Middle East: Kraft in, Starbucks out
Middle East with the acquisition of an Egyptian biscuit group,
another American firm - Starbucks - withdraws after dissolving its
Israeli joint venture.
Relationships between the US and Arab nations are understandably strained at the moment, given the war in Iraq, but there were no signs of any tension yesterday when America's biggest food group announced plans to begin production in the biggest country in the Arab world, Egypt.
Kraft Foods, the US-based food arm of the Altria group which also owns the Philip Morris tobacco group, has signed a preliminary agreement to acquire the privately-owned Egyptian company Family Nutrition.
The acquisition, which will be carried out by Kraft's international unit, is subject to final agreement and regulatory approvals. Terms of the acquisition were not disclosed, but press reports suggest that the deal is valued at $80 million (€73.4m).
The Family Nutrition Company is a leading producer of biscuits and snack cakes in Egypt with 2002 revenues of approximately $40 million. It employs over 1800 employees. Its best known brands are Borio biscuits, Nitty cakes and Gobar mayonnaise and ketchup.
Kraft Foods is the second largest branded food and beverage company worldwide (after Nestlé) and markets many of the world's leading food brands, including Kraft cheese, Maxwell House coffee, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, Post cereals and Milka chocolates, in more than 150 countries.
This will be the first time it has set up production in Egypt, however.
While Kraft prepared to strengthen its position in the Middle East, another US group, Starbucks, announced yesterday that it was to withdraw from another key market there, Israel.
The Seattle-based coffee group is to dissolve its joint venture with the Israeli Delek Group as a result of "ongoing operational challenges in the market". Following the decision, Shalom Coffee Company, the joint venture between Starbucks Coffee International and the Delek Group, will close its six Starbucks stores in Tel Aviv.
"It was a very difficult decision," said Mark McKeon, president of Starbucks Coffee International for Europe, Middle East and Africa. "Following months of serious discussions and market reviews with the Delek Group, we came to this amicable and mutual decision. Our commitment in the market continues to be strong and long-term and we will return at an appropriate time.
"As these are still very early days of our growth, we are committed to making strategic decisions to help ensure our future success," added McKeon. "We are very confident that the acceptance of the Starbucks brand is extremely strong, and we remain committed to our expansion plans and strategies in the region."
