-
Contents of this Note :
Key Takeaways from the Report -- Industry Perspective Page
3-4
Key Takeaways from the Report -- Company Perspective Page
4-5
Industry -- Key Facts & Figures Page 6-11
Marketsize, Value / Volume Breakup, YoY Growth - 2009-2013
( Sweet & Savoury Snacks, Western Snacks )
Key Players of the Segment
( 27 Players Contributing 95 % of the Segment Sales )
Extruded Snacks
( Projected Value/Volume Growth 2014-2018 )
Marketshare of Key Brands Extruded Snacks
( Kurkure, Bingo, Yellow Diamond, CRAX, Cheetos, TakaTak, Peppy,
Piknik )
Assessment of Competition Page 12-19
Pepsico Marketshare Trend -- 2004-2013
Haldiram Marketshare Trend -- 2004-2013
Financial Profile of Nine Companies Constituting 71 % of Segment
Sales
( Pepsico, Haldiram, Balaji Wafers, ITC, Bikaji Foods,
Bikanervala,Prataap Snacks, Apricot Foods, DFM Foods )
Key Things to Note
( Haldiram & Bikaji Segmentwise Sales Breakup, 3 Years' CAGR
in Sales, EBITDA Margins, PE-deal Valuations in the Segment )
-
Assessment of Competition specific to DFM Foods Page 20-21
CRAX Brand Key Marketshare Figures( Sweet & Savoury Snacks,
Western Snacks, Extruded Snacks, Corn-Based Extruded Snacks )
Prataap Snacks the Key Competitor( Aggressive Marketing,
Distribution Edge, Backed by Sequoia Capital )
Conclusion Page 22-22
Page Intentionally Left Blank
-
Introduction :
In continuation with our initial brief note on 'DFM Foods Ltd'
dated 10th February 2014, we present here a detailed 'Industry
& Competition Analysis' for the same company. This report is
the result of an extensive on and off the field work done by our
team over the span of last two months across each geography so asto
remain as exhaustive as possible, and, while presenting the facts
& figures, we have tried to remain as unbiased as possible in
our analysis.
Key Takeaways from the Report Industry Perspective :
'Indian Branded Sweet & Savoury Snacks' segment has grown at
a CAGR of 26.2 % over 2008-2013 (in value terms) to become the
third fastest growing segment of Indian Packaged Food Industry.
The segment is categorised into 'Western Snacks' and
'Traditional Snacks' which together give it a ( 2013 ) market size
of ` 110.68 bn. 'Western Snacks' comprises of Chips/Crisps &
Extruded Snacks (like Rings, Puffs, etc.) whereas 'Traditional
Snacks' comprises of Namkeens, Bhujia, Papad, Khakhra, Nuts,
Sweets, etc.
Only Twenty Seven organised players contribute to 95 % of the
segment sales with Nine Players controlling ~71 % of the
marketshare. These Nine players include :
Pepsico, Haldiram, Balaji Wafers, ITC, Bikaji Foods,
Bikanervala, Prataap Snacks, DFM Foods & Apricot Foods.
[ Note :- Financial Profile of each of these nine companies is
included in this report ]
Extruded Snacks as a category stands out amongst all other
categories having registered highest volume growth over 2008-2013 (
CAGR = 21.9 % ) and its projected 16.9 % ( CAGR ) volume growth
over 2013-2018 which is again highest in the segment.
Only Six companies control 82 % of the Extruded Snacks market.
Pepsico is the leader in the space whereas Prataap Snacks, DFM
Foods and Haldiram are noteworthy marketshare gainers over last ten
years.
Opportunity is huge ahead of every serious player in Indian
Branded Sweet & Savoury Snacks segment because of the fact that
Indians are natural snacks' consumers, and entire 124 crore Indian
public is served by only Twenty Seven major branded savoury snacks
players atpresent. Rural markets are still unpenetrated and lower
price points ( ` 2, ` 5 & ` 10 ) prevalent in the segment could
drive aggressive sales in rural India.
-
Competition is likely to intensify going forward as more of the
organised business groups enter into this space ( recent entry of
Tobacco major Gopal Corporation is a case in point ) to grab their
share of opportunity as also existing players make a dent in peers'
stronghold by offering similar products with superior distribution
and marketing reach.
Key Takeaways from the Report Company Perspective :
CRAX Brand Key Marketshare Figures
Sweet & SavourySnacks Segment
Western Snacks Segment Extruded Snacks Segment Corn-based
Extruded Snacks Segment
CRAX MarketShare( 2013 )
2.03 % 2.79 % 5.61 % 9.19 %
Source :- Exemplar Research, Channel Checks, Euromonitor
International, Company Reports
DFM Foods Ltd. via its 'CRAX' brand is a key player in Extruded
Snacks category of Indian Branded Sweet & Savoury Snacks
segment.
Over last five years, company has gained significant marketshare
of the category.
If we consider 3 Years' ( FY10-FY13 ) CAGR in Sales, then, DFM
has outperformed industry as well as almost all of its peers quite
handsomely :
3 Years' CAGR in Sales( 2010-2013 )
Sweet & Savoury Snacks
Segment
Pepsico Haldiram Balaji Wafers Bikaji Foods Bikanervala Prataap
Snacks
DFM Foods
25.26 % 19.93 % 25.82 % 33.15 % 28.39 % 17.29 % 30.56 % 46.13
%
Its main product offerings ( CRAX Corn Rings ) are targeted
towards children of age group 6-12 years --- an isolation strategy
which has done wonders for the company so far.
If we take into consideration DFM's key product offerings and
its target audience, then, key competitors for it are Pepsico,
Haldiram ( Extruded Snacks ), ITC, Prataap Snacks &
Venkataramana Food Specialities.
-
As per our analysis, Prataap Snacks ( via its brand YD Rings ),
as a peer, poses an immediate threat to DFM Foods because of its
almost similar marketing strategy, same target audience, identical
product USP and low margin business model.
Prataap has recently ( in 2013 ) commenced its Rings
manufacturing plant ( technology from American Extrusion ) and is
going all out to make a dent into DFM's ( CRAX Corn Rings )
marketshare. Aggressive marketing strategy is adopted by Prataap by
getting associated with popular children tv show 'Chhota Bheem' and
Mr. Amitabh Bachchan starrer children-oriented supernatural movie
'Bhootnath Returns'.
Medium-term Revenue Growth is not under threat for DFM because
of an aggressively expanding market size itself as also unsaturated
nature of company's Western & Eastern Sales presence. However,
for this to happen, company has to expand its manufacturing
capacities intime, fill the many gaps prevalent in its distribution
network as also design a wise consumer-pulling marketing
strategy.
EBITDA margins of the company might not show a significant
improvement considering the fact that all its peers ( except Balaji
Wafers ) operate at a lower EBITDA margin as also likely
intensification of the competition in the space.
Source :- Exemplar Research, Channel Checks, Company Reports,
Rating Reports, Euromonitor International,
Kurkure 51.00%
Bingo 10.80%
Yellow Diamond 5.90%
CRAX 5.60%
Cheetos 1.70%
TakaTak 4.30%
Peppy 1.40%Piknik 1.30%
Others 18.00%
Extruded Snacks Key Brands Marketshare ( 2013 )
Kurkure Bingo Yellow Diamond CRAX CheetosTakaTak Peppy Piknik
Others
-
Industry --- Key Facts & Figures :
'Packaged Food' segment is one of the fastest growing segment of
Indian FMCG sector.
'Branded Sweet & Savoury Snacks' segment is the third
fastest growing Indian Packaged Food segment. It has grown at a 5
Years' CAGR of 26.2 % over 2008-2013 ( in value terms ).
Indian Packaged Food Segment{ Fastest Growing FMCG Segment }
Sweet & Savoury Snacks Segment{ 3rd Fastest Growing Indian
Packaged Food Segment }
2013 Market Size = ` 110.68 bn.
Western Snacks
` 69.44 bn.
Traditional Snacks
` 41.24 bn.
Chips / CrispsExtruded Snacks
Namkeens, Bhujia, Papad, Khakhra,Nuts, Sweets, etc.
Key Players :
Pepsico, ITC, Parle, Balaji Wafers,Prataap Snacks, DFM Foods,
Venkataramana Food
Key Players :
Haldiram, Bikaji Foods, Bikanervala, Pepsico
Source :- Euromonitor International, IBEF, Exemplar Research
'Western Snacks' and 'Traditional Snacks' are the two broad
categories under Branded Sweet & Savoury Snacks segment.
Although, in volume terms, both the categories' contribution is
almost equal ( 50.73 % v/s 49.27 % ), but, in value terms, Western
Snacks dominate the space with 62.73 % share as at 2013.
Chips/Crisps & Extruded Snacks (like puffs, rings, etc.)
form 'Western Snacks' category whereas Namkeens, Bhujia, Papad,
Khakhra, Nuts, Sweets, etc. form 'Traditional Snacks' category.
-
Indian Branded Sweet & Savoury Snacks Segment
( Value Growth YoY ) 2013 2012 2011 2010 2009
Sweet & Savoury Snacks Segment 24.94 % 23.92 % 26.99 % 30.63
% 24.93 %
Western Snacks 25.75 % 25.15 % 27.42 % 32.79 % 22.99 %
Traditional Snacks 23.42 % 21.90 % 26.35 % 27.07 % 28.06 %
Chips / Crisps 23.37 % 23.06 % 29.14 % 33.62 % 29.63 %
Extruded Snacks Segment 28.69 % 27.83 % 25.29 % 31.78 % 15.71
%
Source :- Euromonitor International, Exemplar Research
48.11%51.89%
Volume
Chips / Crisps
Extruded Snacks
Western Snacks
50.73% 49.27%
Volume
Western Snacks
Traditional & Other Snacks
54.21%45.79%
Value
Chips / Crisps
Extruded Snacks
62.73%
37.27%
Value
Western Snacks
Traditional & Other Snacks
-
Only Twenty Seven organised players constitute 95 % of the total
Indian Branded Sweet & Savoury
Snacks segment sales with Nine players dominating the space with
71 % of the marketshare.
Pepsico leads the race with 35.1 % marketshare (2013) with
Haldiram ( all family fractions' geographies combined ) standing
second at 23.5 % marketshare. Pepsico is a clear leader in 'Western
Snacks' space whereas Haldiram dominates the 'Traditional Snacks'
space.
Each of the two major players have seen their marketshare
gradually decline because of the emergence of other strong players
like ITC, Balaji Wafers, Prataap Snacks, Bikaji Foods and DFM
Foods.
Key Players in Indian Sweet & Savoury Snacks Segment( Note
These Players together control 95 % marketshare of the segment
)
Large Players( by FY13 Annual Sales )
` 500 cr. +
Pepsico
Balaji Wafers
Haldiram
ITC
Mid-Size Players( by FY13 Annual Sales )
` 200 500 cr.
Parle Products
Prataap Snacks
Bikaji Foods
Bikanervala
DFM Foods
Small Players( by FY13 Annual Sales )
` 100 200 cr.
Parle Agro
Cavinkare
Venkataramana Food Specialities
Agrotech Foods
Apricot Foods
Micro Players( by FY13 Annual Sales )
` 1 100 cr.
Perfetti Van Melle
Samrat Namkeen
Jabson Food
Euro India Fresh Foods
-
Atop Food Products
Zee Foodex
Chheda Specialities
SKB Food Products
Advance Tech Energy Edibles
Melar Healthcare
Priniti Foods
Krushi Corporation
Grove Ltd.
Source :- Onground Research, Channel Checks, Company Reports,
Rating Reports, Exemplar Research, Euromonitor International,
'Extruded Snacks' as a category stands out amongst all other
categories of Branded Sweet & Savoury Snacks segment not only
because of the highest volume growth registered by it over last 5
years ( 2008-2013 CAGR = 21.9 % ) but also because of its projected
volume growth over 2013-2018 at a CAGR of 16.9 % which is highest
amongst the segment.
( Growth YoY ) 2014 2015 2016 2017 2018
Volume Growth :
Chips / Crisps( Volume Growth )
11.64 % 10.82 % 9.19 % 8.22 % 7.96 %
Extruded Snacks( Volume Growth )
19.54 % 17.92 % 16.42 % 15.49 % 15.10 %
Value Growth :
Chips / Crisps( factoring-in normal price increase
based on price trend till 2013 )
20.78 % 19.38 % 17.21 % 15.90 % 15.10 %
Extruded Snacks Segment( factoring-in normal price increase
based on price trend till 2013 )
26.57 % 24.54 % 22.62 % 21.31 % 20.65 %
Source :- Euromonitor International, Exemplar Research
-
Six companies dominate Extruded Snacks category by controlling
82 % market as at 2013. They include Pepsico, ITC, Prataap Snacks,
DFM Foods, Haldiram & Vekataramana Food Specialities.
Pepsico is the leader with its Kurkure & Cheetos brands
controlling 52.7 % marketshare ( 2013 ) of the category ; ITC, with
its brand Bingo occupies second slot ( 10.8 % marketshare ) while
Prataap, with its brand Yellow Diamond ( 5.9 % marketshare ) and
DFM Foods with its brand CRAX ( 5.6 % marketshare ) occupying third
and fourth position respectively.
If we talk of specific brands, then, over last five years (
2008-2013 ), CRAX ( DFM Foods ), Yellow Diamond ( Prataap Snacks )
and TakaTak ( Haldiram ) have gained significant marketshare at the
expense of Peppy & Piknik ( Venkataramana Food ) and other
smaller players.
Extruded Snacks Marketshare Trend of Key Brands
2013 2012 2011 2010 2009
Kurkure & Cheetos( Pepsico )
52.7 % 55.2 % 53.8 % 49.2 % 52.9 %
Bingo( ITC )
10.8 % 10 % 11 % 11.9 % 11.5 %
Yellow Diamond( Prataap )
5.9 % 4.7 % 4.6 % 4.9 % 4.8 %
CRAX( DFM )
5.6 % 5.3 % 5.1 % 4.1 % 3.9 %
TakaTak( Haldiram )
4.3 % 4.3 % 4.2 % 3.8 % 3.3 %
Peppy & Piknik( Venkataramana )
2.7 % 3,3 % 4.0 % 4.8 % 6.0 %
-
Key driver for robust growth of Extruded Snacks segment has been
lower price points ( ` 5 & ` 10 ) which, coupled with
innovative promotional activities, have made the segment extremely
popular, especially amongst school going children.
Consumption pattern suggests that Brand Loyalty is absent in
this segment ; however, brand preference exists to a certain
extent. Product Loyalty is completely absent because of which
companies need to continuously innovate to offer more flavours as
also engage consumers in varied ways.
'Taste' & 'Price Point' are the key determinants of purchase
decision of consumers in the segment. For products targeted at
children, 'Gift' (bundled with each product packet) is the third
most important determinant of the purchase decision.
Source :- Exemplar Research, Channel Checks, Company Reports,
Rating Reports, Euromonitor International,
Kurkure 51.00%
Bingo 10.80%
Yellow Diamond 5.90%
CRAX 5.60%
Cheetos 1.70%
TakaTak 4.30%
Peppy 1.40%Piknik 1.30%
Others 18.00%
Extruded Snacks Key Brands Marketshare ( 2013 )
Kurkure Bingo Yellow Diamond CRAX CheetosTakaTak Peppy Piknik
Others
-
Assessment of Competition :
Pepsico with its brands Lay's & Uncle Chipps in Chips/Crisps
segment (Western Snacks) , Kurkure & Cheetos in Extruded Snacks
segment (Western Snacks) & Lehar in Traditional Snacks segment
is a clear leader in Indian Branded Sweet & Savoury Snacks
segment. However, if we observe its overall marketshare of the
segment over last 10 years, then, it seems to have lost
considerable ground :
Pepsico Marketshare Trendin Indian Branded Sweet & Savoury
Snacks Segment
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
35.1 % 36.5 % 36.7 % 37.4 % 39.3 % 40.1 % 41.1 % 46.5 % 45.7 %
44.3 %
Source :- Euromonitor International, Exemplar Research
In contrast, Haldiram as a group has more or less maintained its
marketshare to become the second largest player of Indian Branded
Sweet & Savoury Snacks segment :
Haldiram Marketshare Trend ( all family fractions' geographies
combined )in Indian Branded Sweet & Savoury Snacks Segment
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
23.5 % 23.7 % 24.1 % 24.1 % 24.2 % 23.0 % 21.5 % 20.8 % 21.3 %
21.4 %
Source :- Euromonitor International, Exemplar Research
It is worthwhile to note here one important fact regarding
Haldiram --- although for calculation of marketshare figures,
'Haldiram' as a brand is considered, but, the rights for 'Haldiram'
brand are clearly demarcated amongst different family fractions
with each family fraction's respective company/ies handling
manufacturing, sales and distribution of 'Haldiram' brand of
products for the respective geography :
Geography Family Fraction Respective Companies
North India Manohar & Madhusudan Agarwal Haldiram Snacks
Pvt. Ltd.Haldiram Manufacturing Co. Pvt. Ltd.
West & South India Shiv Kishan Agarwal Haldiram Foods
International Pvt. Ltd.Komal Foods Pvt. Ltd.
East India Prabhu Shankar Agarwal Haldiram Bhujiawala Ltd.
-
In this report, for assessing financial and segmental
positioning of 'Haldiram', figures of all the above-mentioned five
companies are taken as one single consolidated entity.
All the other players in the segment command a marketshare in
single digits ; however, their relative growth over the years is
noteworthy and exceptional which suggests :
an expanding overall marketsize,gradual shift towards organised
from unorganised, &also explains the marketshare-loss suffered
by the leader of the segment (Pepsico).
Key players that have gained significant marketshare over last
ten years include ITC, Balaji Wafers, Prataap Snacks, DFM Foods,
Bikaji Foods, Parle & Apricot Foods.
Let's now assess the financial profile of nine companies which
together control 71 % marketshare of Indian Branded Sweet &
Savoury Snacks segment. Here we will look at :
Actual Revenue & YoY Revenue Growth for each fiscal over
FY10-FY13,
3 Years' CAGR in Sales (Revenue) achieved by each player,
and
EBITDA & PAT Margins 4 Years' Average as well as of
FY13.
Comapnies covered are :Pepsico,
Haldiram (all family fractions' gepgraphies combined),
Balaji Wafers,
ITC,
Bikaji Foods,
Bikanervala,
Prataap Snacks,
Apricot Foods,
DFM Foods.
-
FY13 FY12 FY11 FY10
Pepsico[ Snacks ]
YoY Growth
( Actual Revenue )
14.13 %
( 2546.81 cr. )23.94 %
( 2231.46 cr. )21.92 %
( 1800.33 cr. )
N.A.
( 1476.54 cr. )
Haldiram[ All Geographies Combined ]
YoY Growth
( Actual Revenue )
22.36 %
( 2936.48 cr. )29.29 %
( 2399.74 cr. )25.89 %
( 1856.01 cr. )25.88 %
( 1474.29 cr. )
Balaji Wafers
YoY Growth
( Actual Revenue )
28.19 %
( 913.58 cr. )31.36 %
( 712.67 cr. )40.18 %
( 542.53 cr. )
N.A.
( 387.01 cr. )
ITC
YoY Growth
( Actual Revenue )
N.A.
( 500 cr. )
N.A. N.A. N.A.
Bikaji Foods
YoY Growth
( Actual Revenue )
32.54 %
( 325.50 cr. )31.38 %
( 245.57 cr. )21.53 %
( 186.91 cr. )33.91 %
( 153.79 cr. )
Bikanervala
YoY Growth
( Actual Revenue )
25.23 %
( 350.25 cr. )24.93 %
( 279.68 cr. )3.13 %
( 223.86 cr. )
N.A.
( 217.05 cr. )
Prataap Snacks
YoY Growth
( Actual Revenue )
33.41 %
( 343.80 cr. )35.93 %
( 257.69 cr. )22.72 %
( 189.57 cr. )54.16 %
( 154.47 cr. )
Apricot Foods
YoY Growth
( Actual Revenue )
36.04 %
( 107.81 cr. )
N.A.
( 79.25 cr. )
N.A. N.A.
DFM Foods
YoY Growth
( Actual Revenue )
32.94 %
( 225.24 cr. )41.37 %
( 169.42 cr. )66.02 %
( 119.84 cr. )35.34 %
( 72.18 cr. )
-
3 Years' CAGR in Sales( 2010-2013 )
Sweet & Savoury Snacks
Segment
Pepsico Haldiram Balaji Wafers Bikaji Foods Bikanervala Prataap
Snacks
DFM Foods
25.26 % 19.93 % 25.82 % 33.15 % 28.39 % 17.29 % 30.56 % 46.13
%
Source :- Company Reports, Rating Reports, Exemplar Research
DFM
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Bik
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Bik
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Ba
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Ha
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Sw
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Sn
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stry
3 Years' CAGR
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
25.26%
19.93%
25.82%
33.15%
28.39%
17.29%
30.56%
46.13%
Industry Pepsico Haldiram Balaji Bikaji Bikanervala Prataap
DFM
-
4 Years' Average FY13
Pepsico[ Snacks ]
EBIT Margin
PAT Margin
4.52 %
N.A.
2.93 %
N.A.
Haldiram[ All Geographies Combined ]
EBIDTA Margin
PAT Margin
10.61 %
5.79 %
10.03 %
5.36 %
Balaji Wafers
EBITDA Margin
PAT Margin
18.55 %
12.07 %19.45 %
12.41 %
ITC
EBITDA Margin
PAT Margin
N.A.
N.A.
N.A.
N.A.
Bikaji Foods
EBITDA Margin
PAT Margin
7.39 %
3.71 %7.49 %
4.07 %
Bikanervala
EBITDA Margin
PAT Margin
8.33 %
4.02 %8.53 %
4.26 %
Prataap Snacks
EBITDA Margin
PAT Margin
8.83 %
4.63 %
7.99 %
3.72 %
Apricot Foods
EBITDA Margin
PAT Margin
9.51 % *
5.13 % *
8.95 %
4.90 %
DFM Foods
EBITDA Margin
PAT Margin
11.94 %
5.42 %
10.58 %
2.80 %
* 2 Years' Average
-
Source :- Company Reports, Rating Reports, Exemplar Research
Key things to note from above :
Haldiram's revenue figures optically seem higher than Pepsico
because, they include sales from other sources like Dairy items,
Milk, Ghee, Syrups, Squashes, Dry-Fruits as well as Restaurant
sales which are not part of 'Sweet & Savoury Snacks' sales. To
cite here an example, given below is the segmentwise sales breakup
of Haldiram for FY13 :
Haldiram Segmentwise Sales Breakup( FY13 )
Segment FY13 Revenue
Savoury Snacks ` 1879 cr.
Sweets ` 602 cr.
Others ` 455 cr.
Total ` 2936 cr.
Source :- Approximate Breakup Data derived from Company Reports,
Rating Reports
If we go further down into the breakup of 'Savoury Snacks'
segment sales, then, Haldiram's dominance in 'Traditional Snacks'
segment becomes evident :
Pepsico Haldiram Balaji Wafers Bikaji Bikanervala Prataap
Apricot DFM Foods
0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%
10.00%11.00%12.00%13.00%14.00%15.00%16.00%17.00%18.00%19.00%20.00%
2.93%
10.03%
19.45%
7.49%8.53%
7.99%8.95%
10.58%
5.36%
12.41%
4.07% 4.26% 3.72%
4.90%
2.80%
FY13 EBITDA Margin FY13 PAT Margin
-
Haldiram Savoury Snacks Sales Breakup( FY13 )
Sub-Segment FY13 Revenue
Western Snacks ` 191 cr.
Traditional Snacks ` 1688 cr.
Total ` 1879 cr.
Source :- Approximate Breakup Data derived from Company Reports,
Rating Reports
This is in sharp contrast to Pepsico which derives majority of
its sales from 'Western Snacks' segment.
Similarly, Bikaji & Bikanervala revenue figures also include
sales from other sources, albeit to a smaller extent ; a
segmentwise breakup of Bikaji's FY13 revenue is provided below for
reference :
Bikaji Segmentwise Sales Breakup( FY13 )
Segment FY13 Revenue
Savoury Snacks ` 280 cr.
Sweets ` 33 cr.
Others ` 12.50 cr.
Total ` 325.50 cr.
Source :- Approximate Breakup Data derived from Company Reports,
Rating Reports
Balaji Wafers has emerged as the strongest player over last 5
years by growing aggressively and eating into Pepsico & ITC's
marketshares. Balaji atpresent commands 8.3 % marketshare in the
segment and has a very sound financial profile which could enable
it to continue to outperform peers in future too. Balaji operates
at highest EBITDA & PAT margins amongst the peers.
Prataap Snacks with its 'Yellow Diamond' brand and DFM Foods
with its 'CRAX' brand have also made a dent in Pepsico's
marketshare by growing ahead of it over last five years. Prataap
commands 3.1 % marketshare while DFM commands 2.03 % marketshare as
at 2013.
-
DFM Foods has registered highest 3 Years' CAGR in Sales over
FY10-FY13. It has outperformed all the peers quite handsomely.
EBITDA margins of DFM are at par with Haldiram & just second
best to Balaji Wafers which is a very satisfying thing. Its
important to note here that Haldiram's major sales come from
Namkeens & Sweets ( 78 % as at FY13 ) and Chips & Extruded
Snacks forms only a small portion of its sales ( 6.5 % of FY13
Sales ). Similarly, Balaji Wafers' major Sales contributors are
Chips (Wafers) & Namkeens. Its only Pepsico & Prataap which
have major contributions coming from Extruded Snacks.
DFM Foods' Scale of Operation (FY13) is smallest amongst all the
companies mentioned (except Apricot Foods) with Pepsico &
Haldiram at 2500+ cr. and Balaji at 913 cr. with ITC, Bikaji,
Bikanervala and Prataap at 500 cr., 325.5 cr., 350.2 cr., and 343.8
cr. respectively.
Out of these nine companies, Prataap has got Sequoia backing (51
% stake), Bikaji recently got Lighthouse PE backing (12.5 % stake),
DFM got Westbridge backing (24.90 % stake) and Balaji is in final
talks with Capital International PE (15 % stake). Pepsico and ITC
are capable conglomerate while Haldiram has each family fraction
catering to respective region. Its only Bikanervala which is the
weakest amongst the lot that is looking for a funding partner since
last many years but has not got anyone yet.
Since four out of nine companies have got ( or about to get ) PE
investors, its worthwhile to note here the valuations at which each
respective PE-investment deal was stuck :
EV/Sales TTM EV/EBITDA TTM PE Deal Happened in Year
Prataap Snacks 1.05 15.47 2011
Bikaji Foods 2.27 30.29 2014
DFM Foods 1.41 13.32 2014
Balaji Wafers 4.37 22.50 Most Likely in 2014
Source :- Company Reports, Rating Reports, VCCircle Data,
Company News, Media Articles, Exemplar Research
-
Assessing Competition specific to DFM Foods :
CRAX Brand Key Marketshare Figures
Sweet & SavourySnacks Segment
Western Snacks Segment
Extruded Snacks Segment
Corn-based Extruded Snacks Segment
CRAX MarketShare( 2013 )
2.03 % 2.79 % 5.61 % 9.19 %
Source :- Exemplar Research, Channel Checks, Euromonitor
International, Company Reports
Since the company of our concern is DFM Foods, let's evaluate
competitive scenario with that regards.
DFM Foods over last many years sustained and outpaced
competition by adopting a sound strategy of targeting a specific
age group and concentrating on marketing & distribution
strategies circling around only that age group. Entire
competition's products were targeted to all age groups ( with
majorly being adults above 15 years of age ) while DFM targeted
children with age group 6-12 years.
DFM was the first company to include 'Free Gift' with every CRAX
Corn Rings pack of ` 5 and this isolation ( i.e., catering to only
specific audience ) strategy enabled it to distinguish itself from
competition as also sustain and grow amidst strong financial power
of Pepsico & ITC.
Since last year or so ( 2013 ), competition has become intense
with Pepsico introducing similar ( to CRAX ) product 'Corn Cups'
targeted at children and Yellow Diamond ( Prataap Snacks )
introducing 'YD Rings' a replica of CRAX Corn Rings.
If we talk specifically for CRAX Corn Rings ( which contributes
84 % + to DFM's FY13 revenues ), then, Pepsico's 'Corn Cups' price
point is higher while other players like ITC and Balaji cater to
general audience rather than specific age group whereas Haldiram
has a more diverse offering which is not in strict competition.
Hence, the player which could threaten the market position of CRAX
in real sense is Prataap Snacks and as per our analysis, it is this
player which DFM will find it hard to compete with.
Prataap Snacks is taking on DFM Foods in-and-out by striking on
every corner. It has introduced almost identical shaped product
which is a replica of Crax Corn Rings and has offered it in almost
every flavour in which CRAX is available ( except Pudina &
Chatpata ).
In addition to offering similar product with similar flavours,
what Prataap has done is it has targeted the same age group with
same strategy of including 'Free Gift' with every pack. Prataap, in
recent past, got associated with one of the most popular children
tv show 'Chhota Bheem' and has introduced free gifts revolved
around the main character of the show in its every YD Rings pack.
In continuation with the same strategy, only recently, in
April'2014, it got associated with Mr. Amitabh Bachchan starrer
'Bhootnath Returns' a supernatural comedy movie and launched YD
Rings promos with the trailer of the movie.
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On distribution front, DFM & Prataap are almost neck-to-neck
if we consider regionwise-spread, but, if we go into detail and
talk specific, then distribution reach of Prataap is almost double
that of DFM ( Prataap reaching ~ 5 lakh retail outlets v/s DFM's
reach of ~ 2.15 lakh outlets ). However, each company has its
strength and weaknesses in each region, with DFM far stronger in
North India while Prataap a clear leader in West India. Visibility
and availability of Prataap's Yellow Diamond is far better in West
India ( relative to CRAX ) while in North India, DFM's CRAX is
slightly ahead than Prataap.
What Prataap has done is, in whichever areas it is present, it
has covered as many retail outlets as possible which gives it great
visibility ( only second to Lay's & Kurkure ) in respective
areas. In contrast, DFM has focussed on covering more areas which
gives it relatively low visibility relative to Prataap, especially
in Western India.
To give a brief background of Prataap Snacks, it is a company
backed by PE player Sequoia Capital which invested in it in 2011
and has so far invested ~ ` 180 cr. in the company. As per sources,
it holds ~51 % equity stake in the entity as at FY13. It is
worthwhile to note here the growth attained by Prataap over last
seven years :
( fig. In ` cr. ) FY13 FY12 FY11 FY10 FY09 FY08 FY07
Prataap 343.80 257.69 189.57 154.47 100.20 66.60 35.50
DFM Foods 225.24 169.42 119.84 72.18 53.33 31.66 23.88
Sequoia invested in the company in May'2011
Three things to note here is that :
first, DFM started focussing aggressively on its Snack Food
segment only from FY09,
second, Prataap aggressively introduced Rings in the market only
from FY13 as previously its main focus was competing with Lay's,
Kurkure & Cheetos ( by introducing YD Chips, Chulbule &
Puffs ),
third, as at FY13, Extruded Snacks segment contributes ` 199 cr.
to Prataap's Revenues as against ` 194 cr. to DFM's Revenues.
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Conclusion :
Opportunity is huge ahead of every serious player in Indian
Branded Sweet & Savoury Snacks segment because of the fact that
Indians are natural snacks' consumers, and entire 124 crore Indian
public is served by only Twenty Seven major branded savoury snacks
players atpresent. Rural markets are still unpenetrated and lower
price points ( ` 2, ` 5 & ` 10 ) prevalent in the segment could
drive aggressive sales in rural India.
Sweet & Savoury Snacks Food Industry in itself is likely to
grow handsomely at a CAGR of 19.4 % over 2013-2018 with its
sub-segments like Extruded Snacks likely to outperform industry
growth rate by growing at a CAGR of 23.1 % over 2013-2018.
Shift towards organised from unorganised segment is projected to
continue, albeit at a gradual pace.
These factors combined, offers immense opportunity for each of
the organised player in the segment to grow aggressively as they
have done in the past. However, competition is likely to intensify
going forward as more of the organised business groups enter into
this space ( recent entry of Tobacco major Gopal Corporation is a
case in point ) to grab their share of opportunity as also existing
players make a dent in peers' stronghold by offering similar
products with superior distribution and marketing reach.
If we look at last four years, then DFM Foods has outperformed
almost all its peers, including Prataap Snacks as far as revenue
growth is concerned.
DFM Foods is unlikely to face strong threat in the medium term
as far revenue growth is concerned, provided it can expand
manufacturing capacities intime. However, EBITDA margins could
remain under pressure until a new product success is met on the
lines of CRAX Corn Rings. This is because, all the efforts towards
any sort of significant improvement in EBITDA margins will be met
by cut-throat competition, especially from Prataap Snacks ( YD
Rings ) which will put-in its every effort to fully utilise its
Rings manufacturing plant which commenced operations in 2013.
DFM Foods definitely has a first mover advantage in the space
and has a strong brand credibility amongst its target audience (
majorly in North India ). However, to counter Prataap's aggressive
low margin model, DFM will need to innovate more on the product
front and fill the many gaps prevalent in its distribution network
as also design a wise consumer-pulling marketing strategy.
With a good PE player like Westbridge entering into DFM Foods by
acquiring 24.90 % equity stake in it and promising an active
involvement into formulating company's growth strategies by taking
a board seat, DFM might be able to identify gaps more proactively
and fill them with ease.
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Disclaimer :
This Research Note should only be taken as a direction for
further research and should, in no way, be construed as an advice
to Buy/Sell concerned Company. While preparing this note, we have
used all publicly available information as also information from
other sources which are thought of as most reliable. However,
although we have tried to be as genuine and as accurate as possible
in publishing the data(s), still, reader of this note is advised to
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liable for any incorrect information. Its safe to assume that we
have the concerned company as part of our portfolio and so the
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