Hershey India: Foreign Investment in Packaged Food Industry

FMCG Projected Growth in India NexensusOn 29th Feb, 2016 Hershey International Ltd (USA) made a foreign investment of INR 840 Million in Hershey India in order to ramp up its operations. Nexensus explores the Packaged Food segment of FMCG sector in India and the Foreign Investments it attracts.

FMCG is amongst one of the largest sector in the Indian economy, generating revenue worth 3185 billion in 2016 and projected to grow at ~18-20% reaching ~7000 billion by 2020. Of this chunk, food products account for 40-45% of the overall market.

Many foreign players including Nestle, Kraft, Pepsi contend to get a share in the large consumer driven packaged food industry of India. While Indian players like ITC, Britannia and Amul continue being in the lead, global players persist by pouring investments in the country, given the large potential.

The Government of India approves 100 % foreign investment in processed food segment provided they are manufactured in India. This is applicable for both multi-brand and single-brand retail in the FMCG sector. Prior to 2011 for  Foreign single brand retail companies there was a investment cap at 51%.

Nexensus explores the trend of Foreign Investments by a historic global player in Processed Food Industry – Hershey (www.hersheyindia.com).

Hershey India Private Limited – A Synopsis

ItemsAs on Year End -'15
Company Type
Production Unit
Mandideep near Bhopal
Chittoor in Andhra Pradesh
Total Revenue
3253.7 Million
Advertising expenditure
321.6 Million
Loss after tax (3364.7) Million
SubsidiaryNutrine Confectionery Company Private Limited
Other Related PartiesCSH Foods Inc (Canada )
The Hershey Co. (USA)
Hershey’s Singapore
The Hershey Company (Philippines)
Managing Director
Praveen Prafulla Jakate
Managing Director Remuneration
97.72 Million


Nexensus- Foreign Investment (FDI) Trend for Hershey India In 2012, with the revised guidelines of 100% Foreign direct Investment Hershey International Limited (USA) acquired the entire stake in Godrej Beverages and Food Limited from Hershey Netherlands BV and Godrej Industries Limited.

Hershey’s entered India in 2007 by acquiring 51% stake in Godrej Beverages and Food Limited, at a time when GOI allowed for single-brand retail companies in the FMCG sector to have maximum FDI Investment upto 51%.

It is noteworthy that post the change in rule Hershey India has received a total Foreign investment of 7.3 Billion between 2012-2016 from Hershey International  Ltd.

Currently Hershey International  Ltd. (USA) has 100% ownership in Hershey India Pvt. Ltd and its subsidiary Nutrine Confectionery (NCCPL) owning 511490301 equity share.

We have put together a timeline of the foreign investment Hershey International (USA) has poured in India between  2007-2016 to establish its base in the packaged food Industry .

A total of 7.3 Billion ( 7,264,300,000 to be exact) has been invested over the last decade.

Nexensus - Hershey India

Hershey – Product Focus in India

Nexensus - Hershey IndiaHershey’s India and its subsidiary Nutrine Confectionery  have over 8 product lines in the Packaged Food & Beverages segment in FMCG. Some of the more known brands of Hershey include ‘Sofit’, ‘Jumpin’, ‘Maha Lacto’, ‘Hershey Syrup’.

From the production and revenue numbers (refer table below) it can be concluded that for Heshey’s Refined oil & Vanaspati is generating the Maximum revenue followed by Fruit Beverages, Fruit based products (e.g. Jumpin).

Hershey’s range of Confectionery items and Fruit & Vegetable Puree are generating the least amount of revenue as compared to the other product lines.

Product Line of Hershey Turnover (INR Mil)
Quantity (MT)
Soya Milk
Hershey Syrup
Fruit & Vegetable Puree, Pulp & Juices
Refined oil & Vanaspati
Fruit Beverages, Fruit based products881.4

Hershey Product Lines

Hershey ‘s Performance

It can be observed that while Hershey India has consistently received Foreign Investment year-on-year and its revenue growth has also improved per year at 10-15%, there hasn’t been a proportional increase in profitability.

Last year the company experienced an exponential increase in losses touching a all time high of (3364.7) Million in INR

Nexensus - Hershey PeformanceNexensus - Hershey Cash Flow

It has been noted that Cash flow from operations for Hershey’s is negative. The cash flow from investing activities of the company has also been negative however it has improved in the recent years.Positive cash flow from the financing activities of the company has helped to sustain the continuous losses Hershey India Private Limited and its subsidiary Nutrine Confectionery have incurred so far.

Nutrine Confectionery contributes to 12% of the loss incurred by the group.

Financial Position & Ratio Analysis

Earnings per share (Rs.) EPS
Profit before tax to capital employed (%)-267.84%
Profit before tax to net worth (%)-59.32%-8.37%
Profit before tax to value added of company (%)-1182.21%
Profit before tax to net revenue from operations of company (%)-108.59%-14.19%
Debt equity ratio
Current assets to current liabilities141.01193.4
Value added to net revenue from operations of company (%)-108.59%14.19%
Raw materials stock to consumption of company (in months)0.960.96
Stores and spares stock to consumption of company (in months)2.351.71
Finished goods stock to sales of company (in months)0.470.4

In Conclusion

It is especially relevant to observe that only the foreign investment from Hershey International (USA) is sustaining growth and operations of Hershey India Private Limited. It is clear that so far Hershey has not been able to establish operations in India like some of its other competitors like Nestle (Profit of 5632.7 million).

Consequently foreign investment of 7.3 Billion invested by the company so far indicates that globally Hershey expects the consumer driven Indian market to grow and hopes to establish a strong base in India.

We anticipate Hershey to enter other lines in the packaged food sector by expanding its product lines and establish a strong foothold in India.  Innovation of products suited best to Indian taste buds can be the only way forward if the company wishes to sustain itself in the country.

Having entered only in 2007 Hershey is still new in the market.  The new launch of Sofit with John Abraham as the brand ambassador was a good attempt to reach out to the health conscious urban consumer base of India.

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