SUBSCRIBE

Breaking News on Food & Beverage Development - EuropeUS edition | Asian edition

Headlines > Business

Olam sells 25% of its packaged food operations to Sanyo Foods to grow in Africa

Post a comment

By Anna Bonar+

21-Aug-2014
Last updated on 22-Aug-2014 at 09:20 GMT

The companies chose Sub-Saharan Africa for their joint-venture because of the predicted population, consumption and gross domestic product (GDP) growth for the next two decades as well as increased urbanisation of that region.
The companies chose Sub-Saharan Africa for their joint-venture because of the predicted population, consumption and gross domestic product (GDP) growth for the next two decades as well as increased urbanisation of that region.

Olam International sells 25% stake of its packaged food business to Japan-based Sanyo Foods for $187.5m. The partnership is aimed at expansion in Sub-Saharan Africa.

Singapore’s agri-business Olam may bump their profits to US$212.5 million should they record a $850.0m company value in financial year 2015. It is subject to achieving specific performance milestones.

“This strategic partnership is a win-win for both parties and an exciting step forward for our Packaged Foods business. Given our common vision for this sector and our strong working relationship over the past year, Sanyo Foods is a natural choice as a strategic partner,” said Mahadevan Ramanarayanan Olam’s president and global head of packaged foods in a statement.

The companies chose Sub-Saharan Africa for their joint-venture because of the predicted population, consumption and gross domestic product (GDP) growth for the next two decades as well as increased urbanisation of that region.

"Africa has the world’s fastest growing population and the fastest growing middle class – 62% of the population in Africa is under 25 years, while the World Bank estimates that by 2020 more than 50% of African households will have discretionary spending power. So, as opportunities in the consumer goods market are increasing, many others are also now recognising them," Ramanarayanan told Food Navigator.

The companies also believed that as an early entrant would be able to shape industry development and erect entry barriers. 

"With each passing year the cost of entry, acquisition and brand-building grows manifold, which puts early entrants such as Olam at a great advantage, Sanyo’s expertise and insights in emerging markets just makes this opportunity even stronger," Ramanarayanan added.

It's (not the first) time for Africa

It is not the first partnership between the companies. Sanyo, Japan’s third largest instant noodles producer, already owns 25.5% stake in Olam’s instant noodles business. Nor is it the first time the two are planning to enter the African market. Olam has been present in Africa for 25 years and together with Sanyo they have been selling instant noodles in Nigeria and Ghana since 2013.

"With Sanyo’s noodle expertise this meant we could grow the instant noodles business at a much faster rate, bringing out new flavours and new products.  In particular, we focused on developing flavours that corresponded to well-loved Nigerian local dishes, coming up with innovative formats in the noodle cake and also how we could make the product more convenient given the Nigerian and Sub-Saharan context.

"Just over a year later, we’ve seen the benefits of the partnership exceed our expectations and hence both partners wanting to expand the JV across the wider Packaged Foods Business," said Ramanarayanan.

Olam is present in Africa in nine packaged food sectors: candies, tomato paste, seasonings, noodles, milk powder, juices and dairy drinks and is a market leader for seasoning and candies.

The deal's completion was planned for September-December 2014, according to Reuters .

Subscribe to our FREE newsletter

Get FREE access to authoritative breaking news, videos, podcasts, webinars and white papers. SUBSCRIBE

Post a comment

Comment title *
Your comment *
Your name *
Your email *

We will not publish your email on the site

I agree to Terms and Conditions

These comments have not been moderated. You are encouraged to participate with comments that are relevant to our news stories. You should not post comments that are abusive, threatening, defamatory, misleading or invasive of privacy. For the full terms and conditions for commenting see clause 7 of our Terms and Conditions ‘Participating in Online Communities’. These terms may be updated from time to time, so please read them before posting a comment. Any comment that violates these terms may be removed in its entirety as we do not edit comments. If you wish to complain about a comment please use the "REPORT ABUSE" button or contact the editors.