Wants to capitalise on Cadbury’s 70% share.
Cadbury’s acceptance of Kraft’s bid to acquire it will give the latter a needed access to the India market.
Cadbury, unlisted subsidiary of the British chocolate and confectionary maker, has been doing exceedingly well. It registered net sales of Rs 1,588 crore and a net profit of Rs 166 crore for calendar year 2008, a growth of 23 per cent and 41 per cent, respectively, over the previous year.
In terms of market share, too, Cadbury has 68-70 per cent of the organised chocolate and confectionary market, estimated at Rs 2,500 crore. Nestle India is a distant second, with 28 per cent market share.
Kraft is the world’s second-largest food group, after Nestle. It will now get a ready market with the acquisition. For a company that has been looking hard to get into India, this is a blessing, say analysts.
Anand Ramanathan, manager, KPMG, believes the acquisition will be a ‘win-win’ situation for Kraft. It will use the Cadbury network to launch its dairy products here, even as its presence remains secure in chocolate and confectionary. “That will happen soon,” says Ramanathan. “I don’t think Kraft will waste any time, especially when rivals such as Danone have already forayed into the space in India. Nestle is already there,” he adds.
Kraft had forged an alliance with Dabur Foods in 2001, through a subsidiary (KJS India) of its parent, Philip Morris, now called Altria, to distribute its popular powder-flavoured drink, Tang. That deal, however, was terminated in 2003.
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Kraft did not give up its Indian dreams. In 2007, following its bid for the global biscuit business of Group Danone, Kraft officials had articulated their interest to forge an alliance/joint venture with anyone interested to roll out their offerings in the country. This was done because Kraft had left out the Indian and South American markets when bidding for Danone’s international biscuit portfolio.
The company had hoped that Danone would be able to offload its stake in Britannia to it, provided the Wadias, the then Indian partner in the venture, would allow the company to do so. That never happened. Kraft then said it would go alone in its attempts to get its products, especially biscuits, into the country. It did not happen.
The organised dairy market in India is about Rs 7,000 crore in size. It is set to touch Rs 8,500-9,000 crore by the end of the next financial year. So, Kraft is not likely to waste time getting into the space.