May 4, 2018

Kellogg Company, the largest breakfast cereal maker in the U.S. with a portfolio of 1,600 foods including Frosted Flakes, Raisin Bran, Rice Krispies, Special K, Mini-Wheats and more, is investing another $420 million to strengthen and expand its joint venture interests with its West African partner, Tolaram Africa Foods.

Kellogg’s tie-in with Tolaram Foods began in September 2015 through a deal that also saw the company acquire a 50 percent stake in Multipro, a leading sales and distribution company in Nigeria and Ghana. The joint venture with Tolaram was designed to develop snacks, breakfast foods, and noodles for the West African market.

At the time, John Bryant, chairman and CEO, Kellogg Co. said, “Tolaram Africa has built a highly successful consumer products business and today, it is one of the largest food companies in Nigeria. “Tolaram has a great track record of building beloved consumer brands, including the market leader Indomie noodles, and fueling their growth.  This partnership is an excellent strategic fit for Kellogg.”

This sentiment was echoed by Kellogg’s chairman Steve Cahillane upon the company’s expanded investment in Tolaram.

“Africa offers incredible growth opportunities, and our experience partnering with Tolaram over the past couple of years has confirmed that we have a strong relationship, attractive brands, local expertise, and a proven business model. Our additional investment is a statement of confidence in this venture.”

Kellogg began looking abroad to emerging markets for growth opportunities after shifting tastes and demands in the U.S. and other developed markets resulted in consumers turning away from breakfast cereals.

For years breakfast cereals have been losing market share as consumers raise concerns about their nutritional content and lack of convenience, opting instead for higher protein choices like yogurt or breakfast bars. And although 90 percent of American households still buy cereal and sales topped $8.75 billion in 2015, this number is down from sales of $9.6 billion in 2012 according to data from Nielsen.

One of the key markets eyed by Kellogg for expansion has been Africa.

“As a region that is experiencing explosive growth, with a population of almost one billion people and an economy that is expected to more than double over the next 10 years, Sub-Saharan Africa provides tremendous opportunity for our company,” said Bryant in 2015.

That same year, Kellogg Co. also made clear its plans to expand into East Africa, particularly Kenya, due to the country’s growing middle class and rising demand for ready-to-eat cereal.

“The focus is to tap opportunities in the East African market and use Kenya as the central avenue to deepen its products’ penetration in the region,” Amati Banati, Kellogg’s president in charge of Asia Pacific, told Ventures Africa in 2015.  “The real opportunity is in the growing wealth in Africa, especially the middle class and the changing lifestyles that make our products attractive.”

The following year, in 2016, the Kellogg Co. set its sights on another emerging market, announcing that it had agreed to acquire a majority stake in the privately held Brazilian food group, Parati – a maker of biscuits, powdered beverages, and pastas – for US$428 million in cash.

Aside from geography, the Kellogg Co. has also turned to other channels in search of growth in the face of softening cereal sales.

In 2016 the company was the latest CPG food giant to enter the venture capital space, launching its VC arm, eighteen94 which made its first investment in plant-based smoothie company Bright Greens in January 2017.

Following the same path as General Mills and Campbell’s before it, Kellogg’s launched eighteen94 as a vehicle through which to identify and gain exposure to successful, on-point food startups that tap into up-to-the-minute consumer tastes. Over the next five years, the fund plans to invest up to a total of $100 million (sourced from Kellogg’s corporate balance sheet) through commitments of between $1 million and $3 million in Series A and B rounds.

The company also has pursued greater diversity under its new CEO Steve Cahillane through acquisitions. In October of last year the company announced its agreement to acquire RXBAR, the fastest growing bar brand in the U.S., for a significant $600 million.

Reflecting how the addition of RXBAR to its roster satisfies the company’s strategy and vision, Cahillane said, “RXBAR is an excellent strategic fit for Kellogg as we pivot to growth. With its strong millennial consumption and diversified channel presence including e-commerce, RXBAR is perfectly positioned to perform well against future food trends.”

-Lynda Kiernan