Suitor PepsiCo joins Haldiram Snacks queue; US execs in direct talks with Aggarwal family

PepsiCo has made a late entry into the competition for a stake in Haldiram Snacks Food, executives aware of developments said. Key contenders Temasek and Alpha Wave Global, the latter also a late-stage bidder, are said to be in advanced talks with the Aggarwal family, the founders of India’s largest ethnic snacks and convenience foods maker, having made firm offers last month for a 10-15% stake.

Executives from PepsiCo headquarters in New York have initiated talks directly with members of the Aggarwal family for buying a minority stake in recent weeks. However, these are still exploratory and may not lead to a formal transaction, said the people cited. The funding will also be led by the US parent. The Indian unit’s leadership is said to be playing a smaller role.

The Aggarwals are expecting a valuation of Rs 85,000-90,000 crore as they seek to rope in an external investor for the first time.

PepsiCo, the maker of Lay’s chips, Kurkure salty snacks and Doritos nacho chips, has been facing intense competition in the domestic snacks market.

Regional Players

There has been a rapid increase of regional players and direct-to-consumer snacks makers. Apart from Haldiram, Bikanerwala and Balaji, and listed companies Bikaji Foods, Gopal Snacks and Prataap Snacks, the ethnic snacks market is fragmented and teeming with regional players. Most of them charge less than national brands, have direct distribution and give higher retailer margins.

PepsiCo’s beverages business, which includes Pepsi, Mountain Dew and 7Up carbonated drinks, and Slice and Tropicana juice drinks, is managed almost entirely by RJ Corp-owned listed company Varun Beverages Ltd (VBL). “With beverages bottling outsourced to VBL, PepsiCo India’s core focus is snacks, a market where it is no longer as dominant as it used to be,” said an executive.

PepsiCo leads in western snacks—chips and nachos—with about 24% market share. It lags in ethnic snacks such as namkeen, bhujiya, chana chur, etc. The company sees synergies and growth opportunities in an alliance with Haldiram. Its snacks and beverage business are of similar size.

PepsiCo’s current head in India, Jagrut Kotecha, was handpicked for his decades-old experience in PepsiCo’s snacks business, with the focus on bolstering the snacking business in the country.

PepsiCo didn’t respond to queries. Haldiram Snacks Food chief executive KK Chutani said he had no comment to offer.

PepsiCo India Holdings reported consolidated revenue of Rs 5,954.16 crore for the nine-month period of April to December 2023, according to Registrar of Companies (RoC) data accessed by financial intelligence platform Tofler. For the same period, PepsiCo’s snacks business, which includes Kurkure, Lays, Doritos and Quaker, reported revenue of Rs 4,763.29 crore.

Haldiram Snack Foods reported revenue of Rs 12,800 crore in FY24, well over twice the size of PepsiCo. It manufactures and distributes 500 types of snacks, namkeen, sweets, ready to eat and pre-mixed food.

“With the merger of its north and west operations, Haldiram has market dominance in ethnic snacks,” said one of the executives cited above. “For PepsiCo, even a minority stake with Haldiram will give it huge access to distribution strength pan-India and a foothold in massive bandwidth in ethnic snacks.”

PepsiCo’s past acquisitions in snacks include Uncle Chipps, a brand of potato chips it acquired from Amrit Agro Ltd in 2000. At that time, PepsiCo India’s snacks division was called Frito Lay. However, Uncle Chipps is predominantly distributed in tier 2 and 3 markets as a price warrior brand. In 2016-17, PepsiCo India introduced Doritos nachos, its multi-billion brand, which operates in the western snacks space.

In its last reported earnings for the July-September 2024 quarter, PepsiCo said its India business witnessed high single-digit growth by unit volume both in beverages and snacks. PepsiCo does not provide country-specific numbers in its quarter earnings.

“There are pockets of strength in international (business),” PepsiCo chairman Ramon Laguarta had said during the company’s third-quarter earnings call in October. “There are markets like Southeast Asia and India that are growing nicely.”

In the June quarter, sales volume for PepsiCo’s Frito-Lay North America business dropped 4%, the company said. The snacks-and-soda giant reported a small bump in revenues and a 2% drop in sales volume in the June quarter globally.

Market research company IMARC Group said in a report that the Indian snacks market was estimated at Rs 42,694.9 crore in 2023, and is expected to more than double to Rs 95,521.8 crore by 2032.

Some analysts said Haldiram is unlikely to sell a minority stake to PepsiCo and instead seek a premium for selling out. In the past, it’s been in talks with Mondelez, Kellogg’s and Tata Consumer for a sale, but eventually walked away. Even PepsiCo’s former CEO Indra Nooyi held talks with the family for an investment, but that too did not yield any result.

“If the family at this stage decide to open the doors to strategics, then they will run a full process and seek competitive bids,” said the CEO of a homegrown snacks company. “Even at $10-12 billion valuation, for a business and brand like Haldiram, there will be enough takers. But knowing them, they will then seek an even higher valuation. We have seen how the cookie crumbled in the past.”

As reported by ET on January 8, Temasek is leading in the discussions to buy a minority stake for upwards of $1 billion. On December 7, ET was the first to report that three rival groups had submitted binding offers for a 10-15% stake in the company. These included a consortium led by Blackstone along with Abu Dhabi Investment Authority and GIC of Singapore, Temasek-Bain and Alpha Wave. Bain later dropped out.