Everstone bakes plan to grab a slice of North Indian market

Everstone Group, which acquired Modern Foods last year, is planning to acquire and forge JVs with bread companies in Northern India, with a top-line of up to ₹200 crore, to make Modern Bread a national brand once again.

It is targeting strong regional bread brands, which have distribution, plant and machinery, with a bread-plus portfolio of products, to make up for the lost time in the Northern markets, where has not had a presence for more than decade.

Modern Foods’ previous owner, HUL, had exited the Northern markets, and today, Modern’s presence is restricted to States such as Tamil Nadu, Karnataka and West Bengal, primarily.

Currently, it has manufacturing facilities based primarily in the South, along with one plant each in Mumbai and Kolkata.

“There are different kinds of bread brands, and we are targeting companies with a top-line of ₹50-200 crore, for making acquisitions,” said Aseem Soni, Chief Executive Officer, Modern Food Enterprises. “We are willing to give a multiple of the turnover, depending on the price valuation, and there is no restriction on the budget for acquiring good bread brands, which are large with distribution, plant and machinery.

“HUL had abandoned the Modern Bread brand in places such as Delhi and Punjab. We are now planning to make acquisitions by taking over local companies and bakeries to re-enter these markets.”

Private equity fund Everstone Capital now has the onus of turning around the heritage brand (it was launched in 1968), but competition has increased significantly in the ₹6,800-crore branded bread category with both regional and national players such as Wibs, Britannia and Golden Harvest dominating across markets in the country.

But penetration of branded bread is low in the urban markets at 35 per cent, with almost 65 per cent of the category still unorganised.

“We are willing to invest 3-4 per cent of Modern’s current turnover of ₹270 crore on a yearly basis to grow the brand. We already have six manufacturing facilities, and the rest of the manufacturing is expected to be done through franchises,” he added.

“We have the capacity to make 15,000-50,000 bread loafs at are our existing six plants, but logistics is a challenge when we go pan-India since bread has to be delivered to outlets every morning, and is not like the typical FMCG model of distribution,” Soni said.

Meanwhile, Modern Foods is building its non-bread portfolio in the bakery category, for which it will be building a separate distribution channel. “Today, our bread reaches 1 lakh outlets across the six States where we are present. But going forward, packaged food like cakes and pastries will have an FMCG distribution model unlike bread. We are in talks with global companies to make a foray into these areas.”

Modern has also tried its hand out in ethnic food like rotis and malabar parathas in the Southern States.

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