Chinese company Bright Food is reportedly in talks with Lion Capital to acquire British cereal maker Weetabix and could make its first mark on Europe, according to an analyst.
BakeryAndSnacks.com spoke to Marcia Mogelonsky, director of insight for Mintel Food and Drink about a potential deal after major media outlets reported that talks for a £1bn deal were on-going.
Likelihood of a deal
“Lion Capital is in the business of turning over companies, so it is not surprising that it is looking to sell Weetabix,” said Mogelonsky.
She added that a number of companies had moved through Lion’s doors in recent years, including Kettle Foods and Orangina-Schweppes.
However, she warned that companies could be put off as the cereal market that had suffered from the recession and consumers were moving away from cereal as a breakfast choice.
Weetabix itself reported a 1% value decline in cold cereal in 2010 and flat sales in cereal bars.
However its hot cereal sales from brands such as Ready Brek grew 18%, helping the company boost profit by around 1%.
“Since the market in the ‘traditional’ cereal areas of N America, S America and Europe is not likely to improve in any major way in 2012, it is likely that Lion is looking to off-load the company now, while it is still doing relatively well,” said Mogelonsky.
BakeryAndSnacks.com asked Lion and Bright about the alleged talks but a response was not forthcoming. Bright has denied the talks to other media sources, while Lion is declining to comment.
Others in the picture
Asked if there could be any other potential bidders, Mogelonsky said: “The ‘usual suspects’ include Kraft and perhaps PepsiCo, which is working to improve its “Better for you” image by investing more in its Quaker brands – there could be a synergy between Quaker and Weetabix.”
She added that Weetabix, a cereal business, may not necessarily fit with Kraft’s operational split into a global snacks company and a North American grocery business, and also threw another name into the mix: US firm Campbell’s.
Kellogg’s Pringles buy shows how traditional cereal companies are broadening portfolios to include more snacks and biscuits to mitigate risk in their core market, she continued.
“We would not really look to a cereal company to jump in, therefore,” she said.
Bright’s European springboard
According to Mogelonsky, Weetabix would be Bright Food’s “first European beachhead”.
She said Bright may use Weetabix as a platform for European expansion as Asian confectioner Lotte had done when it acquired Wedel in Poland from Kraft.
“The acquisition of Weetabix would expand Bright’s holdings into a number of new markets and give the company springboards) for its other products.“
“Bringing Weetabix to Asia may be more problematic as Asian consumers have not yet completely adapted to ‘western’ cold cereal traditions.”
However, she said hot cereal may prove an easier transition from congee (traditional Chinese hot breakfast food) to more “westernized” breakfast formats.
This is not the first time Bright has been connected to a European business. In 2010, the company was reportedly in discussions to buy Jaffa Cakes and McVities maker United Biscuits for $2bn, but a deal was never struck.