Modern Foods - Disinvestment and After*

            


Details

Case Code : CLBS022
Publication date : 2004
Subject : Business Strategy
Industry : Foods
Length : 04 Pages
Price : Rs. 50

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Key words:

distribution network, distribution channels, turnaround


* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.

 


Abstract: ICMR India ICMR India ICMR India ICMR India RSS Feed

The caselet gives an overview of the disinvestment of MFIL by the GoI and the turnaround efforts initiated by HLL for MFIL. When HLL took over MFIL, it was believed that MFIL would perform better under the new management. The case discusses the various steps taken by HLL management for turning around the sick company.

Issues:

 » The disinvestment process initiated by the GoI.
 » HLL’s experience with MFIL.
 » HLL’s turnaround strategies for MFIL.

Introduction

In February 2000, as part of its disinvestment programme, the Government of India (GoI) sold Modern Food Industries (India) Limited (MFIL) to Hindustan Lever Limited (HLL) for Rs. 1.05 billion. This was hailed as a major step in the GoI’s disinvestment plan. However, some analysts questioned the GoI’s decision to sell MFIL - a company with 14 production units spread across the country and almost 0.5 million square meters of land - for just Rs. 1.05 billion.


The acquisition of Modern Foods provided HLL control over 14 bread manufacturing units and a distribution network with 22 franchise units. HLL officials said that the vast distribution network of MFIL would help the company’s growth in the high-end of the foods business. HLL, which sold branded wheat, felt that it could generate synergies in procurement. This would be critical to success in a low margin, high volume business.....

Questions for Discussion:

1. Analysts felt that by taking over MFIL, HLL could consolidate its position in the food business. Identify and describe the synergies that HLL was looking for by taking over MFIL.

2. MFIL was plagued with capacity under-utilization, and labor problems. Discuss various strategies adapted by the HLL to revive MFIL.