Monday, November 4, 2013

ITC set to enter branded juice biz with B Natural buy

English: Logo of ITC Limited
Cigarette-to-foods conglomerate ITC Ltd is set to enter a new segment — branded ready-to-drink juices. The company is close to acquiring Bangalore-based Balan Natural Food Pvt Ltd’s B Natural brand to roll out packaged fruit juices under its foods category.

The deal, which is in the final stages, could be valued at Rs 100-200 crore, said those aware of the development. Both companies, however, declined to comment.

But a person privy to the development said on condition of anonymity that ITC will soon make an announcement on the deal, which will be concluded in about 90 days. This entry will pitch ITC into a highly competitive market against the established leader, Dabur India Ltd, which has a 54 per cent market share through its Real fruit juice brand, and PepsiCo India with a 25-30 per cent market share through its Tropicana juice brand.

According to market researcher Nielsen, India’s branded packaged juice market is estimated at Rs 1,000 crore and growing annually at 15-20 per cent.

This deal will also be the cash-rich ITC’s first major acquisition in the foods segment since it entered the business in 2001.The only exception is the acquisition of the Mint-O brand from the Delhi-based Candico in 2002 in the confectionery segment. 

Explaining the company’s strategy, a fast-moving consumer goods (FMCG) analyst with a foreign brokerage said ITC prefers developing brands on its own rather than making expensive acquisitions.

Currently, the company’s food business spans four categories — staples, snack foods, ready-to-eat foods, and confectionery that includes biscuits, aata noodles, candy and chips.

The B Natural acquisition also marks a significant step in fulfilling Chairman Y. C. Deveshwar’s aspiration of making ITC the No 1 non-cigarette FMCG player in India. The company is eyeing a turnover of Rs 15,000 crore from its non-cigarette FMCG business by 2017-18 against Rs 7,000 crore in 2012-13. Last fiscal, its non-FMCG segment revenue grew 26.5 per cent, while the net overall income rose 19.4 per cent to Rs 29,605.6 crore.

ITC’s non-cigarette business includes branded packaged foods, personal-care, lifestyle apparel, education and stationery, incense sticks and safety matches. Balan Natural Food, founded by lawyer-turned-entrepreneur A. Nanda Kumar, began production in 2004 and currently offers packaged fruit and vegetable juices in 15 flavours.

According to an ICRA report of May 2012, the company has a processing and packaging facility with an installed capacity of 80 million litres/year in Singapura village in Bangalore. The company reported an operating loss of Rs 2.2 crore and an operating income of Rs 65.3 crore in 2011-12, the report added.


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