Nestle India Buys Pet Food Business Of Purina For Rs 123.5 Crore

Nestle India Ltd. has acquired the pet food business of Purina Petcare India Pvt. for Rs 123.5 crore as more people adopt pets.

The business transfer effective from Oct. 1, 2022, will strengthen Nestle's petcare business in India, estimated to grow at a CAGR of 50% during 2022-26 period, according to its exchange filing.

"With faster rate of pet adoption along with portfolio and town expansion opportunities, there are significant synergies upon integrating the pet food business of Purina Petcare India into Nestle India to help unleash the full potential," the company said in the filing.

The acquisition, according to Edelweiss Financial Services Executive Director Abneesh Roy, would help Nestle India address investors' concerns of two different companies. "It is a step in the right direction."

Nestle S.A. owns 100% of Purina Petcare India and 62.76% of Nestle India. Purina Petcare incorporated in 2018 for marketing and sale of dry dog and dry cat foods under brands such as Purina Supercoat, Purina Pro Plan and Purina Friskies in the country in association with Nestle India Ltd. The products, however, are imported from Nestle Thailand and Nestle Australia.

The pet food business has grown in India at a compounded annual rate of 39.4% over 2018-2021. "The business has an exciting future with pet adoption on the rise, especially post pandemic," Suresh Narayanan, chairman and managing director, Nestle India told, in a post-earnings briefing. The market size is worth Rs 4,000 crore with dry dog food being the biggest segment, he said.

The company plans to expand the brand to tier 1 towns via the e-commerce channel which contributes 14% to sales.

The valuation of pet care business, which works out to around 3.4 times the FY22 turnover of Purina, also seems "reasonable", Roy said.

Purina Petcare India reported a turnover of Rs 36 crore in FY22, up 62.8% from FY21. As on March 31, 2022, Purina has cash and cash equivalent of Rs 4.39 crore and has debt and debt-like items of Rs 41 lakh, the company said.

Mars Inc., Indian Broiler Group, Stylam Sydney, Cargill Inc. and Himalaya Drug Co. are the key pet care product sellers in India. Recently, FMCG firm Emami Ltd. also announced entry into the pet care industry by acquiring a 30% stake in a startup—Cannis Lupus Services India—for an undisclosed sum.

Premiumisation Play

Nestle India also announced the launch of toddler food brand Gerber in India as it seeks to tap new categories for growth.

"Nutrition business has been perceived as a somewhat ‘mature' business in the past and it has been our endeavor to find new and exciting consumer insight led opportunities in this promising category," the company said.

The acquisition of pet care business and launch of Gerber buttresses is the company's way to cope with biting inflation.

The acquisition of pet care business and launch of Gerber is in line with company's focus on premiumisation to cope with biting inflation