Acquisition of Domestic Food Business by MNCs
Liberalisation has brought in through the entry of large multinational and transnational corporations, foreign investment in this sector. This resulted in competition, technological upgradation and market expansion. In the face of the competition, domestic Industries are gradually losing market share and thus selling their businesses to the new entrant MNCs well before the value of the brand and businesses drops further due to ongoing onslaught of multinational brands. This is happening because MNCs have much greater resources to put behind their brand and business and also have long term vision and sustainability. Domestic industries are no comparison. The first attack came in soft beverages industry with Coke acquiring Parle brands and Pepsi acquiring Dukes and with the entry of Cadbury Schweepes in this sector entire soft drink industry is now in control of MNCs. MNCs such as Nestle, Brooke Bond and SmithKline & Beechern controlled earlier only hot beverages (both white and brown segments). But soft beverage sector was dominated by domestic industries. With Coke and Pepsi acquiring Indian businesses, total non-alcoholic beverage industry is now under control of MNCs.
Recently Sara Lee -- a US multinational has acquired Nutrine -- a large Indian bakery and confectionery business. Britannia is already under control of Danone group of France. Only large bakery and confectionery left to be acquired in private sector is Parle Products. And with the entries of confectionery giants like Perfetti, Wriggly and Agrilimen (a Spanish confectioner in joint venture with Dabur but in the process of acquiring Dabur's equity to have 100% control) confectionery and bakery sector, will also become the domain of MNCs.
With Nestles' strong presence in Tomato Ketchup and Pickles and Hindustan Lever acquiring Kissan and Dipy brands from UB group through Brooke Bond route fruit and vegetable sector is also dominated by multinationals.
Heinz, the world's largest Tomato Ketchup manufacturer had acquired food business of Glaxo. Due to strategic restructuring of portfolio Glaxo decided to divest their dairy business with established brands like Complan, Glucon-D and Farex. Hindustan Lever, on the other hand, through a strategic alliance route, took control of Kwality Ice-cream as well as 100% Ice-cream brand of Jagatjit. Hindustan Lever with their own presence in dairy sectors, and with the introduction of Baskin Robbins and Walls has emerged as a dominant player in dairy segment, in general and Ice-cream segment, in particular. Hindustan Lever (HLL) also acquired Dollop Ice-cream brand from Cadburys'. HLL, however, recently announced their intention to sell-off their Dairy unit in UP. Ice-cream industry, which is reserved for small-scale sector, has now been in the control of multinationals through a different route. The argument that ice-cream is actually a frozen dessert -- a nomenclature that has been accepted by both food and law ministry of Govt. of India -- paved the way for Hindustan Lever for this strategic acquisition. The earlier successful domestic businesses such as Dalmia Dairy, Foremost Industry and Jagatjit Industry in dairy sector are all in deep trouble -- and MNCs have taken a control of this sector as well.
National Dairy Development Board (NDDB) with its strong brand Amul and with its deep root extended up to farmers level as a means of backward integration will of course, remains a significant force to reckon with. But nobody will deny that in branded dairy products Amul has to put up a constant fight against multinational brands. Vadilal is also a significant player in ice-cream but their presence is limited in Western India and for how long they will remain has to be seen. Kraft Foods a unit of Phillips Morris is holding a licence to set up 100% owned entity and they are expected to come and set up their operation anytime.
In the convenience foods -- 'Corn Products', a US multinational is fast making progress. This is an old company, which did not make any significant contribution in the Indian food business largely because of lack of interest from their principals. CPC - International is now fast making progress with their well known Rex and Brown & Poison and Knorr soup brands. Recently they announced the acquisition of DCW Chemicals -- makers of Captain Cook brands, which ran into rough weather because of the objection taken by some miller in Haryana to whom allegedly DCW. has contractual obligations. Shortly, we will also have products in joint venture with Paoma Industries, the manufacturer of Rasna soft drink mixes and Campbell a world leader in canned foods. Godrej, on the other hand, has joined hands with Pilsburry a leading player in the convenience foods business to boost their business activities.
Pilsburry has already introduced instant Cake mix.
In this category others including Gits brand are relatively smaller and regional players.
Apparently, first change that we have witnessed is of acquisitions of domestic brands in frontiers of food business by MNCs and alongwith although at a much lower scale a few joint ventures. Even the public sector undertaking, Modern Foods although making profit is up for sale in line with the Govt. policy of PSU disinvestment and ANZ Bank has been appointed to find a buyer for the same.
The first lesson that we have learnt as the
effect of liberalisation is acquisition of successful domestic
food business by MNCs.
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