My Q4FY14 & FY14 estimates for DFM Foods :

Mahesh,

Should we not compare the debt levels of both companies to get a better perspective on the valuation multiples? Do you have any info on Bikaji's debt-equity ratio?

I am also analyzing DFMs expansion strategy and have a few points to make...

1. They are simultaneously expanding in the eastern as well as the western part of the country.

2. For a product such as Crax which has a very low value to weight ratio (Rs 5 pack for 17 grams), the farther the consumers are from the manufacturing plant, the higher will be the transportation costs and growth will be at lower margins.

3. Is it not better for the company to expand by taking on one territory at a time? Had they expanded only in the west or east, would they not have experienced some economies of scale? A denser distribution network in one territory would have led to reduced transportation costs as well as lesser overheads when compared to expanding in two territories that are geographically apart.

Let me have your thoughts.

Rgds.

Originally posted by Arshavin23 Mahesh, Should we not compare the debt levels of both companies to get a better perspective on the valuation multiples? Do you have any info on Bikaji's debt-equity ratio? I am also analyzing DFMs expansion strategy and have a few points to make... 1. They are simultaneously expanding in the eastern as well as the western part of the country. 2. For a product such as Crax which has a very low value to weight ratio (Rs 5 pack for 17 grams), the farther the consumers are from the manufacturing plant, the higher will be the transportation costs and growth will be at lower margins. 3. Is it not better for the company to expand by taking on one territory at a time? Had they expanded only in the west or east, would they not have experienced some economies of scale? A denser distribution network in one territory would have led to reduced transportation costs as well as lesser overheads when compared to expanding in two territories that are geographically apart. Let me have your thoughts. Rgds.

Packaged salty snacks topped FMCG sales in 2013: Report

 

NEW DELHI: Indians consumed more packaged salty snacks than any other fast moving consumer goods (FMCG) in 2013, as they emerged as the fastest growing grocery category, according to data compiled by researcher Nielsen. 

To drive growth in an otherwise uncertain consumption environment, snacks makers such as PepsiCo, ITC and Parle introduced low price points, stepped up distribution in smaller cities and towns and made their products to suit regional taste preferences. Others such as Haldiram, Balaji, Garden, Bikano, Yellow Diamond and DFM Foods' Crax, on the other hand, are playing on low price points, local flavours and quick turnaround time in churning out innovations. Snack sales are usually immune to seasonal fluctuations, which often affect beverages. 

"Conversion from loose to packaged, new formats, and convenient price points of Rs5 and Rs10 are key differentiators driving this category," said ITC Divisional chief executive (Foods) Chitranjan Dar. According to him, ITC's newer innovations under its flagship salty snack brands, Mad Angles and Tangles, have been key sales drivers. 

Salty snacks were the fourth fastest growing category in 2012, but last calendar year they topped all other fast-growing categories such as packaged rice and diapers. Pace of growth, however, slowed down from 29 per cent to 25 per cent over the past two years. That still was far quicker than the 9.4 per cent growth in 2013 sales posted by the overall FMCG sector, where the pace has slowed from the previous year's 18 per cent, according to Nielsen data. 

 

The salty snacks market was worthRs12,679 crore last year. A low-cost business compared with those like chips or biscuits, salty snacks operate on limited barriers to entry. Five of the top six fastest growing FMCG categories in 2013 were foods — snacks, chocolate, atta, non-refined oil and rice — all in excess of 20%. Popular items such as biscuits posted just 7 per cent growth, while detergent sales rose 10 per cent and soaps expanded 4 per cent. 

"Snacks isn't a me-too product... there's a value addition," said Shirish Pardeshi, executive director of investment banking as well as head of consumer and consumer services practice at Anand Rathi Advisors. PepsiCo, the market leader for salty snacks, had launched several local flavours under popular brand Kurkure. Chief executive Indra Nooyi projects about twothirds of PepsiCo's revenue growth to come from snack sales, driven by emerging markets. PepsiCo's senior director, foods marketing, Vidur Vyas said affordable indulgence and convenience were boosting growth in the category. 

"Traditional namkeens and localisation have been a crucial factor in driving category growth," said Parle Products group product manager BK Rao. Parle's first attempt to enter the category over three years back wasn't successful but it re-entered a year later and has met with good response, Rao said. The maker of Hide & Seek and Monaco biscuits sells namkeens under the brand Parle and FullToss. 

The unorganised snacks market remains undocumented, but industry players conversion from loose to branded is happening rapidly. Three years back, Pepsi-Co restructured its foods division to set up a mass-priced, low-cost traditional business model under its Lehar brand, mainly to fight off smaller brands.