Home >Companies >News >PepsiCo said to be exploring offer for Balaji Wafers

Atlanta / Mumbai : PepsiCo Inc., the world’s largest snack-food maker, is among suitors exploring a bid for India’s Balaji Wafers Pvt as it pushes to sell more chips in developing countries, said two people familiar with the matter.

PepsiCo hasn’t submitted an offer and a deal may not emerge, said the people, who asked not to be named because the deliberations are private.

Balaji, based in Rajkot in western India, manufactures and distributes potato chips and other grain-based bagged snacks in flavours such as masala.

Chief executive officer Indra Nooyi has tried to wrest a greater share of snack markets in developing countries by appealing to local tastes.

The Purchase, New York-based company has added more spicy offerings and recruited Bollywood actors as brand ambassadors to get a greater share of India’s snack market, which Euromonitor Plc projects will be worth 268 billion ($4.2 billion) by 2018.

“The Virani family plans to sell up to a 49% stake for as much as $300 million", people familiar with the matter said.

Jeff Dahncke, a spokesman for PepsiCo, declined to comment.

Balaji is seeking a partner who will invest funds and help it expand operations, founder and managing director Chandubhai Virani said in an interview.

While potential suitors have come saying they want to buy out the whole company, the family isn’t interested in selling the entire business, Virani said in a telephone interview from his office.

“Discussions with Pepsi and others are ongoing",Virani said.

Cheap snacks

Virani founded Balaji in 1974 as a supplier of snacks to a movie theatre, and later set up a manufacturing plant to produce chips and vegetarian eatables.

The company now sells its products in 400,000 to 500,000 stores in Western India. His three sons also work for Balaji.

Its wafers and snacks in shiny plastic pouches costing as little as 5 (8 cents) are sold at neighbourhood mom-and- pop stores and supermarkets. Unlike bigger competitors like PepsiCo and ITC Ltd, Balaji doesn’t run television advertisements or hire Bollywood brand ambassadors.

Virani has instead focused on keeping his products cheap and building a distribution network in towns and villages in the three states.

“His strategy has worked."

“ Balaji’s share of the local potato and vegetable chips market grew to 13.7% in 2012, from 9.5% in 2008, "according to researcher Euromonitor, while PepsiCo’s share fell from 69.7% to 56.8%.

Developing markets

“Our goal has always been to make good quality products that are cheap," Virani said.

“Right now we don’t produce enough to meet the demand."

“Sales have been growing at 25% annually and reached 10 billion last year," Virani said. “The entire company is worth about 40 billion ," he said.

Per-capita consumption of salty snacks in India is a fraction of that in Mexico, one of PepsiCo.’s biggest snack markets, according to a February presentation by the maker of Mountain Dew and Quaker oats.

PepsiCo. and rival Coca-Cola Co are vying for a bigger chunk of developing countries’ business as growth rates in Asia, the Middle East and Africa are four to five times those in the US and Europe, according to PepsiCo. The company generated about half its $65.5 billion in revenue last year from outside the US. BLOOMBERG

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