Kelloggs on an expansion spree; spending millions

Aiming to serve its breakfast and snack food offerings in West Africa, Kellogg’s company is setting up a joint venture with the African arm of Singapore's Tolaram Group.

Announcing a new, long-term partnership with the food giant Tolaram Africa, Kellogg's is aiming to multiply its presence in the growing African market and advancing the company's breakfast, snacks and emerging market strategies to drive future growth. 

Commenting on the deal, John Bryant, Chairman and CEO, Kellogg’s Company 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.”

He further added, "Tolaram Africa has built a highly successful consumer products business and today, it is one of the largest food companies in Nigeria. Tolaram has a great track record of building beloved consumer brands, including the market leader Indomie noodles, and fuelling their growth.  This partnership is an excellent strategic fit for Kellogg’s."

Interestingly, apart from the creation of a joint venture between Kellogg’s Company and Tolaram Africa to develop snacks and breakfast foods for the West African market. Kellogg’s has acquisition 50 per cent stake of Multipro, a premier sales and distribution company in Nigeria and Ghana. The right to acquire a stake in Tolaram Africa Foods (which owns 49 per cent of Dufil Prima) in the future. Dufil Prima manufactures and markets several leading food brands, including Indomie noodles, which are often consumed at breakfast, as well as Minimie snacks, Power oil and Power pasta.

Meanwhile, Sajen Aswani, CEO, Tolaram Group shared, "Kellogg’s is a world leader in its categories and has successfully built brands that are synonymous with it. We're pleased to have entered into this partnership, as we share similar values and an aligned vision for Africa, a continent we have been operating in for over 35 years. This is another significant step towards providing affordable and wholesome nutrition for our expanding consumer base.”

Reportedly, Kellogg’s Company has agreed to pay approx $450 million for a 50 per cent stake in Multipro and the option to purchase a stake in Tolaram Africa Foods.  The total sales expected to be approximately $750 million in 2015. Kellogg’s Company will fund the acquisition using international cash and an increase in commercial paper of $350 million, says a release.

Expectedly, the company that reported earnings per share excluding transaction and integration costs will not be affected by the transaction in 2015 or 2016; the company expects slight earnings accretion in 2017.