Mondelez International Inc., the maker of Oreo cookies and Ritz crackers, agreed to buy a majority stake in Kinh Do Corp.’s snack business for $370 million, bolstering its presence in emerging markets.
The transaction gives Mondelez 80 percent of Ho Chi Minh City, Vietnam-based Kinh Do’s snack unit and the option to buy the rest after 12 months, the companies said in a statement.
Mondelez is buying into a business whose top-selling biscuits, soft cakes and seasonal moon cakes help bring in $175 million in annual sales. The deal includes two manufacturing plants, Mondelez’s first in the country. Kinh Do’s sales significantly eclipse Mondelez’s nascent Vietnam business, said Tim Cofer, who runs Mondelez’s operations in Asia Pacific, Eastern Europe, the Middle East and Africa.
“The opportunity to take strong leadership brands and build on that success is attraction No. 1,” Cofer said in an interview.
In addition to its brands, Kinh Do gives Mondelez access to new distribution routes for its own products. Growth in the region may help counter slower sales in developed markets such as the U.S. and U.K.
“The chance to expand our existing Mondelez brands through their route to market is one that is very attractive,” Cofer said.
Mondelez will look to expand the business in a region that has an emerging middle class with discretionary income for snacks and where 60 percent of consumers are under 30, he said.
A worker at a Kinh Do factory in Ho Chi Minh City.
The deal, which is expected to be completed in the second quarter of 2015, is subject to approval by Kinh Do’s shareholders.
Mondelez Chief Executive Officer Irene Rosenfeld has pledged to cut $3 billion of costs through 2016 as she works to boost profit margins. Last week, Rosenfeld said Mondelez was “sharply focused” on higher productivity and cost cutting to boost earnings. Global retail and consumer demand would remain soft for the “near term,” she said.
Mondelez’s third-quarter profit topped analysts’ estimates and the company raised its earnings forecast, helped by the cost-cutting work.
Activist investor Nelson Peltz has pushed for cutbacks at the company. Mondelez named Peltz to its board in January after his Trian Fund Management LP abandoned a proposal for Mondelez to merge with PepsiCo Inc. (PEP) to spur growth.