South Korean conglomerate Lotte Confectionery Co. Ltd has agreed to acquire Havmor Ice Cream Ltd for 164.5 billion won ($152 million, Rs 978 crore) to establish a foothold in the world’s fastest-growing ice cream market.
Lotte said in a filing to Korea Exchange on Thursday that it will acquire all of Havmor’s 10 million issued shares in cash from the founding Chona family.
The deal will help Lotte expand its business in India, where it already sells gums, candies and snacks through Chennai-based unit Lotte India Corporation Ltd.
The acquisition will pitch Lotte against a host of branded homegrown ice cream makers such as Amul, Kwality Walls, Mother Dairy and Vadilal as well as and international players such as Baskin-Robbins, Häagen-Dazs and London Dairy. While the foreign companies cater mainly to the high-end segment, the Indian players sell products at wide-ranging price points.
India’s ice cream market has grown at a compound annual rate of 13% over the past five years, the fastest pace in the world, market research firm Mintel said in July. Ice cream sales in India are forecast to reach 381.8 million litres in 2017, overtaking the UK, and reach 657.2 million litres in 2021, Mintel said.
However, India’s ice cream market is still far smaller than the world’s biggest markets—China, the US and Japan, which clocked sales of an estimated 4.3 billion litres, 2.7 billion litres and 756 million litres, respectively in 2016.
Ahmedabad, Gujarat-based Havmor is a leading player in western India. Its products are available at more than 50,000 outlets across Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Punjab, Goa, Delhi and Telangana, according to its annual report. Havmor also operates ice cream parlours under the brand HavFunn. The company is led by managing director Ankit Chona.
Havmor was founded in 1944. It posted a net profit of Rs 12.5 crore on net sales of Rs 343.7 crore for the year through March 2016, according to VCCEdge, the data research arm of VCCircle.
Lotte Confectionary owns a 98.57% stake in the Indian unit. The Korean company had, in 2004, acquired a majority stake in Parrys Confectionery Ltd and renamed it Lotte India.
Lotte India has a wide range of confectionery products such as Coffy Bite, Lacto King, Caramilk, Coconut Punch and Chocopie. Its factories are located at Cuddalore and Chennai in Tamil Nadu, and Rohtak in Haryana.
Lotte India posted net sales of Rs 423.38 crore and a net loss of Rs 22.5 crore for the 15 months ended March 2016.
Meanwhile, Bloomberg reported earlier in the day that Lotte Group planned to invest between $3 billion and $5 billion in India in the next five years. The group intends to invest in retail, chemicals, food processing and real estate, as well as develop railway platforms in the country, according to the report.
