Amira Nature Foods added a main ingredient to its recipe for
growth when the packaged Indian specialty rice provider agreed to
buy a major rice distributor in Germany, as it steps up its
) sells primarily basmati rice, a premium long-grain rice grown
only in certain regions of the Indian subcontinent, sold under
the company's flagship Amira brand as well as under third-party
labels. The Amira branded products consist of several rice
varieties, such as Amira Sameena Basmati Rice and ready-to-eat
The company sells its products, primarily in emerging markets,
through a broad distribution network. The products are sold in
over 40 countries, with a branded presence in over 25 of
In a deal announced last month Amira agreed to buy Basmati
Rice GmbH, a Germany-based specialty distributor of premium
branded rice, particularly basmati. Basmati posted roughly $8
million in sales in 2012 and $6.5 million in sales for the nine
months ended Sept. 30, 2013.
The proposed acquisition is expected to be accretive to
Amira's current 2014 fiscal year earnings. Details were not
The buy would mark the first acquisition for Amira since the
Dubai, United Arab Emirates-headquartered company went public in
More On The Plate
Once the deal closes, Basmati will bring a lot to the table:
In announcing it, CEO Karan Chanana called the acquisition
"highly accretive," while noting that Basmati has a 25-year
history of serving some of the largest supermarkets in Germany
and more recently in neighboring countries across Europe.
"We believe our team can quickly expand their sales and
further enhance their high-margin branded product offering as we
leverage our existing vertically integrated infrastructure and
distribution in Europe to provide consumers a vast array of
branded Basmati rice from our natural and organic offerings to
new, unique items like smoked Basmati rice," he said in a
Basmati offers 10 different varieties of rice to consumers
under brands such as ATRY, Scheherazade and Sultan. These brands
can be found in more than 4,000 stores across Germany and
Jefferies analyst Thilo Wrede sees more buys on the horizon:
"So far, it has grown without acquisitions," he said. "I wouldn't
be surprised if going forward we hear more about acquisitions
Grow it has. Amira has posted triple-digit earnings growth in
all but one of the four quarters it's reported since going
public. In the fiscal 2014 second quarter ended Sept. 30,
earnings rose 100% to 18 cents a share.
"Our consistent top-line growth underscores our success in
continually adding new customers and expanding our business as
the growing global demand for our premium products and offerings
including our core basmati rice, in addition to our expanding
product portfolio of ready-to-eat snacks, meals, and
complementary products," Chanana said on the quarterly conference
call with analysts.
Analysts surveyed by Thomson Reuters see Amira staying on the
fast track. They expect fiscal 2014 earnings to rise 66% to 98
cents a share. They see a 32% rise in 2015.
Wrede says a number of factors have been driving Amira's
growth, including expansion in existing markets by getting into
more stores, and entering new markets.
Big On Basmati
The United Kingdom is among the markets it's entered recently
with the launch of the Amira brand, it announced in June. It
marks the company's first sales in the U.K. market with five
products across over 2,230 retail distribution points, including
Morrisons Supermarket. Morrisons is one of the leading
supermarket chains in the U.K. with over 400 stores. Amira also
launched the brand to certain food-service customers and a
Michelin star restaurant.
"The U.K. is definitely an important market," said Wrede.
"It's a sizable market and one of the major growth markets for
them this year and next."
He says the average U.K. consumer regularly eats a dish that
goes with basmati rice. Indian basmati, he adds, accounts for
roughly 50% of the rice market in the U.K.
And Amira wants to expand into other retailers in the U.K., he
Amira, through its Amira Pure Foods Private subsidiary, also
entered the South Korean market last year via an agreement with a
new South Korean customer to supply Indian medium short-grain
specialty rice for roughly $8 million. The company expects the
revenue under the contract to be recognized in the first and
second quarter of the fiscal year ending March 31, 2014.
Amira is also tapping into growing global demand for packaged
organic foods. It created the Amira Organics business division
last June to launch products in this category.
Basmati rice is gluten-free.
"Amira is well positioned to capitalize on the growing trend
of consumers becoming increasingly concerned about moderating
gluten intake," Chanana said on the earnings call. "Many
retailers are focusing on offering their customers a higher
number of gluten-free options. This provides a strong growth
opportunity for the Amira brand to gain market share with these
retailers, with our rice offerings as well as our complementary
Chanana says Amira will be launching organic ready meals in
India by the first half of 2014. It plans to start rolling this
product out in the U.S. starting in the second half of this
"This will serve as a platform for us to expand our rollout of
organic products internationally," Chanana added.
The organic ready meals are portion packs of precooked and
seasoned rice and other grain mixes, Wrede wrote in a report.
World Of Opportunities
Meanwhile, "the growth story is fully intact and, if anything,
the opportunities are expanding," Wrede wrote in a report after
attending an investors meeting with Chanana.
The global basmati market continues to grow at an average rate
of 15% to 18% a year, writes Wrede, and Amira is gaining market
share in this environment. Wrede notes that the company buys
roughly 5% of India's annual basmati harvest in the form of rice
paddy (the unprocessed grains) and supplements that with
purchases of semifinished rice to meet demand.
"In other words, the company should be able to increase supply
in order to meet growing demand for its brands and products," he
added. "The category continues to be driven by increasing
disposable income in emerging markets where basmati is an
aspirational product, and growing preference for the flavor of
basmati rice in developed markets."
Amira has been owned and operated by the Chanana family since
1915. Chanana became CEO and chairman in 2006, making him the
fourth-generation family member to run the company.
Chanana and his affiliates, including various companies
controlled by him and direct members of his family, and certain
other directors, directly or indirectly held approximately 68.6%
of the company's share as of last June.
Amira sells in both emerging and developed markets to global
retailers such as Carrefour,Costco Wholesale (
), Jetro Restaurant Depot, Lulu's and Smart & Final, and
through the food-service channel. It sells its Amira branded
products to Indian retailers such as Bharti Walmart (aWal-Mart
) joint venture) and Big Bazaar.