Actually have not read much into it but just read an interview of one of the Amul guys somewhere around a week backNalin said...
he said that this product margarine is more harmful than butter as it contains fatty acids more harmful than butter. Actually both companies will promote there products and will speak in favour of their products.
But the question here is that this company has 60% of market share because none of the other biggies britania and amul are in this market (correct me if i am wrong as i am just speaking from GK, and i am very .... )
If this product becomes a big hit then do you think that these biggies will not jump in the fray (whatever the amul employees may think about it )
sorry for spamming
I would agree with Sandeep (hi!!). For any company to exploit growth opportunity, should establish entry barriers. In this case entry barriers are not obvious. I dont have an informed opinion on this. just a laymans perspective. Furthuremore a large market for the product in US doesnt translate into an immediate opportunity in india.Prem replied ...
case in point is cornflakes. breakfast meals are big in us but are only now beginning to get into the indian mind space. and the puny li'l reason was that indian drink hot milk unlike americans who like it cold. ;-). It required a sustained ad campaign over the years by a major like kellogs. I don think carnation nutra has such deep pockets.
At the current valuations it is trading at 14.28x over EBITDA (operating EV) and 20x over EBITDA (entire EV). I doesnt seem to be cheap as well.
Hi Saurabh,The floor is now open for further discussion. Views and Comments invitied ... !
Thanks for the mails. I enjoyed reading them.
Here is my reply to all your friends, and welcome any more discussions on same.
1. Both butter and margarine have their pros and cons. Butter is more natural (and some would argue more flavorful), is not hydrogenated and, thus does not contain trans-fats. Margarine, on the other hand, is cholesterol free, lower in saturated fats and is increasingly becoming available in trans-fat free varieties. Whichever you choose, experts say moderation is key. Too much of either is definitely a bad thing. Indians are prone to cholesterol related diseases..that is where margarine has an upper hand I believe (not to be taken at face value)
2. As far as the biggies foray is concerned, its a free market, so anything can happen. But taking the cue from Sugar Free, and the fact that its a Cadilla company, I dont see a very huge risk..though that means a mkt share drop. Execution is a different thing. that can only be seen with time... as of now, I am only concerned with the opportunity.. what the co will really do is anybody's guess. for that reason, a scaling up of shares as and when they do well is a good idea. I dont want to take a guess on execution capabilities now! An average purchase on the way up (as execution is proved) should be the key.
3. Kellogs was a great product, but ahead of its time. I think if they had introduced Kellogs in 2005, it would have been a better performer. Back in 90s the health consciousness was poor and the willingness of the Indians to pay for cornflakes was questionable.
4. Its not a question of comparing how well it did in US, but how good it is for any Indian, given our lifestyle. The market is huge in the sense, Indians are getting health conscious.. if Margarine is good for health, or not, is for us to investigate. We need to remember that an average Indian is frugal and cost conscious, and not so health conscious. Educating them will take time.
5. Its too early to do a competitive advantage check. But it has a first mover advantage. Being a single product, and being the product of a co with 0 debt, they can afford to focus on it..and give more advertising focus.. money should not be an issue, though profitabilty will be affected in the early days... again too early to talk abt it.
6. I am not saying its a truly wonderful opportunity. I think this is an area where as a consumer we have a competitive advantage to check things out, a product thats easy to anlayse and review, a compnay thats not complicated with a myriad of things and the like.
Will be eager to receive more comments.