- PepsiCo is buying Be & Cheery from Shenzhen-listed Haoxiangni Health Food
- Haoxiangni's shares jump by their 10 per cent daily limit in Shenzhen
PepsiCo has announced its biggest acquisition in China, dipping its toes into a business environment characterised by nimble, customer-facing innovations through buying an online retailer of dried fruits, beef jerky and snacks.
The drinks giant has agreed to pay US$705 million (HK$5.5 billion) for Hangzhou Haomusi Food - also known as Be & Cheery - from Haoxiangni Health Food, according to a statement. Haoxiangni's shares jumped by their 10 per cent daily limit in Shenzhen to a 52-week high of 12.32 yuan after the announcement.
The acquisition is a recognition that China's consumer-facing companies and their active e-commerce platforms have lessons to offer to the rest of the world, particularly when it comes to spotting quick-changing consumer tastes and innovations, said PepsiCo's Greater China chief executive Ram Krishnan.
"Be & Cheery is highly complementary to our existing China business with its broad product portfolio, asset-light model, and focus on e-commerce," said Krishnan.
Based in Hangzhou, Be & Cheery's data-led innovation, as well as its flexible manufacturing and sourcing, enables it to quickly adjust its product portfolio to respond to changing consumer trends, said PepsiCo, which produces Gatorade drinks and Doritos tortilla chips.
PepsiCo has been operating in China for nearly 40 years and this transaction marks a deeper investment in the world's second-largest economy at a time when many other multinationals have been pulling back and the US-China trade war has been deterring cross-border investment.
Both Yum! Brands, the owner of KFC, and McDonald's have sold operations in China in recent years. Multinationals have in many cases struggled to keep pace with changing Chinese consumer tastes and nimble Chinese competitors, armed with data, that are able to respond fast to developments in the fast-moving consumer goods sector.
Last year, PepsiCo agreed to buy a 26 per cent stake of China's second-largest health food producer Shenzhen-based Natural Food International for HK$1.02 billion (US$131 million). The purchase of Be & Cheery is the largest by PepsiCo in China, and its eighth-biggest outside of the United States, according to data by Dealogic.
On the other hand, Chinese companies can benefit enormously from the sourcing capabilities of global companies.
Be & Cheery's chairman Qiu Haoqun said the Chinese company will benefit from PepsiCo's strong branding and route-to-market capabilities, as well as its global supply chain network.
After selling Be & Cheery, Haoxiangni will focus on developing red dates and local speciality agricultural products in the future, said the company's chairman Shi Jubin, in a statement. Deutsche Bank is acting as sole financial adviser to Haoxiangni. The transaction is subject to a Haoxiangni shareholder vote, regulatory approvals and other customary conditions.
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