Tasty Bite going places with growing food service to QSRs

MUMBAI: Profit growth has been dismal for quick service restaurants and hotels. But, one of the leading suppliers to them -Tasty Bite Eatables (TBE) -has been growing at a faster clip. It started as a `ready to eat' foods company , mainly for the US market. Over the years, it gradually expanded in India -its second line of business -supplying speciality sauces and frozen foods to several hotels, quick service restaurants (QSRs) and FMCG firms such as McDonald's, Domino's Pizza, KFC, Subway , Pizza Hut, Burger King and HUL.

Japan's food products maker Kagome, which bought a majority stake in 2015 in TBE's holding company from a US-based private equity firm, has taken it to new heights.

The company's ready-to-eat busi ness remains the largest contributor to the total sales with 69% share. It grew by a strong 21% in FY16. With offerings in rice, noodles and other meals, it commands a 65% market share in the segment in the USA's natural channel and 28% in the grocery channel.

But what has given the growth a different trajectory is the food services business to the QSRs in India. “The food service business has grown 10.3% in FY16 even though the QSR industry faced pressure because of a slowdown and regulatory delays,“ said the management in its latest annual report. According to Assocham, QSR industry is likely to grow from `8,500 crore to `25,000 crore by 2020.

Kagome's entry has boosted the speciality sauces business, which grew at a much faster rate of 40% in FY16 compared with the 7% growth in frozen foods category . the last three months. Analysts expect a triple-digit earnings growth for FY17. Assuming a 100% growth for the entire year, the stock is trading at 27 times FY17 multiple.

Kagome's expansion plans in India are also expected to help. Kagome, Ruchi Soya and Mitsuhi set up Asia's largest tomato processing plant with 21,000 MT capacity in Nashik, Maharashtra, and recently , Kagome bought out the stake of the other two entities. TBE is likely to benefit from this given its strong distribution reach and relations with the QSRs and parentage of Kagome.

Stand-out stocks and stand-out companies seldom get noticed in troubled times. ET delves into financial performance of India Inc every week to identify stocks and companies that have bucked the trend to emerge stronger. This week, we present Tasty Bite.