BG Bunge Global SA

In a move to strengthen its foothold in Brazil, U.S. beverage major PepsiCo International (PEP) plans to purchase local cookie maker Marilan Alimentos. The potential deal follows the acquisition of yet another Brazilian cookie company, Grupo Mabel in November, 2011.

According to the Valor Economico newspaper, Marilan Alimentos has asked for a price between 600 million reais ($320 million) to 800 million reais ($426.6 million). M. Dias Branco SA, Campbell Soup Co. (CPB) and Bunge Ltd. (BG), are also interested for the bid, but they feel that the price range asked by the cookie maker is too high to concede to.  

Based in Marilan, Sao Paulo, Marilan Alimentos S/A. is the country’s fourth largest maker of cookies. Its products include salted snacks, classical Italian, filled, classic, and sandwich biscuits; and butter cookies, cream crackers, and toasts. As per the most recent reports available, Marilan Alimentos generated revenue of $219.56 million in 2009.

According to the analysts, the acquisition will give the world’s largest beverage and snacks maker, the number two position in the Brazilian biscuit market. Brazil is the second largest cookie and cracker producing nation in the world.

In the Brazilian cookie market, PepsiCo will have to compete with Nestle, which holds a 21% share in the market, Grupo Arcor with a 16.4% share and Pandurata Alimentos with a 16.1% share in the Brazilian market.

The retail giant continues to push deeper into the emerging market of Latin America. In September 2011, it opened a new manufacturing plant in Feira de Santana, in the Northeast of Brazil that is expected to generate about 400 direct and indirect jobs in the region. It also acquired Dilexis, a traditional manufacturer of cookies and crackers in Argentina.

In November 2011, PepsiCo acquired Grupo Mabel, for an undisclosed price. However, according to Bloomberg, sources with knowledge of the deal said that the retail giant would pay $450 million for the acquisition.

PepsiCo’s diverse portfolio ranging from sodas and snacks to juices, combined with its ability to innovate and launch products suited to the requirements of the local markets drove better-than-expected results in the recently ended quarter. Moreover, strong sales in emerging markets helped blunt the impact of ongoing weakness at home.

Currently, we prefer to be Neutral on Pepsi’s stock. However, Pepsi holds a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.

 
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