INTERVIEW-Kellogg looking for ways into China, Russia http://today.reuters.com/news/articlebusiness.aspx?type=consumerProducts&storyid=nN21330693&from=business
Wed Feb 21, 2007
By Brad Dorfman
SCOTTSDALE, Ariz., Feb 21 (Reuters) - Top U.S. breakfast cereal maker Kellogg Co. (K.N: Quote, Profile, Research) is looking for ways to expand into emerging markets like China and Russia, seven years after the company scaled back its international expansion because it decided it was spread too thin.
"We're going back to look at some of the markets we sort of retracted from in 2000," Chief Executive David Mackay said in an interview with Reuters on Wednesday.
Mackay conceded in a presentation to analysts that the company is a "little late" to those markets, which are seen as key potential growth areas compared with the slower-growing, mature U.S. market.
Top competitor General Mills Inc. (GIS.N: Quote, Profile, Research), for example, sells several products in China, including cereal, frozen dumplings and Haagen-Dazs ice cream.
But Mackay said in the interview that Kellogg decided in 2000 that it was trying to develop in too many markets where it was losing money and had to focus its resources elsewhere.
Kellogg's business has since improved and it is again looking to venture out, he said.
The company already sells a small amount of cereal in China that it imports, Mackay said, adding that Kellogg would like to move its own manufacturing, marketing and distribution into that nation and others.
TURKEY AS MODEL
The best way to do this, from a shareholder perspective, is through an acquisition or a partnership with a manufacturer that already has scale and expertise in the country, Mackay said.
He gives Turkey as an example. Kellogg partnered with leading Turkish food company Ulker Group about a year ago and has increased its share of the cereal market in Turkey to 22 percent from about 2 percent. Cereal is a small category in Turkey, but it is growing at about 15 percent, he said.
"If you could do 10 or 20 Turkeys, that would be significant," Mackay said. Mackay said Kellogg does not have a timetable for moving into China or other markets.
"If the right entry vehicle comes up and the right opportunity comes up, then we'll pursue it," he said.
Kellogg shares were down 20 cents at $49.40 on Wednesday on the New York Stock Exchange. The stock trades at about 16.6 times analysts average 2008 earnings estimates, compared with a multiple of 17 for General Mills.
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