UPDATE: CHINA: Analysts see packaged food, sourcing deals for Wahaha

The decision by Wahaha to look at acquisitions for overseas growth has come as little surprise to some analysts who believe the Chinese food and drink firm may look at packaged food or sourcing deals.

Kelly Zong, head of international business at Wahaha, told Bloomberg in an interview yesterday (13 September) the company is working with investment banks to identify food and beverage deals in Europe and Australia.

The daughter of owner Zong Qinghou told the publication the Chinese food and beverage group is interested in companies that can "help it source raw materials more efficiently and share distribution systems". As well as Europe, Zong said Wahaha would look to the US as a potential market for entry.

James Roy, senior analyst at China Market Research Group, said it "no surprise" Wahaha, which was last month rumoured to be the frontrunner in the bidding process for the snack unit of UK firm United Biscuits, is looking to acquire foreign brands.

"They are extremely successful in China but don't have much of a brand presence overseas," he told just-food. "Buying an established international brand like KP Snacks could provide this right away. I would expect them to mainly be looking to buy packaged food and drink companies, but a lot will depend on what companies are up for sale and who they are competing with."

Torsten Stocker, partner at consulting firm Monitor Group, was equally unsurprised at Wahaha's admission.

"Everyone and their brother across different consumer goods sectors in China is now talking about overseas acquisitions. In part, this is driven by a genuine desire to expand the portfolio of brands, gain technical and marketing skills etc."

Stocker said a deal made by the group overseas may be "quite opportunistic", adding: "Any acquisition that is sourcing related may make more sense for Wahaha."

However, he added: "I have my doubts that this will work that well in practice. In part, there's also a bit of one-upmanship involved.

"Of course, as long as the investment makes sense from an economic perspective and creates more value for shareholders than further expanding in China, there is nothing wrong with this. One concern I have though is that it distracts management from some of the more critical tasks of competing better at home.

"I don't believe in expanding overseas because competition gets tougher at home. It is easy to take your eye off the ball in your home market, in particular when your management bench is still thin, which is still the case for most food and beverage companies in China, and even more so for local businesses."