The Rising Influence of Rising Affluence

[DewDiligence]

HNZ Buys Controlling Stake in Brazilian Ketchup Maker

[In 2010, HNZ bought a Chinese company that makes branded soy sauce (#msg-51552987). Now it’s on to South America, where HNZ has some catching up to do (heheh).

HNZ trades at a reasonable valuation, has posted YoY sales growth every quarter for six straight years, and sports a dividend yield of almost 4%. On top of all that, it’s a beneficiary of The Global Demographic Tailwind. What’s not to like?]

http://www.bloomberg.com/news/2011-03-03/heinz-agrees-to-buy-80-stake-in-brazil-s-quero-brand-owner.html

›By Chris Burritt and Matthew Boyle - Mar 3, 2011

HJ Heinz Co. (HNZ), the world’s biggest ketchup maker, agreed to buy an 80 percent stake in Brazilian food manufacturer Coniexpress S.A. Industrias Alimenticias, gaining the Quero brand.

Coniexpress’s Quero brand of ketchup, condiments and vegetables generates annual sales of about $325 million, Pittsburgh-based Heinz said in a statement. Terms weren’t disclosed.

Heinz, along with other U.S. food companies like Kraft Foods Inc. (KFT), is looking to boost sales abroad to counter slower growth at home. Heinz said Quero will be its first major business in Brazil, the world’s fifth most populated country, and will double its Latin American sales in the first full year it owns the brand.

“Heinz has become a smart acquirer and a good integrator, and they have shown a willingness to support growth in emerging markets,” David Palmer, an analyst at UBS AG, said yesterday in an interview. Palmer, who is based in New York, has a “neutral” rating on the shares.

Heinz said it plans to expand Quero into supermarkets and other outlets larger than the independent stores and shops where the brand is sold. It plans to increase marketing and use its technical expertise to drive Quero’s growth, while using the brand’s position in stores to sell Heinz’s other products in Brazil.

Heinz Chief Executive Officer Bill Johnson said at an investor conference last week that the company plans to generate at least 30 percent of total sales from emerging markets by 2016, up from a previous target of 25 percent. Countries like China, Russia, and India currently make up 16 percent of sales.

Net income rose 20 percent to $273.8 million, or 84 cents a share, in the third quarter ended Jan. 26, from $228.5 million, or 72 cents, a year earlier, the company also said today. Earnings matched an estimate Heinz gave on Feb. 24. The company reiterated a full-year profit forecast of as much as $3.10 a share it gave at the time [the guidance is a range of $3.04-3.10—see #msg-60346381].‹