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Contents of this Note :

Key Takeaways from the Report -- Industry Perspective

Page 3-4

Key Takeaways from the Report -- Company Perspective

Page 4-5

Industry -- Key Facts & Figures Marketsize, Value / Volume Breakup, YoY Growth - 2009-2013
( Sweet & Savoury Snacks, Western Snacks )

Page 6-11

Key layers o! the "e#me$t


( 27 Players Contributing 95 % of the Seg ent Sales )

%&tru'e' "$a(ks
( Pro!ecte" #alue$#olu e %rowth & 2'()*2'(+ )

Marketshare o! Key Bra$'s ) %&tru'e' "$a(ks


( ,urkure, -ingo, .ellow /ia on", C012, Cheetos, 3aka3ak, Pe44y, Piknik )

Assessment of Competition epsi(o Marketshare *re$' -- 200+-2013 ,al'iram Marketshare *re$' -- 200+-2013 -i$a$(ial ro!ile o! .i$e /ompa$ies /o$stituti$# 01 1 o! "e#me$t "ales
( Pe4sico, 5al"ira , -ala!i Wafers, 63C, -ika!i 7oo"s, -ikanervala, Prataa4 Snacks, 14ricot 7oo"s, /78 7oo"s )

Page 12-19

Key *hi$#s to .ote


( 5al"ira & -ika!i Seg entwise Sales -reaku4, 9 .ears: C1%0 in Sales, ;-63/1 8argins, P;*"eal #aluations in the Seg ent )

Assessment of Competition specific to F! Foods /234 Bra$' Key Marketshare -i#ures


( Sweet & Savoury Snacks, Western Snacks, ;<tru"e" Snacks, Corn*-ase" ;<tru"e" Snacks )

Page 20-21

rataap "$a(ks ) the Key /ompetitor


5 1ggressive 8arketing, /istribution ;"ge, -acke" by Se=uoia Ca4ital 6

Conc"usion

Page 22-22

Page Intentionally Left Blank

Introduction : In continuation with our initial brief note on 'DFM Foods Ltd' dated 10th February 2014, we present here a detailed 'Industry & o!petition "nalysis' for the sa!e co!pany# $his report is the result of an e%tensi&e on and off the field wor' done by our tea! o&er the span of last two !onths across each (eo(raphy so asto re!ain as e%hausti&e as possible, and, while presentin( the facts & fi(ures, we ha&e tried to re!ain as unbiased as possible in our analysis#

Key Takeaways from the Report Industry Perspective :

'Indian Branded Sweet & Savoury Snacks' se(!ent has (rown at a CAGR of 26.2 % over 2008-2013 (in value terms) to beco!e the third fastest (rowin( se(!ent of Indian )ac'a(ed Food Industry#

$he se(!ent is cate(orised into 'Western Snacks' and 'Traditional Snacks' which to(ether (i&e it a ( 2013 ) !ar'et si*e of ` 110#+, bn# '-estern .nac's' co!prises of hips/ risps & 0%truded .nac's (like Rings, Puffs, etc.) whereas '$raditional .nac's' co!prises of 1a!'eens, 2hu3ia, )apad, 4ha'hra, 1uts, .weets, etc#

5nly Twenty Seven organised players contribute to 95 % of the segment sales with Nine Players controlling ~7 % of the mar!etshare# $hese 1ine players include 6

Pepsico, Bikanervala,

Haldiram, Prataap Snacks,

Balaji Wafers, DFM Foods


&

ITC,
Apricot Foods#

Bikaji Foods,

[ Note :- Financial Profile of each of these nine companies is included in this report ]

Extruded Snacks as a cate(ory stands out a!on(st all other cate(ories ha&in( re(istered highest volume growth over 2008-2013 ( CAGR = 21.9 ) and its pro3ected 1+#7 8 ( CAGR ) &olu!e (rowth o&er 2019:201, which is a(ain hi(hest in the se(!ent#

5nly Si" companies control #$ % of the %"truded Snac!s mar!et # )epsico is the leader in the space whereas )rataap .nac's, DFM Foods and ;aldira! are noteworthy !ar'etshare (ainers o&er last ten years#

5pportunity is hu(e ahead of e&ery serious player in Indian 2randed .weet & .a&oury .nac's se(!ent because of the fact that Indians are natural snac's' consu!ers, and entire 124 crore n!i"n #u$lic is serve! $% onl% &went% 'even m"(or $r"n!e! s"vour% sn"c)s #l"%ers atpresent# <ural !ar'ets are still unpenetrated and lower price points ( ` 2, ` ! " ` 10 ) pre&alent in the se(!ent could dri&e a((ressi&e sales in rural India#

Com#etition is li)el% to intensif% (oin( forward as !ore of the or(anised business (roups enter into this space ( recent entr# $f %$&acc$ ma'$r G$(al C$r($rati$n is a case in ($int ) to (rab their share of opportunity as also e%istin( players !a'e a dent in peers' stron(hold by offerin( si!ilar products with superior distribution and !ar'etin( reach#

Key Takeaways from the Report Company Perspective :

CRAX Brand Key Marketshare Figures

Sweet & Savoury Snacks Seg ent

Western Snacks Seg ent

;<tru"e" Snacks Seg ent

Corn*base" ;<tru"e" Snacks Seg ent

C012 8arketShare ( 2013 )

2.0

2."# !

$.%& !

#.&# !

Source :- Exemplar Research, Channel Checks, Euromonitor International, Company Reports


DFM Foods Ltd# &ia its :C012: brand is a 'ey player in 0%truded .nac's cate(ory of Indian 2randed .weet & .a&oury .nac's se(!ent#

5&er last fi&e years, co!pany has g"ine! signific"nt m"r)etsh"re of the c"tegor%#

If we consider 9 =ears' ( )*10+)*13 ) ">< in .ales, then, DFM has out#erforme! in!ustr% "s well "s "lmost "ll of its #eers ?uite handso!ely 6

3 Years' CAG in Sales


# $%&%-$%&' (

Sweet & Savoury Snacks Seg ent

Pe4sico

5al"ira

-ala!i Wafers

-ika!i 7oo"s

-ikanervala

Prataa4 Snacks

/78 7oo"s

2$.2% !

&#.# !

2$.'2 !

.&$ !

2'. # !

&".2# !

0.$% !

(%.& !

Its !ain product offerin(s ( CRA, C$rn Rings ) are tar(eted towards children of a(e (roup +:12 years ::: an isol"tion str"teg% which h"s !one won!ers for the com#"n% so f"r#

If we ta'e into consideration DFM's 'ey product offerin(s and its tar(et audience, then, 'ey co!petitors for it are )epsico, ;aldira! ( -.tru/e/ 0nacks ), I$ , )rataap .nac's & @en'atara!ana Food .pecialities#

Extruded Snacks !ey Brands "arkets#are $ %&'3 (


) her! 18.00%

&iknik 1.%0% &e''( 1.$0% #aka#ak $.%0% Kurkure 51.00% Chee o! 1."0% CRAX 5.60%

Yellow Diamond 5.90% Bingo 10.80%

Kurkure TakaTak

Bingo Peppy

Yellow Diamond Piknik

CRAX thers

Cheetos

Source :- Exemplar Research, Channel Checks, Company Reports, Rating Reports, Euromonitor International,

"s per our analysis, Prataap Snac!s ( via its &ran/ *1 Rings ), as a peer, poses an i!!ediate threat to DFM Foods because of its al!ost si!ilar !ar'etin( strate(y, sa!e tar(et audience, identical product A.) and low !ar(in business !odel#

)rataap has recently ( in 2013 ) co!!enced its <in(s !anufacturin( plant ( tec2n$l$g# fr$m American -.trusi$n ) and is (oin( all out to !a'e a dent into DFM's ( CRA, C$rn Rings ) !ar'etshare# "((ressi&e !ar'etin( strate(y is adopted by )rataap by (ettin( associated with popular children t& show ' hhota 2hee!' and Mr# "!itabh 2achchan starrer children:oriented supernatural !o&ie '2hootnath <eturns'#

*e!ium-term Revenue Growth is not un!er thre"t for DFM because of an a((ressi&ely e%pandin( !ar'et si*e itself as also unsaturated nature of co!pany's -estern & 0astern .ales presence# ;owe&er, for this to happen, co!pany has to e"pand its manufacturing capacities intime& fill the many gaps prevalent in its distribution networ! as also design a wise consumer'pulling mar!eting strategy#

+, &-A m"rgins of the com#"n% might not show " signific"nt im#rovement considerin( the fact that all its peers ( e.ce(t 3ala'i 4afers ) operate at a lower 02I$D" !ar(in as also li'ely intensification of the co!petition in the space#

Industry ))) Key *acts + *i,ures :

')ac'a(ed Food' se(!ent is one of the fastest (rowin( se(!ent of Indian FM > sector# ()randed Sweet * Savoury Snac!s( se(!ent is the thir! f"stest growing Indian )ac'a(ed Food se(!ent# It has (rown at a B =ears' ">< of 2+#2 8 o&er 200,:2019 ( in value terms )#

6n"ian Package" 7oo" Seg ent


{ Fastest Growing FMCG Segment }

Sweet & Savoury Snacks Seg ent


{ 3rd Fastest Growing Indian Packaged Food Segment } 2013 Market Size = ` 110.68 bn.

-estern .nacks
` 69.44 bn.

Traditiona/ .nacks
` 41.24 bn.

C#i)s * Cris)s Extruded Snacks

+a,keens- B#u.ia- /a)ad- !#ak#ra+uts- Sweets- etc0

Key Players : Pepsico, ITC, Parle, Balaji a!ers, Prataap Snacks, "FM Foods, #enkataramana Food $aldiram,

Key Players : Bikaji Foods, Bikaner%ala, Pepsico

Source :- Euromonitor International, IBEF, Exemplar Research

(+estern Snac!s( and (Traditional Snac!s( are the two broad cate(ories under 2randed .weet & .a&oury .nac's se(!ent# "lthou(h, in &olu!e ter!s, both the cate(ories' contribution is al!ost e?ual !"#$% & v's ()#*$ & +, but, in &alue ter!s, -estern .nac's do!inate the space with 62..3 % sh"re "s "t 2013# hips/ risps & 0%truded .nac's Cli'e puffs, rin(s, etc#D for! '-estern .nac's' cate(ory whereas 1a!'eens, 2hu3ia, )apad, 4ha'hra, 1uts, .weets, etc# for! '$raditional .nac's' cate(ory#

Indian Branded Sweet & Savoury Snacks Se1,ent


3alue 3olu,e

3.(/.* +-(.3* 0/(.3* &,(/.*

&estern $na%ks

Traditional ' ther $na%ks

&estern $na%ks

Traditional ' ther $na%ks

Western Snacks
3alue 3olu,e

&+(.,* +&(/)*

&'())*

+)(',*

Chips ! Crisps

"#truded $na%ks

Chips ! Crisps

"#truded $na%ks

( Value Growth YoY )

%&'3

%&'%

%&''

%&'&

%&&2

Sweet & Savoury Snacks Se1,ent Western Snacks Traditional Snacks C#i)s * Cris)s Extruded Snacks Se1,ent

2(.#( ! 2$."$ ! 2 .(2 ! 2 . "! 2'.%# !

2 .#2 ! 2$.&$ ! 2&.#0 ! 2 .0% ! 2".' !

2%.## ! 2".(2 ! 2%. $ ! 2#.&( ! 2$.2# !

0.% ! 2."# ! 2".0" ! .%2 ! &."' !

2(.# ! 22.## ! 2'.0% ! 2#.% ! &$."& !

Source :- Euromonitor International, Exemplar Research

5nly Twenty Seven organised players constitute 95 % of the total Indian 2randed .weet & .a&oury .nac's se(!ent sales with /ine #l"%ers do!inatin( the space with .1 % of the m"r)etsh"re# Pepsico leads the race with 9B#1 8 !ar'etshare C2019D with ,aldiram all famil, fractions- .eo.rap/ies com0ined + standin( second at 29#B 8 !ar'etshare# )epsico is a clear leader in '-estern .nac's' space whereas ;aldira! do!inates the '$raditional .nac's' space# 0ach of the two !a3or players ha&e seen their m"r)etsh"re gr"!u"ll% !ecline because of the e!er(ence of other stron( players li'e I$ , 2ala3i -afers, )rataap .nac's, 2i'a3i Foods and DFM Foods#

Key Players in (ndian $weet ' $a)oury $na%ks $egment

( 5$te 6 %2ese Pla#ers t$get2er c$ntr$l 9! markets2are $f t2e segment ) Pepsico 0ar,e P/ayers
( &# )*13 Annual 0ales )
`

500 cr. +

Balaji

a!ers

$aldiram ITC

Parle Prod1cts Prataap Snacks 1id).i2e P/ayers


( &# )*13 Annual 0ales )
`

200 500 cr.

Bikaji Foods Bikaner%ala "FM Foods

.ma// P/ayers
( &# )*13 Annual 0ales )

Parle 2gro
`

100 200 cr.

Ca%inkare #enkataramana Food Specialities 2grotec3 Foods 2pricot Foods

Per!etti #an Melle 1icro P/ayers


( &# )*13 Annual 0ales )
`

1 100 cr.

Samrat 4amkeen 5a6son Food 71ro India Fres3 Foods

2top Food Prod1cts 8ee Foode9 C33eda Specialities S:B Food Prod1cts 2d%ance Tec3 7nerg; 7di6les Melar $ealt3care Priniti Foods :r1s3i Corporation Gro%e <td(
Source :- Onground Research, Channel Checks, Company Reports, Rating Reports, Exemplar Research, Euromonitor International,

0+1tru!e! 'n"c)s0 as a cate(ory stands out a!on(st all other cate(ories of 2randed .weet & .a&oury .nac's se(!ent not only because of the hi(hest &olu!e (rowth re(istered by it o&er last B years 2''+*2'(9 C1%0 > 2&.# ! + but also because of its pro3ected &olu!e (rowth o&er 2019:201, at a ">< of 1+#7 8 which is highest "mongst the segment.

( Growth YoY )

%&'4

%&'5

%&'6

%&'7

%&'8

#olu e %rowth ?
Chi4s $ Cris4s ( Volume Growth ) ;<tru"e" Snacks ( Volume Growth )

&&.%( !

&0.'2 !

#.&# !

'.22 !

".#% !

&#.$( !

&".#2 !

&%.(2 !

&$.(# !

&$.&0 !

#alue %rowth ?
Chi4s $ Cris4s ( a!tori"#$i" "ormal %ri!e i"!rease &ase' o" %ri!e tre"' till 2013 ) ;<tru"e" Snacks Seg ent ( a!tori"#$i" "ormal %ri!e i"!rease &ase' o" %ri!e tre"' till 2013 )

20."' !

&#. ' !

&".2& !

&$.#0 !

&$.&0 !

2%.$" !

2(.$( !

22.%2 !

2&. & !

20.%$ !

Source :- Euromonitor International, Exemplar Research

'i1 com#"nies !omin"te +1tru!e! 'n"c)s c"tegor% $% controlling 82 % m"r)et as at 2019# $hey include )epsico, I$ , )rataap .nac's, DFM Foods, ;aldira! & @e'atara!ana Food .pecialities# )epsico is the leader with its ,urkure & Cheetos brands controllin( 52.7 % marketshare ( 2013 ) of the cate(ory E I$ , with its brand -ingo occupies second slot ( 10.7 fourth position respecti&ely#

markets2are ) while )rataap, with its brand .ellow /ia on" ( !.9 markets2are ) and DFM Foods with its brand C012 ( !.8 markets2are ) occupyin( third and
If we tal' of specific brands, then, o&er last fi&e years ( 2007+2013 ), C1A2 ( 1)9 )$$/s ), 3ello4 Diamond ( Prataa( 0nacks ) and TakaTak ( :al/iram ) ha&e (ained si(nificant !ar'etshare at the e%pense of Pepp, & Piknik ( ;enkataramana )$$/ ) and other s!aller players#

"#truded $na%ks Marketshare Trend o* Key Brands


%&'3 %&'% %&'' %&'& %&&2

,urkure & Cheetos ( Pe%si!o ) -ingo ( ()* ) .ellow /ia on" ( Prataa% ) C012 ( +,M ) 3aka3ak ( -al'iram ) Pe44y & Piknik ( Ve"katarama"a )

$2." !

$$.2 !

$ .' !

(#.2 !

$2.# !

&0.' !

&0 !

&& !

&&.# !

&&.$ !

$.# !

(." !

(.% !

(.# !

(.' !

$.% !

$. !

$.& !

(.& !

.# !

(. !

(. !

(.2 !

.' !

. !

2." !

3 !

(.0 !

(.' !

%.0 !

Extruded Snacks !ey Brands "arkets#are $ %&'3 (


) her! 18.00%

&iknik 1.%0% &e''( 1.$0% #aka#ak $.%0% Kurkure 51.00% Chee o! 1."0% CRAX 5.60%

Yellow Diamond 5.90% Bingo 10.80%

Kurkure TakaTak

Bingo Peppy

Yellow Diamond Piknik

CRAX thers

Cheetos

Source :- Exemplar Research, Channel Checks, Company Reports, Rating Reports, Euromonitor International,

4ey dri&er for robust (rowth of 0%truded .nac's se(!ent has been lower price points C ` 5 & ` 10 D which, coupled with inno&ati&e pro!otional acti&ities, ha&e !ade the se(!ent e%tre!ely popular, especially a!on(st school (oin( children#

onsu!ption pattern su((ests that 2rand Loyalty is absent in this se(!ent E howe&er, brand preference e%ists to a certain e%tent# )roduct Loyalty is co!pletely absent because of which co!panies need to continuously inno&ate to offer !ore fla&ours as also en(a(e consu!ers in &aried ways#

(Taste( & (Price Point( are the 'ey deter!inants of purchase decision of consu!ers in the se(!ent# For products tar(eted at children, (-ift( (&un/le/ <it2 eac2 (r$/uct (acket) is the third !ost i!portant deter!inant of the purchase decision#

4ssessment of Competition :

2e#sico with its brands .ay(s & /ncle 0hipps in hips/ risps se(!ent (4estern 0nacks) , 1ur!ure & 0heetos in 0%truded .nac's se(!ent (4estern 0nacks) & .ehar in $raditional .nac's se(!ent is a clear leader in Indian 2randed .weet & .a&oury .nac's se(!ent# ;owe&er, if we obser&e its o&erall !ar'etshare of the se(!ent o&er last 10 years, then, it see!s to ha&e lost considerable (round 6
Pepsi%o Marketshare Trend
in (ndian Branded $weet ' $a)oury $na%ks $egment

%&'3

%&'%

%&''

%&'&

%&&2

%&&8

%&&7

%&&6

%&&5

%&&4

$.& !

%.$ !

%." !

".( !

#. !

(0.& !

(&.& !

(%.$ !

($." !

((. !

Source :- Euromonitor International, Exemplar Research

In contrast, 3"l!ir"m as a (roup has !ore or less !aintained its !ar'etshare to beco!e the second lar(est player of Indian 2randed .weet & .a&oury .nac's se(!ent 6
+aldiram Marketshare Trend ( all famil# fracti$ns= ge$gra(2ies c$m&ine/ )
in (ndian Branded $weet ' $a)oury $na%ks $egment

%&'3

%&'%

%&''

%&'&

%&&2

%&&8

%&&7

%&&6

%&&5

%&&4

2 .$ !

2 ." !

2(.& !

2(.& !

2(.2 !

2 .0 !

2&.$ !

20.' !

2&. !

2&.( !

Source :- Euromonitor International, Exemplar Research


It is worthwhile to note here one i!portant fact re(ardin( ;aldira! ::: althou(h for calculation of !ar'etshare fi(ures, 03"l!ir"m0 "s " $r"n! is consi!ere!, but, the ri(hts for ';aldira!' brand are cle"rl% !em"rc"te! "mongst !ifferent f"mil% fr"ctions with each fa!ily fraction's respecti&e co!pany/ies handlin( !anufacturin(, sales and distribution of ';aldira!' brand of products for the respecti&e (eo(raphy 6
)eography Fami"y Fraction Respective Companies

5orth India

9an$2ar " 9a/2usu/an Agar<al

6a/diram .nacks Pvt. 0td. 6a/diram 1anufacturin, Co. Pvt. 0td.

-est + .outh India

02iv >is2an Agar<al

6a/diram *oods Internationa/ Pvt. 0td. Koma/ *oods Pvt. 0td.

7ast India

Pra&2u 02ankar Agar<al

6a/diram 8hu9iawa/a 0td.

6n this re4ort, for assessing financial an" seg ental 4ositioning of :5al"ira :, figures of all the above* entione" five co 4anies are taken as one single consoli"ate" entity@

"ll the other players in the se(!ent comm"n! " m"r)etsh"re in single !igits E howe&er, their relati&e (rowth o&er the years is noteworthy and e%ceptional which su((ests 6 an e%pandin( o&erall !ar'etsi*e, (radual shift towards or(anised fro! unor(anised, & also e%plains the !ar'etshare:loss suffered by the leader of the se(!ent C)epsicoD# 4ey players that ha&e (ained si(nificant !ar'etshare o&er last ten years include 63C, -ala!i Wafers, Prataa4 Snacks, /78 7oo"s, -ika!i 7oo"s, Parle & 14ricot 7oo"s@

Let's now "ssess the fin"nci"l #rofile of nine co!panies which together control 7 % mar!etshare of 2ndian )randed Sweet * Savoury Snac!s segment # ;ere we will loo' at 6 Actua" Revenue & *o* Revenue )rowth for each fisca" over F*&%-F*&'+ ' *ears, CA)R in -a"es #Revenue( achieved .y each p"ayer+ and /0IT A & PAT !argins 1 2 *ears, Average as we"" as of F*&'3

o!apnies co&ered are 6 Pe4sico, 5al"ira 63C, -ika!i 7oo"s, -ikanervala, Prataa4 Snacks, 14ricot 7oo"s, /78 7oo"s@ (all famil# fracti$ns= ge(gra(2ies c$m&ine/), -ala!i Wafers,

F*&'

F*&$

F*&&

F*&%

Pepsico
4 -nacks 5 :o: ;rowth

&(.& !
( 2./0121 !r1 )

2 .#( !
( 22311/0 !r1 )

2&.#2 !
( 1200133 !r1 )

.737

< 4ctua/ Revenue =

( 1/301./ !r1 )

6a"diram
4 A"" )eographies Com.ined 5

:o: ;rowth

22. % !
( 24301/2 !r1 )

2#.2# !
( 234413/ !r1 )

2$.'# !
( 12.0101 !r1 )

2$.'' !
( 1/3/124 !r1 )

< 4ctua/ Revenue =

0a"a7i 8afers
:o: ;rowth

2'.&# !
( 4131.2 !r1 )

&. % !
( 312103 !r1 )

(0.&' !
( ./21.3 !r1 )

.737

< 4ctua/ Revenue = ITC


:o: ;rowth

( 323101 !r1 )

.737

.737

.737

.737

< 4ctua/ Revenue = 0ika7i Foods


:o: ;rowth

( .00 !r1 )

2.$( !
( 32.1.0 !r1 )

&. ' !
( 2/.1.3 !r1 )

2&.$ !
( 120141 !r1 )

.#& !
( 1.3134 !r1 )

< 4ctua/ Revenue =

0ikanerva"a
:o: ;rowth

2$.2 !
( 3.012. !r1 )

2(.# !
( 234102 !r1 )

.& !
( 223120 !r1 )

.737

< 4ctua/ Revenue =

( 21310. !r1 )

Prataap -nacks
:o: ;rowth

.(& !
( 3/3120 !r1 )

$.# !
( 2.3104 !r1 )

22."2 !
( 1241.3 !r1 )

$(.&% !
( 1./1/3 !r1 )

< 4ctua/ Revenue =

Apricot Foods
:o: ;rowth

%.0( !
( 103121 !r1 )

.737

.737

.737

< 4ctua/ Revenue =

( 3412. !r1 )

F! Foods
:o: ;rowth

2.#( !
( 22.12/ !r1 )

(&. " !
( 1041/2 !r1 )

%%.02 !
( 11412/ !r1 )

$. ( !
( 32112 !r1 )

< 4ctua/ Revenue =

3 Years' CAG in Sales


# $%&%-$%&' (

Sweet & Savoury Snacks Seg ent

Pe4sico

5al"ira

-ala!i Wafers

-ika!i 7oo"s

-ikanervala

Prataa4 Snacks

/78 7oo"s

2$.2% !

&#.# !

2$.'2 !

.&$ !

2'. # !

&".2# !

0.$% !

(%.& !

807001

7/.130

>*1 *oods

+87001

+07001

387001

33.1-0

8a/a9i -afers

36.-/0 ,4.320

307001

Prataap

,-.,/0
287001

,-.4,0

8ika9i

6a/diram

.weet + .avoury .nacks Industry

207001

12.230

Pepsico

15.,20

8ikanerva/a

187001

107001

87001

% Year!* CA+R (ndustry Bala8i Bikaner)ala Prataap Pepsi%o Bika8i DFM +aldiram

Source :- Compan Reports, Ratin! Reports, Exemplar Research

2 *ears, Average

F*&'

Pepsico
4 -nacks 5 78IT 1ar,in P4T 1ar,in

(.$2 !
.737

2.# !
.737

6a"diram
4 A"" )eographies Com.ined 5

78I>T4 1ar,in P4T 1ar,in

&0.%& ! $."# !

&0.0 ! $. % !

0a"a7i 8afers
78IT>4 1ar,in P4T 1ar,in

&'.$$ ! &2.0" !

&#.($ ! &2.(& !

ITC
78IT>4 1ar,in P4T 1ar,in

.737 .737

.737 .737

0ika7i Foods
78IT>4 1ar,in P4T 1ar,in

". # ! ."& !

".(# ! (.0" !

0ikanerva"a
78IT>4 1ar,in P4T 1ar,in

'. ! (.02 !

'.$ ! (.2% !

Prataap -nacks
78IT>4 1ar,in P4T 1ar,in

'.' ! (.% !

".## ! ."2 !

Apricot Foods
78IT>4 1ar,in P4T 1ar,in

#.$& ! ? $.& ! ?
9 $ *ears, Average

'.#$ ! (.#0 !

F! Foods
78IT>4 1ar,in P4T 1ar,in

&&.#( ! $.(2 !

&0.$' ! 2.'0 !

207001 197001 1:7001 107001 197001 187001 1+7001 137001 127001 117001 107001 97001 :7001 07001 97001 87001 +7001 37001 27001 17001 07001

12.7-0

1,.710 16.630 4.-30 5.720 -.3/0 7.650 ,.230 7.,/0 3.5,0 ,.460 4.2-0 5.220 16.-40

7.260

Pepsico

6a/diram

8a/a9i -afers

8ika9i

8ikanerva/a

Prataap

4pricot

>*1 *oods

FY13 "B(TDA Margin

FY13 PAT Margin

Source :- Compan Reports, Ratin! Reports, Exemplar Research

4ey thin(s to note fro! abo&e 6

5al"ira 's re&enue fi(ures optically see! hi(her than Pe4sico because, they inclu!e s"les from other sources li'e Dairy ite!s, Mil', >hee, .yrups, .?uashes, Dry:Fruits as well as <estaurant sales which are not part of '.weet & .a&oury .nac's' sales# $o cite here an e%a!ple, (i&en below is the se(!entwise sales brea'up of ;aldira! for F=19 6
+aldiram $egmentwise $ales Breakup ( )*13 ) -egment F*&' Revenue

Savoury Snacks Sweets Athers


Tota"

1879 cr. 602 cr. 455 cr.

2936 cr.

Source :- pproximate Breakup !ata deri"ed #rom Company Reports, Rating Reports
If we (o further down into the brea'up of '.a&oury .nac's' se(!ent sales, then, 5al"ira 's !omin"nce in 0&r"!ition"l 'n"c)s0 se(!ent beco!es e&ident 6

+aldiram $a)oury $na%ks $ales Breakup ( )*13 ) -u.+-egment F*&' Revenue

Western Snacks 3ra"itional Snacks


Tota"

191 cr. 1688 cr.

1879 cr.

Source :- pproximate Breakup !ata deri"ed #rom Company Reports, Rating Reports
$his is in sharp contrast to Pe4sico which !erives m"(orit% of its s"les from 04estern 'n"c)s0 se(!ent#

.i!ilarly, -ika!i & -ikanervala re&enue fi(ures also include sales fro! other sources, albeit to a s!aller e%tent E a se(!entwise brea'up of -ika!i's F=19 re&enue is pro&ided below for reference 6

Bika8i $egmentwise $ales Breakup ( )*13 ) -egment F*&' Revenue

Savoury Snacks Sweets Athers


Tota"
`

280 cr. 33 cr.

12.50 cr.

325.50 cr.

Source :- pproximate Breakup !ata deri"ed #rom Company Reports, Rating Reports
-ala!i Wafers has e!er(ed as the stron(est player o&er last B years by (rowin( a((ressi&ely and eatin( into )epsico & I$ 's !ar'etshares# 2ala3i atpresent co!!ands ,#9 8 !ar'etshare in the se(!ent and has a &ery sound financial profile which could enable it to continue to outperfor! peers in future too# 2ala3i operates at hi(hest 02I$D" & )"$ !ar(ins a!on(st the peers#

Prataa4 Snacks with its 'Yellow :ia,ond' brand and /78 7oo"s with its 'C A;' brand ha&e also !ade a dent in )epsico's !ar'etshare by (rowin( ahead of it o&er last fi&e years# )rataap co!!ands 9#1 8 !ar'etshare while DFM co!!ands 2#09 8 !ar'etshare as at 2019#

DFM Foods has registered highest 3 4ears( 05-6 in Sales over 74 8'74 3 # It has outperfor!ed all the peers ?uite handso!ely#

%)2T95 margins of 97: are at par with ;aldira! & 3ust second best to 2ala3i -afers which is a &ery satisfyin( thin(# Its i!portant to note here that ;aldira!'s !a3or sales co!e fro! 1a!'eens & .weets ( ?7 as at )*13 ) and hips & 0%truded .nac's for!s only a s!all portion of its sales ( 8.! $f )*13 0ales )# .i!ilarly, 2ala3i -afers' !a3or .ales contributors are hips C-afersD & 1a!'eens# Its only )epsico & )rataap which ha&e !a3or contributions co!in( fro! 0%truded .nac's#

DFM Foods' .cale of 5peration CF=19D is s!allest a!on(st all the co!panies !entioned Ce%cept "pricot FoodsD with )epsico & ;aldira! at 2B00F cr# and 2ala3i at 719 cr# with I$ , 2i'a3i, 2i'aner&ala and )rataap at B00 cr#, 92B#B cr#, 9B0#2 cr#, and 949#, cr# respecti&ely#

5ut of these nine co!panies, )rataap has (ot .e?uoia bac'in( CB1 8 sta'eD, 2i'a3i recently (ot Li(hthouse )0 bac'in( C12#B 8 sta'eD, DFM (ot -estbrid(e bac'in( C24#70 8 sta'eD and 2ala3i is in final tal's with apital International )0 C1B 8 sta'eD# )epsico and I$ are capable con(lo!erate while ;aldira! has each fa!ily fraction caterin( to respecti&e re(ion# Its only 2i'aner&ala which is the wea'est a!on(st the lot that is loo'in( for a fundin( partner since last !any years but has not (ot anyone yet#

.ince four out of nine com#"nies h"ve got ( or about to get ) 2+ investors, its worthwhile to note here the &aluations at which each respecti&e )0:in&est!ent deal was stuc' 6

E3*Sales TT"

E3*EBIT:A TT"

/E :eal <a))ened in Year

Prataap Snacks Bikaji Foods DFM Foods Balaji Wafers

1#0B 2#2G 1#41 4#9G

1B#4G 90#27 19#92 22#B0

2011 2014 2014 Most Li'ely in 2014

Source :- Company Reports, Rating Reports, $CCircle !ata, Company %e&s, 'edia rticles, Exemplar Research

4ssessin, Competition specific to >*1 *oods :

CRAX Brand Key Marketshare Figures

Sweet & Savoury Snacks Seg ent C012 8arketShare ( 2013 )

Western Snacks Seg ent

;<tru"e" Snacks Seg ent

Corn*base" ;<tru"e" Snacks Seg ent

2.0

2."# !

$.%& !

#.&# !

Source :- Exemplar Research, Channel Checks, Euromonitor International, Company Reports


.ince the co!pany of our concern is DFM Foods, let's e&aluate co!petiti&e scenario with that re(ards#

DFM Foods o&er last !any years sustained and outpaced co!petition by adoptin( a sound strate(y of t"rgeting " s#ecific "ge grou# and concentratin( on !ar'etin( & distribution strate(ies circlin( around only that a(e (roup# 0ntire co!petition's products were tar(eted to all a(e (roups ( <it2 ma'$rl# &eing a/ults a&$ve 1! #ears $f age ) while DFM tar(eted children with a(e (roup +:12 years#

DFM was the first com#"n% to inclu!e 05ree Gift0 with ever% CRA6 Corn Rings #"c) of ` B and this isolation ( i.e., catering t$ $nl# s(ecific au/ience ) strate(y enabled it to distin(uish itself fro! co!petition as also sustain and (row a!idst stron( financial power of )epsico & I$ # .ince last year or so ( 2013 ), co!petition has beco!e intense with )epsico introducin( si!ilar ( t$ CRA, ) product ' orn ups' tar(eted at children and =ellow Dia!ond ( Prataa( 0nacks ) introducin( (49 6ings( H a replica of <"I orn <in(s# If we tal' specifically for <"I orn <in(s ( <2ic2 c$ntri&utes 7@ A t$ 1)9=s )*13 revenues ), then, )epsico's ' orn ups' price point is hi(her while other players li'e I$ and 2ala3i cater to (eneral audience rather than specific a(e (roup whereas ;aldira! has a !ore di&erse offerin( which is not in strict co!petition# ;ence, the #l"%er which coul! thre"ten the m"r)et #osition of CRA6 in re"l sense is 2r"t""# 'n"c)s and as per our analysis, it is this player which DFM will find it hard to co!pete with#

)rataap .nac's is ta'in( on DFM Foods in:and:out by stri'in( on e&ery corner# It has introduced al!ost identical shaped product which is a replica of ra% orn <in(s and has offered it in al!ost e&ery fla&our in which <"I is a&ailable ( e.ce(t Pu/ina " C2at(ata )#

In addition to offerin( si!ilar product with si!ilar fla&ours, what )rataap has done is it has t"rgete! the s"me "ge grou# with s"me str"teg% of includin( 'Free >ift' with e&ery pac'# )rataap, in recent past, (ot associated with one of the !ost popular children t& show ,Chhota 0heem, and has introduced free (ifts re&ol&ed around the !ain character of the show in its e&ery =D <in(s pac'# In continuation with the sa!e strate(y, only recently, in "pril'2014, it (ot associated with Mr# "!itabh 2achchan starrer ,0hootnath Returns, H a supernatural co!edy !o&ie and launched =D <in(s pro!os with the trailer of the !o&ie#

5n distribution front, DFM & )rataap are al!ost nec':to:nec' if we consider re(ionwise:spread, but, if we (o into detail and tal' specific, then distribution reach of )rataap is al!ost double that of DFM ( Prataa( reac2ing B ! lak2 retail $utlets vCs 1)9=s reac2 $f B 2.1! lak2 $utlets )# ;owe&er, each co!pany has its stren(th and wea'nesses in each re(ion, with DFM far stron(er in 1orth India while )rataap a clear leader in -est India# @isibility and a&ailability of )rataap's =ellow Dia!ond is far better in -est India ( relative t$ CRA, ) while in 1orth India, DFM's <"I is sli(htly ahead than )rataap# -hat )rataap has done is, in whichever "re"s it is #resent7 it h"s covere! "s m"n% ret"il outlets "s #ossi$le which (i&es it (reat &isibility ( $nl# sec$n/ t$ Da#=s " >urkure ) in respecti&e areas# In contrast, DFM has focussed on co&erin( !ore areas which (i&es it relati&ely low &isibility relati&e to )rataap, especially in -estern India#

$o (i&e a brief bac'(round of )rataap .nac's, it is a com#"n% $"c)e! $% 2+ #l"%er 'e8uoi" C"#it"l which in&ested in it in 2011 and has so far in&ested J ` 1,0 cr# in the co!pany# "s per sources, it holds JB1 8 e?uity sta'e in the entity as at F=19# It is worthwhile to note here the (rowth attained by )rataap o&er last se&en years 6

( fig. In ` cr. )

=Y'3 343.80 225.24

=Y'% 257.69 169.42

=Y'' 189.57 119.84

=Y'& 154.47 72.18

=Y&2 100.20 53.33

=Y&8 66.60 31.66

=Y&7 35.50 23.88

/rataa) :=" =oods

Se=uoia investe" in the co 4any in 8ay:2'((

$hree thin(s to note here is that 6 first, DFM started focussin( a((ressi&ely on its .nac' Food se(!ent only fro! F=07, second, 2r"t""# "ggressivel% intro!uce! Rings in the !ar'et only fro! 5913 as pre&iously its !ain focus was co!petin( with Lay's, 4ur'ure & heetos ( &# intr$/ucing *1 C2i(s, C2ul&ule " Puffs ), third, as at F=19, +1tru!e! 'n"c)s se(!ent contributes ` 99 cr; to )rataap's <e&enues as a(ainst ` 9< cr; to DFM's <e&enues#

Conc/usion :

5pportunity is hu(e ahead of e&ery serious player in Indian 2randed .weet & .a&oury .nac's se(!ent because of the fact that Indians are natural snac's' consu!ers, and entire 124 crore n!i"n #u$lic is serve! $% onl% &went% 'even m"(or $r"n!e! s"vour% sn"c)s #l"%ers atpresent# <ural !ar'ets are still unpenetrated and lower price points ( ` 2, ` ! " ` 10 ) pre&alent in the se(!ent could dri&e a((ressi&e sales in rural India#

.weet & .a&oury .nac's Food Industry in itself is li'ely to (row handso!ely at a ">< of 17#4 8 o&er 2019:201, with its sub:se(!ents li'e +1tru!e! 'n"c)s li)el% to out#erform in!ustr% growth rate by (rowin( at a ">< of 29#1 8 o&er 2019:201,#

.hift towards or(anised fro! unor(anised se(!ent is pro3ected to continue, albeit at a (radual pace#

$hese factors co!bined, offers i!!ense opportunity for each of the or(anised player in the se(!ent to (row a((ressi&ely as they ha&e done in the past# ;owe&er, com#etition is li)el% to intensif% (oin( forward as !ore of the or(anised business (roups enter into this space ( recent entr# $f %$&acc$ ma'$r G$(al C$r($rati$n is a case in ($int ) to (rab their share of opportunity as also e%istin( players !a'e a dent in peers' stron(hold by offerin( si!ilar products with superior distribution and !ar'etin( reach#

If we loo' at last four years, then -5* 5oo!s h"s out#erforme! "lmost "ll its #eers, includin( )rataap .nac's as far as re&enue (rowth is concerned#

DFM Foods is unli)el% to f"ce strong thre"t in the me!ium term as far re&enue (rowth is concerned, pro&ided it can e1#"n! m"nuf"cturing c"#"cities intime# ;owe&er, %)2T95 margins could remain under pressure until a new product success is !et on the lines of <"I orn <in(s# $his is because, all the efforts towards any sort of si(nificant i!pro&e!ent in 02I$D" !ar(ins will be !et by cut:throat co!petition, especially fro! )rataap .nac's ( *1 Rings ) which will put:in its e&ery effort to fully utilise its <in(s !anufacturin( plant which co!!enced operations in 2019#

DFM Foods definitely has a first !o&er ad&anta(e in the space and has a stron( brand credibility a!on(st its tar(et audience ( ma'$rl# in 5$rt2 En/ia )# ;owe&er, to counter )rataap's a((ressi&e low !ar(in !odel, 97: will need to innovate more on the product front and fill the many gaps prevalent in its distribution networ! as also design a wise consumer'pulling mar!eting strategy#

-ith a (ood )0 player li'e -estbrid(e enterin( into DFM Foods by ac?uirin( 24#70 8 e?uity sta'e in it and pro!isin( an acti&e in&ol&e!ent into for!ulatin( co!pany's (rowth strate(ies by ta'in( a board seat, DFM !i(ht be able to identify (aps !ore proacti&ely and fill the! with ease#

Disclaimer :
This Research Note should only be taken as a direction for further research and should, in no way, be construed as an advice to Buy/Sell concerned Company. hile preparin! this note, we have used all publicly available information as also information from other sources which are thou!ht of as most reliable. "owever, althou!h we have tried to be as !enuine and as accurate as possible in publishin! the data#s$, still, reader of this note is advised to cross%check the information and we should not in any way be held liable for any incorrect information. &ts safe to assume that we have the concerned company as part of our portfolio and so the views e'pressed in this note should be seen in that backdrop. The reader assumes the entire risk of any use made of this note and we should, in no way, be held liable for any loss arisin! out of the contents or action taken by the reader because of this note. This Research Note should not be interpreted as a recommendation of any kind but is only for the information purpose.

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