FOUR-S Consumer

Vol. XIV, 8(Soft)

th
Nov’10Track
-20th Nov’10

`
CONSUMER (SOFT) TRACK
Update on Indian Food Processing/FMCG/Retail Industry

Top Story Content

FMCG companies see return of ‘premium’ demand Content
After two years since they began down trading, or preferring Top Story 1
cheaper alternatives to regular brands, the trend is reversing in
the `130bn FMCG industry. People are now upgrading, or buying
premium products across personal care and foods segments. Private Equity 2
Companies such as Hindustan Unilever, Procter & Gamble,
GlaxoSmithKline and Marico are responding to this new trend by
promoting and launching a spree of premium brands across Mergers & Acquisitions 2
shampoos, skincare products, toothpastes, biscuits, breakfast
cereals and fine cheese.
News Update 3
 L’Oreal last week launched Kiehl’s, its premium cosmetic
brand, which includes skin, hair, and body care products.
The prices start from `400 and go up to `3,800.
Corporate Developments 4
 GlaxoSmithKline Consumer Healthcare, which makes
Horlicks and Boost, has selectively rolled out its premium
toothpaste brand Sensodyne for sensitive teeth in Upcoming Events 4
southern states.

Dove, the premium personal and hair care brand from Hindustan Stock Market Update 5
Unilever increased its share in the hair care market from just
0.1% five years ago to about 5% in 2010, while P&G’s Olay
premium anti-ageing skincare brand has grabbed a 20% share Peer Benchmarking 5
within one year of launch in a category that grew five times since
2007. Marico’s premium variant of rice, Saffola Arise, which
helps consumers manage weight, and United Biscuits’ premium About Four-S Services 6
offering McVitie’s biscuits have generated good response.

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 FOUR-S Consumer (Soft) Track
Investment Activity
Private Equity Deals in 2010
Date Investor(s) Target Stake (%) Amount ($Mn) Business Stage
12-Mar Rabo Equity Advisors Global Green Company NA 10.0 Food Processing Growth
15-Mar Nine River capital Global AgriSystems NA 7.0 Food Processing Growth
KKR, Standard Chartered PE, Coffee Day Resorts Pvt.
31-Mar NA 200.0 Food Retail Late
New Silk Route Ltd
21-April DAR Capital Stevia Cultivation NA NA Agriculture Project
03-June Carlyle Group Tirumala Milk Products NA 22.0 Dairy Growth
Blackstone, Moore Capital,
22-July REI Agro 15 64 Food Processing Growth
wellington Management
Seed &
09-Aug Light House Fund Dhanuka Agritech NA 7.3 Growth
Agrochemical
IL&FS Investment Managers Growth
11- Aug Karuturi Global 6.5 16.1 Rose Exporter
30-Sep Motilal Oswal Mrs. Bector Foods 20 NA Food Processing Growth
Mergers & Acquisitions in 2010
Date Acquirer(s) Target Stake (%) Amount (`Mn) Business
5-Jan Marico Code 10 100 280 Cosmetics
7-Jan Ruchi Soya Gemini Edible and Fats 50 450 Edible Oil
12-Feb Capital Foods Khana Khazana 100 NA Food
15-Mar Godrej Consumers Tura 100 4,000-5,000 Cosmetics
22-Mar Jay Shree Tea M P Chini 100 1,125 Sugar
26-Apr EID Parry GMR 65 1,120 Sugar
26-Apr Jay Shree Tea Kijura, Mata & Gisakura Tea 60-100 1,125 Tea
02-Jun Café Coffee Day Café Emporio NA 150 Tea & Coffee
02-Jun Godrej Consumer Argencos 100 NA Hair Care
10-Jun Dabur India Fem Care Pharma NA NA Cosmetic
29-Jun McCormick & Company Eastern Condiments 26 NA Food
14- Aug Marico Ingwe NA NA Cosmetic
30-Sep ADF Foods Elena's Food Specialities , Inc. NA NA Food
12-Oct Dabur Hobi Kozmetik Group NA 324 Cosmetics
4-Nov Jain Irrigation Sleaford Quality Food Ltd NA 715 Food
16-Nov Dabur Namaste Labs NA 4,600 Hair Care

FMCG Index Movement

Movement in FMCG Index vis-à-vis Benchmark Indices
19-Nov 15 days (% 1M (% change) 3M (% change) 6M (% change) 12M (% change)
change)
FMCG Index (BSE) 3,595 -2.8% -2.3% 6.1% 25.0% 23.4%
Nifty 5,890 -6.2% -3.5% 7.5% 19.5% 15.4%
Sensex 19,585 -6.3% -3.3% 7.5% 19.1% 14.0%

3,793.28
3,706.47
3,658.53
3,603.23
3,755.74 3,622.34
3,699.92 Source: BSE
3,679.20
3,595.08

8-Nov 9-Nov 10-Nov 11-Nov 12-Nov 15-Nov 16-Nov 18-Nov 19-Nov


News Update
A). Food Processing Sector
Iffco signs pact with two NZ firms for dairy development.
Aiming to establish world-class dairy farms in India, fertiliser
major Iffco has entered into an agreement with two firms,
including the world’s largest milk exporter Fonterra
Cooperative Group, to conduct a joint feasibility study on a
pilot basis. The Indian Farmers Fertiliser Cooperative (Iffco)
signed a memorandum of understanding (MoU) with Fonterra
Cooperative Group and Global Dairy Health in New Zealand.
The cooperative said the study, which would be completed
shortly, would mainly look at zeroing in on key parameters for
the project. In the first phase, there would be around 3,000-
5,000 cows at the farm. The MoU is the first step towards the
vision of establishing large-scale world-class dairy farms in
India
Centre disbursed ` 890bn agriculture credit till June 2010
Agriculture credit of `896.87bn has been disbursed to farmers
across the country till June 2010 in 2010-11 as against credit
flow target of `3750bn.The credit disbursement in 2009-10
was to the tune of `3669.19bn (provisional figures) against
the target of `3250bn. The flow of agriculture credit since
2003-04 has consistently exceeded the target. Agriculture
credit flow has gone up from `869.81bn in 2003-04 to `
3669.19bn in 2009-10.
Pakistan opens market for Indian vegetables
In order to meet the domestic shortage, Pakistan has allowed
open import of vegetables from India. A few months back, the
neighboring country faced devastating floods which damaged
vegetables on hundreds of acres across the country.
According to a Statutory Regulatory Order (SRO), issued by
Pakistan's commerce ministry, in exercise of the powers
conferred by sub-section (1) of section 3 of the Imports and
Exports (Control) Act, 1950 (XXXIX of 1950), the federal
government directs that the following amendments shall be
made in the Import Policy Order, 2009.
Onion MEP raised by $150 a tonne to discourage exports,
tame domestic prices
With onion prices almost doubling in the domestic market,
the government on Monday decided to raise the minimum
export price (MEP) of onion by $150 per tonne for the next
two weeks to discourage exports. Earlier in the month, the
government had slashed onion MEP by $50 to $ 375 per
tonne. However, it had to review its decision because of
sudden spurt in price in the domestic market. Thus the MEP
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FOUR-S Consumer (Soft) Track
for onion for the remaining weeks of November has been
revised to $525 per tonne which is expected to halt exports.
India, Germany to strengthen cooperation in food processing
India and Germany have stressed transfer of technology and
investment promotion in the field of food processing and
allied sectors in the country.
Agriculture minister Sharad Pawar, food processing minister
Subodh Kant Sahai and German agriculture minister Ilse
Aigner will sign the declaration, according to a release issued
by the German Embassy in India. Investment can be made in
Mega Food Parks that ensure value addition of agricultural
commodities, including poultry, meat, dairy, fisheries and
would facilitate state-of-the-art processing technology, quality
assurance through better processing control and capacity
building.
Godrej Agrovet to add 9,000 ha under palm plantation
Godrej Agrovet (GAVL), a diversified agribusiness company,
plans to add 8,000-9,000 hectares (ha) under palm plantation
every year. The company is in talks with a number of farmers’
groups and individuals in several states to persuade them to
take to palm farming.
The company has covered 37,000 ha under palm plantation,
of which only 13,000 ha is yielding and planning to reach 2 lac
hectares. According to industry sources Over 70% of India’s
annual 9.5mn vegetable oil imports consists of crude palm oil
for blending with other edible oils. Hence, an increase in
plantation area in India will increase domestic source of edible
oils.
Indian spirits tax holds up trade talks: EU industry
European Union demands that India open its doors to
European whisky and vodka are among the factors holding up
a free-trade agreement between the two powerhouses.
India is resisting dismantling its 150% tariffs on EU-made
spirits, a factor producers of whisky and vodka say has kept
the EU's market share at 1% in India, even though the country
is the single biggest consumer of whisky. A wide-ranging EU-
India trade agreement was supposed to be sealed by year-
end, but EU officials now say negotiations will continue into
2011.

Corporate Developments
Parag Milk Foods invests `1bn Go Fruit yoghurt in six
variants to spur future growth
Parag Milk Foods has pumped in `1bn to set up milk and
cheese facilities in Andhra Pradesh and Maharashtra. The
products are sold under the brand name ‘Gowardhan’ and
‘Go’ range covering an entire spectrum of milk, skim milk
powder, ghee, processed cheese, butter, dahi and proprietary
foods like dairy whitener and gulab jamun mix powder.
Of the `1bn, `600mn was sourced through Motilal Oswal
Private Equity Advisors Pvt Ltd. to set up the milk plant at
Palamner, Chitoor district in Andhra Pradesh. The company
invested `400mn sourced through internal accruals to
establish a cheese facility at Manchar, 60 km from Pune.
There was already a milk facility at the location. The company
claims the facility is the largest cheese plant in Asia.
Yum! to invest $100mn to triple number of restaurants in
India
Yum! Restaurants India, the operator of the Pizza Hut , KFC
and Taco Bell restaurant chains, will invest $100mn to more
than treble the number of eateries it operates across the
country to 1,000 by 2015. The company has aggressive plans
to increase the number of Taco Bell restaurants across India
and opening two new outlets in Bangalore by the end of this
month
Empee Sugars in talks with international firms for beer
business
Empee Sugars & Chemicals Ltd is in talks with international
companies for its proposed re-entry into beer business.
According to company officials, as a first step towards the re-
entry, the company is setting up a distillery at
Gummidipoondi, near Chennai. It would involve an
investment of around `1-1.1bn through one of its group
companies, Apollo Distilleries Pvt Ltd. Capacity of the
proposed unit will be five lakh cases per month. The company
is e talking to international players for branding. In 2002, the
company sold its brewing assets to UB group.
Events Calendar
39th Dairy Industry Conference
Date: 4-6 February, 2011
Place: Kolkata
Organizer: Indian Dairy Association.
Web: www.indairyasso.org
FOUR-S Consumer (Soft) Track
Tata Global Beverages taps PE firms for stake sale
Tata Global Beverages (formerly Tata Tea) is in talks with
private equity firms for raising funds through dilution of a
minority stake. The dilution – that could be at the holding
company level or in the UK subsidiary, Tetley – is likely to be
10-12%. UK-based investment bank Rothschild is advising Tata
Global Beverages. According to company officials, the funds
raised can be used for future acquisitions, It is reportedly in
talks with PE biggies Blackstone, Advent and Bain Capital.
Coke plans new unit to enter pure juices
Coca-Cola India is forming a new division dedicated to juices
as it steps up focus on health beverages to offset a possible
slowdown in its core fizzy drinks as urban India begins to ride
the health and wellness boom. The new unit will scout for
mergers and acquisitions in juices space and explore new
business models besides entering the pure juice category.
Coca-Cola has two juice drinks — Maaza and Minute Maid —
the world’s largest beverage maker does not sell pure juices, a
category dominated by Dabur’s Real Activ, PepsiCo’s
Tropicana and recent entrant Parle Agro’s Saint.
Emami to invest ` 9.5bn in its edible oil business
To emerge as a leading manufacturer and garner substantial
marketshare in the branded edible oil segment, the Emami
Group has earmarked `9.5bn over the next two years for the
purpose, even as it is looking at a national roll-out of its
Healthy & Tasty oil brand. Emami plans to Invest around
`9.5bn in Emami Biotech, the arm that looks after our edible
oil business. The funds will be raised through a combination of
internal accruals, equity and debt.
Blackstone to infuse $100mn in Varun Beverages
Bottling king Ravi Jaipuria, the largest bottler for PepsiCo in
South Asia, is in the process of raising $100 million from
Blackstone Group in a deal that marks the private equity
giant’s biggest bet on the Indian consumer story till date.
Blackstone will invest $100mn in the holding company of
Jaipuria’s diversified business interests. It will divest a
minority stake in Varun Beverages—may be divesting a
minority stake in group firm Varun Beverages. The private
equity would accelerate the growth of its soft drink bottling
operations.
 FOUR-S Consumer (Soft) Track
Stock Market Update

` Million

Companies Mcap (Nov 19) Price (Nov 19) 15days (%change) 1M (% change) 3M (% change) 6M (% change) 12M (% change)
ITC 1,308,349.3 171.0 -3.4% -2.0% 4.3% 26.0% 27.2%
Hindustan Unilever 652,324.3 299.0 -0.1% -2.4% 12.6% 29.6% 6.5%
Nestle India 349,492.5 3,624.9 -0.7% 6.4% 17.8% 30.0% NA
Glaxo Smithkline CHL 197,048.9 2,326.4 1.5% 13.5% 30.7% 43.6% 68.8%
Dabur India 169,266.0 97.6 -2.1% -6.2% -6.7% 6.4% 17.5%
Godrej Consumer 132,968.6 431.5 0.0% 9.9% 11.1% 35.0% 53.8%
Marico 84,452.5 138.6 -2.1% 7.7% 10.8% 27.4% 35.6%
Tata Global beverages 74,269.7 120.1 -3.4% -7.9% 1.7% 9.4% 36.8%
Emami Limited 71,986.6 475.8 -3.6% -0.4% 7.3% 49.6% 96.7%
P&G Hygiene & Healthcare 61,443.3 1,892.9 -7.5% -10.9% -15.0% -2.4% 4.3%
Shree Renuka Sugars 60,282.0 90.0 -6.8% 5.7% 34.2% 69.5% -19.6%
Britania Industries 48,514.9 406.2 -1.8% -5.6% 0.4% 21.4% 23.1%
Jubilant foods 36,630.2 575.8 4.1% 14.3% 11.7% 106.8% NA
Ruchi Soya 29,877.3 113.7 -14.1% -16.4% -13.5% 16.9% NA
McLeod Russel 24,085.7 220.1 -4.0% -7.8% -9.7% 12.5% -12.1%
Jyothy laboratories 22,169.8 275.0 -3.2% -11.7% 2.7% 55.4% 82.5%
Balrampur Chini 20,367.7 78.8 -10.4% -10.5% -9.7% 7.3% -37.4%
Rei Agro 7,967.2 25.0 -9.9% -6.9% 24.1% -4.6% -13.6%
Lakshmi Energy & Foods 4,938.3 78.2 0.9% 1.7% -17.3% -18.2% -43.3%
Nifty - 5,890.3 -6.2% -3.5% 7.5% 19.5% 15.4%
Sensex - 19,585.4 -6.3% -3.3% 7.5% 19.1% 14.0%

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 FOUR-S Consumer (Soft) Track
Results Update

Q1 FY’11Vs Q1 FY’10 Results ` Million

Companies Revenue EBITDA PAT Margins Q1FY’11

Q1 FY’10 Q1 FY’11 YoY Q1 FY’10 Q1 FY’11 YoY Q1 FY’10 Q1 FY’11 YoY EBITDA NPM
ITC 39,859 51,316 28.7% 12,983 16,179 24.6% 8,089 10,282 27.1% 31.5% 20.0%
Hindustan Unilever 44,756 47,938 7.1% 7,149 6,809 -4.8% 5,394 5,332 -1.1% 14.2% 11.1%
Nestle 12,149 14,513 19.5% 2,510 2,918 16.3% 1,620 1,948 20.2% 20.1% 13.4%
Dabur 7,730 9,251 19.7% 1,207 1,445 19.7% 890 1,073 20.6% 15.6% 11.6%
Glaxosmithkline C H L 4,618 5,525 19.6% 916 1,045 14.1% 552 718 30.0% 18.9% 13.0%
Godrej Consumer Products 4,404 6,452 46.5% 880 1,213 37.8% 696 1,163 67.1% 18.8% 18.0%
Marico limited 6,967 7,901 13.4% 962 1,055 9.7% 559 746 33.5% 13.3% 9.4%
P & G Hygiene and Healthcare 1,814 1,982 9.3% 651 197 -69.8% 477 101 -78.8% 9.9% 5.1%
Tata Global Beverages 4,194 4,540 8.2% 667 553 -17.1% 429 361 -15.9% 12.2% 8.0%
Emami Limited 1,886 2,419 28.3% 581 658 13.3% 155 352 127.1% 27.2% 14.6%
Britannia Industries 7,338 9,157 24.8% 626 436 -30.2% 473 328 -30.7% 4.8% 3.6%
Shree Renuka Sugars 8,935 19,995 123.8% 1,557 1,626 4.4% 781 902 15.5% 8.1% 4.5%
Jubilant foods 850 1,356 59.5% 121 251 108.4% 34 153 346.5% 18.5% 11.3%
Ruchi Soya 31,094 34,576 11.2% 1,171 980 -16.3% 501 524 4.6% 2.8% 1.5%
Mcleod Russel 1,222 1,251 2.4% 429 209 -51.2% 312 189 -39.5% 16.7% 15.1%
Balrampur Chini 5,380 5,403 0.4% 1,299 641 -50.7% 662 111 -83.2% 11.9% 2.1%
Jyothy laboratories 1,197 1,534 28.1% 289 290 0.2% 220 257.0 16.8% 18.9% 16.8%
Rei Agro 8,577 9,498 10.7% 1,583 1,866 17.8% 415.8 616 48.1% 19.6% 6.5%
Lakshmi Energy & Foods 1,786 3,515 96.8% 565 489 -13.4% 258.0 182 -29.3% 13.9% 5.2%

Valuation

` Million
Companies CMP Market Cap EV EV/EBIDTA P/E EV/Sales
Rs Mn Mn (x) (x) (x)
ITC 171.0 1,308,349 1,295,970 19.6 30.6 6.6
Hindustan Unilever 299.0 652,324 632,309 22.9 30.3 3.5
Nestle India 3624.9 349,493 347,909 32.2 50.5 6.2
Glaxo Smithkline CHL 2326.4 197,049 196,919 29.0 38.0 5.5
Dabur India 97.6 169,266 160,575 40.1 64.7 7.4
Godrej Consumer 431.5 132,969 130,286 28.6 34.4 5.8
Marico 138.6 84,453 87,797 22.8 33.5 3.2
Tata Global beverages 120.1 74,270 71,947 31.3 41.3 8.0
Emami Limited 475.8 71,987 70,916 39.4 18.7 4.1
P&G Hygiene & Healthcare 1892.9 61,443 62,419 17.5 32.4 5.7
Shree Renuka Sugars 90.0 60,282 66,424 41.3 68.0 1.7
Britania Industries 406.2 48,515 57,031 6.1 9.5 1.0
Jubilant foods 575.8 36,630 36,646 46.1 81.7 7.7
Ruchi Soya 113.7 29,877 37,005 9.9 25.3 0.3
McLeod Russel 220.1 24,086 27,580 8.1 7.8 2.4
Jyothy laboratories 275.0 22,170 31,734 9.0 14.0 1.7
Balrampur Chini 78.8 20,368 19,271 19.7 26.2 3.0
Rei Agro 25.0 7,967 48,102 7.6 4.5 1.3
Lakshmi Energy & Foods 78.2 4,938 9,953 4.6 6.5 1.0

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 FOUR-S Consumer (Soft) Track

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 FOUR-S Consumer (Soft) Track

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