US spice maker McCormick & Co. is to set up a joint venture in India with local food company Kohinoor Foods.
The deal, which remains subject to regulatory approval in India, will see McCormick take an 85% interest in the Kohinoor Speciality Foods India venture. Kohinoor Foods will own the other 15%.
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The new company will have annual sales of around US$85m and sell Kohinoor branded food products in India.
The Kohinoor brand holds over 15% of the basmati rice category in India. The namesake Indian firm also sells cook-in sauces, pastes, spices and frozen foods.
McCormick said yesterday (1 June) it would spend $115m on the deal, which, as well as its 85% stake, will also see the “transfer of certain trademarks and non-compete undertakings” from Kohinoor Foods and the Arora family that part-owns and runs the Indian firm.
The venture will also enter into an exclusive agreement with Kohinoor Foods to process branded basmati rice at the Indian company’s production facility in the state of Haryana.
McCormick chairman, president and CEO Alan McCormick said the venture was “an important step” in the company’s plans to “accelerate growth” in Asia-Pacific.
The management of Kohinoor had developed a “fast-growing profitable business” with “vast expertise in their products and an extensive distribution network in the Indian retail market”, he explained.
Mr McCormick added: “Kohinoor Speciality Foods India will take McCormick’s investments in India to more than $150m and we have plans to continue investing in this rapidly growing market.”
The US firm first entered the Indian market in 1994. Last year, it acquired a minority stake in Indian spice and seasoning business Eastern Condiments.
McCormick said the Kohinoor venture would reduce its earnings per share in 2011 by $0.02-0.03 as transaction costs offet its share of the profits from the new company. In 2012, however, the venture is expected to be “accretive” to EPS.
Kohinoor Foods MD Satnam Arora said the venture was a “win-win situation for all stakeholders” and would add “immense value” to Indian consumers and the country’s packaged food industry.
