PepsiCo’s Brazilian biscuit acquisition ‘makes sense'– analyst

Mark Whalley, lead analyst at Datamonitor told BakeryAndSnacks.com: “The investment seems to make sense for Pepsi considering the fact that the US cookie market is relatively stagnant. ​

Rapid Brazilian cookie growth​

“The move appears to be a wise one for PepsiCo, given the growth potential in the Brazilian and wider South American market,”​ he said.

According to figures from Datamonitor, the Brazillian cookie market stood at $4.11bn (€3bn) in 2005. Last year growth had accelerated 15% to $4.76bn (€3.5m).

Datamonitor’s projections for 2015 value the cookie market at $5.44bn, which would mean overall growth of 32.2%.​

Stagnant US market​

“Spend here continues to grow, at a time when consumers in its home US market are tightening their purse strings,” ​said Whalley.

Datamonitor figures for the US cookie market over the same period project overall growth of 9.8%, with annual growth of just 0.9%.

“The move is also indicative of PepsiCo’s increasing focus on its snacking portfolio as it looks to expand in areas outside of the struggling carbonates category, where growth is harder to come by,” ​added Whalley.

In 2009 Mabel held around 3% of the Brazilian cookie market. PepsiCo’s major competitors in the cookie market will be Nestle, which holds a 21% share in Brazil, Grupo Arcor on 16.4% and Pandurata Alimentos with a 16.1% stake.

The deal: around ​€360m​

PepsiCo announced the Mabel deal late last week. The acquisition will bring the number of PepsiCo employees in Brazil to around 12,000 and will mean the company now operates 19 food and beverage manufacturing facilities across the country.

Sources told Reuters that PepsiCo beat global giants Bunge and Bimbo to the biscuit producer with a bid of between €339m and €381m ($460 million to $517 million).

Strategic investment​

John Compton, chief executive officer of PepsiCo Americas Foods and Global Snacks Group, said: "PepsiCo continues to build its global macro-snacks portfolio and make strategic investments that will drive our business performance and unlock long-term growth opportunities,"​

"Brazil is an extremely important market for PepsiCo and this acquisition well positions us in a key segment in the snack category there,"​ he said.

Olivier Weber, president of PepsiCo South America, Caribbean and Central America Foods added that Mabel was important to PepsiCo’s plans in Brazil as it was well-established in the Brazillian market.

Mabel brands include Mabel, Elbi's, Kelly and Skiny, which will compliment exisiting Pepsico brands in Brazil that include Elma Chips and Quaker.

The company said the acquisition would also create new opportunities for future growth and expansion.