South Africa's Pioneer Foods has formed a joint venture company with Nigeria's Food Concepts as a "low risk" opportunity to expand in Nigeria.
Food Concepts is a Nigerian baked goods business that houses the Butterfield Bakeries brand. Pioneer said the tie-up would enable it to leverage Food Concepts' existing infrastructure and brand recognition.
For US$7m Pioneer will take a majority stake in the new entity, Food Concepts Pioneer Limited (FCPL). Under the terms of the agreement, Pioneer Foods will hold 50.1% of the shares in FCPL and the current Food Concepts shareholders interest will be diluted to 49.9%.
"Pioneer Foods…already has a significant export footprint in a number of African countries, and with the conclusion of this partnership with Food Concepts, creates an in-market presence for Pioneer Foods in Nigeria via a low-risk entry strategy. This approach, which is focused on branded packaged goods, is predicated on finding smaller operations that are scalable within the categories that meet Pioneer’s competencies," the company said.
Pioneer said following its investment FCPL it expects to expand the current "modest operations" which include manufacturing facilities in Abuja, Ibadan, Lagos and Benin City. Pioneer will also implement operational changes to the Butterfield bakery to increase its efficiency.
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"FCPL provides an ideal opportunity to leverage our expertise to grow the bread category and to establish a national bread brand over time in a gradual low risk manner," said Phil Roux, CEO of Pioneer.
"Pioneer Foods aims to be a leading FMCG company in Africa with globally trusted brands and Nigeria is a key market for any food company in search of growth. This is a fairly priced asset with good upside potential," he said.