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Editor's Blog

Bidding war expected for Weetabix: Barilla, Nestle, General Mills, pladis and PepsiCo in the loop

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Gill Hyslop

By Gill Hyslop+

27-Jan-2017
Last updated on 27-Jan-2017 at 14:57 GMT2017-01-27T14:57:14Z

Suitors are lining up to woo Weetabix owners Bright Food, says analysts. ©iStock/nicalfc
Suitors are lining up to woo Weetabix owners Bright Food, says analysts. ©iStock/nicalfc

UK cereal company Weetabix has been put up for sale by its Chinese owner Bright Food Group and there are several suitors in the frame, says analysts.

Italian pasta firm Barilla; Cereal Partners Worldwide, a JV between Cheerios maker Nestle and Lucky Charms owner General Mills; Quaker Oats owner PepsiCo; and Turkish group pladis (which bought Jaffa Cakes maker United Biscuits in 2014) have been reported to be lining up for a bite of the UK’s second biggest cereal brand.

Kellogg’s – surprisingly – has not entered the bidding war.

Perhaps they can read the writing on the wall?

Downward trend

Late last year, Bright Food hired investment capitalists Goldman Sachs to sound out interest from potential buyers for its 60% stake in the firm.

With the business valued at as much as £2bn ($2.5bn), it’s been reported that analysts think a bidding war is on the cards.

Barilla is currently seen to be the frontrunner and the figure of £1.5bn ($1.88bn) has been quoted.

Unfortunately, because of the Chinese New Year, several analysts were unavailable to specifically speculate on the Weetabix sale for BakeryAndSnacks, after it was noted that “faltering performance for Weetabix in China” had prompted it.

But, while the analysts said the Chinese breakfast market is expected to keep up the momentum of growth it’s had in the past few years, performance is expected to decelerate.

 

Best and worst case forecast for breakfast foods. Source: Mintel

Reports sent to the editor certainly show the sale could be aligned to market predictions in the Chinese breakfast cereal market.

  • Euromonitor reported year-on-year growth slumping with a CAGR of 11.30% (2013-14) to 8.48% (2015-16).
  • Daxue Consulting, a research firm that concentrates on the Chinese market, predicts a CAGR of 6.2% for the five-year period 2012-2017.
  • Mintel forecasts that Chinese consumers’ total breakfast spending will rise from RMB 1.33bn ($194m) in 2015 to reach RMB 1.95bn ($283m) in 2021, increasing at a CAGR of 6.4% from 2016-21.
  • Weetabix turned over £346.4m ($434m) in the year to January 2016, compared to £352.1m ($441m) a year earlier, with pre-tax profit dropping to £94.3m ($118m).

Pic:©iStock/ktaylorg

Mintropolitans - who are identified by Mintel as potential future trend setters – are more likely to agree that they like Western style than traditional Chinese breakfast foods. 46% of consumers in China claim they prefer to eat cereals for breakfast.

The Chinese conundrum

“Chinese consumers have developed hierarchical needs for breakfast… and are willing to trade up to products and services [to] help them save time and add convenience to the eating process,” said Lauren Gu, director of Research, Food & Drink, Lifestyle, Mintel.

However, Gu contended that convenience is the only perceived advantage of Western breakfasts as compared to Chinese-style foods.

“Mass market consumers tend to think that Western breakfast doesn’t offer such good value for money. They have concerns over Western breakfast being served cold, not being fresh, and not offering balanced nutrition and having fewer varieties.”

Gu told BakeryAndSnacks that brands should take inspiration from The Cereal Killer Café in London that serves cereals from more than 100 different brands globally, with 12 types of milk and 20 toppings for mix and match.

“Packaged breakfast cereal products could also leverage this idea when marketing their products. They could consider opening branded pop-up outlets to not only sell packaged products but also engage with Chinese consumers and educate them about the different possible ways of using cereals to make a healthy and delicious breakfast,” she stated.

“This may help brands to tap into both the healthy eating trend as well as the trend that consumers will develop a stronger interest in authentic Western-types of food as they gain spending power.”

On the books again

Bright Foods bought a majority stake for a reported £1.2bn ($1.9bn) in Weetabix in 2012.

The Shanghai-headquartered company is one of the largest Chinese conglomerates in the entire food industry, with operations in agriculture, food processing and retail.

Despite rumors several years later, the state-owned firm did not buy up the remaining 40% of shares from Baring Private Equity Asia, one of the continent’s largest private equity groups.

Weetabix was established in 1932 and remained a family-owned business until 2003. Today, it commands 13% of the UK cereals market. It also produces the Ready Brek and Alpen brands.

The company sources all the wheat used in its breakfast cereals from within a 50-mile radius of its mills in Burton Latimer, Northamptonshire, in the UK.

The mills export to more than 80 countries around the world, employ around 1,800 staff internationally and operate manufacturing plants worldwide, including North America.

 

Weetabix caused a stir on social media recently with its suggestion of “Benedict’s Eggs”.

Instead of toast or bread under the ham, poached eggs and hollandaise sauce, the recipe suggests using Weetabix.

General feeling on twitter: Weirdest recipe ever.

Bright Foods and Baring Private Equity Asia declined to comment.

The biggest player in the Chinese breakfast cereal market was Guilin Sea Mild Biology Technology Development with an 18% share in 2016, according to Euromonitor.

The domestic player specializes in hot cereals, mainly in the mid-priced segment.

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