Market update from Amul, Coca-Cola and Swiggy

Amul unveils INR 10,000-crore expansion plan

The Gujarat Cooperative Milk Marketing Federation (GCMMF) has announced a substantial investment of INR 10,000-crore in milk and food processing over the next two to three years. This marks Amul's second-largest investment tranche in two years, following an INR 11,000-crore investment in 2023 that has already been almost fully deployed.

According to Jayen Mehta, the managing director of GCMMF, the investment will facilitate the establishment of 10-12 new plants to expand capacity across dairy, ice cream, and food products. This strategic push is aimed at achieving brand Amul's ambitious target of a INR 1-lakh-crore turnover within the next couple of years, building on its reported turnover of INR 90,000-crore in FY23, which saw double-digit growth across categories.

Currently, GCMMF operates around 118 plants nationwide and boasts a significant 50-70% market share in pouched milk and milk items. The new investment will bolster capacity in segments like ghee, cheese, curd, ice cream, protein, and organic food products. Mehta emphasised that this expansion is crucial to meet the anticipated surge in demand, particularly with the rationalisation of GST rates on food and beverages.

With a collective milk processing capacity exceeding 440-lakh litres per day, Amul is also diversifying its product portfolio to include organic dal, wheat flour, basmati rice, and spices, positioning itself as a comprehensive food and beverage company.

The announcement comes on the heels of Amul's recent price reduction across over 700 product packs, including ghee, butter, ice cream, bakery items, frozen snacks, UHT milk, paneer, and chocolates, which now attract a 5% GST. Mehta believes this reduction will spur consumption, as per capita consumption of processed food and beverages remains low in India. This direct impact of GST rationalisation on consumer pricing highlights the potential for 'GST 2.0' to stimulate demand in the F&B sector.

Owned by 3.6 million farmers, GCMMF reported an 11% year-on-year revenue increase to INR 65,911-crore in FY23, driven by volume growth. Experts note that GCMMF's reported turnover does not include sales from independent dairies under the Amul brand in Valsad, Rajkot, Godara, Surat, Vadodara, and Anand.

Coca-Cola to set up INR 2,398-crore plant in Telangana

Global beverage giant Coca-Cola is set to establish a new plant in Telangana with an investment of INR 2,398-crore. This significant announcement was made by deputy chief minister and finance minister Mallu Bhatti Vikramarka following a cabinet sub-committee meeting on industrial promotion.

The committee also cleared proposals for other major investments in the state, including an INR 562-crore gas-insulated switchgear and bushings plant by Toshiba Transmission and Distribution System, and a unit by JSW UAV in Maheshwaram, Hyderabad, with an investment of INR 785-crore.

Collectively, these three companies are investing INR 3,745-crore and are projected to create over 1,500 new jobs. The establishment of companies like Coca-Cola is expected to provide substantial support to mango and orange farmers in Telangana, fostering agricultural growth and economic development in the region. This investment in manufacturing capacity for beverages further underscores the industry's confidence in India's growing consumer market.

Swiggy offloads Rapido stake in INR 2,400-crore deal, hives off Instamart

Food and grocery delivery giant Swiggy has made a move to sell its 12% stake in ride-hailing platform Rapido for INR 2,400-crore. The transaction, executed through two separate deals with Westbridge Capital and Netherlands-based Prosus, marks a significant return on investment for Swiggy, realising over 2.5 times its initial INR 950-crore investment in Rapido made in 2022, all within a span of just over three years.

Regulatory filings revealed that Swiggy will divest 10 equity shares and 163,990 Series D compulsorily convertible preference shares (CCPS) to MIH Investments One BV, a Prosus group entity, for INR 1,968-crore. Additionally, 35,958 Series D CCPS will be sold to WestBridge Capital-backed Setu AIF Trust for INR431.49-crore.

The proceeds from the sale, amounting to INR 2,399.49-crore, are expected to bolster Swiggy's cash balance, which stood at INR 5,354-crore as of the first quarter of the current financial year. Swiggy’s decision to offload its Rapido stake stems from a potential conflict of interest as Rapido ventures into food delivery, intensifying competition in the quick-commerce segment, which already includes players like Blinkit, Zepto, and Rapido itself.

In a related strategic move, Swiggy is also hiving off its quick-commerce vertical, Instamart, into a step-down subsidiary. This restructuring, to be achieved through a slump sale arrangement, mirrors Zomato's organisational structure for its Blinkit operations. The new entity, Swiggy Instamart, will house all assets and liabilities related to the 10-minute delivery business, providing operational flexibility and the potential for independent capital raising without diluting Swiggy’s core food delivery equity.

The WhatPackaging? view: These developments collectively underscore a dynamic period of growth and strategic realignment for key players in India's fast-moving consumer goods (FMCG) and related sectors. The emphasis on expanding capacity, streamlining operations, and responding to policy changes like GST rationalisation promises job creation, enhanced market offerings, and increased investment across the country, particularly within the bustling F&B industry.