Her­shey ac­quires Chi­nese can­dy­maker

China Daily (Canada) - - BUSINESS - By MICHAEL BARRIS in New York michael­bar­ris@chi­nadai­lyusa. com

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.

PRO­VIDED TO CHINA DAILY

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.

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