Breakfast cereal maker Kellogg’s announced yesterday that it was acquiring salty snack brand Pringles from Procter & Gamble (P&G) in a $2.7-billion (Rs 13,000 crore) deal. For the $82.6-billion (Rs 4 lakh crore) P&G, dominant in categories such as household and personal care, the transaction will mean an exit out of a business that is clearly non-core for it.
For the $12.4-billion (Rs 59,000 crore) Kellogg’s, on the other hand, the deal marks an entry into salty snacks, an important addition to its portfolio that includes breakfast cereals and convenience foods.
In India, Kellogg’s has operated only in its core category of breakfast cereals, dominating the cornflakes segment. While 80 per cent of the Rs 500-crore breakfast cereal market in India is cornered by cornflakes, other products such as wheat porridge, oats, muesli and cereal bars are growing, say experts.
In recent years, Kellogg’s has expanded its portfolio into areas such as oats, but has had to contend with competition from new (Britannia, Marico) and existing companies (PepsiCo, Bagrry’s), thanks to the nearly 25 per cent annual growth the category as a whole is seeing.
While salty snacks will give Kellogg’s a larger canvas to operate in India, the road ahead, say experts, will hardly be easy. This market, valued at Rs 2,000-crore, is dominated by PepsiCo (with Lays, Kurkure), ITC (Bingo), Haldiram’s and Parle Products (Parle’s). Apart from these, diverse regional brands dot the landscape.
Sangeeta Pendurkar, managing director, Kellogg India, declined to comment when asked the way forward for Pringles in India. But the brand, now available through the import route and priced at nothing less than Rs 50-100 for a container (Pringles is available in novel tube packs), will give Kellogg’s an entry into urban supermarkets, which like to stock premium snack brands. “Definitely, Kellogg’s will find an entry into the roughly 8,000-strong premium retail outlets in the country with Pringles,” says Shirish Pardeshi, executive director and co-head, research, Anand Rathi.
For the company, estimated to have annual turnover of Rs 350-400 crore at the moment in India, this new channel could be an avenue for incremental revenues.
More From This Section
The question is whether Kellogg’s would opt to begin local production of Pringles, something Cadbury-Kraft did with cookie brand Oreo last year. Anand Ramanathan, associate director, KPMG, believes this could happen over a two-three year period. “Local production will help reduce price points and also help the brand come out with indigenous flavours,” he says.
Globally, Pringles derives the bulk of its $1.5-billion (or Rs 7,200 crore) revenue from markets outside its home turf of the US.