News: Hershey takes 51% in Godrej Beverages for $60 m

(BL 04/04/2007) Mumbai - The US-based Hershey Company has acquired 51 per cent stake in Godrej Beverages & Foods Ltd for $60 million (Rs 270 crore). This includes the 40 per cent equity held by IL&FS in the company, five per cent of Godrej Industries and 6 per cent from A. Mahendran, Mentor and Director of the company. Godrej Industries will now hold 43 per cent and Mahendran six per cent in the company, which will be renamed Godrej Hershey Beverages & Foods Ltd. At a press conference, Adi Godrej, Chairman, Godrej Group, said, "This joint venture is a strategic fit in our growing portfolio of foods businesses and gives us ready access to a strong portfolio of confectionery brands. The global brand equity and experience of Hershey and GBFL's understanding of the Indian consumer and distribution strength will complement each other well." The $5-billion Hershey Company is America's largest chocolate and sugar confectionery player. In the recent past, it has announced a joint venture with Lotte to manufacture confectionery products in China. Its other key markets include Canada and Mexico. Added Richard H. Lenny, Chairman and Chief Executive Officer, The Hershey Company, "Today almost 10 per cent of our annual turnover comes from outside the US. We would like to look at long-term opportunities in other global markets." Hershey intends bringing in some of its iconic brands such as Reese's, Kisses and Special Dark chocolates. "We are exploring the products from our global portfolio and these will complement the existing brands of Godrej," said Lenny. However, the company has yet to decide on its sourcing strategy, although in the long term it would locally manufacture the Hershey brand. Mahendran said, "We are at exploration stage but in the long term the brand will be manufactured locally. There may be partial imports initially or we may even bring in some raw materials and technology to make the brand here." GFCL has two manufacturing facilities at Chittoor in Andhra Pradesh and Mangaldeep in Madhya Pradesh. It is adding a third manufacturing base at Himachal Pradesh. "Our existing plants have enough capacity to add a new category like chocolates as well," added Mahendran. With per capita consumption of chocolate at 0.14 gm in India, Godrej expects to grow the market rather than pose a threat to market leader Cadbury. As Mahendran emphasised, "Our purpose is to build the category and this is an opportunity to increase per capita consumption in the country." Observes Nikhil Vora, Partner, SSKI Securities, "Hershey is a strong global brand and in India, it already has a presence through imports. The company will bring in product innovation and there will be significant growth in category. At the same time, the market shares of the existing Indian players will be under threat."