Nestlé India Ltd and Hindustan Unilever Ltd (HUL) have evinced interest in buying a controlling stake in Havmor Ice Cream Ltd, a Gujarat-based ice cream brand with a pan India presence, two people aware of the development said.
The separate discussions are in the initial stages and it would be premature to say whether a deal will be signed, said the first person. Besides the strategic investors, a couple of large private equity (PE) funds are also interested in Havmor, he added. The company is valued at Rs1,000 crore.
Havmor Ice Cream Ltd is the seventh largest ice cream and frozen desserts maker in India with a 3.5% market share.
The value of the ice cream and frozen desserts segment in India grew 20% in 2016 to reach Rs10,200 crore in sales and is forecast to see a constant value compound annual growth rate of 11% over 2016-21, leading to sales of Rs17,000 crore, as per a December 2016 report by market researcher Euromonitor International.
Gujarat Cooperative Milk Marketing Federation Ltd, which sells the Amul brand, is the leading firm in the ice cream and frozen desserts segment with a 17% market share.
HUL is the second largest, with a 9.7% market share, according to the Euromonitor report.
“There is no serious discussion happening for stake dilution, though we can say there are interest in our company from PEs and strategic buyers,” said Ankit Chona, managing director of Havmor Ice Cream.
An HUL spokesperson declined to comment. A Nestlé India spokesperson said, “we do not comment on speculations”.
HUL has a strong presence in the Indian ice cream space through its brands Wall’s, Magnum and Cornetto. Nestlé India’s presence is in the premium ice cream space with its Mövenpick brand.
Among brands, HUL’s Wall’s holds a 3.9% market share, while Cornetto and Havmor hold 3.5% each. HUL acquired the Kwality Wall’s ice cream brand from Kwality, formerly Kwality Dairy Ltd, in 1994.
Over the next three years, Havmor plans to spend about Rs225-250 crore in setting up a new facility at Faridabad to cater to the northern markets and expand capacity at existing plants in Gujarat from 250,000 litres a day to 350,000 litres, Mint reported last year, citing Havmor’s Ankit Chona.
The company has more than 40,000 outlets across Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Punjab, Goa, Delhi, Chhattisgarh, Uttar Pradesh, Karnataka, Haryana, and Telangana, according to the company website.
Satish Chandra Chona started Havmor in Karachi (now in Pakistan) in 1944 and resumed the business in 1953 in Ahmedabad, after Partition.
Other major firms in India’s ice cream and frozen desserts market are Mother Dairy Fruit and Vegetable Pvt. Ltd (7.8% market share), Vadilal Industries Ltd (5.3%), South India’s Hatsun Agro Products Ltd, which sells the Arun brand (4.6%) and Devyani Food Industries Pvt. Ltd, which sells the Cream Bell brand (3.9%). Other lesser known firms across the country together hold 47% of the market.
“Ice cream market is riding on the tidal wave of Indian consumption story. Indian per capita consumption is still extremely low, so it is expected that it will keep rising over next decades,” said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors.
Annual per capita consumption of ice cream in India is just around 300ml; in the US it is 22,000ml and in China 3,000ml, according to a study by consulting firm Technopak Advisors.
As part of their efforts to expand into new geographies, several Indian ice cream makers are in the process of selling stakes to PE investors.
JSF Holdings Pvt. Ltd, a south India-based ice cream maker, is looking to sell a significant minority stake to raise funds for its expansion, Mint reported in June 2016. The Kochi-based company, which owns the Uncle John, Lazza and Skei ice cream brands, plans to dilute about 30% of its holding.
Plans of Dinshaw’s Dairy Foods Ltd, a North India-based ice cream maker, to raise $100-120 million from PE firms have not materialized yet. Mint reported on discussions between Dinshaw’s and PE firms in October 2015.
“Also with more and more consumers growing to middle class, consumption will increase. Another factor that will drive the growth will be segmentation and in this, premium segment will grow much faster as success of Magnum has shown,” Sahni said. Unilever had launched its premium Magnum ice cream bars in India in 2013. Magnum is the best selling ice cream brand in Europe.