Nusli Wadia-controlled Britannia Industries has agreed to buy out New Zealand’s Fonterra from an existing dairy joint venture,Britannia New Zealand Foods.
Both Britannia and Fonterra, one of the world’s biggest milk co-operatives, agreed to call off the 51:49 JV, with the acquirer assuming the cumulative losses and the exiting foreign partner writing down the investments made into venture.
The deal will bolster and unlock further synergies in Britannia’s go-to-market strategy. The company in recent months brought biscuits, cakes & rusks and dairy products like cheese, butter, ghee and dairy whitener under one distribution vertical, while the ‘daily fresh’ products, such as bread and dahi fall into another.
The company’s distribution was fragmented till some time back, with all the business u
nits approaching the trade separately.
The mainstay biscuits, non-biscuit bakery (breads, cakes & rusks) and dairy constitute three strategic business units within the Rs 3,000 crore company.
“We have a single go-to-market strategy for Britannia as far as possible, which is helping us, especially with the modern trade. The distribution has been streamlined into two verticals, with the fresh consumption products like bread and curd forming one and remaining products going to the market under a separate vertical,” Britannia Industries MD Vinita Bali told ET.
In fact, Britannia has tweaked its brand strategy to accommodate the fresh consumption products under a newly-scripted Britannia Daily Fresh umbrella. Ms Bali said the dairy JV was reporting a turnover of Rs 200 crore and an annualized growth of 15-18%.
The JV, which had turned profitable in recent years, has accumulated losses of around Rs 38 crore. “We will be taking over the P/L of the JV and so the losses,” she added.
Fonterra, a significant supplier of milk ingredients to global food giants such as Danone and Nestle, wanted to exit the Indian market since it could not deliver much value addition, given the fragmented nature of India’s dairy industry.
Fonterra is known for managing large dairy farms. It is not a big player in the branded dairy sector even though it has milk powder offering under Anchor brand in several south east Asian markets.
Britannia will ramp up its presence in the dairy space through new product offerings post acquisition of the Fonterra stake. “We will be looking at differentiated SKUs where we can innovate on the basic dairy technology.
Take our cheese offering, for instance, where we have a market share of nearly 50%. We came out with slim cheese (with 33% lower fat) as well as cheese cubes and spreads that are clearly differentiated,” Ms Bali said.
The Britannia-Fonterra JV exited the liquid milk market in 2004 in wake of mounting losses and has no plans of re-looking at the segment. “It is a high volume low margin play that does not fit into our business model in dairy,” she explained, suggesting that Britannia’s dairy play will essentially revolve around milk derivatives.
Source : www.economictimes.indiatimes.com/News-by-Industry/Britannia-to-buy-out-Fonterra/articleshow/4461080.cms
Both Britannia and Fonterra, one of the world’s biggest milk co-operatives, agreed to call off the 51:49 JV, with the acquirer assuming the cumulative losses and the exiting foreign partner writing down the investments made into venture.
The deal will bolster and unlock further synergies in Britannia’s go-to-market strategy. The company in recent months brought biscuits, cakes & rusks and dairy products like cheese, butter, ghee and dairy whitener under one distribution vertical, while the ‘daily fresh’ products, such as bread and dahi fall into another.
The company’s distribution was fragmented till some time back, with all the business u
nits approaching the trade separately.The mainstay biscuits, non-biscuit bakery (breads, cakes & rusks) and dairy constitute three strategic business units within the Rs 3,000 crore company.
“We have a single go-to-market strategy for Britannia as far as possible, which is helping us, especially with the modern trade. The distribution has been streamlined into two verticals, with the fresh consumption products like bread and curd forming one and remaining products going to the market under a separate vertical,” Britannia Industries MD Vinita Bali told ET.
In fact, Britannia has tweaked its brand strategy to accommodate the fresh consumption products under a newly-scripted Britannia Daily Fresh umbrella. Ms Bali said the dairy JV was reporting a turnover of Rs 200 crore and an annualized growth of 15-18%.
The JV, which had turned profitable in recent years, has accumulated losses of around Rs 38 crore. “We will be taking over the P/L of the JV and so the losses,” she added.
Fonterra, a significant supplier of milk ingredients to global food giants such as Danone and Nestle, wanted to exit the Indian market since it could not deliver much value addition, given the fragmented nature of India’s dairy industry.
Fonterra is known for managing large dairy farms. It is not a big player in the branded dairy sector even though it has milk powder offering under Anchor brand in several south east Asian markets.
Britannia will ramp up its presence in the dairy space through new product offerings post acquisition of the Fonterra stake. “We will be looking at differentiated SKUs where we can innovate on the basic dairy technology.
Take our cheese offering, for instance, where we have a market share of nearly 50%. We came out with slim cheese (with 33% lower fat) as well as cheese cubes and spreads that are clearly differentiated,” Ms Bali said.
The Britannia-Fonterra JV exited the liquid milk market in 2004 in wake of mounting losses and has no plans of re-looking at the segment. “It is a high volume low margin play that does not fit into our business model in dairy,” she explained, suggesting that Britannia’s dairy play will essentially revolve around milk derivatives.
Source : www.economictimes.indiatimes.com/News-by-Industry/Britannia-to-buy-out-Fonterra/articleshow/4461080.cms
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