PepsiCo bets on healthy living, acquiring 26 per cent stake in China’s second-largest health food producer
- PepsiCo to become the second-largest shareholder in Shenzhen-based Natural Food International
- Natural Food shares surge 14 per cent in Hong Kong to close at a record HK$2.03
American beverage and snacks giant PepsiCo has agreed to buy a 26 per cent stake in Natural Food International, reflecting a strategic tie-up with China’s second-largest health food producer at a time when rising affluence is leading to change in dietary habits in the world’s most populated consumer market.
The price represents a 1.1 per cent premium to Natural Food’s closing price of HK$1.78 on Thursday.
Natural Food said it was PepsiCo’s “first strategic investment in China”.
Gui Changqing, chairman of Natural Food said in a statement that the tie-up with PepsiCo would help the company to grow its consumer base.
“I believe the tie-up will lead to a multidimensional partnership between Natural Food and PepsiCo that will encompass brand building, product development, distribution and sales,” said Gui. “The partnership will eventually increase our company’s market share and promote our brand awareness.”
Shares of Natural Food surged as much as 35 per cent on Friday morning before ending at a record HK$2.03, up 14 per cent from Thursday’s close.
Ram Krishnan, chief executive of PepsiCo’s Greater China region, pledged to work with Natural Food to create “added value” in the areas of production, logistics and distribution, according to a statement from Natural Food, which did not elaborate.
Natural Food is the mainland’s second-largest healthy food processor in terms of sales, trailing Nanfang Black Sesame, according to research firm Frost & Sullivan.
The investment by New York-based PepsiCo came two days after Beijing reported a decline in foreign direct investment from the US in China amid growing caution on the country’s growth outlook as the trade war continues. American investors channelled US$1.63 billion into mainland companies in the first six months of this year, reflecting a drop of 16.4 per cent from a year ago, according to data from the National Development and Reform Commission.
Chinese Vice-Premier Liu He will meet with US Treasury Secretary Steven Mnuchin in Shanghai for trade talks starting from Tuesday, the first face-to-face gathering of top trade negotiators from the two countries since an informal tariff truce was agreed during the G20 summit in Japan last month.
Mnuchin said in an interview with CNBC last week that there were “a lot issues” and more meetings were expected before any deal was done.
Founded in 2006, Shenzhen-based Natural Food, through its subsidiaries, processes and distributes natural food products made of grains, beans, nuts and dried fruits.
Last year the company recorded sales of 1.82 billion yuan (US$264.2 million), up 15.4 per cent from 2017. Net profit for the year rose 13 per cent to 213 million yuan.
China’s health food industry was estimated to grow 13 per cent to 116.5 billion yuan in 2018, according to a November report by business advisory firm ASKCI Consulting.
