Hershey acquires Chinese candymaker
Continuing its investment in the huge and fast-growing Chinese candy market, chocolate giant Hershey Co said it agreed to acquire Shanghai Golden Monkey Food Joint Stock Co, a privately held candy maker, for 3 billion yuan ($498 million), plus assumed debt of 522 million yuan.
The deal, which will be handled through the company’s Hershey Netherlands unit, also enables the iconic maker of the Hershey chocolate bar and Hershey’s Kisses to boost its presence in China, which is expected to become the Pennsylvania-based company’s second-largest market after North America by 2017, spokesman Jeff Beckman told China Daily.
“Today’s announcement is the latest example of Hershey’s continuing commitment to growing its presence in the China market and its focus on providing world-class quality products to Chinese consumers,” Beckman said. “Shanghai Golden Monkey’s well-established, trusted brand name and diverse product offerings will provide Hershey with a meaningful presence in China’s growing sugar confectionery and snacking markets, and complement our existing portfolio in the region,” he said.
With more than 130 sales offices, 1,700 sales representatives and 2,000 distributors in China, the Shanghaibased company sells candy and snacks such as malt balls, honey-peach hard candies and Xylitol-branded chewing gum. It has projected 2013 sales of $225 million, according to a US regulatory filing. Last year, its 1.4 percent share of confectionery sales in China made it the country’s ninth-largest confectioner and sixth-largest chocolate company, according to Euromonitor.
Under the two-stage agreement announced Thursday, Hershey Netherlands is first acquiring an 80 percent stake in Shanghai Golden Monkey for 2.4 million yuan, a transaction expected to close in next year’s second quarter. In the second part of the deal, Hershey Netherlands will acquire the remaining 20 percent interest in SGM for 604.2 million yuan, or $99.5 million, on the one-year anniversary of the initial closing, according to the regulatory filing.
China — Hershey’s fastest growing market — is the linchpin in Hershey’s strategy to increase revenue generated from international business to 25 percent from 10 percent.
Beckman said Hershey has demonstrated its commitment to China in recent months by opening its Shanghai-based Asia Innovation Center that will enable it to custom-tailor products to Chinese and Asian tastes, in May, and by rolling out a caramel confection called Lancaster, its first completely new candy brand in 30 years, in three Chinese cities in June.
Targeting China’s major cities, Hershey has seen doubledigit sales growth in the country in recent years. Its chocolate share in Shanghai, Beijing and Hangzhou has risen to number three from number seven and its overall chocolate share has more than quadrupled, according to Beckman.
New chocolate and candy products have been appearing in China with “increasing regularity” as incomes rise and residents are exposed to a widening array of Western cuisines and supermarket confectionery goods, according to research firm IBISWorld.
Workers pack candy at a subsidiary of Shanghai Golden Monkey Food Joint Stock Co Ltd in Henan province. The Hershey Co plans to acquire 80 percent of SGM, with the transaction expected to wrap up in the second quarter of 2014.