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HomeNewsBusinessStartupExclusive |Paper Boat, McDonald's owner, others in talks to acquire Raw Pressery in distress sale

Exclusive |Paper Boat, McDonald's owner, others in talks to acquire Raw Pressery in distress sale

Raw Pressery is best known for its cold-pressed natural sugarcane, orange and grape juices, among others. Industry insiders say its target market is too niche to build a large independent company and that too by raising large amounts of venture capital.

October 05, 2020 / 13:40 IST

A string of new-age consumer brands as well as established food retail operators are in talks to acquire stressed cold-pressed juices startup Raw Pressery at a fraction of its previous valuation, sources have told Moneycontrol. 

Paper Boat, run by Hector Beverages, healthy snacks firm Wingreens Farms and Hardcastle Restaurants, which operates McDonald’s restaurants in west and south India, are in the race to acquire Raw Pressery for about Rs 150-200 crore, the sources said.

Founded in 2013 by Anuj Rakyan, who is also the managing director, Raw Pressery (Rakyan Beverages) was valued at about Rs 500 crore when it last raised Rs 65 crore in funding from existing backers—venture capital firms Sequoia Capital, Saama Capital, and DSG Consumer Partners. So far, it has raised Rs 150 crore in funding from these investors.

The beverage maker has been forced to look for a buyer, cut costs and make changes at the top as it has struggled to contain cash burn for over a year now. It has revenue of about Rs 6 crore a month, sources said. 

“You should not be raising Rs 150 crore in funding to come to Rs 5 crore sales a month after four years. It then becomes a never-ending cycle, where you can’t crack economics and remain dependent on funding for growth,” a person close to the company said, requesting anonymity.

Pressed for cash

The company’s investors and top management realised a few months ago that cutting costs and selling the business was the only way the brand would survive. 

To this effect, instead of Rakyan, CFO Badri Sanjeevi is in charge of the sale, finding a buyer and is also focused on cutting costs. The company’s cash burn has now been reduced to less than Rs 1 crore a month.

Rakyan declined to comment. McDonald’s denied its interest and Hector Beverages and Wingreens Farms did not respond to Moneycontrol’s queries. 

Raw Pressery is best known for its cold-pressed sugarcane, orange, grape and other juices. It also sells coconut water, lemon and aloe vera juice and more recently almond milk. A 200 ml bottle of Raw Pressery sells in stores from anywhere between Rs 60 to Rs 180, depending on the flavour.

Despite having a small dedicated consumer base, who even subscribe to its juices every month, industry insiders say its target market—of health-conscious juice-drinkers willing to pay a premium—is too niche to build a large independent company in a few years and that too by raising large amounts of venture capital.

For the year ended March 31, 2018, its last annual filing, Raw Pressery reported a loss of Rs 48 crore on a Rs 33 crore revenue.

The business and technology website Morning Context reported on September 9 that Raw Pressery was up for sale.

While a deal hasn’t been closed yet, who will pull the trigger will depend on each buyer’s individual plans and the company’s investors too. 

Two of the potential suitors—Hector Beverages and Wingreens Farms are both backed by Sequoia, also a Raw Pressery investor. However, VT Bharadwaj, the partner who led all three investments from Sequoia, has moved on to invest on his own from A91 Partners. A91 is an investor in Paper Boat as well.

For a prospective buyer, Raw will have to fit into its portfolio. Wingreens Farms, which makes healthy chips, sauces, and spice mixes, acquiring Raw will further its food portfolio into the drinks segment. 

Paper Boat is already in the drinks segment and sells mango, anar (pomegranate) and chilli-guava juices along with Jaljeera. Raw’s drinks and more importantly prices will be a deviation but there are some common threads. Paper Boat recently launched coconut water, which Raw already sells.

Listed FMCG companies are also eyeing a deal, sources said. The juices and flavoured drinks market also has inherent challenges such as short shelf life, a competitive market led by Pepsi (Tropicana), Coca Cola (Minute Maid) and Dabur’s Real.

“For one, unlike their sugary counterparts, such juices need to be preserved at controlled temperatures. In a country that has a limited cold-chain infrastructure, it can get difficult to distribute the product as widely as the likes of Raw Pressery would want. At the same time, cold storage can increase the costs by anywhere between 10 and 15 percent on a unit level,” The Morning Context report said.

If Paper Boat or Wingreens acquire Raw Pressery, it will, to some extent, save face for Sequoia. Although its shares in Raw will be sold at a discount, if the buyer can turnaround the business then Sequoia stands to benefit.

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M. Sriram
M. Sriram
first published: Oct 5, 2020 01:40 pm

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