McCormick & Company, Inc. (MKC) has consummated its joint venture with Kohinoor Foods Ltd., India to market and sell basmati rice and food products in India. The venture was announced in June 2011 and will now be named as Kohinoor Specialty Foods India Private Ltd.
Based in New Delhi, India, Kohinoor Foods Ltd. is one of the leading manufacturers and marketers of Basmati rice, which is a premium and naturally flavored long-grained rice used in authentic Indian cuisine. The Kohinoor brand is one of the top national brands in the basmati rice category in India and also has a significant international presence in countries such as the U.S., the U.K., Dubai, Canada, Japan, Australia, Singapore and several European countries.
McCormick had invested a total of INR 5.2 billion ($113 million) in the deal and thus commands an 85% interest in Kohinoor Specialty Foods India Private Ltd. Going ahead, McCormick will also bear approximately $4 million of fees and other costs in the fourth quarter of 2011 related to the deal, which would reduce earnings by 3 cents per share.
However, McCormick expects the joint venture sales to be approximately $85 million in the first year, and will be accretive to McCormick’s earnings per share in 2012.
Satish Rao, who has been associated with McCormick for the past 16 years, will act as the Managing Director of Kohinoor Speciality Foods India Private Limited. In addition, the Kohinoor joint venture will have approximately 275 employees and a modern production facility at Bahalgarh, Haryana, India.
The joint venture is a part of McCormick’s strategic business plan to expand sales in emerging markets. Including India, McCormick expects emerging markets to contribute approximately 12% of total sales by 2015, reflecting an increase of 33.3% from 9% in fiscal 2010. The Kohinoor brand of products is an ideal fit for the company’s portfolio.
Both the companies are expected to significantly benefit through this new joint venture. McCormick believes that Kohinoor has developed a fast-growing, profitable business, with vast expertise in their products and an extensive distribution network in the Indian retail market. McCormick plans to develop and launch new products, penetrate potential and under-served markets and thereby expand in the foodservice channel in India.
McCormick has a decade-long presence in India. The company first partnered with A.V. Thomas Group in 1994. AVT McCormick Ingredients Private Limited has grown into a leading supplier of cleaned, steam sterilized, ready to use spice ingredients for the global market.
In 2010, McCormick acquired a 26% interest in Eastern Condiments Private Limited that is a leading brand of spices, seasonings and other related food products in India and the Middle East.
Based in Sparks, Maryland, McCormick is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry, across the globe. The company’s key sales, distribution and production facilities are located in North America and Europe. Furthermore, the company has facilities in Mexico, Central America, Australia, China, Singapore, Thailand and South Africa.
McCormick which competes with ConAgra Foods, Inc. (CAG) and Krafts Food Inc. (KFT) currently holds a Zacks #4 Rank which implies a short-term (1-3 months) Sell rating.
