Strauss-Elite buys 50% of Brazil’s Cafe Santa Clara for $60m

The merger, signed in Brazil on Saturday, will “make Strauss-Elite Israel’s largest food company, and the seventh largest in the world,” after Nestle (SWX:NESN), Kraft Foods Inc. (NYSE:KFT), Sara Lee Corp. (NYSE:SLE), Procter & Gamble Company’s (NYSE:PG) Folger’s brand coffee, Civo, and Segafredo Zanetti.

By 2009, Strauss-Elite will have transferred over half its business overseas, thereby becoming an international company, commented Strauss-Elite group CEO Erez Vigodman at a press conference convened last night to mark the acquisition of Cafe Santa Clara by Elite International’s Brazilian subsidiary Cafe Tres Coracoes Ltd. Tres Coracoes has a company value of $33 million. The merged company had proforma turnover of real 517 million (NIS 950 million) in 2005 and will have NIS 1.2 billion in 2006.

As a result of the merger, Strauss-Elite will control the second largest coffee company in Brazil, the world’s second largest coffee market after the US. Brazil coffee market totals $2 billion a year. The merged company controlled 11% of Brazil’s roast coffee market at the end of 2005, and is projected to control 12% of the market in 2006.

Strauss-Elite chiefs said the deal was designed to support a massive overseas expansion of the company in order to reach its next target: for international activity to account for half of the company’s business, and probably more. Vigodman said Strauss-Elite’s international activity accounted for 29% of the company’s business in 2005, prior to the Brazilian acquisition. “At the end of 2006, these numbers will jump substantially, and could exceed 40%,” he said.

Vigodman added that the company’s business grew by over 10% in 2005. Sales reached NIS 4.05 billion, including NIS 1.15-1.2 billion in international activity. By 2009, the company’s international business is expected to double from the 25% of total business it accounted for in 2004. Vigodman said, “50% is the target we set at the beginning of 2005, and we’ll probably achieve it.”

Strauss-Elite chairperson Ofra Lahat-Strauss said the company’s international expansion “will also come from mergers and acquisitions”, and that “in addition to the numbers, this signifies the kind of company you want to be”.

Coffee will account for 35-40% of Strauss-Elite’s international activities by 2009. The rest will come from substantial growth from the acquisition of Sabra Salads in the US, which is expected to be reflected in two years, and substantial international growth by Max Brenner Chocolates, expected over the next two to three years.

Strauss-Elite has chosen Latin America, Africa, the Middle East, and Central and Eastern Europe as target markets for future expansion. These markets had the highest growth rates in recent years, they are decentralized in terms of competition, and are emerging markets where the company believes it has the potential for becoming a leading regional player.

“Strauss-Elite’s international coffee business is growing and profitable, and the company is becoming a leading player in coffee markets,” said Vigodman. He predicted that the company’s international coffee business would total NIS 1.17 billion in 2005 (29.2% more than the NIS 950 million in 2004), and would reach NIS 2 billion in 2006.

Founded in 1990, Cafe Santa Clara has 1,700 employees and rapid growth, with sale currently reaching $200 million.

Published by Globes [online], Israel business news – www.globes.co.il – on January 1, 2006