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HUL spins off foods and refreshments division into separate businesses

By RJ Whitehead

- Last updated on GMT

Geetu Verma will take charge of the foods division
Geetu Verma will take charge of the foods division

Related tags: Food, India

India’s biggest consumer goods company has split its foods and refreshments businesses into two separate divisions in a bid to stave off rising competition from domestic rivals.

Hindustan Unilever, the Indian unit of the Anglo-Dutch major, said the move reflected the "strong​" growth of both businesses as they reach "significant​" scale.

The combined business accounted for 19% of HUL's Rs314bn (US$4.7bn) revenues last financial year—though analysts have accused its food brands, which include Kissan jams, Knorr soups and Kwality Walls ice creams, of underperforming.

"We believe that though HUL has strong brands in the segment, the company has been unable to establish itself in the higher growth segments of packaged food—noodles, dairy, biscuits—keeping earnings growth muted​,” ICICI Securities said in a note last month.

Homegrown grocery majors including Dabur India, ITC and Marisco have been hot on HUL’s heels recently, as has Patanjali Ayurved, a controversial new herbal products company started by yoga guru Baba Ramdev.

HUL has seen success in separating its divisions in the past. In 2014, it spun off its home and personal care businesses so each one could concentrate on its own marketing direction.

The incumbent head of foods and refreshments, Geetu Verma, will take charge of the foods division. Sudhir Sitapati, currently a regional vice-president for the refreshments division of Unilever South Asia and Africa, has been named executive director of the India refreshments business, the company said.

"This change is in alignment with the category structure of Unilever globally​," HUL said in a statement. "The reorganisation into two separate businesses will enable sharper focus and help to fully leverage the growth opportunities in line with HUL's ambitions​." 

More stories from South Asia…

New oil labelling standards, 12k ingredients approved, 250 clusters planned

India’s food regulator has announced amendments to its labelling standards in a bid to bring more clarity to consumers regarding the types of vegetable oils and fats used in a product.

Oil

The FSSAI said that the amendment, which has been the subject of public consultation since last July, will also now require companies to declare all trans-fats and saturated fats on labelling, along with quantities used.

From now on, packaged food companies must give specific details on the source of edible vegetable oils. Similarly companies will also have to specify the type of vegetable fats used in a product, including interesterified vegetable fats, hydrogenated oils, partially hydrogenated oils, edible vegetable fats, margarine and fat spreads.

Meanwhile, Indian food companies will soon no longer be required to seek product approval for minor changes and alterations to products containing some 12,000 additives and ingredients after the government rubber stamped a final list.

According to food processing industries minister Harsimrat Kaur Badal, the move will have a substantial impact on companies that were previously forced to spend time and money on bureaucratic approvals as long as they comply with written standards.

"Earlier, only standards pertaining to 375 ingredients were harmonised with international standards; now about 8,000 ingredient standards have been harmonised. Soon this number will be about 12,000 ingredients​," Badal said.

"The companies faced immense problems. If some minor ingredients used to be sprinkled on cakes or to make sweet buttermilk salty, the approval process took months. Now things will be much easier​," she said.

The minister, who attends FSSAI meetings as ministry representative, has spent time recently publicising the government’s relaxation of regulations.

Its aim is to bring Indian standards in line with global food standards of the Codex Alimentarius Commission, established by the Food and Agriculture Organisation and the World Health Organisation of the United Nations.

Separately, Badal has announced that the government intends to set up 250 small agricultural processing clusters across India in a bid to save distribution waste.

The facilities, subsidised by the government at an estimated cost of over Rs50bn (US$748m) through through public-private partnerships, will specialise in processing crops that are produced locally to each cluster.

If someone wants to establish small processing cluster like for onion, he can do that and the government will provide subsidy of up to Rs50m (US$748,700) per cluster​,” Badal said, adding that each one would require an overall investment of some Rs200m.

Reflecting on the the government’s achievements in food processing at the half-way point of Narendra Modi’s administration, the minister said that India has seen a 3.2m tonne increase in capacity from an investment of around Rs20bn (US$300m) over the last two years.

With this, India has started moving toward zero tolerance of food wastage. The new addition of processing capacity will reduce wastage of fruits and vegetables worth Rs90bn per annum because the same value of these commodities can now be processed​,” Badal said.

Cremica secures first-round PE funding worth $15m

Sauce and snacks manufacturer Cremica Food Industries has raised US$15m in a minority-stake sale to a private equity company as it pursues aggressive growth.

Cremica

The Ludhiana-based company is hoping for a five-fold increase in sales by 2020 from last year’s revenue of Rs2bn (US$30m), said Akshay Bector, chairman and managing director at Cremica, which began as a family business in 1978.

The investment by Rabo Equity Advisors is Cremica Food Industries’ first round of funding after the business was divided between the three Bector brothers. Jay and Anup Bector control the Mrs Bector’s Food Specialities business.

Rabo Equity is delighted to invest in Cremica and believes under the leadership of Akshay Bector, Cremica will become a strong household brand when it comes to sauces, condiments, and snacks​,” said Rajesh Srivastava, chairman and managing director of the fund.

Bector intends to use the funding to expand Cremica’s distribution to 120,000 outlets in three years across India, from its current 40,000 outlets, mainly in the north of the country.

The company intends also to expand processing at its existing Phillaur plant and set up a manufacturing plant in Himachal Pradesh.

Rabo Equity serves investment advisors for the India Agri Business Fund II, a US$200m private equity fund focused on expanding Indian food and agribusiness companies. Cremica will be its first investment.

Bakeries take action after potassium bromate report sparks fears

Spurred by reports last week that many of India’s most popular bakeries and fast-food chains were producing breads containing cancer-causing chemicals, manufacturers have been fighting to convince consumers about the safety of their products, with clear labelling and stickers proclaiming that their breads are potassium bromate-free. 

Bread

The report by the Centre for Science and Environment (CSE) revealed that most of the breads it tested contained the chemical, prompting India’s food regulator to announce the impending release of a notification to remove potassium bromate from the list of permissible food additives.

A food additive, potassium bromate is used to bind the dough and make it appear whiter. The FSSAI is yet to 

Ramesh Mago, president of All-India Bread Manufacturers Association, said: “Some players were already not putting potassium bromate in their breads. Other members of the association, who were using it, have stopped doing so​. 

We do not directly purchase potassium bromate, it is the bread improving agents that may come with potassium bromate, and members are working on changing that now​.” 

The scare has touched a nerve in India, with some companies claiming that their bread sales had dipped 15-20% following the release of the report.

Mago said that he expected smaller bakeries to join the larger ones in removing potassium bromate from their goods in the next fortnight.

As an association, our members have also taken a decision to put in clear labelling to clear the confusion in the consumer’s mind​,” he said.

Related topics: Business, Industry growth, South Asia

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