The Shanghai-based joint venture (JV) struck on September 24 aims to establish a sturdy cereal and snacks business across China covering manufacturing, sales and distribution. See HERE.
Speaking at the Kellogg’s analyst day in the US last week, Gary Pilnick, senior vice president, general counsel and secretary for corporate development at Kellogg, noted that in China at this time cereal and snacks are two very different markets.
“Snacks is probably more of an immediate opportunity for us,” Pilnick told analysts.
“The Pringles acquisition is what gives us the ability to get into this market right now… We see Pringles as being our platform to get into an immediate opportunity that is happening in snacks as we speak,” he said.
He noted that while this is the initial strategy, the snacks platform would expand over time.
China’s snacks sector is valued at $13bn for 2012 and forecast to grow at 10% over the next year, according to Euromonitor International data.
Stick to snacks, say analysts
This strategy to dive into snacks first is in line with analyst recommendations when the JV was first announced – to target the lucrative snacks segment.
Analysts joined forces and agreed that the country’s cereal market held significantly fewer opportunities due to its size and make-up of formidable local competitors, like Wahaha. See HERE.
However, Pilnick made clear that while snacks hold a clear, more immediate opportunity for the JV, cereals is an equal target in the long term.
“There is an inflection coming in China’s cereal sector. There are a lot of market forces moving in the same direction,” he said, noting rising incomes, health demands and most importantly; increased milk consumption.
“We have found across the globe that as milk consumption goes up, there’s an opportunity for our business,” he said.
Although he did acknowledge that it wouldn’t be an easy sector to tackle: “There’s going to have to be an education program that takes place with cereal. We think we can do this with sampling and other things because of Wilmar’s modern trading presence.”