Chinese surprise appetite for biscuits

Dear Readers,

As we studied in class Mergers and Acquisitions, I think it is really interesting to talk about a story that caught my eye. While I was reading the news about recent and future M & As, I "discovered" a gripping headline.

Throughout the last decade chinese companies have bought European and American brands in industries such as cars, and personal computers but until now they have not shown much of an interest in food and drinks. As the chinese global reach grows, they are developing a taste for Western snacks. In fact, Bright Food is a hungry company : it is pursuing a deal for Britain's United Biscuits. 

United Biscuits is mostly known for their favourite British snacks (available in any super market) such as Jaffa cakes, Mc Vitie's digestive biscuits and Hula Hoops. The would be buyer, Bright Food, already runs 4 listed companies and has 3,300 retail shops across China. If the deal (valued at more than $3.2 billion) goes through, Bright food (which already makes dairy products, ice-cream, tinned food, sweets, rice wine) would eventually expand its product line.

Why this sudden appetite ? 


First of all, the chinese biscuit market is booming. According to some recent reports, it is facing a 9% growth rate this year. Bright food is keen to acquire from United Biscuits the secrets of baking bestselling snacks to face the Kraft which owns 17 % of the market.

Second of all, Bright Food desperately needs to brighten its public image. Two years ago it was implicated in a scandal when 6 babies died from drinking a baby formula that was contaminated by a chemical product called melamine. The chinese consumers do not trust their domestic food makers to the
extent that they are willing to a premium for foreign brands.

In my opinion if the deal goes through, United Biscuits will give Bright Food " a road " into foreign markets , otherwise it would have to build it " slowly " and " expensively".

But it is important to remind ourselves that mergers and acquisitions are not always fruitful. The latest example is Lenovo, the chinese maker of personal computers, acquired IBM's computer business later to discover that it mightily overpaid for the American firm.

Yacine Dessouki

Sources :

http://www.brightfood.com/en/index/

http://www.ft.com/cms/s/0/23864226-d4ab-11df-b230-00144feabdc0.html