Kellogg Company K recently announced the buyout of Egypt’s leading private cereal company, Mass Food Group, in a cash deal worth $50 million. This move continues the company’s expansion in the emerging markets.
Based in Cairo, Mass Food Group owns popular brands like Temmy's cereals and NutriFit cereal bars. The El Bahay family owned company was the first to launch breakfast cereal in Egypt. The company also boasts a vast sales and distribution infrastructure and exports its products to more than 30 markets, including Europe, East Asia and Africa, thus making it a strategic buy for Kellogg. The transaction is not expected to impact the cereal maker's full-year 2015 earnings.
The cereal company is aggressively expanding its presence in the international markets to improve sales. In January, Kellogg bought a majority stake in Egyptian packaged biscuits company, Bisco Misr. Earlier this month, it announced a joint venture with the leading Nigerian food company, Tolaram Africa, to develop snacks and breakfast foods for the West African market. The company will also acquire a 50% stake in the Nigerian food distributor, Multipro, to expand its presence in the continent. Lagos, Nigeria-based Multipro is a member company of Tolaram Group.
Kellogg is slowly building its business in the emerging markets of Asia, Central and Eastern Europe, Middle East and Africa. It has increased its emerging market business threefold over the last decade. Management especially targets the well-performing countries like India, South Africa and Brazil to boost growth. Management is also increasing production capacity in markets like Thailand, India, Malaysia and Poland to meet international demand.
Kellogg’s most important acquisition in the emerging markets has been the Pringles snacks brand from The Procter & Gamble Company PG in Jun 2012. Pringles, now Kellogg’s second-largest brand, has performed well since the deal closure. The brand posted positive growth in all the regions in 2014 and continues to do well so far in 2015. Pringles has more than doubled Kellogg’s international snacks business and tripled its size in certain key emerging markets.
Stocks to Consider
Kellogg has a Zacks Rank #3 (Hold). Investors interested in the sector may consider stocks like Omega Protein Corporation OME and Cal-Maine Foods, Inc. CALM, both sporting a Zacks Rank #1 (Strong Buy).
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