Growing list of potential suitors for 50% stake in Yoplait

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PAI Partners has stated its intention to sell its 50% stake in Yoplait, the world’s second largest yoghurt brand, thus generating strong interest from a wide range of industry players.

These include Sodiaal, which holds the other 50% stake in the brand, other large multinationals like Nestlé and Lactalis, emerging market players such as the Chinese company Inner Mongolia Mengniu Dairy Industry and Mexico’s Grupo Lala, and various private equity firms.

Yoplait  was the world’s number one yoghurt brand up until 2009 when Activia took over the leading position.

Strategy to strengthen Yoplait’s presence in international markets

Sodiaal sold 50% of its Yoplait business to French investment fund PAI Partners in 2002, the aim of this being to aid international growth. Not having had a major impact on Yoplait’s international expansion, PAI is now seeking to sell its stake.

In 2009, Yoplait generated over 80% of its retail value sales in North America (52%) and Western Europe (29%). The brand’s largest emerging market is Latin America, accounting for 6% of its 2009 retail value sales, with its strongest markets in the region being Mexico and Venezuela. The brand’s presence in Asia-Pacific is largely centred on South Korea, whose yoghurt market is expected to contract by 2% over 2010-2015, or by US$127 million in constant value terms.

In terms of further international expansion, potential buyers with strong emerging market infrastructure and knowledge/ability to launch the brand in new, dynamically growing geographies, such as China, or expand further in existing markets, such as Mexico, would likely achieve good growth results with the brand.

Potential suitors

Sodiaal itself is believed to be interested in re-acquiring full control of Yoplait. However, there has also been speculation that Sodiaal’s member farmers may no longer be as reluctant to sell the Yoplait brand in its entirety to another dairy company or at least more of its stake and thus become a minority investor.

Indeed, other products within Sodiaal’s portfolio are more suited to the co-operative business model than yoghurt, which is more marketing-driven. However, with the expected change in Yoplait’s ownership, Sodiaal has not yet officially stated its intentions with regard to its current 50% stake in the brand.

General Mills, which has held the US licence for Yoplait since 1977, is also expected to be among the potential bidders. It has announced plans to expand its yoghurt production capacity in the town of Murfreesboro, Tennessee, investing US$100 million in the project.

However, General Mills’ presence in the emerging world is relatively minor and it is noticeable that the company has been slower than most at addressing this shortcoming. Although Yoplait would be a valuable new asset to its brand portfolio, it still has limited capacity to expand the brand to new emerging markets in any meaningful way.

Lactalis and Nestlé have also been rumoured in the past to be interested in acquiring the Yoplait brand. The two companies already run a joint venture, Lactalis Nestlé Produits Frais. As such, the two companies would jointly have the required organisational and financial capability to expand the brand’s geographic reach and at the same time strengthen their own portfolio with a label that has strong health credentials and good potential for further functional developments.

Either company, or both of them, would be well positioned to compete in the dynamically growing, high margin health and wellness arena.

Some emerging market players, including Inner Mongolia Mengniu Dairy Industry and Grupo Lala, are also believed to be among the potential bidders for Yoplait. China’s Inner Mongolia Mengniu Dairy Industry is the most rapidly growing company among the top 10 global dairy players.

The company’s key growth driver has been the diversification of its product offerings from long-life/UHT milk into a wide range of other dairy categories.

It has largely benefited from the expansion of its domestic Chinese market, achieving a global ranking of tenth by retail value simply by operating in a single national market – China (including Hong Kong).

The purchase of Yoplait would provide access to the global market, especially affluent North America and Western Europe.

Grupo Lala is currently positioned as the 16th largest global dairy player based on 2009 retail value sales, generating some 70% of its sales in its native Mexico. In 2009, the company purchased Dairy Farmers of America Inc and as a result became the eighth largest dairy player in the US market.

Both Inner Mongolia Mengniu Dairy Industry and Grupo Lala have been growing dynamically within the dairy industry. The purchase of a brand with the reputation and scope of Yoplait would grant them access to a truly global marketplace and expand their consumer base in comparatively affluent North America and Western Europe, which would give their margins a massive boost.

Whether the companies have the financial and operational capabilities to integrate new assets on the scale of Yoplait and drive further growth and expansion will be the most important factor to determining any potential acquisition.

Whether Sodiaal decides to regain full control of the Yoplait business or any other player takes over the ownership of PAI Partners’ 50% stake, the main priorities must be pushing more aggressively for emerging market expansion and driving the brand to stronger growth in its existing markets.