Companies like RJ Corp, which operates KFC and Pizza Hut chains and handles bottling for PepsiCo, the MMG Group, which runs McDonald’s in North and East India and is a Coca-Cola franchise bottler, as well as the local unit of Nestle SA, are closely watching HUL’s move. These companies are expected to evaluate a potential acquisition of the ice-cream business, depending on the committee’s decision, sources said.
The ice-cream brands under HUL, including Kwality Wall’s, Cornetto, and Magnum, account for about 3 per cent of the company’s annual sales, which exceed Rs 60,000 crore.
On Friday, HUL announced the formation of the independent committee to explore “potential structures and alternatives for the restructuring” of 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 business’s valuation,” 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, holds a smaller market share compared to its other ventures, including PepsiCo bottling and quick-service chains like 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 pushcarts.
For Nestle, the world’s largest packaged food company, the acquisition of HUL’s ice-cream business would seamlessly fit into its established dairy network. Nestle India managing director Suresh Narayanan has previously expressed interest in acquisitions that complement the company’s portfolio, provided they meet valuation expectations.
Nestle had previously attempted to enter the Indian ice-cream market with its global brand Movenpick, but exited due to slow demand caused by high pricing. 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 poised for growth
HUL’s parent company, Unilever, is the world’s largest ice-cream manufacturer, with global brands such as Ben & Jerry’s and Magnum contributing significantly to its business. The ice-cream division accounts for Rs 7.9 billion, or 16 per cent of Unilever’s total revenue.
The Indian ice-cream market is rapidly growing and is projected to surpass $5 billion by FY25, up from $3.4 billion in FY23, according to Wazir Advisors. This growth trajectory could further heighten the attractiveness of HUL’s ice-cream division to prospective buyers.
First Published: Sep 10 2024 | 10:02 AM IST