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McCormick open to more JVs, acquisitions in India
June, 20th 2011

After three ventures in India, US-based spice and seasonings major McCormick is now eyeing more. The company, with its revenues in excess of $3 billion, is looking to invest in the branded packaged foods space in the country by making an acquisition or getting into a joint venture with a local company, Satish Rao, McCormicks vice-president, business development, said in a conversation with Business Standard.

McCormick, in fact, has set the ball rolling with its tie-up recently with Delhi-based Kohinoor Foods. The joint venture, called Kohinoor Speciality Foods India, will see McCormick market the popular Kohinoor basmati rice as well as ready-to-eat products from the latters stable, besides distributing its own proprietary products.

But, given the strong growth of branded packaged foods in India, this interest may lead to an additional joint venture partnership or acquisition of a business, Rao, who is slated to take over as the managing director of Kohinoor Speciality Foods after the transaction is closed by the end of this year, said. We have expertise in innovation, marketing and distribution of branded food products and believe that we can help accelerate the growth of brands that deliver flavour, he said.

The market for organised or branded packaged foods in India is estimated to be worth over Rs 10,000 crore and growing at over 15 per cent a year. Segments like chocolates, biscuits, noodles, etc, are large with their category size of Rs 1,300 crore (noodles) and Rs 9,000 crore (biscuits).

The chocolates segment is worth about Rs 2,500 crore. In contrast, branded commodities is a smaller market, at under Rs 1,000 crore. The case is no different from branded spices, seasonings and flavours, which are roughly Rs 1,200 crore in size. The ready-to-eat market is an evolving segment, at about Rs 200 crore, according to industry experts.

Rao says his company is scouting for opportunities to invest in the Indian market. The Kohinoor deal, for instance, was wrapped up for roughly Rs 518 crore, or $115 million, while McCormicks acquisition of 26 per cent stake in Kerala-based Eastern Condiments last year was done for roughly Rs 162 crore, or $35 million. Its third venture, the oldest, is with the Chennai-based A V Thomas group, where it has a 50:50 JV by the name of AVT McCormick Ingredients. This company cleans and processes spices for the global market, while Eastern is a renowned curry ingredient maker that exports to markets in West Asia among others.

Among emerging markets, India, besides China and Latin America, is becoming increasingly important for McCormick, as it looks to expand sales in these regions. McCormick is looking to take its contribution from emerging markets to 12 per cent in 2015 from nine per cent at present.

Rao says the company is actively working in China to expand its business there, while in Latin America it is looking to build its business through a joint venture in Mexico.

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