Grupo Lala CEO says time was right to acquire Laguna Dairy
The acquisition gives Grupo Lala a local platform for production and sales to serve the Hispanic market in the United States.
Grupo Lala CEO Scot Rank today elaborated on the company’s purchase of Laguna Dairy, announced earlier this week.
Rank said the timing was right because drinkable yogurts have been successful with major U.S. retailers, there are “firm commitments” from retailers for drinkable yogurts and premium-priced specialty milks, and most of the capital expenditures have been invested in Laguna’s three dairy plants. Waiting could have been much more expensive, he said.
Rank made his comments in a conference call with investors. Listen to a replay at 800-585-8367 or 404-537-3406.
The acquisition gives Grupo Lala a local platform for production and sales to serve the Hispanic market in the United States. (They had been served mostly by export sales from Mexico.) Grupo Lala will be able to offer local and fresher products, especially from the plants Nebraska and Colorado. A third plant is in Texas.
Grupo Lala expects some purchasing synergies between the Mexican and U.S. operations, especially in the materials like packaging. Raw milk is an exception. It is sourced differently in Mexico and the United States.
In an analysis written in September 2015, BTG Pactual wrote, “New management could transform the culture. We are optimistic about potential changes as Scott Rank could “Walmartize” Lala in positive ways: a very process-oriented execution in all areas such as new business/product development, supply chain efficiencies, and tight cost controls.”
On May 30, Grupo Lala, a Mexican dairy company, announced that it had entered into an agreement to acquire from Laguna Dairy certain assets related to Laguna's branded business in the U.S. for $246 million in an all-cash transaction. This acquisition is in line with Grupo Lala's strategy of expanding in value-added branded categories in high-growth markets in the Americas.
The branded portfolio includes products in high-growth segments such as mainstream drinkable yogurt under the Lala and Frusion brands and specialty milks under Promised Land and Skim Plus brands. The acquisition includes three production plants.
Rank said a third-party consultant estimates the market for drinkable yogurt will grow from $400 million today to $1.5 billion in four years.
In a Dairy Foods "All Things Dairy" podcast, Lala’s Director of Marketing Desiree Johnson talks about the company's drinkable yogurts.