ITC-Sunrise deal: Spice market will get spicier
Indian businesses appear to be rejigging their strategies even as the economy attempts to reboot itself to survive the COVID lockdown. Companies which made headlines in recent time are Reliance getting Facebook on board to invest in Jio. US-based equity firms are also investing in the conglomerate. Then Vedantaannounced its decision to delist the company. And now Kolkata-based multinational firm ITC buying out a city-based spice company.
ITC bought Sunrise Food in its attempt to take on other dominant players in the market like Hindustan Lever, Britannia, and Pepsico.
The two companies agreed to go ahead with the deal in March this year.
Apart from FMCG, ITC is invested in hotels, toiletries, and cigarette manufacturing. In a statement released on 24 May, the conglomerate is strategizing to scale up its FMCG business in a “profitable” manner. The firm’s focus would be to strengthen consumer insight, enhance its supply chain, and strengthen its agricultural product sourcing by developing strong local linkages.
Sunrise Food is a leading brand selling spices in eastern India. Acquiring the brand will allow expanding ITC into spice selling the company’s customer base.
The deal will also encourage ITC to diversify its product basket. This will also help in spreading its hold on the market.
However, both the companies did not announce the value of the deal.
The “Aashirvaad” brand of spices of ITC are market leaders in Telangana and Andhra Pradesh. This deal will allow the group to expand its pan-India distribution.
Sunrise Food, which has been in business since the 1920s, produces basic powdered spices, whole spices and condiments, instant mixes, blended masalas, and more. Everest and MDH masalas are competitors in that category. The group has manufacturing facilities in Bikaner and Jaipur in West, Agra in North, and Kolkata in the East. It has a market presence in more than nine states (mainly in West Bengal and northeastern states).
As per reports, the masala selling company had a turnover of Rs.1000 crores in FY 2019, has in recent years entered the Bangladesh and Nepal markets.
The deal was cheered in the equities market, as ITC shares were up by more than 3% on 26 May.
It may be noted that ITC remains heavily dependent on revenue from selling cigarettes.
India’s spice markets are said to be worth Rs. 75,000-80,000 crores, with the top ten players controlling 50 % of the market.
ITC’s latest step to consolidate its position in this market will surely spice up the market.
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