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Hershey sets up Indian subsidiary after ending Godrej joint venture

By Oliver Nieburg+

07-Sep-2012

The Hershey Company has agreed a deal to buy Godrej Industries 49% stake in the two companies’ Indian joint venture and has announced plans to set up its own subsidiary: Hershey India

Hershey will assume $47.6 million in debt through the agreement and will own Maha Lacto and Nutrine candy brands and the Jumpin and Sofit beverage brands, including related manufacturing sites.

The announcement came amid prolonged speculation that the five-year long Godrej partnership was in jeopardy.

The deal is expected to be completed by the end of the third quarter.

Financial details were not disclosed.

India a key focus

Hershey president and CEO J.P. Bilbrey said: “India is a key focus market for The Hershey Company,”

“Our partnership provided us with insights and an understanding of the consumers and customers in India.

“Confectionery and beverage category growth in India is solid and we’re excited about our opportunities. We’ll make the necessary investments in India to accelerate growth, leveraging our core strengths and business model.”

Matthew Lindsay, managing director, Hershey India, added that the firm would invest in product innovation, people and processes to drive growth.

Kraft Foods dominates the Indian confectionery market while Ferrero recently opened a new site in the country

Hershey India financials

Hershey had entered the partnership with Godrej in 2007 and started the first full-year with $70m in sales

The Godrej Hershey joint venture ended the 2011 calendar year with around US $80 million sales, but recorded a $7 million loss overall.

Godrej has severed ties on a number of joint ventures in recent years including ones with multinationals Procter & Gamble (P&G), Pillsbury, and Sara Lee.

Indian confectionery market

Hershey is believed to be falling behind its rivals in booming developing markets such as India.

Kraft Foods, soon to be Mondelez International, dominates the $1.5bn Indian confectionery market through its Cadbury business.   

Bilbrey previously called India a “participatory market” in a webcast in June (see HERE ) when Hershey announced plans for a new manufacturing facility at an unnamed location in Asia.

China was said to be the growth engine for Hershey in developing markets during the webcast.

Hershey said that its outlook for the full financial year, 7 and 9% sales growth, remains unchanged as a result of the deal.

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