🤔 Forget Victoria’s Secret, What’s Ching’s Secret?
Major FMCGs are battling it out for Capital Foods, which owns Ching’s. But why does everyone want to take a bite of this brand? ReadOn!
That’s the price Nestle is willing to pay to buy Ching’s Secret’s parent entity: Capital Foods.
Yes, the Desi Chinese wala Ching’s.
Yes, the hot-and-spicy ad wala Ching’s.
And Nestle is not the only one craving Ching's right now.
From Tata to HUL, Kraft Heinz to Nissin Foods, everyone wants a bite!
Why? What’s so tempting about Capital Foods?
ReadOn!
🔍 What is Ching’s Secret?
This fusion romance of Desi and Chinese goes back to 1995.
Chinese immigrants had adopted Indian spices, and locals started using Chinese cooking techniques.
That’s it.
When those noodles were tossed in the Chinese style and sprinkled with some desi masala, a new cuisine was born: Desi Chinese.
What next? Capital Foods identified this gem of a cuisine and instantly wanted to capitalise on it.
Thus, was born Ching’s Secret.
This desi Chinese may have been born in India, but it has since then travelled across the world!
From noodles to sauces to soups, Ching’s has a product for every mood.
With its wide range of products and Indian taste, Ching’s is seeing widespread success. It is set to end FY23 with a revenue of Rs. 900 crores and an EBITDA margin of 25%.
But while Ching’s has gained profitability, Maggi’s popularity has put it on the sidelines.
Ching’s Secret only has a 1.9% market share in the instant noodles space. Maggi has a 60% share, Sunfeast Yippee has a 22% share and Hindustan Unilever's Knorr has a 2% share.
Now, the billion-dollar question is: why do brands want Capital Foods for a billion dollars (almost 10x or revenue)?!
Well, well.
Noodles and soup are oldies. They want to cash in on the latest superstar product: masalas!
🔍 Why Brands Want Ching’s Secret?
Capital Foods sells a lot of blended spice mixes like ginger garlic paste, pasta masala, noodle masala, and even paneer masala!
This large demand for spices is not just limited to India.
It also exports spices under its Raji brand to other countries craving the taste of India!
While the demand for spices is booming, not a lot of FMCG players are catering to this demand.
Why?
Well, back in the days, Indians loved to DIY their spices.
Our grannies and moms were fans of the grind, the masala grind.
So, they ground haldi, chillies, and other spices at home. Nobody wanted packaged spices then.
Now, we are busy grinding and hustling at the office.
Ain’t nobody got time for the masala grind.
But we do crave ghar ka khana after a long day at work.
Our saviours: blended spices and chutneys!
Now, to cater to our demands, FMCG is also out shopping for spices (you can read more about it here).
Another great thing about blended spices: they have a 40% gross margin!
In fact, this space is set to double in size from Rs. 24,000 crores to Rs. 50,000 crores by 2025!
So, entering the spices market could also be a great way to boost revenue for FMCG companies.
Now you know the secret to why everyone has their eyes on Capital Foods.
But why is Capital Foods willing to give away this power brand?
Well, the company faced a major setback during Covid. The direct sales of noodles, sauces and condiments to hotels, restaurants, and caterers fell.
Revenue declined by 14% in FY21. It also saw losses of Rs 7.4 crore during FY22.
While sales have again picked up, Capital Foods has had a taste of defeat, of bad luck.
With this space intensely heating up, there are high chances of this episode getting repeated.
Capital Foods is scared, it does not want to repeat this. So, it is quietly exiting this space.
🤨 Who will Get Capital Foods?
Nestle seems to be the number one contender for Capital Foods.
And it makes sense for Nestle to be an aggressive bidder for this deal:
Nestle India has not been active in M&A, whereas most other public companies have made multiple acquisitions in the last five to six years.
So, Nestle is afraid of losing out.
But will this fear be enough for it to win this deal?
Only time will tell.
But, won’t the market become less competitive if big FMCG companies buy out smaller brands? What are your thoughts?
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