B

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BG Goes to India
Source www.pantaloon.com
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Agenda
Company Overview
International Growth Opportunities
Reason for Choosing India
Mode of Entry
Financing the Joint Venture
Impact on the Overall Strategy of BG
Conclusion
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Company Overview
1889 Bloch Guggenheimer starts producing
pickles and peppers.
Dec. 1996 Renamed BG Holding corporation, the
company implements an aggressive growth strategy
by acquisition.
1999
1997
1999
1999
2003
Today BG Foods, Inc has 18 leading brands.
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Company Overview
Organization Headquaters located in NJ 5
Facilities 4 distribution centers
Customers Customers include grocery store
chains and food service institutions Wal-Mart
accounted for 10.4 of 2006 Net Sales.
2006 Financial results Net Sales 411.3
million, 8.4 compared to 2005 Net Income
11.6 million or 2.8 of sales
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International Growth Opportunities
2007 Global Retail Development Index TM (GRDI)
Source Euromoney, Wold bank, Global
Competitiveness Report 2005-2006, A.T Kearney
Analysis
100
2007 GRDI Score
0
Chile
Ukraine
China
Brazil
India
Low CountryRisk
High Market Attractiveness
Low Market Saturation
Urgency To Enter Market
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International Growth Opportunities
2007 GRDI Country AttractivenessSource A.T
Kearney Analysis
On the radar screen
Slovenia
100
United Arab Emirates
To consider
Mexico
Low priority
Hungary
Chile
Size of bubble sales
China
Lativa
Lithuania
Malaysia
Thailand
India
Croatia
Country Risk(0 high risk, 100 low risk)
Bulgaria
Saudi Arabia
Tunisia
Russia
Brazil
Vietnam
Romania
Turkey
Colombia
Peru
Egypt
Philippines
Ukraine
Indonesia
Uruguay
25
Market Potential (0 low potential, 100 high
potential)
100
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International Growth Opportunities
Window of Opportunity AnalysisSource A.T Kearney
Opening
Peaking
Declining
Closing
China (2007)
High
Ukraine (2007)
India (2003)
India (2007)
GRDI Ranking
India (1995)
Low
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Reasons for choosing India
India Economy One of the fastest growing
economy in the world with an 8 to 9 annual
growth Agriculture accounts for 28 of the GDP.
Market potential Estimated food processing
industry of 70 billion Estimated growth rate
of 9 to 12 per year
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Reasons for choosing India
Demand Drivers Rapid urbanization with an
estimated increase of urban population from 30
today to 50 in the next 10 to 15 years Rising
per capita income Changing lifestyles
Government Policies Creation of new laws to
allow 100 Foreign Direct Investment is in
progress Ministry of Food Processing Industry
has a program to support and encourage food
processing development. Several tax
incentives Heavy Investments to upgrade
infrastructure
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Mode of Entry
Foreign Direct Investment (FDI) Joint Venture
with 5050 equity based model
Sourcing and Distribution channels Culture and
Marketing Operations Finance availability
Legal Form of Entity Joint venture Subsidiary
registered as Private Corporation under Indian
Companies Act.
Fund operations by equity, debt and internal
accruals Repatriation of dividends Treated as
domestic company for tax purposes
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Mode of Entry
Joint Venture Partner Vision Dedicated to the
health and well being of every
household Founded in 1884 Fourth largest FMCG
Company in India Has a strong distribution
network that covers 175 towns and 75,000 retail
outlets across India
Plans to foray into processed food and
ready-to-eat category Processed Fruit juices
under brand name of Real Fast Moving
Consumer Goods
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Mode of Entry
Alternate Distribution Opportunities In 2006,
97 of food retail sector is operated by small
independent stores but major Indian company are
investing to create supermarket chains Reliance
industries invested 750 million. Food Bazaar
launched its supermarket chain in 2002 and had
already built 47 supermarket by end of
2006. Godrej Agrovet had created a chain of 18
supermarket in less than a year and plans to
open 1000 supermarkets in rural India in the next
5 years. Walmart Bharti Group signed joint
venture.
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Mode of Entry
Market Penetration Strategy Short Term Fruit
products - Variant of Polaner product
line Utilize Daburs Fruit processing
capabilities
Mid Term Target urban markets Ready to eat
products segment variants of Ortega, BM
Long Term Diversify product lines through
acquisitions
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Financing the Joint Venture
Investment Building of a facility with a 750
tones capacity Plant construction cost and
operational cost parameters are proportionally
derived from samples provided on GOI sites.
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Financing the Joint Venture
Production and Sales revenue Estimate Capacity
utilization will increase as sales
increase Excess capacity is required to handle
seasonal character of raw materials
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Financing the Joint Venture
Cost assumptions Costs are based upon a
percent of sales
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Financing the Joint Venture
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Financing the Joint Venture
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Financing the Joint Venture
Break Even Sales and Production levels
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Impact on the Overall Strategy of BG
Small Financial Impact Low start up cost shared
50/50 with Dabur Favorable environment to
finance through debt
Advantages for BG in the US Import from India
of exotic products for the North American
market Delocalization of some US market products
to lower labor cost area
International growth of BG India is a first
step toward international growth (China, Russia,
Brazil) Long term, India could become a
substantial source of revenue
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Conclusion
India provides growth opportunity for
BG. Foreign Direct Investment in India through
Joint Venture Dabur as a Joint Venture
Partner Mid-term objective of product line
diversification Long-term objective of growth
by acquisition
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Questions Answers