Sara Lee Corporation (SLE) is in talks to buy Brazilian coffee, juice and tea producer Marata for approximately 1 billion reais ($617 billion). Marata is part of local Brazilain family owned group called Grupo Jose Augusto Vieira.
The Downers Grove, Illinois based company already has a 22% share of the Brazilian coffee market. Earlier in September 2010, Sara Lee had acquired Café Damasco, a small Brazilian coffee company for approximately $60 million.
Sara Lee’s long term strategy for emerging markets includes further building its leading market share positions and leveraging available opportunities. The company also intends to drive efficiencies into the acquired businesses, thus spurring worldwide growth.
The Marata acquisition is in line with this strategy, enabling Sara Lee to further strengthen its foothold in one of the fastest growing emerging markets. The fact that the demand for coffee in the northeastern consumer market of Brazil is particularly strong is an added bonus.
The coffee market in Brazil is growing about 3 times the worldwide rate, which is currently 2%. Brazil is also the world’s largest exporter and producer (almost 75%) of the premium coffee bean Arabica. It is assumed that Brazil will soon outpace the U.S. as the world’s biggest coffee consumer and by 2015, it is expected that Brazil will retain more than half of its own crop primarily to meet internal demand.
Moreover, Sara Lee is making the acquisition at a right time, given that coffee prices worldwide are on the rise. Marata’s seven operating units enhance Sara Lee’s processing capabilities, better positioning it to meet the growing demand for coffee in Brazil and other parts of the world.
Sara Lee reported strong operating income growth for the third quarter of fiscal 2011, as all segments of the company performed well. Particularly strong North American Retail and International Beverage business segments and lower corporate expenses contributed. The company ended the quarter with cash and cash equivalents of $2.3 million, increasing 142% due to efficient working capital management.
Sara Lee Corporation is a global manufacturer and marketer of high-quality, brand-name products for consumers throughout the world. Sara Lee Corporation builds and maintains leadership positions through innovation and responsiveness. The company primarily competes with Kraft Foods Inc (KFT), Unilever (UL) and Smithfield Foods Inc. (SFD).
Sara Lee currently has a Zacks #3 Rank which implies short term Hold rating on the stock.
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