How would Unilever and Kraft Heinz’s merger play out in India?
A Unilever-Kraft merger would give Hindustan Unilever an opportunity to get into the food business, Kraft would get access to a huge distribution network in India
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Mumbai: A merger of Unilever Plc and Kraft Heinz Co. would give the latter access to the distribution network of India’s largest consumer packaged goods company by sales, Hindustan Unilever Ltd (HUL).
On its part, HUL, the maker of Dove soaps and Surf detergent, would get access to a portfolio of brands like Kraft cheese, Heinz ketchup and Complan, a powdered malt beverage.
“It is a huge opportunity for both companies in India,” said Rajat Wahi, partner and head (consumer markets), KPMG India.
According to him, a merger will give HUL an opportunity to get into the food business, which has not been a priority for the company.
For Kraft Heinz, it will give it access to a larger distribution network.
“There will be some overlaps as well, but the synergies are commendable,” Wahi added.
To be sure, Kraft Heinz has a really small presence in India and has just recently introduced its Kraft cheese in the country.
In financial year 2015, Kraft Heinz India made a profit of Rs188.52 crore on sales of Rs1,394.99 crore, according to the latest data available with financial data provider Capitaline. In comparison, HUL had a net profit of Rs4,082.37crore on sales of Rs31,987.17 crore in financial year 2016.
The offer from Kraft Heinz to Unilever Plc is similar to the one the company made in 2010 to acquire British chocolate maker Cadbury Plc to get an emerging markets footprint.
In 2012, Kraft split its operations, calling the North American food company Kraft and the international food business Mondelez International. The latter operates as a separate company in India.
“It is too premature to say how this proposed merger will work out,” Arvind Singhal, managing director, Technopak Advisors Pvt. Ltd, said, adding,
“If at all it happens, we can look at how the company has treated the Heinz and Cadbury brands—maintaining their distinct identities and consolidating the back-end for synergies.”