Hindustan Unilever looking for buyers for its atta, rice, salt business

MUMBAI: Consumer goods major Hindustan Unilever may sell its commoditised businesses such as atta, rice and salt brands as it looks to realign its food portfolio.

The multinational, in its recent internal review, has decided to sell its ‘non-core’ food brands and focus on its core strength instead — Kissan, Knorr and icecream brands, said three people with direct knowledge of the company’s plans.

The firm has appointed investment bankers to scout for buyers, and rivals and other strategic players have been sounded out.


This is in line with the company’s strategy that it adopted last year when it sold its Modern Foods product portfolio of breads and bakery items to Nimman Foods, which is backed by private equity fund Everstone Capital, for about Rs 220-250 crore.

“The discussions are at an initial stage and the company will take a call depending on the valuation it gets from prospective buyers,” said an investment banker with knowledge of the development. HUL’s packaged foods portfolio consists of brands such as Kissan (jams, ketchups and squashes), Knorr (soups, soupy noodles and meal makers), Annapurna (salt, wheat flour) and Kwality Wall’s and Magnum (frozen desserts/ice creams).

“In the global scheme of things, the atta and salt businesses are inconsequential. In India, HUL was no match to some of its peers in the segment and they want to continue only in businesses where they have a leading position,” said another banker privy to the company’s strategy. “The company expects a valuation of about Rs 350-400 crore from the sale,” said the third person who’s part of the deal.

An HUL spokesperson, when contacted, said, “We do not comment on market speculation.” Hindustan Unilever entered the salt business in 1995 and the atta business in 1998 but has struggled since to take lead in these segments. The sluggish sales of the food products along with the thin margins have forced the company to take a fresh look at its India strategy in the foods business.

As per a HDFC Securities research report, dated January 16, 2016, the company ran a thin margin of 3.2% on its packaged foods segment with a total revenue of Rs 4,695 crore for the third quarter ending December 31, 2015. This was down 7.4%, compared with Rs 5,071crore of revenues in the second quarter ended September 30, 2015. Bulk of this came from the fast-selling segments of Knorr and Kissan. The revenues from packaged foods are just 5.89% of the total revenue of Rs 79,709 crore the company earned for the third quarter.

HUL’s food business largely revolved around Kissan, Knorr and Kwality Wall’s icecream. The company earlier tried various strategies such as clubbing food brands such as Knorr Annapurna and Kissan Annapurna (for ready-to-eat chapattis), but didn’t tinker with them eventually.

According to Ritwik Rai, VP, Kotak Securities, the atta and salt segment aren’t HUL’s focus areas. “In atta, they have already vacated the space to ITC which itself does not make much money. HUL seems to be following the global template and there has been no Indian innovation in the space.”