An acquisition would be a good move. There is an excellent fit between the two firms' product ranges, and Heinz's current restructuring into 'food solutions' groups will only improve this. The company would also become the number two food maker in the Benelux region.
US foods group HJ Heinz yesterday confirmed that it is in talks to acquire the grocery foods unit of CSM NV of the Netherlands.
Struggling with stagnant growth in the US for products such as condiments, frozen foods and tuna, Heinz has been expanding overseas through acquisitions and joint ventures. In 1999, the company expanded its European frozen food business through the acquisition of UB Frozen and Chilled Foods from United Biscuits for $300 million. The CSM grocery foods unit, which makes soups, pastas and sauces under brands such as Honig and Hak, therefore provides an ideal opportunity for Heinz to further expand sales in Benelux. With annual sales of about $315 million, the purchase would double the company's food sales in this region and position Heinz as the number two food maker in Benelux.
The CSM acquisition would offer Heinz a number of new growth opportunities. It would extend the company's product mix into the dry soup segment whilst complementing existing dried and chilled brands. The CSM range would also fit neatly into Heinz's new 'food solutions' strategy, becoming part of the 'meal and snack solutions' business which worldwide has grown at 5% per year since 1998 and is expected to hit double figure growth this year. Adding CSM's KDR sports drink line and fortified juices to the Heinz Great Awakenings soymilk line would also place the company in a stronger position in the high-growth beverage market.
Whilst no financial details of the acquisition have been released, it is rumored that Heinz is close to signing a deal for $380 million. Whatever the price, the CSM portfolio of products would provide a wealth of European opportunity for Heinz, which is keen to introduce a range of new products to boost sales.