INDIA – Nestle, the world’s largest fast-moving consumer goods (FMCG) player by revenue, has advanced its talks with Mumbai-based Capital Foods for the acquisition of the owner of Ching’s Secret brand.
As per sources close to the matter, the three major shareholders of Capital Foods Pvt Ltd have decided to put the company up for sale, in what could turn out to be one of the largest buyouts of a home-grown consumer brand.
The company’s key stakeholders are private equity group General Atlantic (35 percent share), European family office and investment arm Invus Group (40 percent share) and former ad executive turned food entrepreneur and founder chairman Ajay Gupta (25 percent share).
Although the Swiss food giant has not outlined precise plans for the acquisition, if successful, it has the potential to change the dynamics of the local market and boost its presence in the fast-growing economy, people familiar with the matter said.
Several other suitors have also expressed interest in buying Capital Foods in a transaction valued close to US$1 billion (over Rs 8,000 crore).
Started in 1995, Capital Foods has been instrumental in developing the Indian form of Chinese in the country’s ready-to-cook (RTC) category. It has established itself as a ‘Desi Chinese’ brand with varieties of Indianised forms of noodles, masalas, sauces, pickles, and soups.
As much as Nestle already owns the largest instant noodles brand in the country, Maggi, with over 60 percent of the Rs 5,000 crore branded instant noodles market in India, experts say its bid to acquire Ching’s is not without a rationale.
Overall, Technavio projects the ready-to-cook market in India to grow at a CAGR of 7.12% to reach US$488.97 million in the forecast period 2022 and 2027.
Short cooking time, easy preparation, and long shelf life have increased the demand for ready-to-cook products in India. The rising working population in India has increased the demand for convenience foods that can be prepared easily, such as ready-to-cook food products.
According to Abneesh Roy, executive director of Nuvama Institutional Equities, if the deal goes through Nestle India’s addressable market will expand.
Products like Ching’s Secret Schezwan Chutney, Instant Soups, Chinese Masalas, Chinese Sauces, Hakka Noodles, Instant Flavoured Noodles and Smith & Jones Ketchup, Pasta Masala, Paneer Masala, and Ginger-Garlic Paste, could help boost Nestle’s consumer base, he explained.
Capital Foods owns manufacturing plants in Vapi, Nashik, and Gandhidham, apart from a range of co-packers. In FY22, the company had a revenue of Rs 580 crore with a net loss of Rs 7.4 crore.
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