The just-food interview - PepsiCo, Strauss JV Obela

By Michelle Russell | 25 July 2012

Obela chief executive Giora Bar Dea

Obela chief executive Giora Bar Dea

PepsiCo and Strauss Group have taken their Sabra dips and spreads business outside North America for the first time. The companies have launched the Obela brand in Mexico and, in this month's just-food interview, Michelle Russell catches up with Obela chief executive Giora Bar Dea to discuss the plans for the brand and its potential for international expansion.

PepsiCo and Israeli food company Strauss Group first joined forces almost two decades ago, with the formation of snacks venture Strauss Frito-Lay in Israel during the 1990s.

However, it was five years ago that the two companies deepened their relationship significantly, with the start of a venture in North America. The two sides agreed to jointly run Strauss's Sabra business in the US and Canada, with PepsiCo then talking about the "wonderful opportunity" to expand its "role in providing healthier options in snacking".

Last year, it became clear the two companies had a global vision for their partnership in dips. In March, PepsiCo and Strauss announced plans to produce and sell fresh dips and spreads in "key markets" outside North America.

Fast forward to last month and it emerged that the companies had chosen neighbouring Mexico as the chosen location for its first foray into markets outside North America.

PepsiCo and Strauss announced the launch of the Obela brand - it does not hold the rights to the Sabra name outside the US - and outlined why they believed they could succeed in new markets.

"We decided on Mexico after learning about the consumer habits there," Obela chief executive Giora Bar Dea tells just-food. "Mexico is one of the most interesting countries in the world for social dining and the dips category is about social dining and putting a variety of fresh dips and spreads on the table. 

"The growth of the Mexican economy is also very strong. Also, the first country will be close to our [R&D] facility in Virginia, so in just a five-hour flight we can bring our know-how and knowledge [to Mexico]."

The venture involved a start-up investment of US$10m and Bar Dea is confident the Obela brand can achieve annual sales of US$100m in Mexico in five years time.

The Obela range, which comprises a selection of hummus dips and spreads based on natural ingredients, will hit shelves on 1 August. The range will roll out in retail chains throughout the country including Wal-Mart Stores, Soriana, Chedraui and Comexa.

The product line-up in Mexico, however, will not be dissimilar to the Sabra range that adorns the shelves of supermarkets in the US and Canada, Bar Dea said.

"From the product point of view, the recipe is very similar, the only change is it could be a little bit more spicy or the garnish on the top could be different," Bar Dea says. "From the brand point of view it is a totally different issue. We cannot use the Sabra name out of the US because the Sabra name outside of the US does not belong to us. We built a global name for our global journey, so it's not because it's a different product, it's more about legal issues. So the global brand will be Obela."

He is, however, more coy on where the companies might look next.

"We are public companies, both Strauss and PepsiCo, and we cannot talk about our future approach," he said.

Despite his reticence to identify specific markets, Bar Dea suggests markets can be divided in two when looking at a product like hummus.

"We have two kinds of country, a country where hummus is in the supermarket ... and the consumer is aware of hummus. And then you can go to countries where the consumer is less aware of hummus but the habits, they way they eat is different. These countries we approach more from the consumer habits than from the awareness of the product," Bar Dea says. "We are checking the habits of both of these categories of countries but I cannot put a name to them."

Bar Dea, who was the head of Strauss's North American business before taking the role of Obela chief executive, insists hummus began as a "very niche product" but describes the category's growth as "unbelievable".

Strauss purchased the Sabra company from "a rabbi from Long Island" in 2005, Bar Dea says, when the hummus category was small.

"In 2005, the hummus category in the US was worth around $90m with competitors like Kraft and some more local brands and producers. The size of the category today is close to $1bn, it's unbelievable," Bar Dea says.

Kraft Foods will be one of Obela's competitors in Mexico, alongside the small matter of Nestle, the world's largest food manufacturer.

However, Bar Dea insists the venture between PepsiCo and Strauss has its strengths. He explains a focus on a category, as well as the companies' combined strength in infrastructure and procurement, are among the benefits of the venture.

"The joint venture between Strauss and PepsiCo is a very powerful one," Bar Dea says. "Strauss brings to the joint venture many, many years of fresh food experience. PepsiCo brings a lot of global infrastructure from manufacturing to purchasing and so on."

He acknowledges, however, that the venture cannot always benefit from PepsiCo's international reach. "Sometimes [the partnership] can leverage on supply chain, but in some countries PepsiCo doesn't have a chilled supply chain, so we cannot leverage that [everywhere]," he says.

Would Strauss consider forming joint ventures with other companies in certain markets? 

"No, the answer is no," Bar Dea insists. "We believe in this partnership. This is the third joint-venture between Strauss and PepsiCo. This partnership started many years ago in Israel in salty snacks. Let's call it a real partnership. This is about trust, a personal relationship and a long journey together. I believe even if we go tomorrow to a virgin country where there is no Strauss and no PepsiCo, we trust each other to continue to do it. I believe this partnership is much more than about it being legal."

Sectors: Chilled foods, Commodities & ingredients, Emerging markets

Companies: PepsiCo, Strauss Group, Wal-Mart Stores, Kraft Foods, Nestle

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