Godrej Group to exit tea, edible oils businesses

As a part of a strategy to focus on the core business of beverages and confectioneries under its Godrej Hersheys joint venture, the Godrej Group now plans to exit from its edible oil and tea business.

The Godrej Tea business includes brands like Godrej Noble House and Godrej Chai House, whereas in the edible oils category it has Godrej Cooklite, Godrej Oil and Godrej Vanaspati brands.

“We are exiting from the tea and edible oils businesses, as these have a low growth rate of 5 to 10 per cent and is pulling down our overall growth rate,” A Mahendran, managing director, told Business Standard.

The core business of Godrej Beverages and Foods Ltd (GBFL) is confectionery and beverages. Confectionery brand Nutrine is market leader, with 20 per cent marketshare the in Indian hard boiled candy market, led by product Mahalacto. Sofit is a pioneer and market leader in the emerging soyamilk category and Jumpin is a strong player in the competitive fruit drink category. GBFL had a consolidated sales turnover of Rs 340 crore ($78 million) for financial year 2006-07.

However, going by the past record of the company, “Godrej may not completely exit from the edible oils business but may opt for strategic investors to grow its edible oils business and form a new joint venture,” say market sources. The possible list of investors include MNCs like Bunge and Cargill, who have in the past evinced interest in the company. The company has stated on its website that it has aggressive growth plans to be a leading player in the food and beverage space in India, with revenues of Rs 1,000 crore by the year 2010. The company is looking at organic as well as inorganic growth options.

The Godrej Group is known for its strong tradition of joint ventures and acquisitions. For instance, the Godrej Hershey JV was formed in April 2007 with The Hershey Company, North America’s leading chocolate and confectionery manufacturer, acquiring a 51 per cent stake in GBFL after acquiring the 40 per cent equity held by IL&FS.

Prior to the JV’s formation in June 2006, GBFL acquired leading confectionery player, Nutrine Confectionery. GBFL was born in April 2006 when Godrej Tea took over the foods division of Godrej Industries.