ITC Ltd is going to beef up its presence in the fast growing breakfast cereals and nutrition bar space with the acquisition of ‘Yoga Bar’ — an upcoming niche brand positioned to cater to the health conscious consumer segment.

The company will acquire 100 per cent stake in Sproutlife Foods Private Ltd (SFPL), a start-up that manufactures and sells products under the Yoga Bar brand, in multiple phases over the next 3-4 years. An initial investment of Rs 175 crore will be made by ITC to acquire a 39.4 per cent stake in SFPL by February 15, 2023.

It will be followed up by another Rs 80 crore of investment in primary subscription of shares by March 31, 2025 in one or more tranches, taking ITC’s stake in the start-up to 47.5 per cent.

The balance shares will be purchased thereafter subject to fulfilment of various terms and conditions. Incorporated in 2015, SFPL had closed the last fiscal with a turnover of Rs 68 crore even as it is now operating at an annualised run rate of Rs 100 crore.

In a stock exchange filing, ITC said Yoga Bar, positioned as a direct to consumer (D2C) brand, has established itself as a leader in the nutrition bars segment and has built a strong market position in the muesli segment.

While it is the third investment in a D2C brand by ITC after Mother Sparsh (personal care) and Mylo (baby care) segment, the healthy food space is hotting up with the acquisition of smaller outfits by large listed players.

In early 2021, Tata Consumer Products Ltd acquired a 100 per cent stake of the Soulfull brand of breakfast cereals and millet-based snacks.

The breakfast cereal market, which has long been dominated by US multinational Kellogg’s, will now face more intense competition after the entry of TCPL, ITC and Nestle which has launched its own brand in the space.

The market size of the nutrition-led healthy foods space is estimated to be Rs 45,000 crore and growing rapidly.

In a statement, ITC said, the acquisition will augment the company’s future-ready portfolio and enhance market presence in the ‘Good for You’ space which currently includes Aashirvaad Multi-Grain Atta, Aashirvaad Nature’s Super Foods, Farmlite range of biscuits, Sunfeast Protein Shake and B Natural Nutrilite ABC Beverage.

Yoga Bar is expected to be scaled up, leveraging ITC’s enterprise strengths in areas such as sales and distribution, sourcing, product development and digital, it added.

Hemant Malik, divisional chief executive, foods division, ITC, stated, “We believe that this investment is an exciting opportunity that aligns with ITC’s foods business’ aspiration to build a formidable portfolio in the nutrition-led healthy foods space.”

Co-founders of SFPL, Suhasini Sampath Kumar and Anindita Sampath Kumar, said the deal would take them to the next phase of growth.