsinstantmixesrangethatcurrentlyaccountsfor25%
ofthecompany'srevenue.
Categorypresence
Wideportfolioincludinginstantmixes,spices,readytoeat,icecream,papads,pickles
andbeverages.Planstoexpandtosnacksandbreakfastcategory.
After instant success in South India, its national launch endeavour met with initial
failureastheproducts'tastefacedacceptanceproblemsinNorthandWestIndia.
While Indian kitchens are stocking readytocook or instant mixes, the readytoeat
category has a welldefined, but extremely narrow customer segmenta vegetarian
travellingabroadorinanemergencyathome.I'mnotveryoptimisticthatreadytoeat
will become a very large category in India. The Indian woman wants products that
enableherandnotreplaceher.That'sacriticalthingthatfoodmarketersinIndianeed
tounderstand,explainsMr.SanjaySharma,CEO,MTR.
MTR, inthedairysegment,hadexperimentedwitha numberof flavours likealmond,

chocolate, thandai and cinnamonbased milk before deciding to focus on almond
flavoured milk. Essentially, every valueadded feature becomes crucial in the category
astherearemanylocalmanufacturersineachregion.Thecompanysuseofsaffronand
almondflakesinitsflavouredmilkaresomeexamplesofvalueadditionsbycompanies
inthissegmentwhichmetwithdecentsuccess.
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Branding
Planstodoubleadvertisingspendsinthreefouryears.Currently,spendsonanaverage34%
ofsalesonmedia;planstoincreaseitto78%.
Competition
ITCFoods,Britannia,EasternCondiments,CatchMasala,amongothers.
First,thoughMTRisapanIndiabrand,itisbetterknownforSouthIndianspicesandmixes
suchassambar,rasam,puliyogare,bisibelebathandvaangibhaat.
MTR'sspicesalreadybrewstrongsalesinKarnataka,wherethebrandistheleaderwith40%
shareandinAndhraPradesh,whereitcontrols15%ofthemarket.TheIndianbrandedspices
marketisestimatedatINR55bnwithcloseto70regionalplayersintheorganisedsegment.
FuturePlans
The company is looking at top 10 breakfasts, snacks, lunch options and will eventually be
widening its offerings. MTR, which now has a turnover of INR2,500mn, plans to double its
revenueby2012end.Thecompanyalsoplanstogonationalintermsofitscommunication,
whichtillnowhaslargelyremainedregional.
MTRplanstobecomemoreactiveinpromotionthroughthemoderntradeandfocusmore
oninstitutionalsalesandlaunchpanIndiafavouritessuchaspoha,besanladdooandjalebis
andstillremainanauthenticIndianvegetarianfoodcompany.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductMixMedium
5.
6.
204
COMPANYPROFILE
Food
PARAGMILKFOOD
Goforgold
OurView
We believe Gowardhan is creating a niche segment for its products within the highly
competitivedairymarket.Targetingboththeconsumerswhoprefertraditionaltasteas
well as the ones who prefer the Western taste, the company is in a good position to
enjoytheexponentialgrowthofthefoodssegment.
Gowardhan, founded by Parag Milk Foods in 1992, is one of India's largest private
dairies with an output capacity of 1mn liters per day. Located 60 km from Pune, the
companyownsthelargestcowfarminIndiaaswellasAsia'slargestcheeseplant(with
a capacity to process 40 tonnes of raw cheddar daily). With a turnover of about
INR6,500mn, Parag Milk Foods has been selling milk and ghee since the mid90s.The
company also has a national tie up with companies like Baskin Robins, Barista, Caf
CoffeeDayetc.Gowardhanexportsmilkpowder,butterandbutteroil,anhydrousmilk
fats and ghee to 27 countries in the Middle East, South East Asia and Africa, and are
soongoingtoincludecheeseintheexportproductmix.
Category
Theproductportfolioincludesmilkpowder,milk,ghee,cheese,butter,dahiandready
tocookmix.
Products
ProductsarebrandedunderthenamesofGowardhanandGo.GowardhanMozzarella
Cheese,GowardhanProcessedCheese,GowardhanPizzaCheese,GoShreddedCheese,
Go Cheese, Gowardhan Milko, Gowardhan Dairy Whitener, Gowardhan Butter,
GowrdhanPremiumGhee,GowardhanTrimDahi,GowardhanChass,GulabJamunmix.
Branding
Along with television commercials, the company is using the outdoor medium to
amplifybrandrecall.Besidesbusshelteroutdoors,ongroundactivationsarealsobeing
done by way of sampling at malls, multiplexes, hyper markets and traditional retail
outlets.GoCheesealsohadaprintcampaignrunningespeciallyinGoasinceChristmas
isabigeventthereandcheeseconsumptionpicksupduringthattimeoftheyear.
WithrespecttothedifferencebetweenbrandingGowardhanandGo,managementhas
explained that Gowardhan represents something which is more traditional and
homemade, while Go represents products which are westernised, innovative and
premium.
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Food
Competition
BesidesnationalbiggiesAmulandMotherDairy,itfacesmultinationalssuchasNestle,Kraft
andDanone.
Gowardhan has a strong presence in West India, particularly in Mumbai and Pune. The
companyclaims40%shareinMumbaimodernretailoutletsforpackagedcheese.
FuturePlans
Offlate,quiteafewprivateequityfirmshaveshowninteresttoinvestasmuchasUSD100mn
tobuyastakeinthiscompany.TopbracketPEfirmsBainCapital,TPGandKKRhaveemerged
as frontrunners to invest in the range of USD75mn100mn. The company intends to invest
some of the proceeds to expand capacities for processing milk and into a backward
integrationprojectinvolvingacoldchain.
Matrix
1. PenetrationlevelsMedium
2. BrandsalienceMedium
3. ChallengefromMNC/regionalcompetitionHigh
4. ProductmixHigh
5. DistributionreachMedium
6. AppetiteforadbudgetMedium
206
COMPANYPROFILE
Food
PARLEAGRO
Fromjuicestosnacks
OurView
Sheer dominance of Frooti in the fruit juice segment with ~70% market share gives
ParleAgro(Parle)anedgeovercompetitors.Welikethiscompanyalsobecauseofits
presenceinthesnackssegmentandcontinuousinnovationinthepackagedfruitjuice
segment.
Parlecommencedoperationsin1984.Startingwithonlybeveragesanddiversifyingto
includebottledwaterin1993andconfectioneryin2007.Frootiwasthefirstproductto
be launched by the company in 1985. It went on to become Indias favourite mango
drinkandstillcorners~70%share.
The company has brands like Frooti, Appy, Appy Fizz and packaged drinking water,
Bailley.Parlewasthefirsttointroducefruitdrinksintetrapackaging,firsttointroduce
applenectarandalsothefirsttointroducefruitdrinksinPETbottles.
Asofnow,beveragescontribute80%tothebusiness.Confectionaryisnewandsalesdo
notaggregatetoomuchinvalueterms.
Frooti is already available in international markets. The company exports Frooti to

many countries including the US, Canada, UK, UAE, Australia, among others. The
company is looking at expanding in international markets aggressively through
franchiseoperations.
ThecompanyalsoaddedHipposnacktoitsportfolio.
Category
Mineralwater,confectioneryandbeveragesbusinesses.
Products
Frooti,Hippo,Mintrox,Appy,LMN,Bailley.
Appyhasbeenaroundsince1986.ItwaslaunchedinawhitepackayearafterFrootis
debut.Thenin2002,itwasrelaunchedinablackpacksincethepreviousonedidnotdo
toowell.LMNsinitialresponsehasbeenmuted.
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Food
Branding
EversinceFrootiadoptedtheWhygrowup'themefromitspopular'MangoFrooti,freshand
juicy' ad tune, the brand has been constantly reinventing itself and challenging its own
creatives.Thisadcampaigninparticularisrefreshingnotonlyforthebrandbutevenforthe
categoryandisdisruptive.
Competition
PepsiCo,CocaCola,ITC.
Distribution
Thereare4mnoutletsforbottledwaterand1.5mnbeverageoutletsinthecountry.
PanIndia
FuturePlans
TheideaistolookatcategoriesthatothershavenotexploredyetanddonotexistinIndia.
So,thecompanydoesnotplantointroduceproductsinmetoocategories.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductMixMedium
5.
6.
208
COMPANYPROFILE
Food
PARLEPRODUCTS
Biscuitlegend
OurView
We are positive on Parle Products (Parle) primarily on account of well known brand,
strong distribution reach and its understanding of Indian consumers. The company
faces strong competition from domestic players as well as MNCs in the snacks and
biscuits segments. However, its relentless branding exercise, evident from increase in
adspendingandinvestmentincapexmakesusconfidentofitsfocusonbusiness.We
likethiscompanyalsobecauseofitsentryintothehealthandwellnesssnackssegment.
ParlehasbeenIndia'slargestmanufacturerofbiscuitsandconfectioneryforalmost80
years. It is maker of the world's largest selling biscuit, ParleG, and a host of other
popular brands. With a reach spanning even the remotest villages of India, the
companyhasdefinitelycomealongwaysinceinception.ManyParleproductsbiscuits
orconfectioneriesaremarketleadersintheircategories.Ithasa~40%shareofthe
totalbiscuitmarketanda15%shareofthetotalconfectionarymarketinIndia.
ParleG has 70% market share in India in the glucose biscuit category followed by
Britannia,Tiger(1718%)andITC'sSunfeast(89%).Thebrandisestimatedtobeworth
over INR 20 bn and contributes more than 50 % to the company's turnover. It is also
popularacrosstheworldandisstartingtosellinWesternEuropeandUSaswell.
Apart from factories in Mumbai and Bengaluru, Parle has factories in Bahadurgarh,
Haryana and Neemrana, Rajasthan. These are the largest biscuit and confectionery
plants in the country. Additionally, Parle also has 10 manufacturing units and 75
manufacturingunitsoncontract.
Category
Biscuits,sweets/confectionery,snacks.
Products
ParleG,Hide&Seek,Krackjack,Monaco,ParleMarie,Melody,Milano,Nice,Poppins,
MangoBite,MonacoChips,ParleWafers,Fulltoss.
Monacosmartchips.
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Food
Branding
Advertising and sales promotion budget is about INR0.5bn to INR0.6bn per annum. Four
years ago it was around INR0.2bn to INR0.25bn, but after the company roped in superstar
Hrithik Roshan as brand ambassador the budget more than doubled. Later, the company
signedAmirKhanandDarsheelSafaryforbrandParleGbecausethecharactertheyplayedin
TaareZameenParwassimilartothemessagetheywantedtoconveythroughthebrand,i.e.,
G for Genius. Other than these three stars, the company does not plan to sign anyone, at
leastatthemoment.
Competition
Britannia,ITC,PepsiCo,SuryaFood&Agro(PriyaGold).
Distribution
ParleProductshasareachof3.3mndistributionoutlets.
PanIndia.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductMixMedium
5.
6.
210
COMPANYPROFILE
Food
PEPSICO
Diverseportfoliotoaidgrowth
OurView
Diverseproductportfoliowithpresenceinsnacks,beverages,bottledwater,breakfast
cereals,togetherwithstrongparentage,providePepsiCowithacompetitiveedgeover
peers. It is the market leader in fried snacks and its increased focus on fast growing
wellnesssnackssegmentmakesusconfidentonthecompanyspotential.Wearealso
positiveduetoitsstrongbrandrecall.
PepsiCo is one of the worlds largest food and beverage companies with revenues of
nearlyUSD60bn.PepsiCoofferstheworldslargestportfolioofbilliondollarfoodand
beverage brands, including 19 different product lines each generating more than
USD1bninannualretailsales.BesidesitsmainbusinessFritoLay,Quaker,PepsiCola,
Tropicana and Gatorade, the company makes hundreds of other nourishing, tasty
foodsanddrinksthatbringjoytoconsumersinmorethan200countries.
PepsiCoestablisheditsbusinessoperationsinIndiain1989andhasinvestedmorethan
USD1bnsincethen.IthasadiverserangeofproductsfromTastyTreatstoHealthyEats
and has more than 36 bottling plants including 13 company and 23 franchise owned
ones.Ithas3stateoftheartfoodplantsinPunjab,MaharashtraandWestBengal.
Foods contribute 3335% to the business and beverages the remaining. NonCSDs
contributeasmuchasathirdoftherevenuefrombeverageswith,Tropicanabeingone
ofthefastestgrowingjuicesinthecountry.Meanwhile,marketleaderFritoLayIndia,
with nearly 60% market share, mainly relies on starpacked ad campaigns and
consumerengagementmodulestopromoteitsflagshipbrandLaystofightdesiplayers
inIndia.
Category
Snacks, bottled water, carbonated beverage, nonaerated beverages (JV with Tata
GlobalBeverages),breakfastoats.
Products
Pepsi,FritoLays,Aliva,Quaker,Kurkure,UncleChips,Gatorde,Tropicana,Aquafina.
Iced Tea (Lipton): Theres a lot of latent potential however the product did not meet
withdesiredsuccess.
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Food
Branding
Oneofthebiggestadvertisersthecompanymainlyreliesonstarpackedadcampaigns.
Competition
CocaCola,ITC,Dabur,Kelloggs.
PanIndia.
FuturePlans
Oflate,thecompanyhasincreaseditsfocusonlowcalorieandnutritionfood.Thecompany
planstointensifyitspresenceinhealthfoodsegmentviaQuakerOats.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductmixHigh
5.
6.
212
COMPANYPROFILE
Food
PERFETTIVANMELLE
Confectionaryking
OurView
Perfetti Van Melle India (Perfetti) has succeeded in cracking the Indian confectionary
market and retaining leadership on account of its strong branding and innovative
product line. We are extremely positive on its understanding of the Indian market,
entryintofastgrowingsnackscategoryandbrandsalience.
Perfetti has annual sales of INR12bn and is a fully owned subsidiary of the global
conglomerate Perfetti Van Melle, headquartered in Lainate, Italy. Thecompany today
enjoys close to 30% market share and is a leading player in the Indian confectionery
industry.PerfettiVanMelleenteredtheIndianmarketin1994byofferingitsfirstbrand
Center Fresh, followed by Big Babol and Alpenliebe in 1995. The other brands like
Chlormint,Mentos,Fruittella,Cofitos,HappydentandMarblesfollowedsubsequently.
Perfettienjoysahugebrandrecallamongitsconsumersandhasmorethan15brands
underitsumbrella.Indiacontributes~67%totheparentsglobalturnover.Thesugar
confectioneryfirmrecentlyenteredthepackagedchipsandsnacksmarket.
Category
Confectionary,snacks.
Products
Center Fresh, Big Babol, Happydent White, Chlormint, Alpenliebe, Mentos and Stop
Not.
Branding
PerfettibrandshavelaunchedseveralinnovativeadcampaignslikeHappydentWhite,
Chlormint,Alpenliebe,andMentoswhichhavewonseveralawardsforthecompany.
Thecompanyspentclosetoafifthofitsturnoveronadvertising,thehighestsofarby
any confectionery company. The company went into a headon fight with small local
players by having localized ideas and advertising taglines in local languages for all its
brands.
Competition
Cadbury,Mars(Wrigleys),Lotte,Parle,ITC,andNestle.
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Distribution
Distributedacross2.8mnoutlets.
PanIndia.
FuturePlans
DevelopmoreproductsforIndianmarketwhichwillbesubsequentlytakentoglobalmarket
Trytoreducedependenceon50paiseproducts.
Increaseruralpresence.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductmixMedium
5.
6.
214
COMPANYPROFILE
Food
PIZZAHUT
Settobrawlcompetition
OurView
The word pizza is now etched in the vocabulary of urban youth and Pizza Hut well
linked with teens who consider eating out as gettogether with friends. With its
continuously innovating Indianised menu, vibrant staff and ambience and attractive
combooffers,PizzaHutappealswellandwithitsshiftfromquickservicerestaurantsto
finedine.Weremainenthusedonitsgrowthtrajectory.
PizzaHutenteredIndiain1996andopeneditsfirstrestaurantinBangalore.Sincethen
it has captured a significant share of the pizza market and currently has 191 outlets.
Yum!Brands,Inc.,basedinLouisville,Ky.,istheworld'slargestrestaurantcompanyin
termsofsystemrestaurantswithnearly38,000restaurantsinover110countriesand
territoriesandmorethan1mnassociates.Yum!isranked#214ontheFortune500List
and generated more than USD11bn in revenue in 2010. The company's brands KFC,
PizzaHut,andTacoBellarethegloballeadersofthechicken,pizzaandMexicanstyle
food categories, respectively. In 2010, the company recorded 17% EPS growth and
maintainedROICof20%+.
Categorypresence
Pizzaswithsidedishesincludingpastas,buffalowings,breadsticksandgarlicbread.
Pizza Hut played its cards right from the start. Within three years of its 1996 launch,
PizzaHutopeneditsfirstvegetarianrestaurantinAhmedabad,Gujarat,astatewitha
largeJainpopulation.Notonlydidtheoutletservenomeat,italsoofferedaselection
ofJaintoppings.TherearenowthreeallvegetarianrestaurantsinIndia,theonlysuch
PizzaHutoutletsintheworld.Thereareothersignsof"Indianization":Threeyearsago,
PizzaHutlaunchedthe"GreatIndianTreat"productrange,itsfirstcompletelylocalized
menu.Evennow,themenuincludesamixofIndianandinternationalingredientsand
tastes.ThishelpedPizzaHuttobolsteritsmarketshare.
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Food
Branding
PizzaHutusesvariousmarketingchannelslikeTVcommercials,socialnetworkingsites,print,
outdoor and radio. The company has appointed Hungama Digital Media Entertainment to
strengthen its social media presence. Pizza Hut has partnered with E4 to produce its first
channelexclusivetelevisionadvertsinFebruary2011totargetyoungerpopulation.Thepizza
industryisfamousforintroducingnewproductstosparkshorttermsalesandPizzaHutleads
insuchinnovations.
Many customer service initiatives have been uniquely developed for India and have been
greatly instrumental in building an emotional bond with the customer. For instance the
crewmembers at Pizza Hut break into a Boogie at restaurants in Delhi and Mumbai and do
the Bhangra in Chandigarh and Amritsar. Also, a bell hangs at each Pizza Hut restaurant,
which is rung by customers who, as they leave, wish to thank the servers for yet another
memorablevisit.
Distribution
PizzaHutusesthreedifferentmethodsofsellingitsproductsdirectlytothemarket:delivery,
todineinandonlineordering.
Competition
Domino'sPizza,operatedbyDelhibasedJubilantFoodWorks,PizzaHutsbiggestcompetitor,
has some 439 stores at the moment. Yum! is also bracing up for the challenge. It plans to
investINR4.5bninthenextfiveyearstoincreasethenumberofstores.
PizzaHuthas27%marketshareintheIndianpizzamarketandboastsof70000footfallsper
day across the country. It has deeper presence in the North on basis of the number of
outlets.
FuturePlans
PizzaHutDelivery(PHD),(whichfocusesonhomedeliverytoconfrontitsrivalDominos),is
some40innumbercurrently.Thegameplan,accordingtoofficialsatYum!,istoincreasethe
numberofstoresrapidlyunderPHD.Thequickservicerestaurants,currently120,willalsobe
increasedovertime.
By2015,Yum!hopestohavealargerfootprintinIndiathanitsglobalpeers,with500KFCs
againstMcDonaldsplannedtotalof410stores,400PizzaHutsandcloseto100TacoBells.
By then, it hopes to be in 65 Indian cities that have a population of at least 1mn, from 35
today.
Matrix
1.
2.
3.
4.
5.
6.
216
BrandsalienceHigh
ProductmixHigh
COMPANYPROFILE
Food
RASNA
Powdereddrinkveteran
OurView
Rasna,thelargestandtheoldestplayerinthepowderedreadytodrinkmarketinthe
country, is sprucing up distribution. The company faces severe competition from
multinationalplayerssuchasKraftFoodsIndia,CocaCola,andPepsiCo. However,we
areoptimisticaboutthelowcostpowderdrinksegmentand,therefore,arepositiveon
thecompany.
It is India's largest instant drink maker. Ahmedabadheadquartered Rasna, which has
~90%shareintheorganisedconcentrateddrinkmarketinthecountry,hasreporteda
turnover of INR3.25bn in FY10. In mid2010, Rasna launched its Fruit Plus series and
went the 'natural' way by incorporating fruit extracts in its product. As per the
company,mostotherbrands,likeTang,aresyntheticwhileRasnaistheonlyonewith
natural ingredients. The past two years have been good for the company in terms of
salesgrowth.
Categorypresence
Powder drink, fruit syrups, milkshake mix, energy sports drink, iced tea, ready to
eat/readytocook.
Products
Rasna.
Branding
ThecompanyisactivelypromotingandadvertisingitsRasnabrandviaTVcommercial,
outdoor, celebrity promotion and merchandising. However, compared with earlier
years,theadsseemlessvisible.
Competition
ItfacescompetitionfromglobalbrandssuchasTangandIndianbrandssuchasKissan,
Glucovita,Maproetc.
Distribution
1.8mnretailoutletinthecountry.
AbneeshRoy
+912266203141
PanIndia.
HarshMehta
+912240635543
February9,2012
217
Food
FuturePlans
Rasna will introduce a second brand for the first time to enter the premium beverage
segment and expand its health beverage portfolio as it expects the premium segment to
drive growth in future. Rasna chairman & managing director, Piruz Khambatta, feels that
eventhoughthemassmarketwillreignforthenextthreefiveyears,futuregrowthwillcome
fromthepremiumsegment.Hence,theneedtohavefootholdinthepremiummarket.This
wouldrequireanewbrandsinceRasnahasrecallmainlyinthemasssegment.
FutureGroup,RasnaplanmegaFoodParknearAhmedabad.
Matrix
1.
2.
BrandsalienceHigh
3.
4.
ProductMixLow
5.
6.
218
COMPANYPROFILE
Food
SUBWAY
Playingwellonurbanisation
OurView
SubwayIndiaisaggressivelyincreasingitspresenceinthecountry.Ithasworkedclosely
withlocalchefstoensureagoodbalanceofvegetarianandnonvegetarianfoodonits
menu. To match the Indian consumer's palate for strong, bold flavors, Subway
restaurantsinIndiaofferawidearrayofpopularlocalandinternationalfavourites.It
has positioned itself on the health (less than 6 grams of fat) plank, an interesting
strategy,givenitsarchrivalsperceivedvulnerabilityonthisscore.Globally,Subwayhas
surpassedMcDonald'stobecomethelargestrestaurantchain.WeexpectSubwayIndia
tobeasaggressiveinthecountry.
Withmorethan34,000outletsin95countries,Subwayistheworld'slargestsandwich
franchise.HeadquarteredinMilford,Connecticut,theSubwaychainwascofoundedby
FredDeLucaandDr.PeterBuckin1965.
Subway Systems India opened its very first restaurant in 2001 in New Delhi and has
swiftlygrownitsoperationsto223operatingrestaurantsin27citiesacrossIndia.
The Subway chain in India and around the world is 100% franchisee owned and
operated. Subway restaurant's in India serve no beef or pork products and have an
expanded selection of vegetarian choices. Popular sandwiches, both local and
international favourites, include Veggie Patty, Paneer Tikka, Aloo Patty, Chicken
MeatballMarinara,RoastedChicken,ChickenTeriyaki,Turkey,andTuna.
Categorypresence
Sandwiches,salads,cookies.
Products
Sandwiches like paneer tikka, veg shammi, alloo patty, chicken tandoori, along with
internationalflavorslikeItalianBMT,SubwayClub,Turkey,Tunaetc.
Branding
The brands mainly used print advertising promoting its Sub of the Day. It has also
appointed a creative agency and has had modest spends to date. Apart from this,
SubwayhasfocusedonamultimediaapproachinvolvingTV,socialmediaandmobile
marketinginordertocreatetopofthemindslottingforitsrestaurants.
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
219
Food
Competition
Thoughthereisnocompetitionforthebrandinthesandwichspace,thebrandcontendswith
fastfoodservicessuchasMcDonalds,KFC,PizzaHutandDominos.
SubwayhasastrongpresenceonlyinthemetrosandbigcitiesinIndia.Theyplantoexpand
itsreacheventosmallercitieseventhoughtheconceptmaynotbeacceptedbythepeople.
FuturePlans
Thecompany'sgoalistohave530storesopenby2015fromitscurrentstorecountof223.
Theywouldbesetinplaceswherepeoplework,studyandshop.Theywouldfocusnotonlyin
metrocitiesbutalsoplacessuchasChandigarh,Hyderabad,PuneandAhmedabad.
Matrix
1. PenetrationlevelsLow
2. BrandsalienceMedium
3. ChallengefromMNC/regionalcompetitionLow
4. ProductmixMedium
5. DistributionreachLow
6. AppetiteforadbudgetMedium
220
COMPANYPROFILE
Food
TUNIPAGRO
Juicystory
OurView
We believe increasing awareness of health and hygiene among people and higher
disposable incomes of middle class in India has resulted in higher consumption of
branded fruit juices. Thus, Tunip has identified its target market as young urban
professionalswhereconvenientfoodscategoryisindemandbythisworkingclass.
Establishedin1994,TunipAgroproducesandmarketsfruitjuices.BennettColeman&
Coacquired11.68%foraroundINR667mn(UDS1.4mn)inMay2010.Thecompanyhas
been making conscious investment in creating market for fruit juices, helping it
successfully establish brand ONJUS in the market. The company has 3 warehouses at
Mumbai, Delhi and Kerala, and 16 super stockist in different parts of India, with a
manufacturingfacilityinSriLanka.Thecompanysnetsalesincreased30%YoYinFY10
toINR399.1mn.
Category
100%fruitpulpJuice,readytodrinkmilkbasedthandai.
Products
OnjusOrange,OnjusApple,OnjusPunch,OnjusMango,OnjusGuavaandthandai.
Branding
ThecompanyhasbeenengagedinvariousmarketingactivitieslikeBuy1Get1Freeor
Buy2Get1Free.
Competition
The company faces stiff competition in the fruit drink category from companies like
Dabur,PepsiCo,HULandParleAgro.
Distribution
The company has an efficient sales team that ensures nationwide distribution of the
ONJUSbrand.Itsproductsareavailableinallthereputedchainsofsupermarketsand
alsoatsmallgeneralandprovisionalstores.
ThecompanyhasastrongpresenceinNorthIndia,with45%ofitssalescomingfrom
thisregion,followedbyWest(30%),South(20%)andEast(5%).
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
221
Food
FuturePlans
ThecompanyfiledDRHPwithSEBIinJuly2010.Theyaimatfundingtheirexpansionplans
throughtheIPO.
Matrix
1.
2.
BrandsalienceMedium
3.
4.
ProductmixLow
5.
6.
222
COMPANYPROFILE
Food
UNIBIC
Innovationleadsthestory
OurView
UNIBICIndia,arecententrantintheINR126bnbiscuitsegmentwithpremiumcookies,
may face stiff competition from national players (Parle, Britannia) and other
unorganised regional players. However, its expertise and unmatched focus on the
premium end reinforces our confidence on its growth prospects. On account of
consistent and superior quality of products, we believe Unibic can capture a niche
spaceforitself.
A subsidiary of UNIBIC Australia, UNIBIC India, has its factory and infrastructure in
BengaluruwithstateoftheartmachinesfromItaly.Itisthefirstcompanytobesetup
with wire cutting technology, the only method available to make a real cookie.
UNIBIC makes cookies for PepsiCo's Quaker, Future Group's Tasty Treat, Cafe Coffee
DayandalsoexportstoAustralianretailers.
The company holds ~78% of the premium cookie market and aims to achieve 10%
marketshareoverthenext1218months.UNIBICIndiaisnotprofitableyet,butaimsat
revenueof~INR1bninthenext1218months.
Categorypresence
Cookies.
Products
Anzac Cookies, Bradman Chocolate Chip Cookies, Jamz, Cashew Butter Cookies,
Chocolate,andCookies.
Competition
Kraft'sOreocookies,UnitedBiscuits'McVitie'sandBritannia.
Metrofocused(willnotfightatthebottomendofthemarket).
AbneeshRoy
+912266203141
HarshMehta
+912240635543
February9,2012
223
Food
FuturePlans
TheIndianarmofAustraliancookiemakerUnibicisscoutingforapartner,eitherstrategicor
financial, to stoke its growth ambitions in the country, says Unibic Biscuits India MD Nikhil
Sen.BangalorebasedUnibicnowtargetsrevenuesofUSD100mninIndiain45years.Unibic
Biscuits India, the country's only wire cut cookie major, has developed chyawanprash
fortified cookies, Chyawanprash Cookies, in an effort to grab a share of the market in the
healthandwellnessspace.
Matrix
1.
2.
BrandsalienceLow
3.
4.
ProductmixLow
5.
6.
224
COMPANYPROFILE
Food
VENKYSINDIA
Betonfrozennonvegmarket
OurView
We are optimistic about the huge opportunity in theIndian poultry industry. There is
vast scope of improvement in per capita consumption, which is much lower than
NationalInstituteofNutritionrecommended180eggsand11kgofpoultrymeat.Venky
iswellestablishedinpoultrymarketanditsentryintoRTChaveenthusedus.Alsothe
company is ramping up production of broiler chicken, while rising prices have fueled
bettergrowth.
Venky`s (India) formerly known as Western Hatcheries was incorporated in 1976 as a
private limited company, mainly to produce dayold layer and broiler chicks for the
densepoultrymarketsofNorthIndia.ThecompanywasfoundedbyDr.BVRao.The
company`s principal activities are to own and operate chicken and broiler breeding
farms. Their portfolio include animal health products, pellet feeds, processed, and
furtherprocessedchickenproducts,solventoilextraction,SPFeggs,nutritionalhealth
products for humans, and pet food & health care products. The company operates
throughthreebusinesssegments,namelypoultryandpoultryproducts,animalhealth
products and oilseed. Their major business segment is poultry and poultry products,
which consists of production and sale of dayold broiler and layer chicks, specific
pathogen free eggs, processed chicken products and poultry feed. They have
manufacturingfacilitiesformanufacturingnutritionalhealthproductsforhumans,and
petfoodandhealthcareproducts.Theyarealsoinvolvedinsolventoilextraction.
Categorypresence
Processedchicken,poultryproducts,eggs,biscuits,flour,RTC,frozenfoods.
Products
Venkyschicken,VenkysXpres,VenkysAtta,VenkysBiscuits,arangeofRTCproducts.
Branding
ThecompanyhasacquiredtheEnglishPremierLeaguefootballclub,BlackburnRovers
forGBP23mn.Theyhavegivencontracttomanyoftheirplayersontheclausethatthe
playerwouldhavetomakehimselfavailableforadvertisement&promotionalworkfor
theclubandthecompany.Recently,10playerscametogetherforanadvertisementof
chickenmeantfortheIndianmarket.
AbneeshRoy
Competition
+912266203141
Godrej Tyson Foods, Suguna, Aarambaug, Amrit group. Also, the company faces
competitionfromtheunorganizedsectorintheProcessedChickensegment.
HarshMehta
+912240635543
February9,2012
225
Food
RegionalPresence/Sstronghold
The company has a strong presence in supermarkets and retail stores in all major cities in
India.
FuturePlans
Thecompanyisplanningtoexpanditspresencein25newcountriesthroughofferingfeed,
health and hygiene services at the doorstep of farmers in SouthEast Asia, the Middle East
andLatinAmerica.Thecompanyisalsoplanningtoestablishapoultrydiagnosticlaboratory
with all the latest diagnostics facilities in South Vietnam to provide free diagnostic and
technicalservicestotheVietnamesepoultryfarmers.Inthenonpoultrysector,thecompany
islookingatsettingupafloatingfishfeedplantinVietnam.
The company has decided to start plants in Philippines, Bangladesh and Switzerland. They
havestrongsalesnetworkandcustomerbaseandareplanningtointroducenewproductsin
thosemarkets.
Matrix
1.PenetrationlevelsMedium
2.BrandsalienceMedium
3.ChallengefromMNC/regionalcompetitionLow
4.ProductmixHigh
5.DistributionreachMedium
6.AppetiteforadbudgetMedium
226
Food
AnnexureI
HistoryofeatinghabitsinIndia
The food consumption pattern in India varies extensively across regions, influenced
predominantly by culture, religion and climatic conditions. Food preparation practices have
beenanintegralpartoftheIndiansocietywhichischaracterizedbyanemphasisoneating
freshhomemadefood.Severalreasonshavecontributedtotheseeatinghabits.
Existenceofjointfamilystructure
Ajointfamilyisdefinedasseveralgenerationsofextendedfamilylivingunderoneroof.This
arrangement is still common in India because of the lack of affordability, social bindings,
upbringingofchildrenandotherreasons.Theprotocolofsuchfamilyarrangementswasthat
themalememberswereassumedtohaveaprofessionallifewhilethefoodpreparationand
householdworkwerelefttohousewives.
Fig.1:Typicaljointfamilyarrangement
Emphasisonhomemadefreshfood
Specific food habits and religious constraints lay emphasis on homemade food. In some
sections of the Indian society, the practice of consuming onion less food can be observed
becauseofrespectivereligiousbeliefs.Also,thepracticeofconsumingvegetarianfoodbya
majorpartofthepopulationcanbetracedbacktobeanoutcomeoftheinfluenceofHindu
culture.
The influence of religion and a culture of festivals is another important aspect of Indian
traditionwithrespecttofoodconsumptionaseveryfestivalisprimarilyassociatedwithsome
special dish. Additionally, the regional diversity of food cuisines can be substantiated from
thefactthatIdliandDosaarepreferredintheSouth,fishandriceinWestBengalandEastern
statesanddisheslikeDhoklainWesternstateslikeGujarat.Achar(pickle),chutniandpapad
are also considered an important part of the meal, all of which were prepared at home by
housewives.EmphasisonhomemadefoodisevidentfromtheprevalenceofChakkikaaatta
(wheat flour prepared from traditional hand driven compact flour mill), with rotis being a
primecomponentoflunchinNorthernandWesternpartofIndia.
227
Food
Fig.2:GrindingwithChakkitool
Fig.3:Modernflourmillmachine
Accessibilityofhomemadefoodatworkplace
With~75%ofthepopulationlivinginRuralIndiatill1990s,accessibilityofhomemadefood
at the work place was never an issue. Government jobs with comfortable lifestyle ensured
thattakingtimeoutofhomemadefoodwasatoppriority.Intheurbanpopulation,unique
service industry concept, like the Dabbawala, emerged whose primary business was to
collectfreshhomemadefoodtooffices.
Fig.4:MumbaisDabbawalaservice
Lackofeatingoutopportunities
Organisedeatingoutameager8%
ofoverallfoodservicesindustry
Eating out requirement of Indians has been addressed by the unorganised sector like
traditional Dhabas and roadside eateries comprising street stalls. Organised eating out, like
restaurants, are less than 8% of the overall food services industry in India. With limited
hygienestandards,theseplaceshaveofferedvaluemeals.However,locationoftheseDhabas
wasmostlyoutsidecityasthesewerestrategicallylocatedforconsumerstravellingintercity
via roads. With in cities, street stalls were present, but mostly focused on providing mid
mealssnacks,ratherthanvalueformoneymeals.
228
Food
Fig.5:Roadsideeatingjoints
Hotelsandrestaurantshavea
hugescopeofgrowthinIndia
AccordingtoHVSInternational,Indianconsumersspend~2.4%oftheirfoodexpenditurein
hotelsandrestaurants(includingonpremisesandtakeoutsales)ascomparedtoAmerican
consumerswhichspend~46%oftheirfoodexpenditureonawayfromhomemeals.
Socialgatheringsconsideredeatingoutopportunities
Theclosedknitsocialfabricensuredthatcommunalfestivitieslikeweddings,childbirthetc.
werecelebratedatalargelevel.This,inturn,presentedenougheatingoutopportunitiesfor
Indianfamilies.AtypicalIndianweddingwouldhavearound~500700guests,ascompared
tomuchsmallergatheringinthewesternsociety.
Fig.6:Indianweddingmeal
Lackofdisposableincome
Mostimportantly,lackofdisposableincomehasbeenamajorfactortorestrictIndianeating
habitstohome.Wediscussitfurtherinthecomingsections.
229
Food
AnnexureII
Foodandfoodprocessing
Food and food products constitute ~ 40% of urban household spend and 36% of blended
(urban+rural)walletspent(Source:Technopak).
Chart1:Discretionaryspendinggainingfootholdinruralwallet
Durables Housing
5%
Apparel
3%
6%
Healthcare
6%
Education
6%
Food
42%
Communication
5%
Entertainment
7%
PersonalCare
9%
Travel
11%
Source:Technopak,Edelweissresearch
RuralIndiashelloutmoreonfood
thanurban
Chart2:Walletshareofblendedwalletshare
Feul,Transport
Savings&
&
Investments
Communication
4%
10%
Discretionary
Expenditure
30%
Rent,Utilities&
Education
20%
Food&Grocery
36%
Source:Technopak,Edelweissresearch
FoodProcessing:
India,withapopulationofmorethan1.2bn,isoneofthelargestconsumermarketsinthe
world.Foodandbeverages,thelargestcategoryinIndianconsumerspending,isexpectedto
remainsointhefuture.
230
Food
WithagricultureatthecoreofIndianeconomyandmorethantwothirdsofthepopulation
dependent on farming, a developed Food Processing sector can be a strong link between
agricultureandtheconsumers.Thegovernment'shighprioritytothesectorcoupledwitha
growingconsumptionleddemandisleadingtoafastpacegrowthinthesector.
Processed food in India is estimated to be ~44% of the total food Industry by 2011
i.e.~USD110bn. The level of processing in each segment is low relative to many other
countries.InIndia,thelevelofprocessingforFruitsandVegetablesis2.2%ascomparedto
65%inUS,23%inChinaand78%inPhilippines.Inmarineproducts,poultryandmeat,the
processing levels in India are 26%, 6% and 20% respectively whereas it is 6070% in
developedcountries.Thebenefitsofastrongagricultureproductionbasearegettinglostdue
tolackofstorageandprocessinginfrastructure.Thesadstatecanbeseenfromthefactthat
the post harvest losses of fruits and vegetables are as high as 35% (loss of INR500bn per
annum).
The Ministry of Food Processing in its Vision 2015 document has estimated the size of the
processedfoodsectortogrowthreefold,processinglevelofperishabletoincreasefrom6%
to20%,valueadditiontoincreasefrom20%to35%andIndiasshareinglobalfoodtradeto
go up from 1.5% to 3%. Both the Central and state governments have launched various
initiativesandschemestoinviteprivatesectorparticipationinthissector.
Table1:Indianfoodindustry:Keystatistics
FoodIndustrysize(USDbn)
FoodProcessingIndustrysize(USDbn)
%FoodProcessingIndustryintotalfoodindustry(%)
Sizeoforganizedsectorinfoodprocessingindustry(USDbn)
%organizedsectorinfoodprocessingindustry(%)
200203
175
70
40.0
13
19.0
200607
200
85
43.0
23
27.0
201011*
250
110
44.0
37
36.0
201415*
300
150
50.0
60
40.0
Presentstatus,futureprospectsofIndianfoodprocessingindustries
Thefoodprocessingsectorishighlyfragmentedindustry,itcomprisesofthefollowingsub
segments:fruitsandvegetables,milkandmilkproducts,beerandalcoholicbeverages,meat
andpoultry,marineproducts,grainprocessing,packagedorconveniencefoodandpackaged
drinks.Ahugenumberofentrepreneursinthisindustryaresmallintermsoftheirproduction
and operations, and are largely concentrated in the unorganized segment. This segment
accounts for more than 70% of the output in terms of volume and 50% in terms of value.
Thoughtheorganizedsectorseemscomparativelysmall,itisgrowingatamuchfasterpace.
231
Food
Fig.1:Processedfoodscategorizedbyconsumersneeds
>INR10.0lacs
>INR5.010.0lacs
>INR2.05.0lacs
>INR0.52.0lacs
>INR0.5lacs
Lifestyle&Aspiration
Cheese,Wine,Gourmet,Food,etc.
1.2mn
Convenience&TimeSaving
RTE,RTC,Purses,etc.
2.4mn
FoodInflationProtection
FrozenFruits&Vegetables,Juices
10.9mn
WholesomeNutrition
Milk,Juices,Meats,etc.
91.3mn
BasicNutrition
FortifiedAtta,IodizedSalt,etc
101.0mn
AnnualHouseholdIncome
No.ofHouseholds
NeedfromProcessedFood
Source:Technopack,Edelweissresearch
232
Food
AnnexureIII
Trendofadspends
Snapshotoficecream&frozendessertadsonTV
Keyfindings:
Kwality Walls' Cornetto Truffle and Paddle Pop became top two brands with 17% and
15%sharerespectively.
Thetoptwoadvertiserscontributedawhopping74%sharetotheadvolumesin2010
Regionalmediaenjoyed69%ofthepieagainstnationalmediathatheld31%
May and April witnessed maximum ad volumes from brands that advertised for ice
creamandfrozendessertonTV,37.5%and29.7%sharerespectively
January, February and November were the least advertised months, totaling to one %
share
Chart1:TVAdvolumecomparison
450
394
Chart2:Monthly%Shareofoveralladvertisingin2010
40.0
360
32.0
322
24.0
(Hrs)
(%)
270
16.0
180
8.0
90
December
October
August
July
June
May
April
November
JanDec2010
September
JanDec2009
March
February
January
0.0
Source:
Chart1:Top5Advertisersin2010
Rank
1
2
3
4
5
Chart2:Monthly%Shareofoverall
Advertiser
HindustanUnileverLtd
VadilalEnterprises
GCMMF(Amul)
HatsunAgroProductLtd
IndussIceCream
%Share
64.0
10.0
9.0
9.0
2.0
Rank
Brand
%Share
KwalityWalls'CornettoTruffle
17.0
KwalityWalls'PaddleTop
15.0
KwalityWalls'SeleDutchChoconut
12.0
VadilalIceCream
10.0
KwalityWalls'Cornetto
8.0
Source:AdExIndia,Edelweissresearch
233
Food
Overviewof'Namkins/Wafers(Chips)'advertisingonTV
Keyfindings:
Wafersisbeingaggressively
marketedbycompanies
'Wafers' segment contributed for more than half of the overall advertising share of
'Namkins/Wafers(Chips)'categoryonTVduringJanOct'10.
'PepsiCo'wasthenumberoneadvertiserof'Namkins/Wafers'categoryonTVbetween
JanOct'10.
'Bingo Spicy Masala Remix' was the most advertised new brand of
'Namkins/Wafers(Chips)'categoryonTVduringJanOct'10.
Between JanOct '10, 'Namkins/Wafers(Chips)' category contributed for 5% of overall

advertisingshareoftheFood&BeveragessectoronTV.
TV Advertising of 'Wafers(Chips)' and 'Namkins' brands was in the ratio of 59:41

betweenJanOct'10.
'Pepsi Co India Holding(P) Ltd' with 45% share leads TV advertising of

'Namkins/Wafers(Chips)' category followed by 'ITC Ltd' and 'Agro Tech Foods Ltd' with
31%and16%sharerespectivelyduringJanOct'10.
Top 5 advertisers contributed for 96% of overall ad share of 'Namkins/Wafers(Chips)'

categoryonTVduringJanOct'10.
TVadvertisingof'Namkins/Wafers(chips)'categorydeclinedby1%duringJanOct'10.
Top 3 new brands of 'Namkins/Wafers(Chips)' category advertised on TV were 'Bingo

Spicy Masala Mix', 'Lehar Kurkure Funjabi Kadhai' and 'Lays American Style & Cream
Onion'duringJanOct'10.
3brandseachoutoftop10belonged'PepsiCoIndiaHolding(P)Ltd'and'ITCLtd'
''Andhra Pradesh', Tamil Nadu' and 'Karnataka' were the Top 3 states in advertising of
'Namkins/Wafers(Chips)'productsonRegionalChannelsduringJanOct'10.
Chart4:TVaddeclined1%duringJanOct'10
100.0
(Index:JanOct09=100)
Chart3:Namkins5%shareofoverallF&BTVad
Namkin
5%
99.6
99.2
98.8
98.4
98.0
Others
95%
JanOct2009
JanOct2010
234
Food
Chart5:Wafersaccountedfor59%ofoverallad
Chart6:Majoradvertisingcompanies
Flavour
Foods
Parle
products
Namkin
41%
Agro
Tech
Wafers/chi
ps
59%
16
ITC
31
PepsiCo
45
Table3:NewBrandsadvertisedonTVduringJanOct10
Rank
1
2
3
4
5
6
7
8
9
10
TopNewBrands
BingoSpicyMasalaRemix
LeharKurkureFunjabiKadhai
LaysAmericanStyle&CreamOnion
HippoMunchies
BingoJuicyTomatoKetchup
BingoPremiumSaltedPotato
LeharKurkureKhicdi
RealNamkin
RealFalahari
MukharochakChanachur
Chart7:National&regionalchannels
Chart8:Shareofstatesinregionalchannel
West Others
9%
AP
Bengal
24%
10%
Regional
39%
Karnataka
8%
Punjab
13%
Maharasht
ra
11%
National
61%
Assam
3%
TN
22%
235
Food
SnapshotofTVadvertisingbyinstantfoods/meals
KeyFindings:
HULadspendshasbeen
aggressivetofacemarketleader
Nestle
Maximum TV advertising of Noodles/Pasta under Instant Foods/Meals category during

JanOct'10.
HULwasthetopadvertiserofInstantFoods/MealsproductsonTVduringJanOct'10.
HighadvertisingshareofInstantFoods/MealsonregionalchannelsduringJanOct'10.
Noodles/Pasta contributed the maximum. i.e. 76% of overall advertising of Instant

Foods/MealscategoryonTVfollowedbyInstantMixandInstantsoupmixeswith13%
andseven%sharerespectivelyduringJanOct'10.
HindustanUnileverLtdhadthemaximumsharei.e.37%ofoveralladvertisingofInstant
Foods/MealscategoryonTVduringJanOct'10.
NestleIndiaLimitedandGSKConsumerwith27%and13%shareoccupiedsecondand
thirdpositionintheTop5listofadvertisersofInstantFoods/MealsbrandsonTVduring
JanOct'10.
KnorrSoupyNoodles,MaggiThrillincurryandMaggiMultigrainzNoodlesweretheTop3
newbrandofInstantFoods/MealscategoryadvertisedonTVduringJanOct'10.
DuringJanOct'10,advertisingofInstantFoods/Mealscategoryonnationalandregional
channelswasintheratioof55:45.
Top 3 states in advertising of Instant Foods/Meals category on regional channels were

TamilNadu,Maharashtra,andAndhraPradeshduringJanOct'10.
Chart9:TVAdvolumecomparison
200
Chart10:Adfordifferentcategories
Frozen
foods
Instantmix 3%
Readyto
13%
eat
1%
160
120
Instant
Soup
Mixes
7%
80
40
0
JanOct2009
JanOct2010
236
Noodles/P
asta
76%
Food
Chart11:Leadingadvertisers
MTR
IndoNissin
Foods
Smithkline
Beecham
Chart4:Leadingbrandsadvertised
Ranks
1
2
3
4
5
10
NewBrands
KnorrSoupyNoodles
MaggiThrillinCurry
MaggiMultigrainzNoodles
MaggiTrickyTomato
MTRBreakfastmixes
13
Nestle
27
HUL
37
Chart13:Shareofstatesinregionalchannel
Orissa
5%
Others
7%
TN
25%
West
Bengal
9%
National
45%
Regional
55%
Kerala
11%
Karnataka
12%
Maharasht
ra
17%
AP
14%
OverviewofchocolatesadvertisingonTV
KeyFindings:
CadburysIndiaLtdrulesinadvertisingofchocolatesonTVduringJanOct'10.
Cadburys Perk Glucose was the top new brand of chocolates advertised on TV during
JanOct'10.
HighshareofchocolateadvertisingonnationalchannelsduringJanOct'10.
CadburysIndiaLtdledchocolatesadvertisingwith80%shareonTVfollowedbyNestle
IndiaLtdandFerreroIndiaLtdwith15%andthree%sharerespectivelyduringJanOct
'10.
CadburysPerkGlucose,CadburysDairyMilkSilkandNestleBarOnewerethetopthree
newchocolatebrandsadvertisedonTVduringJanOct'10.
237
Food
TV advertising of chocolates saw a growth during the period of August to October '10
sinceitisalsothefestiveperiod.
Advertising of chocolates on national and regional channels was in the ratio of 52:48
duringJanOct'10.
Chart14:TVadvolumecomparison
160
Chart5:Mostadvertisedchocolatecompany
128
96
Rank
Company
CadburysIndiaLtd
NestleIndiaLtd
FerreroIndiaLtd
SmithklineBeecham
InbiscoIndiaPvtLtd
64
32
0
JanOct2009
JanOct2010
Chart6:Mostadvertisedbrands
Rank
NewBrands
CadburysPerkGlucose
CadburysDairyMilkSilk
NestleBarOne
ChokiChokiChocolate
GalaxyChocolate
Regional
48%
National
52%
238
Food
SnapshotofbeveragessectoronTVduringJanMay'10
KeyFindings:
CocaColaleadswith17%sharein
advertisement
'Aeratedsoftdrink'categoryled'beverages'sectoradvertisingonTVduringJanMay'10.
'CocaColaIndiaLtd'wasthetopadvertiserof'beverages'sectoronTVduringJanMay
'10.
High advertising share of 'Minute Maid Nimbu Fresh' among the new brands of
'beverages'sectoronTVduringJanMay'10.
'Aerated soft drink' had the maximum share i.e. 52% of overall advertising share of
'beverages'sectoronTVfollowedby'milkbeverages'and'nonaeratedsoftdrink'with
29%and16%sharerespectivelyduringJanMay'10.
Among the categories of 'beverages' sector, 'mineral water' was the top category to
record maximum growth in its TV ad volumes followed by 'milk beverages' and 'non
aeratedsoftdrink'categoriesduringJanMay'10comparedtoJanMay'09.
'CocaCola India Ltd' had the highest share i.e. 43% of 'Beverages' sector TV ad pie
followed by 'Pepsi Co' and 'GSK Consumer' at second and third position with 22% and
15%sharerespectivelyduringJanMay'10.
'MinuteMaidNimbuFresh','SignatureNaturalMineralWater'and'DanoneChocoMilk'
werethetopthreenewbrandsof'beverages'sectoronTVduringJanMay'10.
55%of'beverages'sectoradvertisingonregionalchannelsandrest45%sharewason
nationalchannelsduringJanMay'10.
'Tamil Nadu', 'Andhra Pradesh' and 'West Bengal' were the top three states in
advertisingof'beverages'sectoronregionalchannelsduringJanMay'10.
Chart16:TVadvolumegrowth
18,600
Chart17:%shareinTVads
Others
14%
18,000
(Hrs)
17,400
16,800
16,200
15,600
JanJun2010
JanJun2011
Food&
Beverages
86%
239
Food
Chart7:Sectoradvertising
Chart8:Mostadvertisedbeveragecompany
Category
%share
Company
Share(%)
SoftDrinkAerated
18.0
CocaColaIndiaLtd
17.0
MilkBeverages
14.0
Cadburys
13.0
Chocolates
8.0
SmithknlineBeecham
7.0
Biscuits
8.0
PepsiCo
6.0
SoftDrinkNonAerated
8.0
BrookeBondLipton
6.0
Spices
4.0
PerfettiVanMelle
4.0
Tea
4.0
Heinz
4.0
Noodles/Pasta
3.0
ITC
4.0
ChewingGum/BubbleGum
3.0
Nestle
3.0
EdibleOil
3.0
Britannia
Chart9:Top10brands
Rank
1
2
3
4
5
6
7
8
9
10
3.0
Chart18:Nationalvs.regionalchannels
Brands
Sprite
Complan
Maaza
Fanta
ThumsUp
MDHMasalaRange
Limca
Horlicks
Pepsi
Cadbury'sBournvitaPlusPlus
National
42%
Regional
58%
Source:
240
Food
AnnexureIV
SurveyFindings
Risinghealthconsciousnesstoboostdemandfornutritionalproducts
Evolvinglifestyletocreatemoreavenuesofgrowth
ManyIndias:emergingasakeythemedrivingthestrategyofmajorplayers
Consumerflexibilitytopricehikewillhelpmitigateinflationarypressure
Categoriesplacedonhighgrowthpath
Relativepositioningofmajorplayersandtheirbrands
Risinghealthconsciousnesstoboostdemandfornutritionalproducts
Whilemakingapurchasedecisiononpackagedfoodproducts,57%oftherespondentswere
stronglysensitivetohealthconsciousnesswith37%beingmildlysensitive.Thisresultattests
the thesis of rising health consciousness levels and points towards the opportunity in this
segment. Major Consumer companies have been increasingly positioning their products in
thefoodsegmentwithahealthandnutritionproposition.Consumerplayersinthissegment
havebeenaggressivelylaunchingproductsincategorieslikemultigrainnoodlesandbiscuits,
healthdrinksandpulpbasedfruitjuices.Theactionhappeningintheindustryclearlypoints
towardsthepotentialofhealthyandnutritionalproducts.
Chart1:Consumersensitivitytofollowingfactorswhilepurchasingpackagedfood
100.0
Consumerslookforqualityand
healthinpackagedfood
(%)
80.0
60.0
40.0
Stronglysensitive
Mildlysensitive
Promotional
Offfers
Price
Convenient
toCook
Brand
EasyAvailability
AtStores
Quality
0.0
Health
Consiousness
20.0
Indifferent
Priceplaysasmallrole
89%oftherespondentswerestronglysensitivetoqualityintheirpurchaseofpackagedfood
with44%beingbrandconscious.42.8%oftherespondentswerestronglysensitivetobrand
aswellasqualitywhichshowsastrongcorrelationbetweenbrandandquality.i.e.branded
products are largely perceived to be of good quality. In various categories major food
companies face stiff competition from local manufacturers and food shops. A significant
241
Food
inclination towards brand consciousness points towards increasing acceptance of branded
foodproducts.
Thesensitivenesstobrandandhealtharesignificantlycorrelatedas65%oftherespondents
whoarestronglysensitivetobrandarealsostronglysensitivetohealth.Thereishighoverlap
inrespondentssensitivenesstoquality,brandandhealthwith28%beingstronglysensitive
to all these factors simultaneously. This, points towards the opportunity for established
brandstocomeupwithhealthyandnutritionalproducts.
Fig.1:Health,QualityandBrandconsumerspreference
89%
Quality
Conscious
44%
28%respondentsare
stronglysensitiveto
Health,Qualityas
wellasBrand
Health
Conscious
Brand
Conscious
57%
Chart2:Responsetoqualityconsciousness
StronglySensitive
toQualityaswellas
brand
Indifferent
1%
StronglySensitive
89%
MildlySensitive
10%
242
Food
Chart3:Healthconsciousnessontherise
31%
30%
56%
32%
(12%)
(37%)
SoftDrinks
Increased
HealthFoodDrinksFruitJuices
Remainedsame
Decreased
Evolvinglifestyletocreatemoreavenuesforgrowth
With stricter work schedules and family structures moving towards nuclear, people are
gettingmoretotheconvenienceincooking.32%oftherespondentswerestronglysensitive
totheconveniencetocookfactor.Thisisanindicatoroftheopportunityforprocessedfood
productsthatreducethetimetocookbyavoidingintermediateprocesseslikegrindingand
fermenting.Italsopointsouttowardstheopportunityofreadytoeatorreadytocookmeals
andconveniencefoodslikenoodlesandpasta.
Chart4:Changeinfrequencyofeatingnonhomemadefoodoverlast5years
Decreased
17%
Eatingouthasincreasedmainly
attributedtochanginglifestyle
Increased
Significantly
46%
Increased
Marginally/Rem
ainedSame
37%
The frequency of people eating non homemade food has largely increased. For 46% of the
respondents,theincreasehasbeensignificantandfor37%ithasmarginallyincreased.17%
of the respondents have decreased the frequency of eating outside food which was
significantly higher than our hypothesis. The reason to this could be attributed to the
243
Food
consumers getting more health conscious and preferring freshly prepared homemade food
overpackaged.
Packagedfoodisalifestyle.Naturalandfreshfoodhasalwaysbeenmypreferenceover
packagedfood.
Alwaysunpackedfreshfoodispreferredoverpackedfoodirrespectiveoftheprices.
EdelweissEmployee,May25,2011
16.2%ofthefemalesconsumefoodnotcookedathomeatafrequencyofmorethan4times
aweek.Formales,thefigurestandsat24.8%.Thisimpliesthatthetrendofeatingoutsideis
higherforthemalepopulation.
Chart5:Frequencyofeatingfoodnotcookedathome
RelativelyHigher
proportionofmales
eatingoutsidefood
24timesa
week
38%
Male
Morethan4
timesaweek
22%
lessthanoncea
week
40%
Female
48.0
(%)
36.0
24.0
DoNotWant
toCook
StressBuster
LackOfTime
toCook
Easy
Availability
DrivenByFamily
KidsFriends
0.0
SocialGathering
12.0
TastePreferences
Consumersprefertastetoother
factors
Chart6:Tastetopsthelistwhileeatingnonhomemadefood
60.0
244
Food
Consumingthemealswithafamilygettogetherorsocialgatheringisanintegralpartofthe
Indian culture. Indian consumer primarily goes out to consume non homemade food as a
meansforsocial gatheringor beingdrivenbyfamilyandfriends.For47%respondents,the
influenceofsocialgatheringishighindrivingpeopletoeatout.
Indianconsumerishighlysensitivetotastepreferencesandisdriventoeatoutofhomefora
change of taste or to please his/her palates. 57% respondents were strongly influenced by
tastepreferencesineatingoutofhome.
Withtheincreasingtimepressureandhecticworkschedules,factorslikelackoftimecook,
not willing to cook and eating out as a means of stress buster are gaining significance in
driving people to consume less of homemade food. 20% of the respondents were highly
influencedbylackoftimetocookandunwillingnesstocooktoeatoutofhome.Inaddition
tothis,outsidefoodandpackagedfoodisaneasilyavailablealternativeandpeopleareless
willing to spend time and effort on cooling food at home. 38% of the respondents were
consumingoutsidefooddrivenbyitseasyavailability.
ManyIndias:Emergingasakeytheme
Chart7:%ofrespondentswhohighlypreferthesefoods
80.0
64.0
48.0
(%)
Traditionalfoodstillapreference
overwestern
Indiansarehighlyspecifictotheirtastepreferencesandaspointedoutbythesurveystudy,
57% of the respondents were strongly driven by taste. The taste preferences vary
significantly across cultures and geographies in India. 59% respondents highly preferred
traditional regional food specialties while 29% highly preferred western and Chinese fast
foods.
Duetostronginclinationtowardstraditionaltaste,Indianizationofproductshasbeenoneof
the key focus areas, driving the success of western fast food players in India. Western fast
foodcompanieslikeMcDonalds,KFCandSubwayhavebeenlaunchingtheirproductswitha
blend of western preparation and traditional taste (e.g. Maharaja Mac, Aloo Tikki burger).
HencetastepreferencesoftheIndianconsumerareamajorfocusareaoftheplayersinthis
segmentandakeydriverofthestrategyformulationforthefoodcompanies.
32.0
16.0
0.0
TraditionalIndianRegional
WesternFastfoodChineseFood
245
Food
Chart8:%ofrespondentswhoregularlyconsumethisproduct
80.0
64.0
(%)
48.0
Traditionalsnackswidely
consumedbutRTE/RTChasgood
potentialahead
32.0
BottledWater
PackagedAtta
Spices
Readytoeat
WesternMeal
Readytoeat
IndianMeal
TableRelishes
Traditional
Snacks
0.0
NoodlesPasta
Soups
16.0
Chart9:Frequencyofconsumingnoodles,pasta,soups
Donotconsume
7%
Rare
16%
Regular
31%
Occasional
46%
31%oftherespondentsareregular(atleastonceaweek)consumersofNoodles/pasta
andsoups.Foratotalof77%oftherespondents,thefrequencyofconsumptionismore
thanatleastonceamonth.Only7%oftherespondentsdonotconsumetheseproducts.
Traditionalsnackslikenamkeenandtablerelisheslikepickle,jamsandsaucesforman
integral part of regular consumption with 60% and 42% of the respondents regularly
consumingthesefoodproductsrespectively.
Readytoeat Indian meals (like rajma, halwa) and readytoeat western food products
likefrozenorcannedfooddonothavemuchappealtotheIndianconsumeras38%and
49%oftheconsumersdonotconsumetheseproductsrespectively.Theseproductsare
meant for occasional usage and 27% and 29% of the respondents consumed these
productsonceinsixmonthsrespectively,whichisanencouragingfigurefortheoutlook
ofthesecategories.
246
Food
40% of the respondents are regular users of packaged Atta and spices. This is an
indicator that the penetration level in these categories has increased in spite of stiff
competitionfromunorganizedsector(neighborhoodstoreofferingchakkikaatta).
43% of the respondents are regular consumers of bottled water. This indicates rising
healthconsciousnessamongconsumers.
Consumerflexibilitytopricehikewillhelpmitigateinflationarypressure
Consumers are predominantly mildly sensitive to price (65%). In the case of high inflation
scenario,theplayersinthissegmentcanaffordtopassonsomeofthecostincreasetothe
consumerswithoutgettingmuchhitonthesalesfront.
Theconsumerisalsohighlysensitivetoeasyavailabilityoftheproductsatthenearbystores
as53%oftherespondentswerestronglysensitivetothesame.
Highgrowthpath:HFD,juice,biscuits,fastfoodsandnoodles
56% of the respondents have increased their consumption of health food drinks and
fruitjuicesoverthepast5years.Theproportionofrespondentswhohaveincreasedthe
consumption in this category is highest among all the packaged food and beverages
categories.ThisresultagainsubstantiatestherisinghealthconsciousnessoftheIndian
consumer.
36.0
24.0
ReadyToCookIndian
JamsJelliesSpreads
InstantSoups
Popcorn
Pasta
Sauces
SoftDrinks
Noodles
Pack.RiceAttaPulses
CookingAids
PackedIndianSnacks
BreakfastCereals
Icecream
PizzaBurger
Health(FruitJuices)
0.0
Chocolates
12.0
BiscuitsChips
Health,milkproductsandbiscuits
gainingmomentum
48.0
MilkProducts
Salesgrowth(%)
Chart10:%ofrespondentswhohaveincreasedtheirpurchaseoverpast5years
60.0
247
Food
Softdrinkconsumptionhas
largelydeclined
Table1:Categorywisechangeinconsumptionpattern
Increased
Remainedsame
Health(FruitJuices)
56.0 30.7
MilkProducts
51.2 31.8
BiscuitsChips
49.1 36.0
Chocolates
43.8 33.9
PizzaBurger
42.9 32.7
Icecream
39.9 39.0
BreakfastCereals
39.0 31.0
PackedIndianSnacks
35.4 38.7
CookingAids
35.4 51.5
Pack.RiceAttaPulses
34.2 38.1
Noodles
33.3 42.3
SoftDrinks
32.1 29.8
Sauces
31.3 45.2
Pasta
30.1 36.3
Popcorn
26.2 37.8
InstantSoups
24.1 34.8
JamsJelliesSpreads
22.3 44.9
ReadyToCookIndian
13.4 42.6
Decreased
11.6
14.6
14.0
21.4
21.4
19.3
28.3
23.5
11.6
25.6
23.2
36.6
20.5
31.3
33.9
37.5
29.8
41.1
Source:xxx
37%oftherespondentshavereducedtheirconsumptionofsoftdrinksoverthepast5
years.Thisindicatestowardsatrendofconsumerpreferencesshiftingfromcarbonated
drinkstohealthdrinks,fruitjuicesandmaltedfooddrinks.
Theconsumptionofmilkproductslikebutter,gheeandcurdhasseenanincreasewith
51% of the respondents mentioning an increase in this category. Milk products are an
integral part of the diet of Indians. This result is an indicator that people have largely
movedfromhomemademilkproductstopackagedproducts.
Inthecategoryofbiscuits,breakfastcereals(likecornflakesandoats),noodlesandpasta,
49%, 39%, 33% and 30%of the respondents respectively have increased the purchase.
Indiansnackitemssawanincreaseby35%oftherespondents.
Theoutlookoffastfoodcategorieslikepizzaandburgeralsoseemsverypositiveas43%
oftherespondentssaidtohaveincreasedthepurchaseoverpast5years.
The purchase of chocolates and ice cream has increased for 44% and 40% of the
respondentsrespectively.
34%oftherespondentshaveincreasedthepurchaseofpackagedAtta,riceandspices.
248
Food
Table2:Relativepositioningofmajorplayersandtheirbrands
(in%)
Nestle
Britannia
ITC
HUL
Dabur
Marico
GSKCH
Alwaysprefer
61.3 53.0 19.3 24.4 28.0 29.8 22.3
Sometimesprefer
26.5 32.1 40.2 39.9 35.1 28.9 22.3
Indifferent
8.9 11.0 36.3 32.1 33.0 37.8 50.3
Chart11:%ofrespondentswhoalwayspreferfoodproductsoffollowingcompanies
70.0
56.0
(%)
42.0
28.0
14.0
Nestle
Britannia
ITC
HUL
Dabur
Marico
GSKCH
Chart12:%ofrespondentswhofindtheproductsofthesecompanieseasilyavailable
90.0
72.0
(%)
54.0
36.0
18.0
0.0
Nestle
Britannia
ITC
HUL
Dabur
Marico
GSKCH
249
Food
Chart13:%ofrespondentswhofindtheA&Pofthesecompanieshighlyeffective
40.0
32.0
(%)
24.0
16.0
8.0
0.0
Nestle
Britannia
ITC
HUL
Dabur
Marico
GSKCH
Food products of Nestle and Britannia are largely preferred with 61% and 53% of the
respondentsbeingloyaltobrandsofthesecompaniesrespectively.
Around85%oftherespondentsfindtheavailabilityofNestleandBritanniaeasy.
34% of the respondents find the effectiveness of advertisement and promotions

initiativesofNestletobehighlyeffectiveindrivingtheirpurchase.
Table3:Categorywiserankings
Category
Biscuits
Noodles
Pasta
MilkProducts
HFD
Soups
IceCream
packagedRice
Rank1
Parle
Maggi
Maggi
Amul
Bournvita
Knorr
KwalityWalls
Kohinoor
TopBrands
Rank2
Britannia
Sunfeast
Britannia
Horlicks
Maggi
250
Food
Table4:Preferredbrandinbiscuits
Biscuits
Rank1
Rank2
Parle(ParleG,
Krackjack,Hiden
Seek)
47.0
39.9
Britannia(Tiger,
Treat,Goodday,
5050)
ITC(Sunfeast)
PriyaGold
3.6 0.3
8.3 1.8
Table5:Preferredbrandinnoodles
Noodles
Rank1
Rank2
NissinFoods(Top
GSKCH HUL(Knorr
Nestle(Maggi)
Ramen)
(Foodles)
Soupy)
88.7 1.8 0.9 1.5
8.9 33.9 7.1 19.6
Table6:Preferredbrandinpackagedrice
PkgRice
Kohinoor
Dawat
LalMahal
Rank1
72.0 7.1 3.3
Rank2
8.3 44.0 23.8
Table7:Preferredbrandinpackagedmilk
Nestle
(Everyday,
MilkProd
Amul
Britannia
MotherDairy
Milkmaid)
Rank1
72 10 7 5
Rank2
15 34 15 25
Table8:PreferredbrandinHFD
Cadbury
HFD
GSKCH(Horlicks) Heinz(Complan) GSKCH(Boost)
(Bournvita)
Rank1
19.3 9.8 4.2 55.4
Rank2
28.0 21.1 14.9 20.5
Table9:Preferredbrandinpasta
Pasta
Nestle(Maggi)
ITC(Sunfeast)
Bambino HUL(Knorr)
Rank1
55.4 12.8 10.1 4.2
Rank2
18.2 22.3 10.1 24.7
Table10:Preferredbrandinsoups
Nestle(Maggi)
40.2
40.5
Rank1
Rank2
HUL(Knorr)
45.8
36.9
Table11:Preferredbrandinicecream
KwalityWalls
BaskinRobins
Dinshaw
Vadilal
Rank1
42.3 39.3 2.1 7.7
Rank2
37.5 20.2 6.3 22.9
251
Food
SurveyApproachandMethodology
Objectiveofthesurvey
An extensive survey was conducted to get a comprehensive view of the evolving food
consumption pattern across India and understand the outlook of packaged food and
beveragesindustry.Theprimaryobjectivesofthesurveyarelistedbelow:
a)
Tounderstandtheevolvingfoodconsumptionpattern:Thestudywasfocusedtowards
understanding the shifting consumer preferences in the food and beverages industry.
Thesurveytriestogaugethechangeinfrequencyofconsumingnonhomemadefood.
Capturing the frequency of consuming products in specific categories like Noodles and
Readytoeat meals was another focus area. Additionally, the survey was designed to
understand if the consumer has shifted his preferences across various categories (e.g.
shiftingfromplainnoodlestomultigrainnoodles)overthepastfewyears.
b)
To get an insight of the key drivers of increasing demand: Another objective of the
surveywastogetabetterperspectiveofthefactorsthatdrivetheconsumerstowards
consumingnonhomemadefood.Withtheevolvinglifestyle,stricterworkschedulesand
changing family structures, there has been an increasing inclination towards
conveniencefoodproducts.Thesurveytriestogaugetheextenttowhichthefactorslike
tastepreferences,socialgatheringsandtime pressuredrive consumerstowardseating
outsidefood.
c)
To understand the sensitivity to factors impacting purchase decision:Whilemakinga

purchasedecisiononpackagedfood,theconsumerisinfluencedbyvariousfactorslike
brand consciousness and health and nutrition proposition of the product. The survey
wasdesignedtogetanunderstandingontheextenttowhichthesefactorsimpactthe
purchasedecision.
d)
Toidentifythecategoriesonhighgrowthpath:Anotherfocusareaofthesurveywasto
identify the key growth segments of the industry. Various categories in the processed
foodandbeveragesindustryareindifferentgrowthstagesandpenetrationlevels.The
studyfocusestowardsnarrowingdowntocategorieswheretheconsumptionhasbeen
increasingoverthepastfewyearsandareplacedonahighgrowthtrajectory.
e)
To identify the better positioned players: Thestudywasalsofocusedtowardsgaining

aninsightontheconsumerpreferencesacrossbrandsandcompanies.Thesurveytries
togaugethereachofthefoodproductsacrossmajorConsumercompaniesandmeasure
theeffectivenessofadvertisementandpromotioninitiativesonacomparativescale.
f)
Togaugetheeffectofmacroeconomicfactors:Thesurveytriestolookattheeffectof
macroeconomicfactorslikeinflationandhigherdisposableincomesonthepurchaseof
packagedfoodproducts.
Methodologyandresearchdesign
Thestudyfollowedacombinedapproachofprimaryandsecondaryresearch.Thefindingsof
the secondary research gave a broad perspective of the consumption pattern and this
understanding aided in the formulation and design of the questionnaire for the primary
research.
252
Food
Secondary Research: Survey results and historical data were captured from following
sources:
ASSOCHAM,NSSOdatabasesandsurveys
Internet/publications
Primary Research: Primary research of the current study comprised of a quantitative

approach through a food consumption pattern survey that was primarily floated online to
capturetheresponses.Afieldstudyofthesamesurveywasalsoconductedthatcomprised
offacetofaceinterviewsofconsumersatmompopstoresandhypermarkets.
Hypothesis Formulation: Based on the objectives of the study and findings from the
secondary research, an initial hypothesis was formulated. The survey results were then
comparedtothehypothesistocapturetheactualtrendsandpatternsofconsumerpurchase.
Questionnaire specifications: Survey Questionnaire methodology was employed for the
study. A structured questionnaire was formulated for the purpose of the study. Few
questionswerekeptopenendedtocaptureconsumerinsights.
The scaling technique used in preference and sensitivity related questions was primarily
nominal. Rank ordering technique with ordinal scaling was used to gauge the comparative
rankingofthebrands.
Samplingdesign:
Samplingtechnique:NonprobabilityConveniencesamplingwasusedinthestudy.The
respondentswereprimarilytheemployeesoffinancialservicesindustryintheMumbai
region. In addition to this, respondents with diverse profiles were interviewed in the
fieldsurveyoutsidehypermarketsandmompopstoresandtheresultswereintegrated
withthefindingsoftheonlinesurvey.
Sample Size: A total of 457 respondents participated in the survey. This includes 82
responsesfromthefieldsurvey,therestbeingfromtheonlinesurvey.
RespondentsProfile:
253
33%oftherespondentswerefemales
17.3%oftherespondentswerebelow25yearsofage,80%werebetweentheage
group2545andtherestweremorethan45yearsofage
89% of the respondents were from Mumbai, the rest being from Delhi, Chennai,
HyderabadandKolkata.
Food
Chart14:Genderprofile
Chart15:Ageprofile
3545 >45years
4%
years
12%
Female
33%
<25years
17%
Male
67%
2535
years
67%
254
Food
RATING & INTERPRETATION
Company
Absolute
Relative
Relative
reco
reco
risk
Company
Absolute
Relative
Relative
reco
reco
Risk
AsianPaints
BUY
SP
Colgate
HOLD
SU
Dabur
BUY
SO
Emami
BUY
SP
GlaxoSmithKlineConsumerHealthcare
BUY
SP
GodrejConsumer
BUY
SO
HindustanUnilever
BUY
SO
ITC
BUY
SO
Marico
BUY
SO
NestleLtd
HOLD
SP
HOLD
SU
UnitedSpirits
ABSOLUTE RATING
Ratings
Expected absolute returns over 12 months
Buy
More than 15%
Hold
Between 15% and - 5%
Reduce
Less than -5%
RELATIVE RETURNS RATING

Ratings
Criteria
Sector Outperformer (SO)
Stock return > 1.25 x Sector return
Sector Performer (SP)
Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return
Sector Underperformer (SU)
Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING

Ratings
Criteria
Low (L)
Bottom 1/3rd percentile in the sector
Medium (M)
Middle 1/3rd percentile in the sector
High (H)
Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings
Criteria
Overweight (OW)
Sector return > 1.25 x Nifty return
Equalweight (EW)
Sector return > 0.75 x Nifty return
Underweight (UW)
Sector return < 0.75 x Nifty return
Sector return < 1.25 x Nifty return
257
Food
EdelweissSecuritiesLimited,EdelweissHouse,offC.S.T.Road,Kalina,Mumbai400098.
Board:(9122)40094400,Email:research@edelcap.com
VikasKhemani
HeadInstitutionalEquities
vikas.khemani@edelcap.com
+912222864206
NischalMaheshwari
CoHeadInstitutionalEquities&HeadResearch
nischal.maheshwari@edelcap.com
+912266233411
Coveragegroup(s)ofstocksbyprimaryanalyst(s):ConsumerGoods
AsianPaints,Colgate,Dabur,GodrejConsumer,Emami,HindustanUnilever,ITC,Marico,NestleLtd,GlaxoSmithKlineConsumerHealthcare,UnitedSpirits
RecentResearch
Date
1,150
Company
(INR)
750
Buy
Price(INR)
15Feb12
Nestle
Marginmantra;
ResultUpdate
15Feb12
Consumer
Goods
Resiliencecontinues;
SectorUpdate
13Feb12
Emami
Buy
Buy
Marginsurge:apositive
surprise;ResultUpdate
950
Title
Recos
4,412
Hold
376
Buy
550
350
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
150
DistributionofRatings/MarketCap
RatingInterpretation
EdelweissResearchCoverageUniverse
Buy
Hold
Reduce

Rating
Total
Expected to
RatingDistribution*
*3stocksunderreview
119
> 50bn
MarketCap(INR)
111
47
15
184
Between 10bn and 50 bn
< 10bn
57
16
Buy
appreciatemorethan15%overa12monthperiod
Hold
appreciateupto15%overa12monthperiod
Reduce
depreciatemorethan5%overa12monthperiod
Access the entire repository of Edelweiss Research on www.edelresearch.com

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recipientofthisdocumentshouldmakesuchinvestigationasitdeemsnecessarytoarriveatanindependentevaluationofaninvestmentinthesecuritiesofcompaniesreferredtointhis
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Philippines Vietnam Indonesia

b) Supplydemand mismatch of electricity especially in rural/TierII cities. Though the

Increase in cold storage capacity from ~25 MT to ~150200 MT and in warehouse

Additionally, 1.7mn skilled manpower will be required including production managers,

The current warehouse capacity shortage is estimated at ~50 MT compared to an installed

Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12

100 101 99 101 102 103 105 105 107

Consumption of pleasure oriented foods namely, cookies, carbohydrates, icecream,

Consumers do not approve of outstretching their budget; when they up trade in a

Branded market at around INR55bn is extremely fragmented and includes national,

11.1 11.1 11.4 11.2

As per a survey conducted by electronics payments company VISA on mystery spending or

ReadytoCook:Instantmixeslikecakemixes,gulabjamun mix,faloodamix, icecream

60 12.0 106 10.0 156

4.5 15.0 9 12.0 14

75 12.0 132 10.0 195

The per capita consumption of coffee is about 600 gm in India compared to 10 kg in

1.1 20.0 3 18.0 6

1.5 20.0 4 18.0 8

Growth is expected to be driven by Indian womens increasing reliance on packaged

As per FY11 budget, specific equipments for preservation, storage or processing of

FoodStreets are proposed to be developed that would be tourist attraction centers

Modernization of abattoir scheme was launched in 200809 with the objective of

Advertisement content on leaflets and on the website of Supreme Food Industries

Onthelines oftheEuropean UnionPledge, sevenIndian multinational foodandbeverages

* Promoters pledged shares

* Promoters pledged shares

Hindustan Unilevers (HUL) beverages, foods, and ice creams business

* Promoters pledged shares

* Promoters pledged shares

We expect competition to increase as other organised players (Pizza Hut, KFC,

* Promoters pledged shares

Advertisement & sales costs

Extraordinary items (net of tax)

Profit after tax after Minority Interest & Associate

EPS (INR) basic

Diluted shares (mn)

EPS (INR) fully diluted

Common size metrics (%)

Advertising & sales costs

Other general expenditure

Net interest expenditure

Net profit margin

Deferred tax liability

Net fixed assets

C apital work in progress

Asset Held for disposal

C ash and bank balance

Loans and advances

Add: Non cash charge

Gross cash flow

Cash flow metric

Operating cash flow

Financing cash flow

Investing cash flow

C ash conversion cycle (days)

Interest coverage (x)

Nestle is consistently posting robust growth in spite of rising food

* Promoters pledged shares

Pantaloon Retail (PRIL), the largest retailer in the country, stands to

* Promoters pledged shares

* Promoters pledged shares