Abstract

The case is about diversified Indian conglomerate ITC Limited’s acquisition of Kolkata, India-based spice business company Sunrise Foods Private Limited (SFPL). SFPL, a leading family-owned company, was engaged primarily in the spices business. Over the years, the spice brand had established a loyal consumer base, both in the basic and blended spices category. ITC, earlier called the Imperial Tobacco Company of India Limited, was a private company with a diverse presence in FMCG, hotels, packaging, paperboards & specialty papers, agri-business, and information technology. The company was one of India’s leading producers and exporters of high-quality foods and spices, sold under the Aashirvaad brand. To scale up its non-cigarette FMCG business and counter its rivals in the food business, ITC planned to grow in an inorganic manner. The FMCG giant looked to augment its product portfolio and significantly scale up its spice business across the country through acquisitions. In July 2020, ITC acquired 100% of the equity share capital of SFPL for Rs. 21.5 billion, its biggest acquisition till 2020. With the acquisition, the company added a 70-year-old brand and a market leader in eastern India to its spice portfolio. ITC went in for the acquisition of SFPL during the Covid-19 pandemic, when people preferred to use branded and packaged products for safety, trust, and quality reasons. The acquisition was expected to help ITC gain a larger footprint as households switched from unbranded to branded spices. ITC said the acquisition was aligned with its strategy of augmenting its spices portfolio under the Aashirvaad brand and scale up its FMCG business across the country. ITC expected its FMCG business to achieve a turnover of Rs.1,000 billion revenue by 2030 and the acquisition of companies to contribute significantly to this end.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand acquisition as a part of a company’s growth strategy
• Understand the demand for FMCG products during the Covid-19 pandemic
• Understand how acquisition is used to augment the acquirer’s business
• Examine how strategic acquisitions help companies become dominant players in an industry.

Keywords

Fast moving consumer goods business; Spices market; Product portfolio; Corporate finance; Acquisition; Share purchase agreement; Equity share capital; Conversion from unorganized to organized segment; Conversion from unbranded to branded products; Inorganic growth