What Weetabix means for Bright Food: analysts' view

By Sarah Hills

- Last updated on GMT

Related tags: Breakfast

The Weetabix deal offers Bright Food access to European markets and growth in Asia
The Weetabix deal offers Bright Food access to European markets and growth in Asia
Weetabix offers the Shanghai-based Bright Food company heritage and access to European markets with the potential for growth in Asia, according to analysts.

Bright Food, one of China’s largest food groups, has agreed to acquire a 60% share of the UK cereal food company Weetabix for £1.2bn, with Lion Capital and management continuing to hold the remaining 40%.

The deal aims to capitalise on growth opportunities for the Weetabix brands, especially in China where there is a growing appetite for packaged and convenient healthy foods.

Trefor Griffith, head of food and beverage at Grant Thornton, told FoodManufacture.co.uk: “For UK businesses, investment from an overseas buyer offers access to new markets and provides them with global expertise which can help them reach their full growth potential.

“Bright Food has a retail operation in China which is obviously a huge advantage in terms of getting products onto the shelves.”

Overseas buyers

Griffith added: “There is a lot of interest from overseas buyers at the moment as they can see the opportunity to exploit brands and businesses in markets they understand. 

“The UK has many quality food and beverage businesses, such as Weetabix, with world-leading food production standards and advanced manufacturing technology and processes.

“These factors provide a sound platform to build operations which can fulfil growing demand from emerging markets, and is a key reason why UK food businesses are so attractive to overseas buyers, in particular those from emerging markets.”

Consumption per capita of breakfast cereal remains low in China, according to Marcia Mogelonsky, director of Insight for Mintel Food and Drink, who said: “It is not a hugely popular food, although the Chinese diet is becoming more westernised.”

This contrasts with a “very mature”​ UK breakfast cereals market, forecast by Mintel to be worth £1.54bn by 2016, up 5% on 2011.

Distribution chains

However, Mogelonsky said there was another side to the acquisition, as it would open up distribution chains in Europe and the US, allowing Bright Food to get its own products on shop shelves in these regions.

Bright Food has a strategy of buying famous international brands, developing advanced technology and taking strong competitive positions in each of its markets.

In 2010, it was tipped to acquire UK-based United Biscuits for £2.5bn but discussions failed. Therefore the Weetabix acquisition is no great surprise, according to Clive Black, head of research, Shore Capital, who described the deal as a marriage of young capital and old experience.

He told FoodManufacture.co.uk that there was a “broader theme” ​as relatively immature developing and emerging market businesses tend to be cash-rich with strong balance sheets, unlike their European counterparts. And they are using their capital to acquire long-standing brands and heritage, which they don’t have, as well as processing and production technology.

Black added: “Time will tell but I wouldn’t be surprised if you saw Weetabix produced in Asia for that market.”

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