Yoplait enhances General Mills' global presence

by Staff
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MINNEAPOLIS — The acquisition of a majority stake in Yoplait by General Mills, Inc. will add approximately $1.2 billion to the company’s International division’s sales during fiscal 2012. It is anticipated the operating profit margin will be in the low double-digit range, said Chris O’Leary, chief operating officer of General Mills’ International unit.

Mr. O’Leary spoke July 13 at an investor’s meeting to discuss the company’s fiscal 2012 outlook.

“This is really the first time we have had a chance to talk about these businesses,” he said.

In July, General Mills completed the acquisition of Yoplait for $1.2 billion. The transaction involved the purchase of a 51% controlling interest from PAI Partners and Sodiaal in a business entity known as Yoplait S.A.S. and a 50% interest in a related business entity that holds the Yoplait worldwide brands. Sodiaal, which is a French dairy cooperative made up of approximately 13,000 milk producers, holds the remaining interest in both
business entities.

Yoplait has wholly owned operations in several countries with the largest businesses being in France, the United Kingdom and Canada. In addition, there are 26 franchisees that license the Yoplait trademark around the world. General Mills’ Yoplait business in the United States is one of the largest franchisees with retail sales of more than $1.3 billion.

In France, where the yogurt business as a whole is generating approximately $6 billion in retail sales, Yoplait is the No. 2 branded yogurt in the country with an 11% share. It is the market leader in the drinkable and specialty yogurt market categories. In the United Kingdom the brand holds the No. 3 position and has a 9% share. In Canada, Yoplait is the second largest brand and has a 30% share of the market.

Mr. O’Leary said there are immediate synergies for Yoplait. He noted that the company has strong positions in the children’s yogurt markets in the United States and France, for example, and may use their combined knowledge to strengthen their positions in
each market.

From a macro perspective, Ken Powell, chairman and chief executive officer of General Mills, said the acquisition strengthens the company’s position globally.

“…It is increasing our scale clearly quite dramatically in France and in the U.K.,” he said. “And I think that whenever you represent more categories to the retailer, and more categories that are big, and you are bringing big brand positions (to) those categories, there is a sales concentration and (a) focus I think that is very advantageous.”

Beyond its established bus-inesses, General Mills sees strong potential in emerging markets.

“… We certainly see opp-ortunities in Asia,” Mr. O’Leary said. “In key markets like China and India, the yogurt category is up and running and in the case of China becoming quite sizeable. But these markets are very fragmented. We will partner with Sodiaal to define and prioritize our opportunities to expand Yoplait into new markets.”

Mr. O’Leary said the investment by General Mills will make Yoplait’s penetration into China go more smoothly, because of the company’s current businesses in the region, such as Wanchai Ferry and Häagen-Dazs.

“The big difference is now they have an infrastructure and a company of people that they can work through as opposed to finding a licensee,” he said. “So right there, we’re a big step forward. A lot of work still needs to be done, because in some cases we have to go find milk supply in certain places where that is a difficult challenge.

“So in terms of our pacing, we have already had meetings in Asia trying to talk about how to get this thing started. We’re not starting from a dead stop, but there is a significant amount of work
to come.”

Mr. O’Leary added that General Mills’ experience in cereal also may play a role in growing Yoplait’s presence around the world.

“We think the global yogurt market looks a lot like global cereal with consumption concentrated in a fairly small number of developed markets today,” he said. “In most markets, per capita consumption levels are quite low. We really like the growth profile of the category and the prospects for Yoplait.

“So as you can imagine it is a busy year for us in International in 2012, and it is going to be a significant growth year for our General Mills international operations.”
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