Companies such as RJ Corp, which operates the KFC and Pizza Hut chains and is responsible for PepsiCo bottling, MMG Group, which runs McDonald’s in northern and eastern India and is a franchise bottler of Coca-Cola, as well as the local unit of Nestle SA, are closely watching HUL’s decision. These companies are expected to consider a possible acquisition of the ice cream business, depending on the committee’s decision, the sources said.
HUL’s ice cream brands, including Kwality Wall’s, Cornetto and Magnum, account for about 3 per cent of the company’s annual sales of over Rs 60 billion.
On Friday, HUL announced the formation of an independent committee to explore “possible structures and alternatives for restructuring” its ice cream business, signalling the possibility of a strategic exit.
“These suitors have clear synergies with the ice cream business, and any deal will likely revolve around the valuation of the business,” an industry executive told The Economic Times.
Strong market synergies
RJ Corp, already a player in the ice cream sector with its Cream Bell brand, has a smaller market share compared to its other businesses, including PepsiCo bottlers and fast food chains such as KFC, Pizza Hut and Costa Coffee. Cream Bell, present in 25 states and ranked among India’s top five ice cream brands, operates with 800 distributors and 11,000 vending carts.
For Nestlé, the world’s largest packaged food company, acquiring HUL’s ice cream business would fit perfectly into its already established dairy network. Nestlé India Managing Director Suresh Narayanan has earlier expressed interest in acquisitions that complement the company’s portfolio, provided they meet valuation expectations.
Nestlé had earlier attempted to enter the Indian ice cream market with its global brand Movenpick, but abandoned the initiative due to low demand caused by high prices. Meanwhile, the MMG Group, with its established cold chain and frozen dessert infrastructure through McDonald’s restaurants, also presents synergies for an ice cream acquisition.
Indian ice cream market is set to grow
HUL’s parent company Unilever is the world’s largest ice cream maker, and international brands such as Ben & Jerry’s and Magnum contribute significantly to its business. The ice cream division accounts for Rs 7,900 crore, or 16 per cent, of Unilever’s total revenue.
According to Wazir Advisors, the Indian ice cream market is growing rapidly and is projected to cross $5 billion by FY25 from $3.4 billion in FY23. This growth trajectory could further increase the attractiveness of HUL’s ice cream division to potential buyers.
First published: September 10, 2024 | 10:02 am IS
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.