Hershey has struck a deal to buy 80% of Chinese confectioner Shanghai Golden Monkey Food Joint Stock Co.
The US candy giant, which has identified China as one of its key international markets, said the agreement was subject to local regulatory approval and the backing of the privately-owned firm’s shareholders. However, Hershey expects the deal to close in the second quarter of next year. Financial details were not disclosed.
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Shanghai Golden Monkey, or SGM, manufactures Golden Monkey candy, chocolates, protein-based products and snack foods. Its net sales “have been growing double digits”, Hershey said. The company is expected to post net sales of US$225m for 2013.
Hershey president and CEO John Bilbrey claimed the transaction was “a win for noth companies”.
He said: “The strength of SGM’s confectionery portfolio and overall distribution capabilities, especially within the traditional trade, is an opportunity for us to leverage scale to make the iconic brands of Hershey and SGM even more powerful. Additionally, SGM’s focus on protein-based products and snacking is on-trend with Hershey’s consumer-centric marketplace insights.”
Around 75% of SGM’s net sales are within the non-chocolate and chocolate candy segments. The remainder is concentrated in what Hershey called the “fast-growing protein-based bean products and other snack categories”.
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By GlobalDataSGM manufactures products in five cities and has more than 130 sales offices in China.
Zhao Qisan, SGM’s founder, chairman and general manager, said: “In less than 25 years, SGM products have become national, well-known, trusted brands in China. We look forward to working with Hershey and leveraging the resources that both of us have to offer to the great benefit of Chinese consumers who will have even more choices for high-quality products after this transaction.”
The SGM founder will stay on with the business, reporting into Bert Alfonso, the head of Hershey’s international operations. He said: “Shanghai Golden Monkey is the type of business we’ve been focused on for potential M&A. It fits Hershey’s acquisition criteria: it is located in our primary international market, China; it is a pure play confectionery and snacks company; and it has distribution into channels where Hershey products have yet to penetrate.”
Hershey, which initially struggled in China when it first entered the market in the 1990s, has stepped up its investment in the country, launching a range of its US brands. This year, Hershey opened an innovation centre in Shanghai. It also launched its first foreign brand in China, Lancaster milk candies, which it plans to introduce – with a different recipe – into the US.
