Nutrine buyout tingles candy mart

High value and volume growth lure non-core players.

With Godrej Beverage and Foods set to announce its acquisition of Nutrine Confectionery, its first acquisition since the restructuring earlier this year, the focus is once again on the confectionery market.

Godrej is the latest among the non-core confectionery companies showing interest in this category. The reason is obvious: The size of the domestic confectionery market is estimated to be between Rs 1,600 crore and Rs 1800 crore, and is growing rapidly with companies like Perfetti, ITC and Candico being the most visible with brands like Minto and Alpenliebe.

Sameer Suneja, head of marketing, Perfetti, one of the biggest players in the category, points out that non-core players have been getting interested in this segment, because of the high value and volume growth that some of the players have seen. But it's not as if all is going well for the sector.

"While some of the larger players have posted respectable growth figures, the industry as a whole has been growing marginally or de-growing," said Suneja.

This, along with the fact that confectionery is an extremely price-sensitive category, has resulted in increased bottomline pressures for the smaller brands which explains why they are looking at selling out.

The Nutrine acquisition is the second major one in the segment after Parry Confectionery was acquired by Korean company Lotte a few years ago.

Nutrine has been on the block for over a year now with companies like Cadbury and Nestle contemplating the acquisition which would have given both the companies a significant foothold in the segment in addition to private equity fund Actis.

Nutrine has a very strong presence in the southern part of the country and also exports its products to about 12 countries including Canada and the Middle East.

The category sees high volumes, to a large extent on account of the pricing which traditionally has not gone above 50 paise. Anand Kripalu, managing director, Cadbury India, also says this was one segment the company needed to have a presence in to complete its product portfolio.

This despite the fact that there are a large number of regional players who tend to dominate the segment locally.

The '50 paise' category has seen a fair amount of action in the recent past with brands like Tic-Tac too introducing packs in this category and now the entry of larger companies like Godrej may be just what is needed to pull the industry out of the low growth it has been seeing.

But industry watchers point out that having a significant distribution presence is not enough to ensure the success of the brand citing the Hindustan Lever example which could not make much of a dent in the market with its Max brand a few years ago.