The acquisition of Pringles back in 2012 has tripled the scale of Kellogg in some emerging markets – completely changing the nature of business, its CEO says.
Kellogg snapped up Pringles for $2.7bn in June 2012 – hurling it into second place on the global snacks market, just behind PepsiCo – and Kellogg’s CEO John Bryant said the brand hadn’t even scratched its potential.
Speaking at the CAGNY conference in New York this week, Bryant told analysts that the huge acquisition had turned Kellogg’s business on its head, in a good way.
“We have made the second largest acquisition in the company’s history (…) and integrated it flawlessly. The business is doing incredibly well,” Bryant said.
‘We are barely scratching the surface’
The future potential of the business, he said, was untapped. “We have more capacity coming on line in 2014 and 2015, and we believe we are barely scratching the surface in terms of the potential this business has.”
The CEO described Pringles as a “tremendous business”; not just because of its obvious growing portfolio, but the impact it was having on emerging markets and the new talent that had been brought to the company.
“[Pringles] is a transformational business, transformational acquisition for our international operations. Now we have dedicated snacks teams in Europe, Latin America and Asia Pacific, as opposed to cereal teams trying to do snacks on the side.”
Pringles: Driving more scale in emerging markets
The Pringles buy has secured exposure in the global snacks market, the CEO said, and in particular will act as a platform for growth in emerging markets like India, Brazil, Russia, China and the Middle East.
“The recent acquisition of Pringles has given us significantly more scale in the emerging markets. It has doubled or tripled some of the scale that Kellogg Company has in some of those markets. Pringles has really changed the nature of the game for Kellogg within the emerging markets,” he said.
Currently, 80% of Kellogg sales reach only 20% of the world’s population, Bryant said. However, he said that Kellogg wants to use Pringles as a platform to win in evolving emerging markets.
For India and Brazil, the CEO said opportunities were bigger in cereal but that Kellogg could leverage this strength to build up the Pringles business over time.
In the Middle East and Russia, he said Pringles was different. In Middle East, the combination of Pringles and Kellogg had doubled the size of the Kellogg’s business and in Russia; Pringles had provided a “whole new source of growth”.
For China, Bryant said the company’s joint-venture with Wilmar International – China’s third-largest consumer packaged goods food company – had been strong so far. He said the company was in a test market phase in some cities in China for both cereal and Pringles that were going “incredibly well”.
Building commitments in Asia Pacific
In January this year, Kellogg announced plans to build a $130m Pringles manufacturing plant in Malaysia to deepen its hold in Asia Pacific markets. The build should be finished mid-2015, creating at least 300 local jobs, it said.
Last year, Kellogg’s Asia Pacific president told BakeryandSnacks.com that while Pringles awareness varied across the region, commercial innovations like seasonal marketing and in-store promotions would drive traction.
“We were not present in snacks in Asia before the Pringles acquisition,” Amit Banati said.
“…The new markets are always, obviously, more difficult because you have to create the brand and in many cases the distribution too. But the size of the opportunity is always bigger.”
The transcript of this conference presentation was made available by Seeking Alpha .