IPO-bound MTR parent Orkla India sees high growth in regional markets, not looking at pan-India presence

MTR Foods

Orkla India, owner of MTR Foods, eyes to cash in on the ongoing shift towards packaged goods, aiming to increase household penetration in its existing key markets while not aspiring for a pan-India presence in the long term, Managing Director and Chief Executive Officer Sanjay Sharma  told Moneycontrol in an interview on October 24.

The company currently lists Karnataka, Kerala, Andhra Pradesh and Telangana as its core markets and has a portfolio comprising  over 400 products across Spices and Convenience Food categories under various brands.

"I am serving 10 to 12 consumption occasions out of 260 consumption occasions. That tells you the headroom that we have in terms of for one product, I have 200 products like this. So the opportunity to grow is very, very high. And every market that we are in, especially in the traditional food space, will move from the unorganized to the organized," Sharma said in an interview. The comments come as health conscious consumers are increasingly opting packaged products  as perceptions of branded, packaged food are evolving, driven by greater access to information through social and print media.

"Markets are transitioning from unorganized to organized and that will continue to happen and  there's enough and more growth opportunity available in the key markets," Sharma said.

The Norway-listed industrial investment company-backed entity competes with other brands such as Everest, MDH, Aachi Masala, among others,with the top eightplayers collectively representing approximately 57 per cent of the overall packaged spices market by value. Private labels include brands by retailers such as Reliance Retail and Big Basket.

"Our biggest strength of being competitive is that we are regional. We are not trying to build a pan India business and our biggest competition is the consumer. What we want to do is to grow and become bigger with the current set of consumers. I am not playing a pan-India business. I don't want to build a generic business. I want to build a business that has great emotional loyalty," he added.

India's cultural and regional diversity makes it difficult for brands to gain nationwide market dominance. The market is fragmented among regional spice makers who cater to local consumer preferences and cooking habits that differ across states.

While loose spices are sold in local markets,  packaged spices are sold across all retail channels, including general trade, modern trade, and e-commerce/quick commerce. For Orkla, 79 per cent sales come via general trade, followed by 13.2 per cent in modern trade and 7.5 per cent in e-commerce and quick commerce.

"Fastest growing channel  is the e-commerce business which is growing at over 40 % yoy," Sharma said.

Going forward, Orkla plans to deepen market penetration, expand across new formats, scale up its international business, and actively pursue strategic acquisitions to broaden its portfolio.

Orkla's current revenue mix consists 66 per cent share coming from spices and remaining from convenient read to eat/ready to cook packets. The company plans to increase the penetration of convenience food products, to capitalise on the rising demand for convenient meals driven by changing consumer lifestyles and preferences.

The company is slated to open its initial public offering on October 29, which is structured entirely as an offer-for-sale of 2.28 crore equity shares by Orkla Asia Pacific and the two other promoters.  The IPO is structured entirely as an offer-for-sale of 2.28 crore equity shares by Orkla Asia Pacific and the two other promoters.

Post the OFS, Orkla Asia Pacific, holding a 90 percent stake in the company, will be left with 75 per cent stake, the company said in a press conference on October 24.