A chunk of Dole Food Co.'s business could end up in the hands of one of Japan's largest trading houses it was announced this week - and China appears to be central to the potential deal.

On Wednesday (12 September), Dole, which is in the middle of a "strategic review" of its operations admitted it is in talks to sell two units, including its packaged food arm, to Japanese conglomerate Itochu.

The two companies are in "advanced negotiations", Dole said, over the sale of the US group's packaged food arm and its fresh produce business in Asia.

No deal had been done, Dole insisted, and it said it was "in discussions" with "several other parties" over the assets.

Itochu seemed a bit more sure a deal could be done. In a statement issued the same day, it indicated it expected the transaction to be finalised by November. The company not be reached for further comment.

It is no secret that Japanese companies, facing a stagnant economy and an ageing population at home, have to look abroad for growth. A number have made acquisitions in the international food and beverage sector. Mitsubishi Corp. owns UK food and drink firm Princes; Suntory snapped up soft drinks group Orangina Schweppes in 2009; Kirin Holdings owns Australia food and drink firm Lion. This summer, Mizkan boosted its presence in Europe with the acquisition of Premier Foods plc's pickles and vinegar business.

The strength of the yen also makes overseas deals more attractive and the length of the economic downturn has made assets, broadly, are available at more reasonable prices than perhaps half a decade ago.

These factors provide a likely context for Itochu's interest in expanding further overseas. It is, however, no stranger to investment outside Japan and we should look to China for a likely reason for its interest in Dole's assets.

In the FMCG sphere, it has made two notable investments in China in the last decade; its acquisition of a stake in convenience retailer FamilyMart and its equity interest in food group Ting Hsin. In 2011, Itochu laid out what it called a "brand new plan" for growth, which included intentions to invest more in "consumer-related" businesses and expand "aggressively" in China.

Itochu is likely to use Ting Hsin's distribution networks (the Chinese firm the owner of food giant Tingyi) and FamilyMart's retail outlets to push Dole's packaged food and Asian fresh produce products to China's consumers.

"Itochu's holdings and experience in food distribution in China are definitely a big asset for Dole products," James Roy, an analyst at China Market Research Group, tells just-food. "Food distribution in China is very tricky - it involves a lot of steps and you need good relationships. It helps enormously to have established networks like Ting Hsin does as the owner of Kang Shifu [instant noodles] and FamilyMart as a major convenience store chain."

Dole's packaged food business has three canneries in Asia, two in Thailand and one in the Philippines, to help serve the region. In China, it owns processing and distribution centres in Shanghai and Qingdao.

Roy says demand for the kind of products Dole can offer is increasing quickly in China. "Demand for fresh produce is growing fast in China both because of strong consumer worries about food safety but also because of rising demand for better variety and for year-round rather than seasonal availability of products."

And it was the Asian market that supported the increase in revenue from Dole's packaged food business, which increased 7% to $1.2bn in the year to 1 January. Of course, a deal would give Itochu Dole's significant packaged food presence in western markets like North America, fitting its strategy of investing more in consumer sectors to increase "stable earnings".

For Dole, its apparent willingness to sell its packaged food business represents an exit from the value-added parts of the sector to focus on fresh produce. It suggests a different strategy to a rival like Fresh Del Monte Produce, which is looking more at added-value products amid what it sees as a sector facing excess supply of products like bananas.

In the US, Janney Montgomery Scott analyst Jonathan Feeney instead suggests Dole's decision to put the packaged food assets on sale is purely pragmatic.

"Its not a strategy, but a tactic reflective of relative marketplace valuations," he says. "It is the appropriate time to sell what's fairly valued (packaged food), if it provides opportunity to augment benefit from what's undervalued (fresh)."