NEW DELHI: Norway’s packaged consumer goods firm Orkla on Friday said it will acquire 67.8% stake in Kerala-based spice maker Eastern Condiments, reaffirming that India’s packaged spice and mixes market remains a big draw among the FMCG companies and investors.
Orkla is already present in the Indian market through its 2007 acquisition of MTR Foods that makes ready-to-eat mixes and spices.
With this move, Orkla is set to double its sales in India, the company said in a release. “With the transaction announced today, Orkla will grow its position as one of the leading branded food players in India and have a platform for further growth in the spice category and in adjacent categories.”
As part of the deal, Orkla will acquire the stake through MTR Foods Pvt Ltd, a wholly-owned subsidiary of the company.
MTR will acquire 41.8% stake from the Meeran family–promoters of the Eastern brand–and the entire 26% stake held by McCormick Ingredients in Eastern Condiments Pvt Ltd.
Following the conclusion of the transactions, an application seeking the. merger of Eastern into MTR will be filed.
The merged entity will be jointly owned by Orkla and brother Firoz and Navas Meeran, with an ownership stake of 90.01% and 9.99% respectively.
The agreement to acquire a majority stake in Eastern is subject to approval of the Competition Commission of India.
India’s spices market is dominated by regional players as taste profiles and flavors vary across regions. As a result, local spice makers are able to hold sway over consumers in specific regions.
But over the years, as consumers switch from unbranded or loose foods to branded, packaged ones, spice makers are in huge demand. That’s also because Indians still continue to cook meals at home, and spices and spice mixes are a large part of in-home consumption.
“The Indian branded food and spice markets are growing by double digits, and we see positive long-term demand dynamics with increasing purchasing power and more urban lifestyles,” Sanjay Sharma, CEO of MTR said in a press statement.
Earlier this year ITC announced the acquisition of Sunrise Foods Private, a dominant spice player in eastern India. Tata Consumer Products too sells spices under its Sampann brand.
Avendus Capital advised Meeran family and McCormick on the sale of Eastern Condiments to Orkla. Eastern is valued at ₹20 billion on a debt and cash free basis, Avendus said.
The deal will also help Orkla strengthen footprint in core geographies.
“By joining forces, Eastern and MTR will create a solid platform in the fast-growing Indian market, based on strong local brands”, Jaan Ivar Semlitsch, Orkla president & CEO said in a statement.
Established in 1983 by M. E. Meeran, nearly half of Eastern’s business is generated in Kerala. It also has a significant presence in the export market, especially in the Middle East. Eastern sells a range of non-vegetarian and vegetarian blended and single spices, rice powders, pickles etc.