US food company Sara Lee is in negotiations to buy Brazilian coffee, tea and juice maker Marata, a Brazilian newspaper said on Wednesday.
According to financial paper Valor Economico, sources close to the two companies confirmed the discussions for the buyout of Marata, also reporting that Sara Lee was open to the idea of a merger.
Marata belongs to Grupo Jose Augusto Vieira, a group of Brazilian family-owned businesses that operates seven coffee processing plants in northeast Brazil.
Valor estimated that a deal between the two groups would be worth around $617 million. One of the sources involved in the talks told the newspaper that "conversations began with a buyout offer from Sara Lee”.
The source added that Marata understands it will have to make a move like this if it plans on expanding but the family wants to be involved in the business, which is why a merger was proposed.
Coffee Consumption Up
Sara Lee is aiming to put itself in a strong position to increase its market share in the world’s emerging economies as they expand. Acquiring Marata would give the company a firm foothold in Brazil, one of the world’s fastest-growing emerging markets.
The Illinois-based food giant already owns 22% of Brazil’s coffee market, with its most recent acquisition of the small coffee company Café Damasco for around $60 million in September 2010.
Brazil is the second-largest coffee market behind the US. The country is the largest producer and exporter of coffee in the world and accounts for some 75% of the premium coffee bean Arabica.
Growth in the Brazilian coffee market is currently around 6% per year – around three times that of the global market. Brazil is soon expected to overtake the US as the biggest consumer of coffee in the world, and by 2015, over half the coffee produced by the country will be kept for domestic consumption.
With global coffee prices steadily on the rise, the acquisition of Marata couldn’t come at a better time. Marata’s additional business units in northeast Brazil would also give Sara Lee additional capacity to meet the world’s growing appetite for coffee.
In 2011, Sara Lee announced a five-year plan that aims to ensure it uses only approved coffee and tea products in all its production facilities across the world to promote a sustainable global coffee industry. Sara Lee markets itself as a manufacturer of high-quality products for worldwide consumers. Its main rivals include Kraft Foods, Unilever and Smithfield Foods.
Key Statistics - Brazil Coffee Industry (source: Datamonitor)
- Between 2004 and 2009, Brazil’s coffee market increased at an annual rate of nearly 5%.
- In 2009, roasted and ground coffee was the highest performing segment with a total share of 89%.
- Sara Lee is the leading player in Brazil’s coffee market.