Britannia signs MoU with Greece’s Chipita for joint venture in India

BENGALURU: Eight years after India’s biggest cookies maker lost its taste for partnerships in foods, Britannia Industries invited Greek baker Chipita to make rolls, croissants, and other dough products in a joint venture to meet the demands of a rapidly urbaniSing home market.

“We’ve signed a non-binding MoU and are working towards formalising a joint venture. We see immense scale through this partnership, since the categories are highly scalable and are bridge products between biscuits, chocolates and fresh bakery, at competitive prices,” Britannia managing director Varun Berry told ET in an exclusive chat, ahead of the formal announcement, which is expected over the next couple of weeks.

The maker of Good Day and Tiger cookies will likely hold the majority stake in the venture that will involve an initial manufacturing investment of about $11million. Berry said Britannia will set up facilities next to its existing plants to optimise logistics costs, and leverage its existing strengths of supply-chain and distribution networks.

The tie-up with Chipita is the first JV the Nusli Wadia-promoted Britannia will formalise after its tie-up with New Zealand’s Fonterra Dairy was dissolved in 2009 on account of lukewarm market response and losses. Britannia’s venture with French food and dairy giant Groupe Danone SA was also terminated the same year after a protracted legal battle.

“This partnership gives us a long runway for aggressive growth in a completely new category,” Berry said. The rollout across markets including modern trade stores as well as tiertwo markets is expected early next year.

According to a Euromonitor report, savoury snacks in India are expected to register a 12% compounded annual growth rate over until 2020, with sales reaching Rs 445 billion. This growth, the report said, will be driven by increase in consumer's purchasing power, product innovation and expansion in lower tier cities and rural areas.

Spyros Theodoropoulos, chief executive of the ¤800-million Chipita said that outside of Europe, in every country the company operates through joint ventures. “The diversity and young population of the Indian market makes us very optimistic about growth here.” Chipita has had a minor presence in India: Over the past four years, it has been selling its confectionery brand Feniti.

Brands in Chipita’s portfolio include 7Days, Molto, Fineti and Chipicao, spanning categories such as croissants, cakes, biscuits, jams and confectionery. The over three-decade-old company has joint ventures in the Middle East with the Almaraih group (with which PepsiCo too had an existing partnership), and operates in Egypt as Edita Food Industries through a joint venture with the Berzi group. In Saudi Arabia, Chipita operates as Modern Food Industries (MFI) through a partnership with the Almarai group and the Olayan Group.

In the third quarter, Britannia Industries recorded a 7.1% increase in net profit to Rs 210.8 crore, with volumes rising 2%. In an analyst call last week, Berry said the company will now evaluate partnerships after incorporating all its learnings from the past joint ventures. He also said that ghee, where the company does not make profit, is not the right category for a company like Britannia. The company is now looking at partnership opportunities through joint ventures to sell dairy products.