Wednesday, February 14, 2007

MTR and Orkla

MTR, the brand that is synonymous with Bangalore, nay Karnataka is now taken over by Orkla Foods Norway. Yes, I am sure that you have the same question that I did, Orkla who? And why? From the website Orkla appears to be a big player in the Nordic countries in the food business with presence in Europe.

Why did a company like Orkla, which has no presence at all in this part of the world pick up something like MTR?

As I had written not so long ago (almost2 years back), India is on the threshold of a packed foods revolution. People do not have time as they did earlier, especially in urban areas with husband and wife working and the disintegration of joint families - broad trends - but the basic tendency is towards convenience. So, if earlier, cooking meant a ground up effort, now cooking varies from a "heat and eat" at one end to a "mix set of different pre-packaged ingredients". The supply of cooks and maids is perhaps the only counter to this trend - since having "hotel" food daily is not an alternative. In the long run, packaged foods will have a greater share in the Indian kitchen than ever before. Combine it with the health food boom and we are talking about some pretty big numbers.

So, did MTR sell off too early? That seems to be my thought process on this. MTR had barely scratched the surface. They had a good presence in Karnataka and a scattered presence at other places. In terms of cuisine (heat and eat), they had only a few varieties. In pickles, they could have broadened their range. In masala powders too, they had only scratched the surface. So, has Orkla got a good deal, even at the price that they did? My sense is yes. Indian cuisine has just about started making its mark all over the world. For Orkla, this acquisition is as much a foothold in the Indian market as much as it is a passport to international cuisine and perhaps even manufacturing in India.

6 comments:

Prasanth said...

Hi,
Agree with you that Orkla got a good deal. I always thought that MTR could have grown much faster if they had put more effort into their distribution network. Another area that they missed out is in frozen (they do have a presence but not much) foods (ready to eat variety) - here in US, you go to any Indian grocery store, you see a lot of frozen foods (frozen masala dosa, Idli-vada etc) from companies like Swad and some other names unfamiliar to me. I think MTR missed this opportunity big time.

Kaps said...

MTR already has a good presence in South East Asia. I do agree that they don't have a big presence in frozen food.

Neelakantan said...

Kaps, good presence yes, but to think they were anywhere near exploiting the market, perhaps not. Their ready to eat is a very small segment, as are their pickles - perhaps they were in a hurry to sell as I read somewhere.

Prasanth, I am not sure that frozen foods will make a mark in India anytime soon. The heat and eat segment does it almost as effectively! Thoughts?

Anand said...

I would have expected MTR to hold out longer as well. But if you look at Orkla's stated reasons for getting into MTR, it seems to be to enter the Indian market! Their website also lists their products and offerings, which are way broader than MTR's. So we should probably not be too surprised to see newer products and variants emerging from the MTR product stable as a result of this acquisition. Basically I am proposing that we look at this not as MTR selling OUT, but Orkla buying IN to the India story!

One of the fundamental reasons why the Indian processed foods business has some way to go (also true for food retail in general, btw) is the fact that our cold chain (that element of the supply chain related to transport of foods that require to be stored at -18 C or so) systems are nowhere as mature as we need them to be. This is a growth area in general for our supply chain/logistics providers.

Thoughts?

Anonymous said...

I remember reading somewhere that MTR does some food-based research/products for the Indian military. I hope this acquisition doesn't have any national security concerns (For those who think I'm beind paranoid, remember all the bribery and corruption involving Indian armed forces & foreign firms, including Bofors, Kargil coffins, etc.)

Prasanth said...

Anon,
It was the other way around. The MTR heat and eat products are based on a technology developed by the DRDO (not sure as to the exact lab). So no issues there.

Neelakantan,

Agree that frozen foods have not taken off in India. My comment was in the context of distribution in US. MTR did have frozen food products. I bought them when i was last in US (Masala Dosa). I think they just never bothered to market them properly.