Kellogg Corners Cereals Market

Tony the Tiger would growl proudly.

Kellogg, whose cartoon tiger is pictured on its Frosties cereal boxes, announced Thursday that it had purchased United Bakers Group, the country's biggest breakfast cereal maker, to take almost complete control of the local market.

United Bakers' products, marketed primarily under the Yantar and Lyubyatovo brands, are very popular, and the company said it had a market share of 90 percent. Kellogg's share is miniscule.

Both companies were tight-lipped about the terms of the deal, but Kellogg said it would have no impact on its 2008 operating profit.

Kellogg chief David Mackay described the acquisition as "an exciting strategic development for Kellogg.

"Consistent with our strategy, we continue to pursue the right kind of opportunities to grow our business," he said in a statement.

The deal gives Kellogg its first plants in Russia -- a total of six scattered across the country -- as well as a large sales and distribution network.

Kellogg is coming to the right place at the right time because consumers have just started shifting en masse toward light-and-fast meals for breakfast, said Andrei Nikitin, a retail analyst with UralSib bank.

"Power-advertising by the likes of Kellogg and a new business culture have weaned Russians from their traditional breakfast meals, such as kasha," Nikitin said.

"Many Russians now favor fast breakfast meals such as Kellogg Corn Flakes and Rice Krispies, in part because of strong advertisement by big companies with huge budgets like Kellogg," he said.

Rice Krispies are not widely available in Russia, although Special K, Corn Flakes and Frosties can be found on many Moscow store shelves. Tony the Tiger, one of the company's best-known trademarks, is known in Russia as "Tigr Tony."

"This is fertile soil for Kellogg, and the trend will accelerate," Nikitin said.

With the buy, Kellogg will make considerable savings on import tax, which had increased prices for its products, said Andrei Verkholantsev, consumer analyst with Antanta Capital Investment.

"Kellogg could leverage the synergy and economics of scale accruing from the deal to emerge as the single largest player in Russia," he said.

Yevgeny Okulich-Kazarin, general director of United Bakers, called Thursday's deal a reward for the company's hard work. "This is an opportunity for United Bakers to further grow the business," Okulich-Kazarin said in an e-mail.

Voronezh-based United Bakers, a closely held company, posted net sales of about $100 million in 2007. Like Kellogg, it also produces biscuits.

The company was founded in 2002 with an initial investment from the European Bank for Reconstruction and Development. Eagle Urals Fund, a regional venture fund managed by the Dutch company Eagle Venture Partners, acquired the company in 2004 and immediately invited in new investors. Alfa Capital Partners took over in 2005 and a year later sold control to International Moscow Bank. United Bakers' nearly 4,000 employees, including its management team, will join Kellogg under the terms of the acquisition. The business will continue to have its headquarters in Voronezh and will report to Kellogg's European division.

With 2006 sales of almost $11 billion, Kellogg Company is the world's leading maker of cereal and a leading producer of convenience foods. Kellogg products are manufactured in 17 countries and marketed in more than 180 countries around the world.