Content area
Full text
On Sept. 8, 2012, The Hershey Co. acquired the outstanding 49% stake in its Indian joint venture with Godrej Group. In doing so, it announced the establishment of Hershey India, a fully owned subsidiary.
Financial details of the deal were not disclosed but under the agreement Hershey assumed $47.6 million in debt from the venture. It will also gain the established brand portfolio, led by the Maha Lacto and Nutrine sugar confectionery brands and Jumpin and Sofit beverages, as well as two factories located in Chittoor and Mandideep. In 2011, the Godrej Hershey venture reportedly had net sales of $80 million but suffered a net loss.
This major acquisition shows that Hershey is finally looking to move beyond its domestic U.S. market and is seriously investing in its recently reaffirmed, and much needed, international expansion strategy. Targeting one of the most attractive confectionery markets in the world is a positive move, but the assets it recently acquired have a track record of unprofitable operations and eroding market share.
Since its formation in 2007, the joint venture failed to introduce any significant Hershey brands to India other than the company's eponymous chocolate syrup. As such, Hershey will face major challenges to turn its new subsidiary into a dynamic and profitable organization that can fully leverage its indisputable legacy and brand equity. Moreover, Hershey will have to do this without a local venture partner and in the face of strong competition from leading multinational rivals already active in India's increasingly lucrative confectionery market.
Positive growth prospects in India
Hershey has chosen wisely in making India one of its primary targets for international expansion. According...