You can’t cook porridge with Kraft Heinz – Newspaper Kommersant No. 55 (7500) of 03/31/2023

American Kraft Heinz has agreed to sell its baby food business in Russia to Chernogolovka Group of Companies, a major producer of soft drinks and snacks. The deal, which was valued at RUB 2.5-3 billion, will include two enterprises, the Umnitsa and Sami with Usami brands, as well as the rights to the Heinz Baby brand for a limited period. After the sale of Kraft Heinz will focus on the production of sauces and ketchups in Russia.

Kraft Heinz has entered into an agreement to sell its baby food business in Russia to Chernogolovka Group, Kraft Heinz Russia and CIS CEO Mary Ghukasyan told partners. “Kommersant” has the text of the letter. As specified in the appeal, the deal includes the brands “Umnitsa”, “Themselves with a mustache” and enterprises in Georgievsk and Ivanovo. Chernogolovka will also be able to use the Heinz Baby brand during a “short” transition period. Kraft Heinz plans to close the deal in the summer of 2023 after regulatory approval.

On Kraft Heinz’s plans to sell the baby food business in the Russian Federation “Kommersant” informed in July 2022. In November, Kommersant’s sources clarifiedthat GC Chernogolovka, Farmalakt, as well as AFK Sistema are interested in the assets. According to Kommersant’s sources, Kraft Heinz estimated the value of the business at 2.5-3 billion rubles. As one of Kommersant’s interlocutors noted, the government commission still has to agree with the assessment.

As noted in Mary Ghukasyan’s letter, the sale of the baby food business in Russia will allow Kraft Heinz to focus on the development of the main categories – ketchups and sauces. The company continues to produce these products at a plant in the Leningrad region, as well as sell products under the Heinz and Picador brands in Russia and neighboring countries, the appeal says. Kraft Heinz confirmed the information, Chernogolovka did not provide an operational comment.

Chernogolovka produces soft drinks, snacks, sweets under the brands Fantola, Baikal, Turbo Energy, Bon Giorno, Fry’s, Savinov. Revenue in 2021, according to the group, 13.7 billion rubles. Back in the fall of 2022, one of Kommersant’s interlocutors called Chernogolovka the most likely contender for Kraft Heinz assets in baby food. According to another Kommersant source, the owners of Chernogolovka have long been looking for opportunities to acquire a well-known brand in this market with a significant share.

Now “Chernogolovka” produces children’s canned meat under its own brand in the Novgorod region. And fruit purees, for example, are produced in Belarus, follows from the data on the product label.

Alexey Popovichev, Executive Director of Rusbrand, notes that Kraft Heinz is one of the leaders in the sauces market, it is logical that the company wants to focus on this market. For Chernogolovka, the deal provides an opportunity to replenish the portfolio with recognizable brands in a relatively new category for itself, he points out. Heinz was a top five seller in dry baby food, according to NielsenIQ. The baby food business was also distinguished by high profitability – about 30% on EBITDA, Gazprombank analysts noted.

The purchase of baby food production from Kraft Heinz is not the only deal being prepared by Chernogolovka. Earlier, the group agreed to buy the Russian business from the American Kellog, which operates three factories where it produces products under the Lyubyatovo brand. Chernogolovka said that food accounts for about 17% of the group’s business, and it is planned to increase this share with each code.

According to NielsenIQ, in the offline segment, sales of baby food in general in January-September 2022 decreased by 12.1% in physical terms, while in money terms they increased by 8.3% year-on-year. Demand for prepared viscous meals in volume decreased by 19.4%, for children’s drinks – by 12.8%, for dairy foods – by 8.6% year-on-year.

Anatoly Kostyrev