By Saabira Chaudhuri
Kellogg Co. (K) has agreed to a joint venture with Wilmar
International Ltd. (WLMIY) for the manufacture, sale and
distribution of cereal and snacks in China as the U.S. company
looks to expand in the fast-growing snack foods market there.
"China's snack-food market alone is expected to reach an
estimated $12 billion by year-end, up 44% from 2008," Kellogg Chief
Executive John Bryant said. "This joint venture positions our China
business for growth and fundamentally changes our game in
China."
Kellogg noted that China is expected to become the largest food
and beverage market globally within the next five years. It said
cereal consumption is currently being driven by rapid growth in
milk consumption, along with consumers' desire for healthy and
convenient breakfast foods, while snack foods also represent a very
large growth opportunity.
The joint venture company will be based in Shanghai, China.
Wilmar, which is based in Singapore, is a leading agribusiness
group in Asia. Its wholly owned subsidiary in China, Yihai Kerry
Investments Co., will participate in the joint venture.
Wilmar will contribute infrastructure, supply chain scale, a
sales and distribution network in China, and its local China market
knowledge to the joint venture. The venture will use the Kellogg's
and Pringles brands.
Kellogg--known for such brands as Pop-Tarts, Rice Krispies and
Nutri-Grain--has seen its sales challenged by weakness in Europe
and lower sales of certain products in the U.S., such as Morning
Foods and Kashi. The company's earnings have also come under
pressure recently as it stepped up investments in its supply chain
in an effort to avoid a repeat of two major product recalls in
recent years.
Kellogg has said it has plans to spend more on advertising to
support product launches. The company paid about $2.7 billion in
May to buy the Pringles potato crisps business from Procter &
Gamble Co. (PG).
Last month, the company said its second-quarter earnings fell
12%, due in part to integration charges, as international sales
declined.
Shares of Kellogg closed at $51.45 Friday and were inactive
premarket. The stock is up 5.1% in the past three months.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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