US-based food manufacturer Kellogg Co is creating a joint venture with the African unit of Singapore's Tolaram Group, as part of its strategy to drive future growth in the West African market and advance its breakfast and snack food offerings.
The US company will also pay $450m to acquire a 50% equity in Lagos, Nigeria-based Multipro, which is also a food sales and distribution company owned by Tolaram. Kellogg will also have an option to acquire a stake in Tolaram's African arm.
Established in 1997 in Lagos, Multipro has a strong sales and distribution infrastructure in Nigeria. The company provides access to around 1,000 exclusive distributors, and operates 19 warehouses across six locations.
With Multipro setting up similar networks in other key African countries such as Democratic Republic of Congo, Ivory Coast, Cameroon and Ethiopia, it will help the world's leading cereal maker to make its presence in these markets.
Kellogg plans to fund the acquisition using international cash.
Kellogg Company chairman and CEO John Bryant said: "As a region that is experiencing explosive growth, with a population of almost one billion people and an economy that is expected to more than double over the next 10 years, Sub-Saharan Africa provides tremendous opportunity for our company."
Kellogg stated that it expects costs related with the Tolaram transaction to reduce third-quarter earnings by 1 cent per share.
The breakfast cereal maker, which owns brands such as Froot Loops and Corn Flakes cereals, has been seeking international expansion as more Americans are consuming breakfast away from home or prefer options such as Greek yogurt.
Packaged foods at large in the US are looking at expansion in overseas markets as domestic consumers prefer cheaper private label foods .
In January, Kellogg bought a majority equity in Egyptian biscuit manufacturer Bisco Misr for $125m.
Image: Kellogg to offer breakfast cereals in West Africa. Photo: Courtesy of rakratchada torsap/ FreeDigitalPhotos.net.
