France's Soufflet chases beer growth with malt deal

NOGENT-SUR-SEINE, France (Reuters) - French grain handler and processor Soufflet has acquired a malt maker in Brazil as it ventures outside Europe to capture brisk global demand for beer, the company said.

Family-owned Soufflet, a household name in the French grain trade, is the world's second-largest manufacturer of malt, the beer ingredient made from cereal crop barley, and has malt plants across the European continent.

The French firm has agreed to acquire 60 percent of Malteria do Vale for an undisclosed sum, giving it control of a malt plant in southern Brazil with an annual production capacity of 105,000 tonnes, the company said in a statement provided to Reuters ahead of publication on Monday.

With beer consumption rising in emerging economies and the brewing industry increasingly concentrated in the hands of four big global players, Soufflet has earmarked international expansion in malt as an investment priority, the group's top executive told Reuters ahead of the announcement.

"In malting, you need global scale to grow alongside the brewers," Jean-Michel Soufflet, chairman of Soufflet's executive board, said at the century-old group's headquarters in the rural town of Nogent-sur-Seine south of Paris.

"We're going where there is potential and where we can develop the upstream malting barley sector."

Africa, Asia and Latin America have sustained worldwide growth in beer, shielding brewers like Anheuser-Busch InBev (ABI.BR) and SABMiller (SAB.L) from flagging demand in mature markets like Europe and the United States.

Beverage analysts Canadean expect Asia and Latin America to power growth in beer demand over 2010-2016, with China expected to increase its lead as the No. 1 market to almost twice the size of the next biggest, the United States, and Latin America to see consumption grow by a third, driven by Brazil.

MILLING LOSING MONEY

Soufflet is also aiming to establish its first malting operations in Asia after entering talks last year in India to create a joint venture with the Jain family, and its chief executive said he hopes to finalise a deal this year.

The acquisition in Brazil, the world's third-largest beer market, gives Soufflet's malting operations a foothold in South America and a first outlet beyond the European continent.

It is buying the controlling stake in Malteria do Vale from the Landmann family, building on a longstanding partnership under which the Landmann group markets malt that Soufflet exports to Brazil.

The Brazilian plant is located about 130 kilometres from Sao Paulo and mainly uses Argentine barley imported via the port of San Sebastian where Malteria do Vale owns a silo, Soufflet said.

Like in eastern Europe, where it has developed malt operations in the two decades since the collapse of the Communist bloc, Soufflet wants to produce locally to strengthen its supply ties with expanding beer companies.

The Brazilian acquisition adds to Soufflet's 22 malt plants in 11 countries across Europe and the former Soviet Union, stretching as far as Kazakhstan.

The deal will take its annual malt capacity to just over 2 million tonnes, bringing it close to Malteurop, the cooperative-owned French group that overtook Soufflet as the world's top maltster in the previous decade after buying the malt operations of U.S. grain giant Archer Daniels Midland Co (ADM.N).

"Our objective is to become the world's No. 1 maltster again," Jean-Michel Soufflet said.

The international push in malt has become a major growth lever for Soufflet, which had sales of over 3 billion euros in the year to June 30, at a time when it is curbing its ambitions in grain trading and flour-making.

Soufflet said last year it did not want to export more than the 7 million tonnes it shipped in 2010/11 during a bumper season for France, citing financial risks and the constraints of selling mainly French grain.

This more careful approach to trading was also echoed by better capacity among operators to cope with a grain price spike this summer compared to volatility in 2007/08, Soufflet said.

"There's more maturity in the market than in 2008."

FAMILY NOT PLANNING TO SELL

The group does not plan to expand its flour activities that are losing money in an oversupplied European market, he said.

Soufflet, whose Baguepi baguette brand sold by independent bakeries is well known in France, wants to refocus on local French markets after losing export outlets in recent years as some former importing countries developed their own mills.

The group's industrial activities are founded on its historical role as a grain handler in France, where it collected nearly 4 million tonnes of grain from farmers in 2011/12, and Jean-Michel Soufflet said this supply base sheltered it from multinational rivals.

"It's not just because Glencore or others decide to come and source grain in France that they would know how to do it," he said, referring to the commodities trading giant whose takeover of Canada's Viterra showed interest in grain assets.

Speaking at the company's headquarters, a 22-hectare complex that boasts a malt plant, grain silos and a river port, Soufflet, the fourth generation of the family to head the firm, said his family had no plans to give up control.

"We'd have to be for sale but it's not the case."

(The story is re-filed to fix byline and correct day of the week in third paragraph)

(Reporting by Gus Trompiz and Valerie Parent; Editing by Dan Lalor and Louise Heavens)