The company’s Rs 200-crore bid for Unibic highlights its seriousness about a segment in which it had been taking small steps.
Over the past few years, the association of Marico Ltd, controlled by Harsh Mariwala, with the foods segment has been through edible oil brand Saffola. The Mumbai-headquartered company has extended the Rs 400-crore health and wellness brand to low-sodium salt, atta mixes for diabetics, low-GI rice and oats. It even tried its hands at baked snacks, but had little success in that.
Amid all this, when the company’s name figures prominently in the race to acquire a biscuit firm, valued at Rs 200 crore, it does evoke surprise.
Last-minute hiccups prevented the maker of Saffola and Parachute brands from consummating the deal, but the boldness of the move did amaze many.
“So far, Marico has been taking relatively small steps in foods. Its bid for Unibic, however, indicates it has bigger plans there,” says a Mumbai-based fast moving consumer goods (FMCG) analyst, who requested not to be named.
While people familiar with the development say the Australian cookie maker is still hunting for strategic partners, Marico is not saying anything on this at the moment.
The firm’s chief executive for consumer products, Saugata Gupta, says he cannot comment on market speculation. Unibic India Managing Director Nikhil Sen chooses not to be drawn into a conversation concerning his company’s hunt for a strategic partner, or Marico’s interest in it.
Still, the questions refuse to die down. Why would Marico want to lay its hands on Unibic?
People in the know say Marico is looking to galvanise its foods business. An acquisition or two will help the company do that. Marico’s head of mergers & acquisitions, Chaitanya Deshpande, while refusing to get into details about Unibic, says his company is open to acquisitions. “We are there in certain dayparts like breakfast, with oats; and lunch, with rice and oil. We tried snacks, but that did not work. We would like to end with after-lunch,” he says.(Click for graph)
And biscuits are an ideal post-lunch snack. The Indian biscuit market is estimated at Rs 10,000 crore in size, with the glucose segment alone constituting 60 per cent of the market. The premium or value-added segment, comprising cookies, creams, etc, make up the rest of the market.
Despite being smaller than the glucose segment, the value-added space is seeing a lot of action these days, with existing players like Parle, Britannia and ITC working aggressively, even as new players like Kraft look to strengthen their presence here.
At the moment, Kraft has Oreo cookies in the value-added space. But, as the number-two foods player in the world looks to launch more products in India, the biscuit market is a potential target, say people in the know.
The Indian biscuit market is growing at a compounded annual growth rate of 15-18 per cent. But, the value-added segment is growing at over 25 per cent. The glucose segment, on the other hand, is moving at about 10-12 per cent a year.
The reason for the glucose segment growing at a rate slower than value-added products is the uptrading happening in biscuits. Bored of eating glucose biscuits, consumers are trying value-added products, say FMCG analysts.
“It helps”, says Ranjit Kapadia, vice-president (institutional research) HDFC Securities, “that value-added products are available at attractive price points”.
In other words, what have been driving the phenomenon of uptrading are smaller packs. This point is also endorsed by Britannia Managing Director Vinita Bali. She says: “The point here is about affordability and accessibility. There is a new area of opportunity, which I call the personal consumption pack. Here, I could give three jim-jam biscuits or four bourbons for Rs 5.”
Typically, a pack of 8-10 bourbons costs anything above Rs 10, while cream biscuits are even more expensive, at Rs 10-15 per pack. When products like these are available at Rs 5, consumption shoots up, says Kapadia.
Marico, company observers say, is conscious of the growth that value-added products, within biscuits, presents. “It dovetails well with its strategy of health and wellness,” say people in the know.
