Kellogg’s is the largest cereal maker in the United States, but the company has recently switched
its focus to snack foods. In October 2016, Kellogg’s announced its plan to acquire Parati Group,
the leading Brazilian food producer and largest snack company in Latin America. The
acquisition serves to further Kellog’s goals of expanding into emerging markets and becoming a
global snacking powerhouse.
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Situation: Kellogg’s Acquires Parati Group for $430 Million
Parati Group owns a range of brands, including Zoo Cartoon, Minueto, Hot Cracker, Parati, and
Pádua. Many of these brands include products that align with Kellogg’s offerings in the U.S. The
Brazilian company also makes powdered beverages, instant noodles, and pasta with net sales of
$190 million.
John Bryant, Kellog’s Company Chairman and CEO, stated, “With its outstanding portfolio of
popular consumer brands, Parati Group is an excellent strategic fit for Kellogg and our business
in Latin America… Brazil is the largest economy in Latin America and this acquisition will
allow us to accelerate our growth and improve our margins in the region. This means more
growth for the core Parati Group business and our well-loved Kellogg brands.”
The two parties expect the acquisition to be complete by the beginning of 2017. Parati Group
sold for $430 million, and Kellogg’s plans to reduce its 2016 buyback program from $750
million to approximately $550 million for a limited time. Parati Group will account for 15
percent of Kellogg’s total net sales. Kellogg’s has high hopes of expanding the Parati brand as
Brazil starts to recover from its worst recession on record.
Approach: Partner with a Strong Brand in an Emerging Market
Parati Group has a strong presence in small- to medium-size retail stores in Brazil and several
other outlets in Latin America. This is key to Kellogg’s goal to expand into snacking in this
emerging market. Parati Group also has two working production facilities and five distribution
centers that Kellogg’s will look to strengthen.
Kellogg’s acquisition of Parati Group is a strategic move, as expanding into a foreign market
without help can be difficult due to the cultural and corporate differences. This is the fourth
major acquisition Kellogg’s has made in emerging markets over the last two years. Kellogg’s also
acquired Bisco Misr and Mass Food Group in Egypt and purchased a major stake in Multipro in
Nigeria and Ghana.
Impact and Advantage
Kellogg’s owns major brands such as Fruit Loops and Special K, but a couple of years ago, the
company began to see slumping sales. As a result, Kellogg’s devised a strategy to expand its
snacking business. The company acquired the Pringles brand in 2012, and today, Pringles makes
up 50 percent of Kellogg’s sales. Acquiring Parati Group is yet another a move by Kellogg’s to
expand further into snacking.
Consumers are changing the way they eat, and Kellogg’s wants to stay ahead of the trends.
Cereal sales are down, but snack sales are up. Parati Group will help Kellogg’s capture this
strong market share.[/show_to]
