Wahaha seeks global deals to fight competition and economic slowdown

PUBLISHED : Friday, 14 September, 2012, 12:00am
UPDATED : Friday, 14 September, 2012, 3:45am

Hangzhou Wahaha Group, the beverage business owned by the mainland's richest man, is hunting for global acquisitions to build an overseas distribution network as economic growth slows and competition heats up at home.

The company was working with investment banks to identify food and beverage deals in Europe and Australia, said Kelly Zong, head of international business and daughter of billionaire owner Zong Qinghou, It was interested in companies that could help it source raw materials more efficiently and share distribution systems, she said.

In pursuing global deals, closely held Wahaha follows Shanghai-based Bright Food Group, which agreed in May to buy a stake in British cereal maker Weetabix. Wahaha gets almost all its revenue from China, where economic growth is slowing and cost pressures are rising.

"The competition within the food and beverages sector in China remains pretty intense," said Olive Xia, a Shanghai-based analyst at Core Pacific-Yamaichi International. "If Wahaha wants to leapfrog bigger rivals such as Tingyi, Uni-President or Coca-Cola, it may need to rely on making overseas acquisitions."

Wahaha reported a profit of US$1 billion on US$11 billion in sales last year. Its overseas drinks business, which sells tea products in South Korea and Britain, generated about US$20 million of annual sales last year, according to Zong.

By contrast, Tingyi (Cayman Islands) Holding, which last year entered into a deal to become PepsiCo's China bottler, had 2011 sales of US$7.9 billion. Uni-President China Holdings, which sells both food and drinks, had 2011 sales of US$2.6 billion.

"Acquisitions are a step we must take if we want to become a global company because it's a fast track," Zong said at the World Economic Forum in Tianjin.

Her father founded the company that makes soft drinks, food, baby formula and children's apparel in 1987 with a US$22,048 loan. He owns more than 80 per cent of Wahaha, and is the 22nd richest man in the world with a net worth of US$22.6 billion.