PepsiCo, a major player in the global beverage and food industry, reported on Friday a “mid-single-digit” growth in the Indian market for 2023. Globally, PepsiCo achieved a net revenue of USD 91.47 billion in 2023, marking a growth of 5.9 percent, according to the latest earnings report.
For the full year, developing and emerging markets such as “China and India each delivered mid-single-digit growth”, PepsiCo said.
However, PepsiCo’s net revenue in the Africa, Middle East, South Asia (AMESA) division, including India, stood at USD 6.14 billion, reflecting a decline of 4.64 percent.
This “primarily reflected a 21-percentage-point impact of unfavourable foreign exchange, driven primarily by the weakening of the Egyptian pound, and a net organic volume decline, partially offset by effective net pricing,” it said.
Within the region, PepsiCo noted a 2 percent increase in beverage unit volumes, with notable growth driven by double-digit expansion in India and low-single-digit growth in the Middle East.
Nevertheless, the volume of its convenient foods unit experienced a decrease of 3.5 percent. This decline was predominantly driven by a high-single-digit decrease in South Africa, partially counterbalanced by high-single-digit growth in the Middle East and low-single-digit growth in Pakistan.
“Additionally, India experienced a low-single-digit decline,” it said.
However, its operating profit in AMESA grew 21 per cent, it added.
For the December quarter, PepsiCo’s net revenue in AMESA declined by 3.72 percent to USD 1.93 billion.
PepsiCo said it is expecting “at least 4 per cent organic revenue growth” in 2024.
“We are confident that our businesses will perform well in 2024 in the context of changing marketplace conditions. Category growth rates are normalising as consumer behaviours largely revert to pre-pandemic norms and net revenue realisation moderates as inflationary pressures are expected to abate,” said Chairman and CEO Ramon Laguarta.
Brokerage firms such as Jefferies, Nuvama, and Kotak have increased their price targets (PT) for Zomato stock following the foodtech giant’s announcement of a consolidated profit after tax (PAT) of INR 138 Cr in the December quarter (Q3) of the financial year 2023-24 (FY24). This surge was attributed to a significant expansion in its quick commerce business.
A large majority of brokerage firms have assigned a “buy” rating to the stock, anticipating a total return of 15% or higher within the span of a year.
While JM Financial, an investment banking firm, maintained its price target (PT) for the stock at INR 200, Jefferies revised its forecast upward to INR 205 from its earlier INR 190.
Similarly, Nuvama institutional equities raised its previous price target forecast of INR 140 to INR 180. Conversely, Kotak increased the number to INR 190 from INR 160.
Zomato’s shares closed at INR 149.45 on Friday, marking a 3.78% increase from the previous day’s closing price.
“Zomato continues to be one of our preferred picks in the listed Internet space as we believe it is well positioned to benefit from robust industry tailwinds for the hyperlocal delivery businesses. Its balance sheet also remains strong with net cash of INR 120 Bn as of December 2023,” JM Financials said.
The brokerage’s response follows the foodtech major’s third consecutive profitable quarter. Its net profit soared by 283% from INR 36 Cr in Q2 FY24. The startup earned INR 3,288 Cr from its operations during the quarter, marking a 69% increase from INR 1,948 Cr in the corresponding quarter of last year.
The company’s rapid growth has been driven by its quick commerce vertical, Blinkit. Due to increased festive demand, its revenue surged to INR 644 Cr, more than doubling from the INR 301 Cr it made in Q3 FY23.
“Blinkit is the market leader in the fast-growing quick-commerce space and is set to see sharp margin improvements,” Jefferies said.
Zomato has indicated that it is on track to achieve adjusted EBITDA break-even for Blinkit on or before the June quarter of the financial year 2025. JM Financial identifies take-rate expansion, store operating leverage, and corporate-level operating leverage as key drivers for near-term margin expansion to reach break-even for Blinkit.
Furthermore, Kotak’s upgrade primarily stems from the strong indication of revenue growth in the Blinkit business.
“We believe that the margins of the business can also improve in tandem with the core business,” the brokerage said.
Nevertheless, the lion’s share of the total operating revenue was still generated by its food delivery vertical. Although the vertical’s revenue increased by 29% year-over-year to INR 2,205 Cr, the sequential growth failed to meet the company’s expectations.
According to Kotak, the demand environment was subdued during the quarter, resulting in lower-than-expected growth of 6.3% quarter-on-quarter in food delivery gross order value (GOV). Nevertheless, it highlighted that this growth surpassed that of some other players in the restaurant industry space.
Nuvama anticipates that the expansion of Zomato’s food delivery vertical will be fueled by enhancements in order frequency, the addition of restaurants, and a boost in market share.
“Based on SOTP [sum of the parts valuation], we are valuing the food delivery business at 60x Q4FY26 EBITDA deriving value of INR122/share ($ 12.1 Bn),” the brokerage said.
Another notable surge in the company’s operations came from its B2B arm, Hyperpure, which saw its revenue double to INR 859 Cr from INR 421 Cr a year earlier. The company is currently in the midst of establishing a plant to process value-added food supplies, aiming to further expand this vertical.
Kotal anticipates that the capital expenditure incurred by Zomato will not significantly impact the overall size of the business. Consequently, the expected payback on this investment is deemed attractive. The brokerage also stated that Zomato intends to start with one facility and may consider expansion in the future.
Reliance Consumer Products (RCPL) has acquired the trademarks, recipes, and all intellectual property rights of sugar-boiled confectionery maker Ravalgaon for INR 27 crore, as per a stock market disclosure by Ravalgaon Sugar Farm Ltd.
RCPL’s strategy of acquiring old Indian brands in distress and relaunching them aligns well with its recent acquisition of Ravalgaon, which boasts nine confectionery brands including Pan Pasand and Coffee Break. This mirrors its previous success with brands like Campa soft drink.
The agreement was signed by both parties on Friday. It excludes the slump sale of all assets and liabilities of Ravalgaon.
“It is clarified that while 100% of the revenue of the company (Ravalgaon) is ascribed to the intellectual property being sold, the company will continue to hold all other assets such as property, land, plant, building, equipment, machinery, etc. post completion of the proposed transaction,” as per the disclosure.
Although the agreement includes a non-compete clause for Ravalgaon, the company clarified that it retains the option to engage in third-party manufacturing for other firms, including RCPL.
Ravalgaon generated a revenue of INR 9.66 crore in the fiscal year 2022-23.
This move will bolster RCPL’s competitive position against major players like ITC, Parle Products, and DS Group in the confectionery segment, where it already operates with two acquired brands – Lotus Chocolate and Toffeeman. Ravalgaon revealed in its disclosure that it has struggled to maintain its sugar boiled confectionery business in recent years, resulting in a decline in market share due to intensified competition from both organized and unorganized competitors.
“At the same time, profitability has been affected by the sustained increase in raw material, energy and labour prices, without the ability to effectively pass on the input price increases to its customers beyond the INR 1- price point,” it said in the disclosures.
Additionally, Ravalgaon stated that as the company’s factory, machinery, and equipment have aged, the cost of production and associated wastage have also risen.
“The financial position of the company was exacerbated by the COVID-19 pandemic as schools and offices remained closed for physical attendance over a prolonged period, resulting in the reduction of movement of the company’s largest demographics of consumers. Being an impulse product, the absence of physical movement translated into weak demand,” it said.
On Friday, Zudio, the affordable fashion brand owned by the Tata Group, opened its first flagship store in Noida.
Nestled beside the towering Hanuman statue and temple in Noida’s Sector 49, this store sprawls across 12,000 square feet, spanning two floors.
This marks the second Zudio store in Noida, yet it stands as its first high-street flagship store within the NCR city. Trent Ltd., the brand’s proprietor, presently manages a store in the Great India Place Mall located in Sector 38A.
Zudio, emerging as one of India’s most prominent success stories in value fashion, is undergoing rapid expansion to leverage the goodwill and buzz it has cultivated over the years.
The budget-friendly fashion label aims to launch approximately 200 stores throughout 2024-25. Should this come to fruition, Trent will see the total count of Zudio outlets reach between 650 and 700 by March 2025.
Tata is setting its sights on transforming Zudio into a billion-dollar brand in the near future. P. Venkatesalu, CEO of Trent, outlined this ambition in an April blog post on the Tata Business Excellence Group’s website, stating their objective to achieve a compounded annual growth rate (CAGR) of over 25%. Additionally, they aim to maintain an Earnings Before Interest, Taxes, Depreciation, and Amortization (EBIDTA) margin of over 10%.
The seven-year-old Zudio has significantly contributed to Trent‘s business, driving its standalone revenue to more than double from under INR 3,500 crore before the pandemic to INR 8,000 crore in 2022-23. This surge has propelled the retail arm’s market capitalization to over $5 billion.
Trent, Tata’s retail venture, oversees operations of the Westside department store chain and Landmark bookstores. Moreover, the company has formed two joint ventures with Spain’s Inditex SA to manage the Zara and Massimo Dutti labels in India.
Zudio offers a diverse range of apparel for men, women, and kids, along with beauty products and loungewear, all attractively priced below INR 1,000.
Swiggy, the Bengaluru-based food delivery giant, has announced the launch of Dineout’s flagship event, the Great Indian Restaurant Festival (GIRF), which began on February 7 and will continue until March 31. This festival features the participation of over 7,000 restaurants across 34 cities in India, offering discounts and deals to customers.
Throughout the festival, patrons can enjoy a generous 50% discount on dining bills at participating restaurants. HDFC Bank credit cardholders can further benefit from an extra 15% savings on GIRF transactions. Moreover, exciting partner deals are on offer, such as 20% off Uber rides and 40% off movie tickets through the Cinepolis app/website.
In its latest edition, GIRF will showcase newcomers like Biergarten, Antera, Lord of Drinks, Ministry of Beer, and Anardana, alongside esteemed five-star hotels including Marriott, Leela, Hyatt, and Holiday Inn, providing opulent dining experiences.
Swapnil Bajpai, Head at Swiggy Dineout, said, “Be it an avid food connoisseur or someone looking to explore new culinary tastes, GIRF 2024 has something in store for everyone. We are converging the country’s best restaurants, exciting offers, and unbeatable savings. Our goal is to make dining out more accessible and enjoyable for our customers while celebrating the best of what the restaurant industry has to offer.”
The company asserted that it saved INR 100 crore on food bills by attracting two million diners last year.
The festival will take place in major metropolitan areas like Delhi, Mumbai, Bengaluru, Hyderabad, and Chennai, as well as Tier-II cities such as Agra, Ahmedabad, Jaipur, and Kochi. It will include restaurant deals, partner offers with Uber, Pernod Ricard, and Cinepolis, along with additional payment options from RuPay, Simpl, and American Express.
Swiggy acquired Dineout, an online restaurant booking platform, from Times Internet in May 2022. Reports suggest the transaction was valued at $120 million in an all-stock deal.
Emami Ltd, a leading FMCG company, announced a notable 11.88% increase in consolidated net profit, reaching INR 260.65 crore for the December quarter of the fiscal year 2023-24. This growth was primarily driven by enhanced margins resulting from lower input expenses.
As per Emami’s regulatory filing, the company had recorded a net profit of INR 232.97 crore in the October-December period of the previous fiscal year.
During the quarter in review, revenue from operations increased by 1.38%, reaching INR 996.32 crore, compared to INR 982.72 crore in the corresponding period.
The domestic business revenue remained flat, while non-winter products saw a 5% growth. Additionally, the international business exhibited a constant currency growth of 11%, as reported by the Kolkata-based firm in its earnings statement.
Regarding margins, Emami said that due to reduced input costs, the company experienced an improvement in gross margins, reaching 68.8 per cent, reflecting a substantial expansion of 290 basis points during the quarter.
In the December quarter, EBITDA stood at INR 315 crore, marking a 7% increase, with margins expanding by 170 basis points to reach 31.6%.
The company’s total expenses amounted to INR 681.45 crore, reflecting a 1% year-on-year increase.
Total income stood at INR 1,013.03 crore, indicating a 2.36% increase from the corresponding period of the previous year.
“The third quarter witnessed subdued demand trends, particularly in rural markets. Moreover, the period was characterized by the late onset of winter, negatively impacting the demand for winter contextual products,” it said.
Despite facing these challenges, the company successfully navigated the dynamic business environment, showcasing resilience and achieving profit-led growth in Q3FY24, it added.
“Disrupted winter, weak rural demand and continued inflationary woes impacted the winter and discretionary offtakes. We remain committed to delivering volume-led profitable growth going forward aided by accelerated scale up of emerging channels, distribution initiatives, ongoing brand and strategic investments coupled with launch of innovative products,” Emami said.
Emami’s shares were trading at INR 487.25 each on the BSE, marking a 0.41% increase from the previous close.
Sapphire Foods India, the company behind KFC and Pizza Hut eateries, reported its largest quarterly profit drop since going public in 2021. This decline was driven by intensified competition in the domestic market and reduced spending from consumers cautious about inflation, leading them to scale back on fast-food purchases.
The Yum Brands franchisee saw its consolidated net profit fall nearly 69% to 101.4 million rupees ($1.22 million) for the quarter ended Dec. 31.
According to LSEG data, analysts had anticipated an average profit of 239.6 million rupees.
During the quarter, inflation-hit consumers continued to reduce spending on discretionary items. To address this trend, fast-food outlets in India have been introducing more affordable menu options and ramping up marketing efforts to stimulate demand.
Nevertheless, companies like Sapphire, which offer pizzas starting at INR 169, have also encountered tough competition from local pizzerias offering more affordable alternatives, thereby impacting the profits of larger quick-service restaurants.
Same-store sales, indicating revenue growth from stores operating for a minimum of one year, dropped by 2% at KFC outlets and experienced a significant 19% decline at Pizza Hut locations.
The company’s total revenue increased by 12% to reach 6.66 billion rupees, while expenses surged by nearly 16%. Consequently, its margins on earnings before interest, tax, depreciation, and amortization (EBITDA) contracted from 19.6% a year ago to 18.4%.
Shares of Sapphire, which also manages Pizza Hut outlets in Sri Lanka, saw a 2% increase following the announcement of the results. This contrasts with a 2% decline in the third quarter.
Honasa Consumer Ltd, the parent company of the D2C unicorn Mamaearth, reported a 250 percent year-on-year increase in net profit, reaching INR 26.1 crore in Q3FY24. This surge was fueled by strong demand during the period, as reflected on a consolidated basis. Notably, the company had reported a net profit of INR 7.4 crore in the same quarter of the previous fiscal year.
The Gurugram-based startup, which entered the market in 2023, reported an operating revenue of INR 488.2 crore, marking a 28 percent increase from the previous year. In Q3FY23, Honasa had reported an operating revenue of INR 382.2 crore.
In comparison to the previous quarter, the company managing Mamaearth experienced a 2 percent decline in operating revenue, dropping from INR 496.1 crore. Additionally, its net profit decreased by 12 percent from INR 29.8 crore on a quarter-on-quarter (QoQ) basis.
During an analyst call, Mamaearth CEO Alagh highlighted that the first half (H1) typically represents a stronger period for the company compared to the second half (H2), emphasizing that products such as facewash, sunscreen, creams, and shampoos constitute some of its core offerings.
In the said quarter, the company witnessed a sales growth of 28% year-on-year.
In terms of the portfolio, the company sold approximately 10 lakh color care units, reaching an Annual Recurring Revenue (ARR) of INR 150 crore. Meanwhile, The Derma Co. attained a positive EBITDA status year-to-date.
“Four out of six brands from our portfolio are already in the INR 150 crore ARR club and we see this as a testimony of our capabilities. Having built colorcare with Mamaearth showcases our ability to build new categories and versatility of the brand. As we move forward, focus continues to be on purpose-based brand building, innovation and distribution expansion,” said Varun Alagh, Chairman and CEO, HCL.
According to filings, employees of the holding firm exercised 3,695,191 stock options during the quarter, while the promoters of Momspresso exited.
“During the current quarter, the promoters of Momspresso resigned from their employment and the vesting conditions of the employee stock option were not fulfilled. Accordingly, the group has reversed the share based payment expense of INR 47.47 million during the current quarter,” it added.
The stock closed the day at INR 432.75 per share, marking a 3.54 percent increase from its previous close on the BSE.
OYO, the IPO-bound hospitality unicorn, achieved its second consecutive profitable quarter in Q3 of the financial year 2023-24 (FY24), doubling its profit after tax to INR 30 Cr, Founder and CEO Ritesh Agarwal said.
At a town hall meeting on Friday, Agarwal announced that the startup’s first profitable quarter was in September, with a net profit after tax of over INR 16 crore.
“In the upcoming quarters, we anticipate a consistent rise in PAT, driven by enhanced patron confidence, improved customer experience, and favourable market conditions conducive to sustained growth,” Agarwal said.
According to sources, Agarwal stated that OYO experienced a nearly 10% year-on-year revenue growth in the third quarter of FY24. Additionally, the company managed to reduce its operating costs by 15% compared to the same quarter last year through optimization efforts.
He mentioned that the platform’s hotel count surged by almost 27%, reaching 17,000 over the past year.
It’s worth noting that OYO witnessed a 34% decrease in its net loss, dropping to INR 1,286.5 Cr in FY23 from INR 1,941.5 Cr in FY22. Additionally, operating revenue increased by 14% to INR 5,463.9 Cr in FY23 from INR 4,781.3 Cr in the preceding fiscal year.
Agarwal announced during the town hall that the startup’s adjusted EBITDA reached INR 275 Cr in FY23 and is projected to increase to approximately INR 1,000 Cr in the current fiscal year.
Recently, OYO also repaid INR 1,620 Cr of its outstanding Term Loan B (TLB), accounting for about 30% of its TLB, which has a term until June 2026.
Last month, it was reported that the startup was in talks with Malaysian sovereign wealth fund Khazanah Nasional Berhad to raise close to $400 Mn in a fresh funding round at a valuation of $6 Bn.
Established in 2012 by Ritesh Agarwal, OYO provides a range of accommodations including holiday homes, casino hotels, coworking spaces, budget hotels, and corporate stays, among others.
Last year, the SoftBank-backed startup filed its draft red herring document (DRHP) for its initial public offering (IPO) via a confidential route. Additionally, it reduced the IPO size to $400-$600 Mn from the initial plan of raising INR 8,430 Cr ($1.2 Bn) when it first filed the DRHP in 2021.
Suresh Narayanan, chairman and managing director of Nestle India
Nestle India’s Chairman and Managing Director, Suresh Narayanan, said that the government’s infrastructure spending, moderating inflation, and the upcoming elections are likely to boost consumption and lessen the polarities in consumer trends where premiumisation has been booming amid tepid mainstream demand.
Narayanan stated that the government’s commitment to invest INR 11 trillion in infrastructure in the recent vote-on-account budget will drive job creation and increase household incomes. He emphasized that a significant portion of these incomes will be directed towards the consumption of essential goods.
Highlighting the polarisation in consumer demand, he said, “If you are a mainstream product, you are facing the vagaries of a combination of job losses and food inflation which continues to be choppy.”
He said there are some stress points and “the Diwali festival demand wasn’t as buoyant as expected”.
“Many people bought more cars and more luxury items but the (demand) for the common man’s products was relatively muted.”
However, Narayanan added that the long-term growth outlook remains positive, and the company aims to achieve revenue growth of 11-12% in 2024, building upon a strong base.
“The underlying growth fundamentals continue to be strong… You can have short-term wobbliness but the long-term sustainability of the trajectory is what we are confident about,” Narayanan said. He said the demand outlook is “fairly positive despite some slog overs”.
The maker of Maggi noodles and KitKat chocolates is investing INR 6,500 crore on capacity expansion over five years – its highest investment in such a timeframe, he said.
Erratic monsoon rains, an extended rural slowdown, and food inflation have contributed to a slowdown in sales across FMCG categories in the October-December 2023 quarter.
In a report released on Tuesday, researcher NielsenIQ predicted that following two years of expansion, the FMCG sector’s value growth could decrease by half to 4.5-6.5% this year, compared to 9.3% in 2023 and 8.4% in 2022.
Narayanan said that despite the general decrease in inflation levels compared to 2022, the stability in commodity prices should result in an uptick in consumption.
“We also have a lot of hope for economic activity to pick up around the elections,” he said.
For the December quarter, Nestle India reported a 4.4% year-on-year rise in net profit at INR 655.6 crore impacted by one-time service costs, while domestic sales grew 8.9% on the back of pricing and strong momentum in ecommerce and out-of-home channels.
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