The acquisitions fit well with the platforms that we have defined for growth: Sunil D’Souza

Capital Foods put out a process note last year in February stating they are available for discussions and had appointed Goldman Sachs in India to operate the entire process. During the management meeting, the company also had a picture of what Tata Consumer Products Ltd (TCPL) can do with the business. This was in May- June. By the time we were at the end of November, we were certain that the acquisition would happen bar any unforeseen incident.

Discussions with Organic India took place in March last year when we got to know that Fab India is looking to exit the business. It is not that we timed the two acquisitions together, both of them happened.

The categories that both the players are in are growing at a rate of 15 to 20 per cent and are far accretive to our base categories. They are higher margin categories and we have a huge runway to grow them because of distribution. We have 10x of the reach of Capital Foods while Organic India is only in 24,000 outlets.

Distribution in the short term is going to play a huge role and the ability to take them internationally as well right away. Half the turnover of Organic India comes from international business, 80 per cent of that is in the US . The job is to make sure to be broad-based and take it to the other markets.

Capital Foods has a great relationship with ethnic Indian retailers across the globe. From a profitability growth and margin perspective, it is significantly accretive. We are looking at cost synergies on logistics, distribution, selling costs, finance and legal.

The acquisitions fit well with the platforms that we have defined for growth. Capital Foods offers sauces, chutneys and noodles that fit into the pantry platform, their soups, and instant noodles fit within the snacking platform. Organic India in tea fits in premiumization and the supplements into the future-looking portfolio.

Organic India’s 40 per cent business comes from United States three big retailers — Whole Foods, Sprouts and Natural Grocers.

We will try and leverage what else from our portfolio we can put there. The bigger opportunity for us to leverage the relationship that Capital Foods has with ethnic Indian retailers across the globe, whether it is the Patel brothers in the US or other big retailers in Southeast Asia, and the Middle East, they’ve got great relationships including the fact that they make they white label their products. We will use that to drive our businesses, whether it is Tea, Sampann, or Coffee into these retailers.

Organic India is not present in Canada but we have got a very strong presence and are market leaders there in Tea. We can put both capital foods and organic intent to main-line retailers, so both sides it was works perfectly.

The company has three plants and has got four contract manufacturers some of which have low utilisation. We also have facilities and an integration team through which we started integrating the tea and salt business. The team will draw up details of how we are going to integrate and how we will optimise the manufacturing facilities.

Organic India offers supplements including capsules with Tulsi, ashwagandha and Triphala. It is a spot between ancient Indian medicines and organic and are differentiated. They are sparsely present in India and hence we not only get a different, very high-margin growth category but we are going to leverage it to build a pharma channel. We have Gofit and Soulful products that can sell in pharmacies but we never had the scale to put up an independent distribution system work. We have products that can be sold in pharmacies. While we have to figure out exactly how to do that, we aim to cover it as well. 

We have a target right now for closing and integration. We aim to integrate the businesses within three to four months of closing. The work has started on how to build this pharma channel. We had access to information, but not all of it. Now that we’ve done the signing, we will have access to almost all the information. I expect in the next three to four months for us to have a very clear view of how we will get into the pharma channel.

We need to retain key employees and have already had that discussion. We are not buying the brands for the brands but for the business and knowledge that sits within these companies. The key employees must continue with us. We will be having discussions with a broad majority of employees. I will be addressing the employees of Organic India and Capital Foods in Delhi tomorrow.