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General Mills dives into emerging markets

August 24th, 2012

General Mills, Minneapolis, Minnesota, US, remains overly reliant on the North American market. Its international breakfast cereals presence falls to Lausanne, Switzerland-based Cereal Partners Worldwide, a joint venture with Nestlé, Vevey, Switzerland. The company indicated, however, that emerging markets are its new focus for growth with Brazil one of the most likely to benefit from its investment.

As part of this strategy, General Mills acquired Yoki Alimentos SA, São Bernardo do Campo, Brazil. Yoki is the country’s second-largest sweet and savory snacks manufacturer and a strong player in sauces, dressings and condiments.

New opportunities for growth

Yoki generates nearly 86% of its US$700 million (€571 million) total packaged food retail value sales in these two core categories: sweet and savory snacks; and sauces, dressings and condiments. Both categories are moderately sized in the Brazilian packaged food market, worth between US$3 billion to US$5 billion (€2 billion to €4 billion) in 2011. However, both snack and sauce sales are also expected to grow dynamically over 2011-16, registering compound annual growth rates (CAGRs) of 6% and 5%, respectively.

With the integration of Yoki, General Mills will become a Top 3 player in these categories, in which previously it had no significant presence. Currently, General Mills’ presence in Brazil largely consists of its ice cream operations, which generate retail value sales of around US$90 million (€73 million). The Yoki acquisition will significantly enhance General Mills’ scale of operations in Brazil, although its combined packaged food value share in the country will still be less than 1%.

Taking on the establishment

Another challenge General Mills will face in its newly entered categories is the strong positions of multinationals. PepsiCo, with a 54% value share in sweet and savory snacks, and Unilever, with a 28% share in sauces, dressings and condiments, dominate the fields.

In sweet and savory snacks, PepsiCo is the outright leader, a status achieved through its wide product portfolio and leading position in most categories including extruded snacks, pretzels, tortilla/corn chips and chips/crisps. The company has continued to invest heavily in new product developments and marketing campaigns, although it registered a slight decline in share largely as a result of the competition from Yoki’s Yokitos brand, which is present in extruded snacks, potato chips and tortilla/corn chips and features lower unit prices than its competitors.

Making a mark in Brazil

Moving forward, General Mills will be able to exploit the favorable price positioning of its newly acquired portfolio and drive strong volume growth. Over the longer term, it could diversify into the premium segment to achieve higher margins. The health-and-wellness trend within sweet and savory snacks is likely to push all manufacturers active in the category toward offering healthier products. This is likely to lead to the wider availability of savory snacks made with sunflower oil as well as those with low sodium and saturated or trans fat content.

In the Brazilian categories that General Mills is particularly interested — snacks and ice cream — two major events are expected to contribute to a stronger performance over the forecast period. The 2014 FIFA World Cup and the 2016 Summer Olympic Games are both scheduled to take place in Brazil.

General Mills must follow through with its expansion plans in emerging markets. With the Yoki acquisition, the company appears to be targeting Brazil by entering new categories with significant growth potential. General Mills’ absolute value growth in Brazil in newly entered sauces, dressings and condiments and its core ice cream category are expected to be higher than in its domestic North American market, where overall growth in packaged food is predicted to be modest.

Source: Baking & Snack International

Cool hunting – IT & Marketing Manager Ferré & Consulting Group

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