Kolkata: The true potential of Modern Food Enterprises Pvt. Ltd could not be realized earlier because the maker of breads could not be integrated with Hindustan Unilever Ltd (HUL), which acquired it from the government in 2000, according to Roshini Bakshi, managing director, Everstone Capital Asia Pte. Ltd.
Modern Food was “a misfit in their (HUL’s) culture because they are an FMCG (fast moving consumer goods) company, and bread is a business of daily distribution,” said Bakshi, whose Everstone Capital concluded the takeover of Modern Food from HUL a year ago.
HUL had planned to integrate the distribution of bread with that of other consumer goods it sells, but the two are “very different”, Bakshi said in an interview. So HUL had to carry on with Modern Food as a separate firm, she added. Edited excerpts:
What excited Everstone about Modern Food?
We conducted an extensive consumer research across 20-odd cities. It showed Modern had an extremely high brand recall among consumers and that consumers were willing to buy other products from it, not just breads. So, the potential for growth was huge. So, when we bought the company, we bought everything, including the sales force.
And now we are expanding the product range-launching more baked products with short shelf life. We have launched chapattis and Malabar parathas, which are doing extremely well in the south. All these happened only after Everstone stepped in.
Did Modern Food have the expertise to launch these products?
The company had a lot of expertise—it was among the first to launch multi-grain bread, for instance. A lot of products were developed, tested, but never taken out to the market or scaled up to their potential. We are now investing in exploiting the expertise that Modern already had when we took it over.
What are you doing to expand the product range?
We need to constantly innovate because some of Modern’s products are in the indulgence category. Modern has set up a fully functional research centre in Chennai, where we have tested our entire portfolio before they were relaunched.
And this needs investments and we are happy to invest more in it. We already have a lot of products in the pipeline, and many are to be scaled up.
What’s been your experience like with Modern Food’s workers?
We have six plants—four in the south and one each in Kolkata and Mumbai—and we have unions at each of them. They are extremely supportive, they want the company to grow. They realize that in the past few decades, other companies have surged ahead and overtaken Modern, and they have supported Everstone because within one year they have seen our commitment. Even when we announced the acquisition, we were received at all the factories with resounding applause.
So what are your internal targets for Modern Food?
We normally invest with a 10-year horizon. Thankfully, people who have invested in Everstone have given us more than enough time to build a brand and add value. Our aim with Modern is the same—to build a long-lasting brand. We have said that in five years, we want to scale up Modern’s revenue to Rs1,000 crore. And we already have a plan in place to scale it up to that level.
You have been investing in consumer goods companies. Which other sectors look attractive?
Several new sectors are getting our attention, neutraceuticals and pharma, for instance. We have invested in the business of distribution in the pharmaceutical sector. It is currently a very fragmented business; it will undergo a lot of consolidation and the business looks interesting. Similarly, health and well being—these too look interesting.