European Business News – Week ending December 3, 2010

 Breaking News
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  • Food and Drink is at the Heart of the UK’s Largest Packaging Show Packaging Innovations, Empack and Label&Print returns to Birmingham’s NEC on 28 February-1 March 2018, and is set to be the most innovative show to date. With over 290 exhibitors already signed up, the UK’s largest annual event for the entire packaging supply chain will feature the latest industry innovations and technologies, alongside a major free-to-attend [...]...
  • AGRO Merchants Group Acquires Grocontinental AGRO Merchants Group, a global leader in cold storage and logistics solutions, announced today the acquisition of UK-based Grocontinental Limited. This transaction reinforces AGRO’s position as the leading cold storage and logistics provider in the United Kingdom and Ireland, deepens its commodity expertise, and substantially enhances its value-added service offerings for customers. David Grocott and Linda Grocott, third generation owners of [...]...
  • Trade Fair and More – The Event and Congress Programme For Anuga FoodTec 2018 Resource efficiency will be the primary focus of Anuga FoodTec 2018, the leading international supplier fair for the food and beverage industry, which will be held in Cologne, Germany from 20 to 23 March 2018. Around 1,700 suppliers from more than 50 countries will be presenting their new products for the production and packing of [...]...
  • TINE to Invest €77 Million in New Jarlsberg Plant in Ireland TINE, Norway’s largest farmer-owned dairy co-operative, is to invest €77 million in a dairy with the capacity to produce 20,000 tonnes of Jarlsberg cheese a year. The goal is to secure and strengthen Jarlsberg sales outside of Norway as export supports are phased out in 2020. This will make export of Jarlsberg from Norway unprofitable. “Jarlsberg [...]...

European Business News – Week ending December 3, 2010

December 03
10:37 2010

The biggest news story of the week was undoubtedly PepsiCo’s surprise $3.8 billion acquisition of a 66% stake in Wimm-Bill-Dann Foods, Russia’s leading branded food and beverages company with leading positions in dairy products, baby food and juice. In addition to making PepsiCo the largest food and beverages business in Russia with a strong presence in the fast growing dairy category, while enhancing its standing in key markets in Eastern Europe and Central Asia, the deal also broadens and improves the ‘healthy’ aspect of PepsiCo’s product portfolio, which has traditionally been dominated by fizzy, sugary drinks and salty snacks.

Indra Nooyi, chairman and chief executive of PepsiCo.

The integration of Wimm-Bill-Dann’s value-added dairy business will immediately advance PepsiCo’s strategy to improve its ‘health and wellness’ credentials. It will raise PepsiCo’s annual global revenues from nutritious and functional foods from about $10 billion to nearly $13 billion, taking it closer to the goal of building a $30 billion nutrition business by 2020.

Dairy products offer a range of health and nutrition benefits. According to Indra Nooyi, chairman and chief executive of PepsiCo: “Dairy has a huge, untapped potential to bridge snacks and beverages.”

$1 Billion Capital Investment

PepsiCo is currently investing $140 million to build its tenth plant in Russia as part of a $1 billion investment programme in the country, announced in 2009. In the previous ten years, PepsiCo invested $3 billion in Russia.

Russia has outpaced global GDP growth with a 7% compound rate since 1998 and is showing signs of recovery from the recent global crisis with GDP up 4% this year. Indeed, Russia is predicted to become the second largest European economy behind Germany by 2013. Russia’s rapidly growing middle class and an increasingly affluent population – almost 300 million consumers when combined with neighbouring markets – are expected to drive growth in branded consumer goods.

Danone’s Russian Move

Danone had previously held an 18.4% stake in Wimm Bill Dann’s since the latter’s IPO in 2002. However, this stake was sold back to Wimm Bill Dann earlier this year for $470 million. PepsiCo has obviously since paid a massive premium to this price.

Franck Riboud, chairman and chief executive of Danone.

The sale was necessary to facilitate Danone in merging its fresh dairy products operations in Russia and other CIS member countries with those of Unimilk. The combined business, controlled by Danone with a 58% stake, is the new leader for dairy products in the CIS area.

Meanwhile, Netherlands registered dairy company Milkiland, which operates in the Ukraine and Russia, is planning to invest Eur83–106 million, including acquisitions, between 2011 and 2013 to expand its interests in the region.

French Resistance

Of course, this is not the first time that PepsiCo has tried to move into dairy. Five years ago the US-based beverages and snacks group was reported to be preparing a bid for Danone. The prospect of such an audacious takeover caused Danone’s share price to rise steeply but also prompted intense opposition from French politicians anxious to stop the dairy and beverages group falling into foreign hands.

Billion-plus Takeover Deals

Also on the dairy front, the Eur1.4 billion bid by French group Lactalis to buy Yoplait and keep the international yoghurt brand in French hands has been rejected. Similarly, another European food business with a billion-plus price tag, United Biscuits, is still in play following the collapse of exclusive talks between its two private equity owners, Blackstone Group and PAI Partners, and Chinese food conglomerate Bright Food Group.

The PepsiCo acquisition was the second multi-billion food industry deal announced during the week. The other transaction entails a private equity consortium including Kohlberg Kravis Roberts, Vestar Capital Partners and Centerview Partners acquiring Del Monte Foods Company, one of North America’s largest producers of branded food products and pet products, for $5.3 billion, including the assumption of approximately $1.3 billion in net debt.

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