However, Marico is likely to face a challenge in creating salience in the oligopolistic instant noodles market. It will demand focused investment in brand-building that may or may not help gain market share from the established brands in the category. In June last year, the company launched Saffola honey in competition to Dabur Honey and has had to aggressively invest in advertising to get noticed. Entry into a new category soon after is likely to impact the advertising budget and in turn the profitability of the company.
Incidentally, Marico has extended the Saffola brand to introduce kadha mix, turmeric milk mix and chyawanprash. Like hand sanitisers, demand for some of these wellness products could taper off as the Covid-19 pandemic recedes.
In a separate development on Friday,
, the operators of Domino’s Pizza, Dunkin Donuts and Hong’s Kitchen in India, announced a Rs 250 crore acquisition of Dutch company Fides Food, which owns 32.8% shares in listed company DP Eurasia NV, the exclusive master franchisee of the Domino’s Pizza brand in Turkey, Russia, Azerbaijan and Georgia. The stock price of loss-making DP Eurasia, while doubling in the past six months, remains 65% down from its high levels traded in 2018.
Jubilant Foodworks has been in a recovery mode after its operations were hit due to Covid-induced lockdowns. It was able to improve the profitability of its operations through measures such as restructuring its workforce, negotiating rents and cutting down on overheads. While the announced acquisition is a relatively small one, it is coming on close heels of a series of forays announced by the company in the past few months. In December, Jubilant started selling biryani through Ekdum! Biryani outlets. It also picked up a 10.7% stake in casual dining restaurant chain Barbeque Nation.
The company’s management had mentioned in the June quarter earnings call that it was focused on India for its growth potential, with likely expansion of stores in Sri Lanka and Bangladesh. A high-growth emerging market like India with its large population of young consumers poses a sufficiently attractive proposition for a food service firm. Besides, foreign acquisitions have seldom worked out well for Indian companies, especially when made during bullish times of peak valuations.