Heinz is looking for baby-food acquisitions in emerging markets but may have to pay “a significant premium” with interest in the category growing in China and India, a leading analyst has claimed.
The US food group announced in February that it plans to launch infant formula in China and Russia and expand its child nutrition portfolio in India.
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Demand for baby food and infant formula in the three emerging markets is growing rapidly and, as well as plans for organic growth, Heinz is likely to expand through M&A, Sanford Bernstein analyst Alexia Howard said today (28 April).
Heinz is often linked with US group Mead Johnson and commentators have forecast further consolidation in the industry after Perrigo’s agreed to buy own-label infant formula business PBM Products last month.
Howard claimed Heinz would be “unlikely” to pursue Mead Johnson as it would to a “sizeable” deal but said the company could look to acquisitions of local players in emerging markets.
The analyst said Chinese companies Synutra and Ausnutria could be targets of Heinz. Synutra is number five in the Chinese infant formula and baby food overall categories and has a market capitalisation of US$1.2bn. Ausnutria holds 2% of the Chinese infant formula market and has a market capitalization of $761m.
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By GlobalDataHowever, Howard added: “Ultimately, we think that as interest in emerging markets has expanded, Heinz will likely have to pay a significant premium in order to acquire a baby food company with meaningful emerging market exposure.”
