Chinese company takes bite out of UK cereal maker Weetabix

Weetabix Talk around UK breakfast tables this morning had to be centered around the news that a Chinese company is taking a big bite out of Weetabix. Bright Food, a government-owned company based in Shanghai, is buying a 60% stake in Weetabix, an iconic cereal company that has been the super-absorbent breakfast of champions in the UK since 1932.

The deal, which values Weetabix at £1.2 billion ($1.9 billion), is “the largest overseas acquisition by a Chinese company in the food and beverage sector,” according to a press release by Lion Capital, Weetabix’s current owner. Lion Capital, a London-based investment firm focused on the consumer products sector, paid about $1 billion in cash in 2003 for Weetabix. Should the sale go through sometime later this year (and there’s no reason it won’t), Lion Capital and Weetabix management will retain the remaining 40% stake.

Weetabix is already exported to some 80 countries, but the ever-growing Chinese market is hard to break into without some domestic distribution partner.  This deal allows Bright Food to really expand outside of China, and vice versa. Any stroll down the grocery aisle will tell you that the competition is stiff for the breakfast market in established Western countries. (In fact, Weetabix’s most recent annual report from 2010 begins with “2010 was undoubtedly another challenging year for the Weetabix group.” Now that’s a tough bite to swallow.) But distributing Weetabix in China through Bright Foods allows it to take advantage of China’s growing appetite for “packaged and convenient healthy foods.”

Bright Foods is one of China’s largest food companies, and Weetabix will go hand-in-hand with its $1 billion-per-year dairy subsidiary Shanghai Bright Dairy. Weetabix made almost $600 million last year, according to an estimate by Dun & Bradstreet, while Lion Capital reports Bright Food took in $12.2 billion. Bright Foods also owns some 3,300 supermarkets and convenience stores in China, so getting Weetabix on the shelves won’t be a problem.

This isn’t Bright Food’s first foray into foreign acquisition. It bought a majority stake in Australia’s Manassen Foods last year, and Manassen took some flak for not immediately repackaging its products to remove a label that reads the company is “Australian Owned.” Shanghai Bright Dairy also bought a majority stake in New Zealand’s Synlait Limited in 2010, and that deal allowed Synlait to build the largest infant formula factory in the Southern Hemisphere. Of course, Weetabix has a strong presence in Australia and New Zealand.

The fact that Bright Food is ultimately owned by the Chinese government may raise some eyebrows, but to be fair, plenty of other Chinese food companies, including COFCO and China Grains and Oils Group, have stakes owned by the government. So keep calm, and carry on.

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Photo by Eric Rice, used with permission under a Creative Commons license.

Tracey Panek

Tracey Panek retired from journalism at the ripe old age of 29 to work for Hoover's, where she enjoys writing about international and publicly traded companies.

Read more articles by Tracey Panek.

Comments

  1. Catherine Colbert Catherine Colbert says:

    Lion Capital — cashing out of its fellow UK holding — looks to be making big money on this deal. And by retaining a 40% stake, it hopes to make even more on the Weetabix name even under Chinese control.

  2. One of my favorite references to Weetabix is an episode on Buffy. The stuff is terrible though. Like shredded wheat with less flavor.

  3. Tracey Panek Tracey Panek says:

    Right! Wait until those children in China get their hands on a box of Fruity Pebbles. Weetabix might not seem that cool and exotic anymore!

  4. Catherine Colbert Catherine Colbert says:

    No matter what it tastes like, I hear that out-of-date boxes of Weetabix can be used as “brown” matter in compost: http://www.recyclethis.co.uk/20090220/how-can-i-reuse-or-recycle-expired-weetabix. If the box is still within the expiration date, this loaf cake scores high: http://allrecipes.co.uk/recipe/5980/weetabix-loaf-cake.aspx. This proves your point, Tracey, that adding sugar to Weetabix saves it.

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