When I immigrated to the United States, one of the snack foods I began to enjoy was microwave popcorn. My American born kids grew up with it during their elementary school years. But we missed it on trips back to India. Some time ago, we began finding ACT II popcorn on the shelves in major Indian cities. This is a product of Nebraska-based giant ConAgra Foods, Inc. and they entered the Indian food market via a minority investment in India’s Agro Tech Foods Ltd (ATFL).
A few weeks ago, ConAgra became the majority owner of ATFL) increasing its ownership of shares to more than 50 percent, through the $10 million purchase of existing shares from a third party.
“ConAgra Foods has enjoyed a strong partnership with Agro Tech Foods, dating back to 1997, and we believe strongly in its business model and leadership team,” said Gary Rodkin, CEO, ConAgra Foods. “Expanding our International business is a key part of our strategic plan, and India represents an attractive growth market for ConAgra Foods. We will continue to work with Agro Tech’s management team to expand its business and our investment in this important region.”
Agro Tech Foods is a public company that markets food and food ingredients to consumers and institutional customers in India. The company’s products include Sundrop branded edible oils, shelf stable pudding and peanut butter, Crystal branded sunflower oil, Healthy World branded dried green peas, and, based on a license from ConAgra Foods, ACT II branded popcorn.
What this means
Sicne Agro Tech Foods has enjoyed consistent EPS growth for the last five years, from 6.60 rupees/share in 2007 to 13.04 rupees/share in 2011 and since the company reported an 11 percent increase in net sales, and a 26 percent increase in profit after tax, it was not a bargain buy for ConAgra. But I think it is a sensible purchase given the projected growth in consumer packaged food sales in India over the next decade. The middle class population and the spending per capita are rising to create a virtuous spiral that your company should probably also consider!.