Tags: Kellogg | china | Cereals | Snacks

Kellogg Forges Deal to Bring Cereals, Snacks to China

Monday, 24 September 2012 09:50 AM

Kellogg is hoping to turn cereal into a breakfast staple in China.

The maker of Frosted Flakes, Pop-Tarts and Eggo waffles says that it formed a joint venture to sell its cereals and snacks in the country as early as next year. The breakfast giant says the deal will tap the infrastructure and local expertise of Wilmar International, a Singapore-based agribusiness, to expand its presence in China.

The Battle Creek, Mich.-based company also plans to sell its Pringles chips through the joint venture. Kellogg acquired Pringles from Procter & Gamble Co. earlier this year, in a deal intended to expand its footprint overseas.

Kellogg Co. currently gets most of its revenue from North America, where growth in the packaged food industry has been relatively weak. But like other companies, Kellogg is increasingly casting its sights on developing markets such as China and India, where the appetite for convenience foods is growing more quickly.

Kellogg notes that China is expected to be the largest food and beverage market within the next five years, as the ranks of middle-class consumers continue to multiply in large cities. As for cereal, which is not traditionally eaten in China, the company says consumption is rising as milk becomes a more common part of the diet.

General Mills Inc., the maker of Cheerios and Wheaties, already has a joint venture with Cereal Partners Worldwide to sell several of its cereals in China.

In an emailed statement, Kellogg noted that it has sold "ready-to-eat cereal in the China market for quite some time."

A representative for Kellogg was not immediately available to say which of the company's cereals are already sold in China, or whether it will tweak its marketing or products to expand its presence through the joint venture.

Kellogg says it hopes to start operating the joint venture Jan. 1, pending regulatory approvals.

For now, Europe remains Kellogg's largest international market. But the company is seeing weakness in the region, with its international sales in the second quarter down 3.8 percent.

With the Pringles acquisition in February, Kellogg is also looking to move beyond the breakfast table. The deal catapulted Kellogg to the world's second-biggest salty snack maker, after PepsiCo Inc.'s Frito-Lay. Pringles is sold in more than 140 countries and gets two-thirds of its revenue from overseas.

Kellogg's other salty snacks include Cheez-It, Keebler's Club crackers and its new Special K crackers.

Wilmar International is a unit of Yihai Kerry Investments Co. Ltd.

Shares of Kellogg were up 4 cents at $51.49

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Monday, 24 September 2012 09:50 AM
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