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maheshishah
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Quote maheshishah Replybullet Posted: 30/Apr/2014 at 1:24pm
 



Key Takeaways from the Report – Industry Perspective :




  • 'Indian Branded Sweet & Savoury Snacks' segment has grown at a CAGR of 26.2 % over 2008-2013 (in value terms) to become the third fastest growing segment of Indian Packaged Food Industry.




  • The segment is categorised into 'Western Snacks' and 'Traditional Snacks' which together give it a ( 2013 ) market size of ` 110.68 bn. 'Western Snacks' comprises of Chips/Crisps & Extruded Snacks (like Rings, Puffs, etc.) whereas 'Traditional Snacks' comprises of Namkeens, Bhujia, Papad, Khakhra, Nuts, Sweets, etc.




  • Only Twenty Seven organised players contribute to 95 % of the segment sales with Nine Players controlling ~71 % of the marketshare. These Nine players include :

    Pepsico, Haldiram, Balaji Wafers, ITC, Bikaji Foods,

    Bikanervala, Prataap Snacks, DFM Foods & Apricot Foods.

    [ Note :- Financial Profile of each of these nine companies is included in this report ]




  • Extruded Snacks as a category stands out amongst all other categories having registered highest volume growth over 2008-2013 ( CAGR = 21.9 % ) and its projected 16.9 % ( CAGR ) volume growth over 2013-2018 which is again highest in the segment.




  • Only Six companies control 82 % of the Extruded Snacks market. Pepsico is the leader in the space whereas Prataap Snacks, DFM Foods and Haldiram are noteworthy marketshare gainers over last ten years.




  • Opportunity is huge ahead of every serious player in Indian Branded Sweet & Savoury Snacks segment because of the fact that Indians are natural snacks' consumers, and entire 124 crore Indian public is served by only Twenty Seven major branded savoury snacks players atpresent. Rural markets are still unpenetrated and lower price points ( ` 2, ` 5 & ` 10 ) prevalent in the segment could drive aggressive sales in rural India.




  • Competition is likely to intensify going forward as more of the organised business groups enter into this space ( recent entry of Tobacco major Gopal Corporation is a case in point ) to grab their share of opportunity as also existing players make a dent in peers' stronghold by offering similar products with superior distribution and marketing reach.







Key Takeaways from the Report – Company Perspective :




CRAX Brand Key Marketshare Figures



Sweet & Savoury

Snacks Segment

Western Snacks Segment

Extruded Snacks Segment

Corn-based Extruded Snacks Segment






CRAX MarketShare

( 2013 )

2.03 %

2.79 %

5.61 %

9.19 %


Source :- Exemplar Research, Channel Checks, Euromonitor International, Company Reports



  • DFM Foods Ltd. via its 'CRAX' brand is a key player in Extruded Snacks category of Indian Branded Sweet & Savoury Snacks segment.




  • Over last five years, company has gained significant marketshare of the category.




  • If we consider 3 Years' ( FY10-FY13 ) CAGR in Sales, then, DFM has outperformed industry as well as almost all of its peers quite handsomely :



3 Years' CAGR in Sales

( 2010-2013 )


Sweet & Savoury Snacks Segment

Pepsico

Haldiram

Balaji Wafers

Bikaji Foods

Bikanervala

Prataap Snacks

DFM Foods









25.26 %

19.93 %

25.82 %

33.15 %

28.39 %

17.29 %

30.56 %

46.13 %





  • Its main product offerings ( CRAX Corn Rings ) are targeted towards children of age group 6-12 years --- an isolation strategy which has done wonders for the company so far.




  • If we take into consideration DFM's key product offerings and its target audience, then, key competitors for it are Pepsico, Haldiram ( Extruded Snacks ), ITC, Prataap Snacks & Venkataramana Food Specialities.


    • As per our analysis, Prataap Snacks ( via its brand YD Rings ), as a peer, poses an immediate threat to DFM Foods because of its almost similar marketing strategy, same target audience, identical product USP and low margin business model.




    • Prataap has recently ( in 2013 ) commenced its Rings manufacturing plant ( technology from American Extrusion ) and is going all out to make a dent into DFM's ( CRAX Corn Rings ) marketshare. Aggressive marketing strategy is adopted by Prataap by getting associated with popular children tv show 'Chhota Bheem' and Mr. Amitabh Bachchan starrer children-oriented supernatural movie 'Bhootnath Returns'.




    • Medium-term Revenue Growth is not under threat for DFM because of an aggressively expanding market size itself as also unsaturated nature of company's Western & Eastern Sales presence. However, for this to happen, company has to expand its manufacturing capacities intime, fill the many gaps prevalent in its distribution network as also design a wise consumer-pulling marketing strategy.




    • EBITDA margins of the company might not show a significant improvement considering the fact that all its peers ( except Balaji Wafers ) operate at a lower EBITDA margin as also likely intensification of the competition in the space.

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maheshishah
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Quote maheshishah Replybullet Posted: 30/Apr/2014 at 1:29pm
 

Industry --- Key Facts & Figures :



  • 'Packaged Food' segment is one of the fastest growing segment of Indian FMCG sector.



  • 'Branded Sweet & Savoury Snacks' segment is the third fastest growing Indian Packaged Food segment. It has grown at a 5 Years' CAGR of 26.2 % over 2008-2013 ( in value terms ).


    • 'Western Snacks' and 'Traditional Snacks' are the two broad categories under Branded Sweet & Savoury Snacks segment. Although, in volume terms, both the categories' contribution is almost equal ( 50.73 % v/s 49.27 % ), but, in value terms, Western Snacks dominate the space with 62.73 % share as at 2013.



    Chips/Crisps & Extruded Snacks (like puffs, rings, etc.) form 'Western Snacks' category whereas Namkeens, Bhujia, Papad, Khakhra, Nuts, Sweets, etc. form 'Traditional Snacks' category.


    • Only Twenty Seven organised players constitute 95 % of the total Indian Branded Sweet & Savoury Snacks segment sales with Nine players dominating the space with 71 % of the marketshare.



    • Pepsico leads the race with 35.1 % marketshare (2013) with Haldiram ( all family fractions' geographies combined ) standing second at 23.5 % marketshare. Pepsico is a clear leader in 'Western Snacks' space whereas Haldiram dominates the 'Traditional Snacks' space.



    • Each of the two major players have seen their marketshare gradually decline because of the emergence of other strong players like ITC, Balaji Wafers, Prataap Snacks, Bikaji Foods and DFM Foods.





    Key Players in Indian Sweet & Savoury Snacks Segment

    ( Note – These Players together control 95 % marketshare of the segment )




    Large Players

    ( by FY13 Annual Sales )






    ` 500 cr. +


    Pepsico


    Balaji Wafers


    Haldiram


    ITC








    Mid-Size Players

    ( by FY13 Annual Sales )






    ` 200 – 500 cr.

    Parle Products


    Prataap Snacks


    Bikaji Foods


    Bikanervala


    DFM Foods






    Small Players

    ( by FY13 Annual Sales )



    ` 100 – 200 cr.

    Parle Agro


    Cavinkare


    Venkataramana Food Specialities


    Agrotech Foods


    Apricot Foods







    Micro Players

    ( by FY13 Annual Sales )





    ` 1 – 100 cr.

    Perfetti Van Melle


    Samrat Namkeen


    Jabson Food


    Euro India Fresh Foods


    Atop Food Products


    Zee Foodex


    Chheda Specialities


    SKB Food Products


    Advance Tech Energy Edibles


    Melar Healthcare


    Priniti Foods


    Krushi Corporation


    Grove Ltd.


    Source :- Onground Research, Channel Checks, Company Reports, Rating Reports, Exemplar Research, Euromonitor International,




    • 'Extruded Snacks' as a category stands out amongst all other categories of Branded Sweet & Savoury Snacks segment not only because of the highest volume growth registered by it over last 5 years ( 2008-2013 CAGR = 21.9 % ) but also because of its projected volume growth over 2013-2018 at a CAGR of 16.9 % which is highest amongst the segment.




    ( Growth YoY )

    2014

    2015

    2016

    2017

    2018


    Volume Growth :



    Chips / Crisps

    ( Volume Growth )


    11.64 %


    10.82 %


    9.19 %


    8.22 %


    7.96 %







    Extruded Snacks

    ( Volume Growth )

    19.54 %

    17.92 %

    16.42 %

    15.49 %

    15.10 %


    Value Growth :



    Chips / Crisps

    ( factoring-in normal price increase

    based on price trend till 2013 )


    20.78 %


    19.38 %


    17.21 %


    15.90 %


    15.10 %







    Extruded Snacks Segment

    ( factoring-in normal price increase

    based on price trend till 2013 )

    26.57 %

    24.54 %

    22.62 %

    21.31 %

    20.65 %

    Source :- Euromonitor International, Exemplar Research

     

     

     

    • Six companies dominate Extruded Snacks category by controlling 82 % market as at 2013. They include Pepsico, ITC, Prataap Snacks, DFM Foods, Haldiram & Vekataramana Food Specialities.



    • Pepsico is the leader with its Kurkure & Cheetos brands controlling 52.7 % marketshare ( 2013 ) of the category ; ITC, with its brand Bingo occupies second slot ( 10.8 % marketshare ) while Prataap, with its brand Yellow Diamond ( 5.9 % marketshare ) and DFM Foods with its brand CRAX ( 5.6 % marketshare ) occupying third and fourth position respectively.



    • If we talk of specific brands, then, over last five years ( 2008-2013 ), CRAX ( DFM Foods ), Yellow Diamond ( Prataap Snacks ) and TakaTak ( Haldiram ) have gained significant marketshare at the expense of Peppy & Piknik ( Venkataramana Food ) and other smaller players.








    Extruded Snacks Marketshare Trend of Key Brands



    2013

    2012

    2011

    2010

    2009







    Kurkure & Cheetos

    ( Pepsico )

    52.7 %

    55.2 %

    53.8 %

    49.2 %

    52.9 %







    Bingo

    ( ITC )

    10.8 %

    10 %

    11 %

    11.9 %

    11.5 %







    Yellow Diamond

    ( Prataap )

    5.9 %

    4.7 %

    4.6 %

    4.9 %

    4.8 %







    CRAX

    ( DFM )

    5.6 %

    5.3 %

    5.1 %

    4.1 %

    3.9 %







    TakaTak

    ( Haldiram )

    4.3 %

    4.3 %

    4.2 %

    3.8 %

    3.3 %







    Peppy & Piknik

    ( Venkataramana )

    2.7 %

    3,3 %

    4.0 %

    4.8 %

    6.0 %

     



    • Key driver for robust growth of Extruded Snacks segment has been lower price points ( ` 5 & ` 10 ) which, coupled with innovative promotional activities, have made the segment extremely popular, especially amongst school going children.



    • Consumption pattern suggests that Brand Loyalty is absent in this segment ; however, brand preference exists to a certain extent. Product Loyalty is completely absent because of which companies need to continuously innovate to offer more flavours as also engage consumers in varied ways.



    'Taste' & 'Price Point' are the key determinants of purchase decision of consumers in the segment. For products targeted at children, 'Gift' (bundled with each product packet) is the third most important determinant of the purchase decision.

     

     

     

    • Assessment of Competition :




      • Pepsico with its brands Lay's & Uncle Chipps in Chips/Crisps segment (Western Snacks) , Kurkure & Cheetos in Extruded Snacks segment (Western Snacks) & Lehar in Traditional Snacks segment is a clear leader in Indian Branded Sweet & Savoury Snacks segment. However, if we observe its overall marketshare of the segment over last 10 years, then, it seems to have lost considerable ground :


      Pepsico Marketshare Trend

      in Indian Branded Sweet & Savoury Snacks Segment


      2013

      2012

      2011

      2010

      2009

      2008

      2007

      2006

      2005

      2004











      35.1 %

      36.5 %

      36.7 %

      37.4 %

      39.3 %

      40.1 %

      41.1 %

      46.5 %

      45.7 %

      44.3 %


      Source :- Euromonitor International, Exemplar Research




      • In contrast, Haldiram as a group has more or less maintained its marketshare to become the second largest player of Indian Branded Sweet & Savoury Snacks segment :


      Haldiram Marketshare Trend ( all family fractions' geographies combined )

      in Indian Branded Sweet & Savoury Snacks Segment


      2013

      2012

      2011

      2010

      2009

      2008

      2007

      2006

      2005

      2004











      23.5 %

      23.7 %

      24.1 %

      24.1 %

      24.2 %

      23.0 %

      21.5 %

      20.8 %

      21.3 %

      21.4 %


      Source :- Euromonitor International, Exemplar Research


      It is worthwhile to note here one important fact regarding Haldiram --- although for calculation of marketshare figures, 'Haldiram' as a brand is considered, but, the rights for 'Haldiram' brand are clearly demarcated amongst different family fractions with each family fraction's respective company/ies handling manufacturing, sales and distribution of 'Haldiram' brand of products for the respective geography :


      Geography

      Family Fraction

      Respective Companies




      North India

      Manohar & Madhusudan Agarwal

      Haldiram Snacks Pvt. Ltd.

      Haldiram Manufacturing Co. Pvt. Ltd.




      West & South India

      Shiv Kishan Agarwal

      Haldiram Foods International Pvt. Ltd.

      Komal Foods Pvt. Ltd.




      East India

      Prabhu Shankar Agarwal

      Haldiram Bhujiawala Ltd.






      In this report, for assessing financial and segmental positioning of 'Haldiram', figures of all the above-mentioned five companies are taken as one single consolidated entity.






      • All the other players in the segment command a marketshare in single digits ; however, their relative growth over the years is noteworthy and exceptional which suggests :

            an expanding overall marketsize,

            gradual shift towards organised from unorganised, &

            also explains the marketshare-loss suffered by the leader of the segment (Pepsico).


      Key players that have gained significant marketshare over last ten years include ITC, Balaji Wafers, Prataap Snacks, DFM Foods, Bikaji Foods, Parle & Apricot Foods.






      • Let's now assess the financial profile of nine companies which together control 71 % marketshare of Indian Branded Sweet & Savoury Snacks segment. Here we will look at :


              Actual Revenue & YoY Revenue Growth for each fiscal over FY10-FY13,

              3 Years' CAGR in Sales (Revenue) achieved by each player, and


              EBITDA & PAT Margins – 4 Years' Average as well as of FY13.






      Comapnies covered are :

      Pepsico,

      Haldiram (all family fractions' gepgraphies combined),

      Balaji Wafers,

      ITC,

      Bikaji Foods,

      Bikanervala,

      Prataap Snacks,

      Apricot Foods,

      DFM Foods.

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maheshishah
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Quote maheshishah Replybullet Posted: 30/Apr/2014 at 1:34pm
 


FY13

FY12

FY11

FY10






Pepsico

[ Snacks ]

YoY Growth


( Actual Revenue )



14.13 %


( 2546.81 cr. )



23.94 %


( 2231.46 cr. )



21.92 %


( 1800.33 cr. )



N.A.


( 1476.54 cr. )






Haldiram

[ All Geographies Combined ]


YoY Growth


( Actual Revenue )



22.36 %


( 2936.48 cr. )



29.29 %


( 2399.74 cr. )



25.89 %


( 1856.01 cr. )



25.88 %


( 1474.29 cr. )






Balaji Wafers


YoY Growth


( Actual Revenue )



28.19 %


( 913.58 cr. )



31.36 %


( 712.67 cr. )



40.18 %


( 542.53 cr. )



N.A.


( 387.01 cr. )






ITC


YoY Growth


( Actual Revenue )




N.A.


( 500 cr. )




N.A.




N.A.




N.A.






Bikaji Foods


YoY Growth


( Actual Revenue )



32.54 %


( 325.50 cr. )



31.38 %


( 245.57 cr. )



21.53 %


( 186.91 cr. )



33.91 %


( 153.79 cr. )






Bikanervala


YoY Growth


( Actual Revenue )



25.23 %


( 350.25 cr. )



24.93 %


( 279.68 cr. )



3.13 %


( 223.86 cr. )



N.A.


( 217.05 cr. )






Prataap Snacks


YoY Growth


( Actual Revenue )



33.41 %


( 343.80 cr. )



35.93 %


( 257.69 cr. )



22.72 %


( 189.57 cr. )



54.16 %


( 154.47 cr. )






Apricot Foods


YoY Growth


( Actual Revenue )



36.04 %


( 107.81 cr. )



N.A.


( 79.25 cr. )



N.A.





N.A.








DFM Foods


YoY Growth


( Actual Revenue )



32.94 %


( 225.24 cr. )



41.37 %


( 169.42 cr. )



66.02 %


( 119.84 cr. )



35.34 %


( 72.18 cr. )

 
 
 
----------------------------------
 


4 Years' Average

FY13




Pepsico

[ Snacks ]

EBIT Margin


PAT Margin



4.52 %


N.A.



2.93 %


N.A.




Haldiram

[ All Geographies Combined ]


EBIDTA Margin


PAT Margin



10.61 %


5.79 %



10.03 %


5.36 %




Balaji Wafers


EBITDA Margin


PAT Margin



18.55 %


12.07 %



19.45 %


12.41 %




ITC


EBITDA Margin


PAT Margin




N.A.


N.A.




N.A.


N.A.




Bikaji Foods


EBITDA Margin


PAT Margin



7.39 %


3.71 %



7.49 %


4.07 %




Bikanervala


EBITDA Margin


PAT Margin



8.33 %


4.02 %



8.53 %


4.26 %




Prataap Snacks


EBITDA Margin


PAT Margin



8.83 %


4.63 %



7.99 %


3.72 %




Apricot Foods


EBITDA Margin


PAT Margin



9.51 % *


5.13 % *



8.95 %


4.90 %




DFM Foods


EBITDA Margin


PAT Margin



11.94 %


5.42 %



10.58 %


2.80 %

 
 
--------------------------------------------
 

Key things to note from above :



  • Haldiram's revenue figures optically seem higher than Pepsico because, they include sales from other sources like Dairy items, Milk, Ghee, Syrups, Squashes, Dry-Fruits as well as Restaurant sales which are not part of 'Sweet & Savoury Snacks' sales. To cite here an example, given below is the segmentwise sales breakup of Haldiram for FY13 :



Haldiram Segmentwise Sales Breakup

( FY13 )


Segment

FY13 Revenue



Savoury Snacks

` 1879 cr.



Sweets

` 602 cr.



Others

` 455 cr.



Total

` 2936 cr.


Source :- Approximate Breakup Data derived from Company Reports, Rating Reports



If we go further down into the breakup of 'Savoury Snacks' segment sales, then, Haldiram's dominance in 'Traditional Snacks' segment becomes evident :





Haldiram Savoury Snacks Sales Breakup

( FY13 )


Sub-Segment

FY13 Revenue



Western Snacks

` 191 cr.



Traditional Snacks

` 1688 cr.



Total

` 1879 cr.


Source :- Approximate Breakup Data derived from Company Reports, Rating Reports



This is in sharp contrast to Pepsico which derives majority of its sales from 'Western Snacks' segment.





  • Similarly, Bikaji & Bikanervala revenue figures also include sales from other sources, albeit to a smaller extent ; a segmentwise breakup of Bikaji's FY13 revenue is provided below for reference :



Bikaji Segmentwise Sales Breakup

( FY13 )


Segment

FY13 Revenue



Savoury Snacks

` 280 cr.



Sweets

` 33 cr.



Others

` 12.50 cr.



Total

` 325.50 cr.


Source :- Approximate Breakup Data derived from Company Reports, Rating Reports



  • Balaji Wafers has emerged as the strongest player over last 5 years by growing aggressively and eating into Pepsico & ITC's marketshares. Balaji atpresent commands 8.3 % marketshare in the segment and has a very sound financial profile which could enable it to continue to outperform peers in future too. Balaji operates at highest EBITDA & PAT margins amongst the peers.




  • Prataap Snacks with its 'Yellow Diamond' brand and DFM Foods with its 'CRAX' brand have also made a dent in Pepsico's marketshare by growing ahead of it over last five years. Prataap commands 3.1 % marketshare while DFM commands 2.03 % marketshare as at 2013.


  • DFM Foods has registered highest 3 Years' CAGR in Sales over FY10-FY13. It has outperformed all the peers quite handsomely.




  • EBITDA margins of DFM are at par with Haldiram & just second best to Balaji Wafers which is a very satisfying thing. Its important to note here that Haldiram's major sales come from Namkeens & Sweets ( 78 % as at FY13 ) and Chips & Extruded Snacks forms only a small portion of its sales ( 6.5 % of FY13 Sales ). Similarly, Balaji Wafers' major Sales contributors are Chips (Wafers) & Namkeens. Its only Pepsico & Prataap which have major contributions coming from Extruded Snacks.




  • DFM Foods' Scale of Operation (FY13) is smallest amongst all the companies mentioned (except Apricot Foods) with Pepsico & Haldiram at 2500+ cr. and Balaji at 913 cr. with ITC, Bikaji, Bikanervala and Prataap at 500 cr., 325.5 cr., 350.2 cr., and 343.8 cr. respectively.




  • Out of these nine companies, Prataap has got Sequoia backing (51 % stake), Bikaji recently got Lighthouse PE backing (12.5 % stake), DFM got Westbridge backing (24.90 % stake) and Balaji is in final talks with Capital International PE (15 % stake). Pepsico and ITC are capable conglomerate while Haldiram has each family fraction catering to respective region. Its only Bikanervala which is the weakest amongst the lot that is looking for a funding partner since last many years but has not got anyone yet.




  • Since four out of nine companies have got ( or about to get ) PE investors, its worthwhile to note here the valuations at which each respective PE-investment deal was stuck :




EV/Sales TTM

EV/EBITDA TTM

PE Deal Happened in Year





Prataap Snacks

1.05

15.47

2011





Bikaji Foods

2.27

30.29

2014





DFM Foods

1.41

13.32

2014





Balaji Wafers

4.37

22.50

Most Likely in 2014


Source :- Company Reports, Rating Reports, VCCircle Data, Company News, Media Articles, Exemplar Research


 
 


Assessing Competition specific to DFM Foods :




CRAX Brand Key Marketshare Figures



Sweet & Savoury

Snacks Segment

Western Snacks Segment

Extruded Snacks Segment

Corn-based Extruded Snacks Segment






CRAX MarketShare

( 2013 )

2.03 %

2.79 %

5.61 %

9.19 %


Source :- Exemplar Research, Channel Checks, Euromonitor International, Company Reports



  • Since the company of our concern is DFM Foods, let's evaluate competitive scenario with that regards.



  • DFM Foods over last many years sustained and outpaced competition by adopting a sound strategy of targeting a specific age group and concentrating on marketing & distribution strategies circling around only that age group. Entire competition's products were targeted to all age groups ( with majorly being adults above 15 years of age ) while DFM targeted children with age group 6-12 years.



  • DFM was the first company to include 'Free Gift' with every CRAX Corn Rings pack of ` 5 and this isolation ( i.e., catering to only specific audience ) strategy enabled it to distinguish itself from competition as also sustain and grow amidst strong financial power of Pepsico & ITC.



  • Since last year or so ( 2013 ), competition has become intense with Pepsico introducing similar ( to CRAX ) product 'Corn Cups' targeted at children and Yellow Diamond ( Prataap Snacks ) introducing 'YD Rings' – a replica of CRAX Corn Rings.



  • If we talk specifically for CRAX Corn Rings ( which contributes 84 % + to DFM's FY13 revenues ), then, Pepsico's 'Corn Cups' price point is higher while other players like ITC and Balaji cater to general audience rather than specific age group whereas Haldiram has a more diverse offering which is not in strict competition. Hence, the player which could threaten the market position of CRAX in real sense is Prataap Snacks and as per our analysis, it is this player which DFM will find it hard to compete with.



  • Prataap Snacks is taking on DFM Foods in-and-out by striking on every corner. It has introduced almost identical shaped product which is a replica of Crax Corn Rings and has offered it in almost every flavour in which CRAX is available ( except Pudina & Chatpata ).



  • In addition to offering similar product with similar flavours, what Prataap has done is it has targeted the same age group with same strategy of including 'Free Gift' with every pack. Prataap, in recent past, got associated with one of the most popular children tv show 'Chhota Bheem' and has introduced free gifts revolved around the main character of the show in its every YD Rings pack. In continuation with the same strategy, only recently, in April'2014, it got associated with Mr. Amitabh Bachchan starrer 'Bhootnath Returns' – a supernatural comedy movie and launched YD Rings promos with the trailer of the movie.



  • On distribution front, DFM & Prataap are almost neck-to-neck if we consider regionwise-spread, but, if we go into detail and talk specific, then distribution reach of Prataap is almost double that of DFM ( Prataap reaching ~ 5 lakh retail outlets v/s DFM's reach of ~ 2.15 lakh outlets ). However, each company has its strength and weaknesses in each region, with DFM far stronger in North India while Prataap a clear leader in West India. Visibility and availability of Prataap's Yellow Diamond is far better in West India ( relative to CRAX ) while in North India, DFM's CRAX is slightly ahead than Prataap.

    What Prataap has done is, in whichever areas it is present, it has covered as many retail outlets as possible which gives it great visibility ( only second to Lay's & Kurkure ) in respective areas. In contrast, DFM has focussed on covering more areas which gives it relatively low visibility relative to Prataap, especially in Western India.




  • To give a brief background of Prataap Snacks, it is a company backed by PE player Sequoia Capital which invested in it in 2011 and has so far invested ~ ` 180 cr. in the company. As per sources, it holds ~51 % equity stake in the entity as at FY13. It is worthwhile to note here the growth attained by Prataap over last seven years :



( fig. In ` cr. )

FY13

FY12

FY11

FY10

FY09

FY08

FY07









Prataap

343.80

257.69


189.57

154.47

100.20

66.60

35.50

DFM Foods


225.24

169.42

119.84

72.18

53.33

31.66

23.88


Sequoia invested in the company in May'2011





Three things to note here is that :


  • first, DFM started focussing aggressively on its Snack Food segment only from FY09,

  • second, Prataap aggressively introduced Rings in the market only from FY13 as previously its main focus was competing with Lay's, Kurkure & Cheetos ( by introducing YD Chips, Chulbule & Puffs ),

  • third, as at FY13, Extruded Snacks segment contributes ` 199 cr. to Prataap's Revenues as against ` 194 cr. to DFM's Revenues.












Conclusion :




  • Opportunity is huge ahead of every serious player in Indian Branded Sweet & Savoury Snacks segment because of the fact that Indians are natural snacks' consumers, and entire 124 crore Indian public is served by only Twenty Seven major branded savoury snacks players atpresent. Rural markets are still unpenetrated and lower price points ( ` 2, ` 5 & ` 10 ) prevalent in the segment could drive aggressive sales in rural India.



  • Sweet & Savoury Snacks Food Industry in itself is likely to grow handsomely at a CAGR of 19.4 % over 2013-2018 with its sub-segments like Extruded Snacks likely to outperform industry growth rate by growing at a CAGR of 23.1 % over 2013-2018.




  • Shift towards organised from unorganised segment is projected to continue, albeit at a gradual pace.



  • These factors combined, offers immense opportunity for each of the organised player in the segment to grow aggressively as they have done in the past. However, competition is likely to intensify going forward as more of the organised business groups enter into this space ( recent entry of Tobacco major Gopal Corporation is a case in point ) to grab their share of opportunity as also existing players make a dent in peers' stronghold by offering similar products with superior distribution and marketing reach.



  • If we look at last four years, then DFM Foods has outperformed almost all its peers, including Prataap Snacks as far as revenue growth is concerned.



  • DFM Foods is unlikely to face strong threat in the medium term as far revenue growth is concerned, provided it can expand manufacturing capacities intime. However, EBITDA margins could remain under pressure until a new product success is met on the lines of CRAX Corn Rings. This is because, all the efforts towards any sort of significant improvement in EBITDA margins will be met by cut-throat competition, especially from Prataap Snacks ( YD Rings ) which will put-in its every effort to fully utilise its Rings manufacturing plant which commenced operations in 2013.



  • DFM Foods definitely has a first mover advantage in the space and has a strong brand credibility amongst its target audience ( majorly in North India ). However, to counter Prataap's aggressive low margin model, DFM will need to innovate more on the product front and fill the many gaps prevalent in its distribution network as also design a wise consumer-pulling marketing strategy.



  • With a good PE player like Westbridge entering into DFM Foods by acquiring 24.90 % equity stake in it and promising an active involvement into formulating company's growth strategies by taking a board seat, DFM might be able to identify gaps more proactively and fill them with ease.

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Quote maheshishah Replybullet Posted: 02/May/2014 at 12:11pm
Board to consider Dividend

DFM Foods Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on May 12, 2014, inter alia, to consider the following:

1. To consider the accounts and recommendation of dividend on the equity shares for the year ended March 31, 2014.

2. To consider and take on record the audited financial results for the year ended March 31, 2014.

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Quote Arshavin23 Replybullet Posted: 02/May/2014 at 1:01pm
Thanks for the additional industry info Mahesh,

One thing that immediately catches the attention is the revenue per distribution outlet of DFM vs Prataap. Prataap's distribution reach is almost 2.3x that of DFM and you have mentioned higher visibility strategy of Prataap. However when I am comparing the FY'13 sales of the two companies, Prataap's sales is only 1.5x of DFM.

Are the distribution outlet numbers as on March 2013 or are they the latest numbers?

Based on the above, I feel DFMs distribution is more efficient in terms of revenue per outlet but one needs to understand the cause of the same. Is it because they have advertised more compared to Prataap and have higher brand pull? Or Is it because of absence of competition which will now increase going forward and thus one needs to monitor the revenue per distribution outlet?
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Quote maheshishah Replybullet Posted: 02/May/2014 at 3:11pm
Yes Arshavin....the outlet nos. are of 2013 for Prataap and latest Dec.'2013 for DFM......As at  March'2013 retail outlet reach of DFM was 1.96 lakh outlets.....
 
Now, rgdg. revenue per outlet, there will be difference, because, DFM's focus is a single product CRAX Corn Rings and it is a relatively old player in the space so brand mindspace is higher, especially in North India....The difference that you notice is because of North India only -- to give specific nos. for FY13 :
 
from 1,15,000 outlets in North India it garnered 191 cr. revenues
from 64,000 outlets in West India it garnered 28 cr. revenues
from 17,000 outlets in East India it garnered 6 cr. revenues
 
 
For Prataap, although regionwise spread is not available, but, its overall per outlet revenue is higher than DFM's West & East India nos. but is lower than North India nos... Second point to note is Prataap is more of a diversified player wherein it has significant portion of revenues coming from Chips (~40 %) and even Namkeens contribute ~7 % to FY13 revenues.....third point to note is that Prataap has already invested heavily in building up capacities for each of its product lines and as on date it has the capacity to generate 700 cr. p.a. revnue without any new CAPEX.....
 
Hence, over last few years what Prataap did was it significantly ramped up its distribution and saturated each area in which it is present....Although theoretically higher revenue per outlet seems a good thing but for an expanding company its not that much significant....this is because, what it has to do is have a significantly large distribution network inplace so that on subsequent launches of its new products, this distribution network can give them a significant headstart.....Launch and part success of YD Rings is a case in point for Prataap....
 
To add, DFM never tried to compete with Pepsico or ITC but Prataap from the beginning took them head-on.....to counter the distribution reach of Pepsico, Prataap had to have significant presence and thats what it did so far.....YD Rings is only recently introduced, but Prataap's Chips is competing with Lay's since last 10 years and its Chulbule is competing with Kurkure since last 6 years....
 
To explain in more direct and simpler way....DFM in a way soft launched Kruchoids quite recently and post launch it went for an IMRB survey-report.....Today if you will do a ground check you will not find krunchoids presence on shelves in a significant way.....Its not that the launch has failed or something but there are two constraints --- first, capacity is not that huge to support an aggressive launch ----second, distribution reach is not that high to give the product a significant headstart.....In contrast, if DFM had a distribution reach and capacities like Prtaap, krunchoids would have garnered significant mindspace to offer a support to its main product CRAX Corn Rings....
 
To conclude, although current efficiency of DFM is good optically, but, in the long run it poses danger to aggressive revenue growth....what i will prefer is continued expansion in distribution, exploring of modern retail channel and expansion of capacities to let DFM grow aggressively as it has done in the past.....
 
Brand pull is there in the market for CRAX and the marketsize itself is expanding aggressively but grabing of opportunity at the right time has to happen and I am sure it will happen.....12th May results will be interesting to watch and post result concall commentry will be key.
 
Feel free to get back in case of any further query.
 
Rgds.
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Quote maheshishah Replybullet Posted: 12/May/2014 at 10:36am
Q4 Results out......top line at 63.14 cr. inline with our estimates......Ebitda at 4.48 cr. lower than our estimates......PAT suffered on account of trademark amortisation charge worth 2.43 cr. rs.........

Looking at the balance sheet, debt down to ~38 cr. from FY13's 54 cr..........

ICD seems to be have been fully repaid which is a good sign......

Debtors at just 1 lakh down from 4 lakh of FY13 despite 17 % rise in revenues which suggests continued brand pull in marketplace...

Overall, P&L is ok on expected lines but balance sheet shows some early signs of strengthening......

Maintained dividend payout at 2.5 rs. Per share a good sign.....

Tomorrow's concall commentry will be interesting to watch.......

Rgds.

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Quote maheshishah Replybullet Posted: 12/May/2014 at 10:41am

DFM Foods Limited Q4 & FY14 conference call to be organized on Wednesday, 14thMay, 2014 at 11:30 a.m. IST

 

New Delhi: DFM Foods Limited, a pioneer in the Indian snacks food market, will be hosting a concall for investors and analysts on Wednesday, 14th May; at 11:30 a.m. IST for the fourth quarter and year ended 31st March, 2014 announced on Monday, 12th May.

 

The call will be initiated with a brief management discussion on the earnings performance followed by an interactive question and answer session. The management team will be represented by Mr. Rohan Jain, Executive Director, Mr. Rajiv Bhambri, CFO & Mr. Rajiv Raina, COO.

 

Wednesday, 14th May, 11:30 a.m. IST

Conference Dial-In Numbers

Mumbai (Primary No.)

6746 5894

Mumbai (Secondary No.)

3938 1094

Delhi, Bangalore, Chennai, Kolkata, Ahmedabad, Hyderabad*

6000 1221

Gurgaon (NCR), Bangalore, Kolkata,  Cochin, Pune, Lucknow, Ahmedabad, Chandigarh**

3940 3977

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