Food supplier Bakers Circle plans to raise $6 million, firms up international plans

Bakers Circle India Pvt Ltd, a leading Indian maker and supplier of frozen bakery products and confectionery dough to major food chains, is stirring up its international plans with an increased presence in markets like Dubai, Bahrain and other Gulf countries, and is looking to raise $5-6 million to fund the growth. The firm is planning to invest around Rs 37 crore ($6 million) to grow in these regions, a senior executive of the company told VCCircle.

The Gurgaon-based company makes breads, including French baguettes, rolls, burger buns and pizza dough; flavoured cakes like chocolate & strawberry; hot & cold pies and quiches. The firm also provides laminated dough, including croissants & pastries, cookies, muffins, chocolate mousse, brownies and other confectionery products. The company has clients like Subway, KFC, Pizza Hut, Starbucks, Chilis, Café Coffee Day, Dunkin Donuts and Smoke House Deli. 

Bakers Circle founder and managing director Dev Lall said the company entered international markets early this year and already receives 6 to 8 per cent revenues from global markets. But Lall feels that in two years, these markets could contribute 30 per cent to the overall revenues. “We would have 20 to 30 per cent earnings from outside India in two years which include markets like United Arab Emirates and Bahrain,” he said. 

The firm had revenues of Rs 69 crore for the year ended March 31, 2014 and expects Rs 85 crore for the year ending March 2015.

Overseas expansion plans

The firm has already acquired 0.6 acre land in Jebel Ali, Dubai, where it will build a 10,000 square feet facility which will have capacity to produce 18,000 sandwiches an hour. This will be a fully automated robotic plant and requires an investment of Rs 35 crore to Rs 37 crore, Lall said.

“We need Rs 35 to Rs 37 crore for this plant which we will raise through a combination of internal accruals, debt and equity. So internal accruals plus money from existing investors will be Rs 10 to Rs 12 crore, bank funding (debt) will be Rs 12 crore and external funding could also be in the similar range. We will start the external fundraising early next year,” said Lall.

At present, Bakers Circle is exporting seven desserts to stores in Dubai, UAE, Qatar and Bahrain from its plant in Kashipur in Uttaranchal. The firm's largest customer in India is Subway, and the Dubai plant is being built so that the company can manufacture for Subway in the Middle East as well, besides expanding to other customers . 

“Once the bread supply to Subway starts, the revenues from Middle East would jump to $10 million in one-and-a-half years,” he said. 

India strategy 

Lall mentioned that the Indian consumer behaviour is changing with the number of consumers eating in high-end restaurants and bakeries going up. The company has now started catering to restaurants with a higher price point. “We realise that consumers are spending more money at casual dining and higher end QSRs rather than QSRs with lower price points.” 

Apart from restaurants, the firm is looking at newer segments for growth. “Our objective for the next two years is to go after different market segments. First, we are looking at 3 and 4 star hotels as our clients for breakfast menu like croissants and muffins. Second, we are looking at supplying to airlines especially for premier ones,” he said.

In 2012, the firm had raised Rs 14 crore from Haystack, a fund founded by former Goldman Sachs' partner Hank Uberoi, and GEM India Advisors (GIA), a fund headed by Deepak Shahdadpuri, to enhance its infrastructure, supply chain and equipment. The company had also invested Rs 6 crore more from internal accruals and Rs 5 crore through debt in the same year. "We invested in improving the supply chain system,” Lall said.

Prior to that, the firm had raised Rs 11.5 crore in funding primarily from GIA.

The company has also beefed up its team to support expansion. The firm has hired Vinay Daniel as General Manager–Operations, who will oversee all plant operations of the company. For the last six years, he worked in the US for TRW Automotive, a Tier 1 supplier to major car manufacturers like General Motors, Ford, Chrysler, VW, Mercedes, as operations and quality manager.

The company has also hired Ranjit Kamath from PepsiCo India as chief financial officer. He will be overseeing the company’s financial performance as well as steering strategic growth. Prior to joining Bakers Circle, Kamath was working as the executive vice president and chief financial officer for Himalayan Region for PepsiCo India.

"The combined sales of our customers in FY14 was about Rs 3,000 crore," Lall said.

According to VCCEdge, the financial research platform of VCCircle, there has been an uptake in investments in the food processing sector. In 2013, the food sector, which includes packaged foods, dairy companies, bakery and confectionery, witnessed 20 private equity deals worth $105 million. In the first seven months of 2014, there have been 10 deals with a total value of $145 million.

Lall said Bakers Circle does not face any direct competition in India, but faces indirect competition from regional bakeries as well as other big firms. The main consumer facing companies in confectionery and  bakery products are Cadbury, Nestlé, Perfetti, Joyco, ITC Foods, Parry’s, Nutrine, Ravalgaon, Britannia, Surya Foods and Mrs Bector’s Food.

In June this year, Future Consumer Enterprise Ltd, the food and FMCG arm of Kishore Biyani-led Future Group, previously known as Future Ventures, acquired 35 per cent stake in Mumbai-based Sarjena Foods Private Limited, which manufactures bakery products under the brand Baker Street. Fine dining restaurant chain Speciality Restaurants, backed by multi-stage PE investor SAIF Partners, acquired majority stake in Mumbai-based bakery chain Love Sugar Dough.

(Edited by Joby Puthuparampil Johnson)

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