Century-Old Beedi Maker Desai Brothers Is Betting On Ready-To-Cook Food

A company that makes seven crore beedis a day is borrowing a leaf out of ITC Ltd.’s playbook for business diversification..Pune-based Desai Brothers Ltd., making the leaf-rolled cigarettes for over a century, ventured into the food business in 2002 by acquiring pickle maker Mother’s Recipe. It cornered about a fourth of the market share for the product before expanding into packaged food and ready-to-eat segments eight years later. Now, it’s focusing on the ready-to-cook market—which is dominated by McCain Foods, Capital Foods Ltd., MTR Foods Ltd. and ITC, according to Euromonitor International. That resembles efforts by India’s largest cigarette maker to expand into businesses such as staples, biscuits, frozen foods and paper—which today contribute over half of its gross revenue.Spearheading Desai Brothers’ food business is Sanjana Desai, chief strategy officer of Mother’s Recipe and a fourth-generation entrepreneur that entered the business 10 years ago. “We wanted to look at categories in the packaged foods segment that are growing at a faster pace,” Sanjana told BloombergQuint in an interaction, adding she’s working on increasing distribution reach and tapping newer markets to expand..The company’s focus isn’t without reason. The packaged food market in the country is expected to grow fivefold over the next decade to nearly $200 billion, according to Credit Suisse, making it one of the fastest growing categories. That comes as the beedi business remains vulnerable to government policies, regulations and growing health awareness, according to an ICRA said report in January, leading to a decline in volume.Desai said the company’s betting on the ready-to-cook segment, comprising mixes and masalas, to take its packaged foods business to the next level. It’s already on a strong footing in the market for chutneys and other pastes—worth around Rs 1,207 crore, according to Euromonitor. That’s led by Dabur India Ltd., which makes only ginger-garlic paste. Mother’s Recipe also sells tamarind paste, heat-and-eat items like upma, poha and chutneys for snacks like bhelpuri and samosas..“Mother’s Recipe seems to have found the gap in the foods space by entering into the ready-to-cook category as it’s the fastest growing category in the packaged foods space,” Alpana Parida, managing director at brand consultant DY Works, told BloombergQuint. Compared with pickles, this category has fewer players and the competition isn’t much, giving it a leg-up, she said.Mother’s Recipe reaches out to 1,50,000 outlets, across general and modern trade with a strong presence in Haryana, Madhya Pradesh and Rajasthan. It leveraged this reach when it started selling Pitara-branded namkeen and Chipseez chips two years ago.The food company’s revenue rose 5 percent over the previous year to Rs 218.6 crore in 2017-18. It jumped more than 25 percent in FY19, Desai said without giving the number. The food division contributes around 20 percent to Desai Brothers’ top line and has been a stable revenue stream for the company over the past three fiscals, ICRA said..And it has one eye on exports as well. Mother’s Recipe already exports to Russia, Netherlands, Australia, Middle East and the U.S., among other nations. Over a third of the company’s revenue come from exports, which it looks to increase to 45 percent in the next two years by entering new geographies. “We plan to export to more markets in the next two years,” Sanjana said. “Currently, our products are sold in 42 countries and our aim is to touch 50.”.Watch the video here

Century-Old Beedi Maker Desai Brothers Is Betting On Ready-To-Cook Food

A company that makes seven crore beedis a day is borrowing a leaf out of ITC Ltd.’s playbook for business diversification.

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