The Hershey Co. has acquired a 51% stake in Godrej Beverages & Foods Ltd for $60 million (Rs258 crore), and proposes to launch a clutch of low-priced offerings in an attempt to increase consumption of chocolate in India. The typical Indian consumes just around 0.14gm of chocolate a year.
“When Milton Hershey started the company in 1894, he converted milk chocolates, then a luxury item, to a mass produced one, affordable to the masses, with appropriate basic products. Given the $300 million size of the Indian chocolate market and the low consumption, we believe that we can bring in expertise here to help boost consumption in India with products that are accessible (affordable), packaged right (in small quantities) and sold in the right places,” said Hershey International president John P. Bilbrey.
Godrej Beverages has now been renamed Godrej Hershey Foods & Beverages Ltd, and it proposes to look at the entire range of Hershey products—from gum and mint-top chocolates and syrups—before deciding on which ones to launch in India.
“We see India as a terrific opportunity and a relatively underdeveloped chocolate market as compared to the $57 billion US market for chocolates,” said Hershey Co.’s chairman, president and CEO Richard H. Lenny. And Bilbrey added that chocolate-consumption is usually a function of economic growth. “Given the high gross domestic product growth in India, consumption will grow manifold as discretionary income of consumers rises,” he said.
Godrej Hershey plans to launch products that will appeal to consumers who wanted low-cost chocolates as well as those who preferred high-end ones. Lenny said that the first products to be launched could be Hershey’s syrup and its milk-mixers (such as Hershey’s chocolate milk mix).
The new company would make a fresh issue of capital once it decided on the products it would launch, and a location for its chocolate manufacturing facility, said Godrej Hershey mentor-director A. Mahendran. He holds a 6% stake in the company.
Hershey picked up the 51% stake in Godrej Beverages by acquiring 40% from Infrastructure Leasing & Financial Services Ltd, 5% from Godrej Industries and 6% from Mahendran.