Glenboden M & A Originations

Strauss coffee business ripening as divestment candidate

Priority Rating priority rating 4
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Origination Status buyer announcement of brands acquisition, April 2008
Asset coffee brands Chornaya Karta and Kaffa (Russia)
Buyer Strauss Group (Israel), fresh foods, snacks and coffee producer
Seller Cosant Enterprises (Russia)
Buyer Rationale to double coffee revenues in Russia and Ukraine
Seller Rationale acceptable valuation
NBs Strauss is no.1 ground coffee producer in CEE
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Strauss seems to have bought these assets quite cheaply, by Russian standards these days. Especially when they’re only acquiring brands, not additional production capacity in the region. Generally, several factors combine to make Strauss’ international coffee business a prime divestment candidate. Maybe Sara Lee will finally step up to the plate ?

Strauss’ coffee business grew by nearly 25% in 2007, to approach $ 500 mln in sales, a rate that will be hard to repeat in 2008. This acquisition will strengthen the group's coffee leadership in CEE, and creates a bigger platform in Russia, making this business all the more attractive to a strategic investor. Another positive feature is the away-from-home segment of Strauss, which grew by 35% last year.

Strauss has already announced that it’s in discussions with strategic partners for its coffee business. Maybe this is a good time for them to sell outright, in order to focus on its newer international businesses that are exhibiting even faster growth rates ?

Its humous business in the US, Sabra, which Strauss acquired in 2006, grew by about 60% last year, and has increased its market share to over 25% in the chilled dips and spreads category, where it holds the no.1 position. Its growth should be accelerated further by a new JV for Sabra with Pepsico, announced last month. Generally the group has huge opportunities, going forward, in what it calls the US Mediterranean salads market. As it does with its new away-from-home indulgence concept of Max Brenner ‘chocolate bars’.

Time for Strauss to turn over its portfolio, perhaps.

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THIS LEAD'S VALUATION
Size (€ mln) 60
Sector coffee
Asset Quality Russia branded
Seller individuals
Buyer mid-cap plc
P/S 1,6
P/Ebitda n/a
Type total consideration
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