CavinKare in talks to buy food company

CavinKare in talks to buy food company

Author | Source: Business Standard | Saturday, May 17,2008 8:54 AM

CavinKare in talks to buy food company

Chennai-based FMCG company, CavinKare, is in active talks with a small food company for acquisition. C K Ranganathan, chairman and managing director, CavinKare, said that after entering the packaged fruit juice market through the acquisition of Maa in February this year, the company is looking at more ‘under-leveraged' brands to grow its food business. The deal is likely to be completed in the current fiscal.

"The idea is to buy regional brands and expand them across the country, backed by the CavinKare brand," Ranganathan told Business Standard. He added that talks are on with a contract manufacturer in Pondicherry for acquiring his unit and making it an export-enabling facility for CavinKare. The manufacturer, apart from making personal-care products for CavinKare, also services some the company's competitors.

"We don't plan to continue that once we take over. Only our products will be made and the focus will be on exports," he said.

Ranganathan said that while the Pondicherry facility could cost around Rs 10 crore, the budget for the proposed brand acquisition could be anywhere between Rs 15-100 crore. He said that CavinKare is more keen on entering new areas as it did with the acquisition of Maa. The company had paid Rs 30 crore to acquire Maa. Apart from this one proximate deal, CavinKare is in talks with 2-3 regional brands for acquisition.

Of the company's Rs 560-crore turnover, less than Rs 40 crore comes from the foods division, which is the youngest business division. The company also plans to place greater thrust on the US market with its Ruchi brand of food products. "The margins in that market are much better," he said.

Commenting on the impact of inflation on the FMCG sector, he said that while the previous financial year grew by only 13 per cent, the current fiscal could see a 20 per cent growth. Indications for these are already visible.

Out-of-court deal

C K Ranganathan, CMD, CavinKare said that his company is close to settling a trademark fight over the Ruchi brand with a peaceful out-of-court deal. Ruchi pickles was acquired by CavinKare in 2003 for Rs 15.5 crore. "We were aware of this case even when we acquired. We are now close to settling this outside the court," he said.

FMCG company Ruchi Soya Industries had challenged the same brand name being used for selling pickles by the earlier owners (Shyam Group) from whom CavinKare had bought it.

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