The Economic Times: February 24, 2015
New Delhi: Japanese conglomerate Mitsubishi has picked up 34% stake in Indo Nissin Foods, maker of Top Ramen instant noodles in India, for about Rs 500 crore, setting the stage for vigorous marketing and advertising activity in the segment dominated by Nestle's Maggi, two people aware of the development said.
Indo Nissin and Mitsubishi Corp confirmed the strategic tie-up, but their officials declined to comment on the valuation of the deal.
Gautam Sharma, managing director at Indo Nissin, said the firm's Japanese parent Nissin will remain the majority shareholder with 66% stake and will drive the business.
Mitsubishi has also picked up equity stake in Nissin Foods Holdings' Singapore, Thailand and Vietnam subsidiaries.
Mitsubishi will hold 34% voting interest in Nissin Foods Holdings' local instant noodle operations in Singapore, India, Thailand and Vietnam, a statement issued by the two firms said.
The deal marks Mitsubishi's foray into consumer-facing business in India. So far it has been largely into largely into automobiles and trading in the country.
"Entering the market for the manufacture and sale of instant noodles, a staple in Asia, will enable Mitsubishi Corp to establish food processing and manufacturing as one of its core businesses overseas," the Japanese firm said in a statement on its website.
Mitsubishi has huge presence across processed foods, frozen and chilled foods, confectionery, pet food and liquor in Japan.
Industry experts and analysts say the alliance with Indo Nissin will give it a foothold in the foods sector in India.
"The move is in line with large corporates looking to unlock potential of differentiated niches in consumer spaces in key markets like India," said Debashish Mukherjee, partner and co-head, consumer & retail, India and Southeast Asia, at consulting firm AT Kearney.
Mitsubishi's investment into Indo Nissin is also expected to spur consumption of instant noodles in India - already the world's largest instant noodles market, having doubled its growth over the past five years — as the company is expected to launch an aggressive marketing drive.
Sharma of Indo Nissin said, "We will leverage the alliance to significantly improve business and profitability through vertical integration of supply procurement — improving cost competitiveness, strengthening distribution network, and building relationships with retailers and distributors."
Indo Nissin's Top Ramen occupies the third spot in terms of market share in the domestic instant noodles market behind Maggi and ITC's Sunfeast Yippee.
Besides Top Ramen and Cup Noodles, Indo Nissin also launched Scoopies brand of instant noodles last year. Market researcher Euromonitor, in a report on instant noodles in India, said the category has huge potential as it's becoming very popular in semi-urban and rural areas. "Noodles were targeted primarily towards children, but have now moved on as a mainstay meal even for adults. This has increased the target audience and the scope to expand," the report said. In 2014, the domestic instant noodle market was valued atRs 3,800 crore, with a value growth of 7.4% and volume growth of 2.9%.
Indo Nissin's current contribution to its parent's global sales is just about 1%. But India is seen as a high-potential market for the category, reporting 118% category growth according to the World Instant Noodles Association. India is followed by Brazil (33%) and Thailand (29%) as the second and third largest instant noodles consuming countries in the world.
With global sales of more than $100-billion instant noodle meals in 2012, the category is among the biggest in packaged foods.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.