Kellogg deal brings cereal and snacks to China

Kellogg Company and leading Asian agribusiness group Wilmar International have entered into a joint venture involving the manufacture, sale and distribution of Kellogg’s and Pringles brand products in China.

The firms are equal partners in the deal designed to accelerate Kellogg’s growth in a market the company expects to become the world’s largest food and beverage market within five years.

"China’s snack-food market alone is expected to reach an estimated $12 billion by year-end, up 44% from 2008," said John Bryant, Kellogg Company’s president and CEO. "To capture this growth, we will leverage the key strengths Kellogg and Wilmar bring to the partnership - the globally recognized Kellogg’s and Pringles brands and deep category knowledge, scale and local market experience and our mutual commitment to consumer-focused innovation."

Bryant said the joint venture fundamentally changes the game in the world’s most populous country where cereal consumption is being driven by rapid growth in milk consumption along with consumers’ desire for healthy and convenient breakfast foods. Snack foods also represent a very large growth opportunity, according to Bryant. Kellogg acquired the Pringles brand from Procter & Gamble earlier this year after a similar transaction with Diamond Foods failed to close.

While Kellogg brings some iconic brands to the deal, Wilmar’s contribution involves infrastructure, supply chain scale, a sales and distribution network and participation from the firm’s wholly owned Chinese subsidiary, Yihai Kerry Investments Co., Ltd.

"This joint venture with Kellogg will complement our existing consumer product business and leverage on our extensive distribution network and support infrastructure in China," said Kuok Khoon Hong, chairman and CEO of Singapore-based Wilmar. "With our joint strength and shared vision, I am confident that we will be able to develop a leading cereal and snacks business together."

The new joint venture company will be headquartered in Shanghai, but the deal is still subject to regulatory and anti-trust approvals by the Chinese government.

While Kellogg is a household name to U.S. consumers, Wilmar is a largely unknown provider of processed agriculture products to the food manufacturing industry. However, Wilmar has an extensive global presence with 400 manufacturing plants, 90,000 employees and a distribution network in China, India, Indonesia and 50 other countries.