Japanese conglomerate Lotte will pick up a 70% equity in the proposed food & beverage (F&B) joint venture with the Delhi-based Dharampal Satyapal (DS) group which makes the ‘Catch’ range of products and mouth freshner Pass-Pass.
The joint venture will a paid-up capital of Rs 75 crore. It proposes to put up a facility in Solan (Himachal Pradesh) to manufacture F&B products besides engaging in import, export and distribution of Lotte group products.
This will be Lotte’s second venture in India after it acquired around 80% stake from the Murugappa group in Parry’s Confectionery a few months back.
“The JV will cover the whole market of the south Asian countries including India, Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka and Pakistan,” a source quoting Lotte Co general manager (International Division) Toshikazu Suzuki said.
The company intends to manufacture and launch its branded products in the country by 2005-end. The product segments include chewing gum, chocolate, candy, biscuits, confectioneries and ice cream.
In May 2004, Korea-based group company, Lotte Confectionery had acquired 80.39% of equity stake of Parry’s Confectionery (now known as Lotte India).
Elaborating on the rationale for setting up a second joint venture, Mr Suzuki said: “India is a large country with a huge population. Lotte India, located in Chennai, will not be able to cover the entire Indian market”.
Commenting on the emerging opportunities in India, he said: “Food business (in India) is local. A success of food business depends on how deeply companies understand the consumer needs and apply suitable technologies by adapting to the local taste.”
The domestic confectionery market is around Rs 1,200 crore, with MNCs such as Perfetti having a dominant share.
Lotte will transfer advanced technology to its Indian subsidiary, which will include formulation, know-how, special recipe, selection of raw material and flavouring technology. The Japanese company will charge a royalty of 2% and 1% of total sales respectively.
The Indian project is expected to manufacture 760 tonnes of product in the first year, which will be increased to 1,830 tonnes by the fifth year.