Advertise with fastmoving.co.za
 
 

Weetabix
Weetabix

Weetabix sale puts it back in cereal pack

INTERNATIONAL NEWS

By Martinne Geller, Adam Jourdan and Lauren Hirsch - Apr 19th, 09:53

London/Shanghai/New York — US company Post Holdings is buying Weetabix from China’s Bright Food Group for £1.4bn, putting the British breakfast favourite back into the hands of a cereal company. 

Post said on Tuesday the combination would help its own brands, which include Honey Bunches of Oats and Grape-Nuts, to expand overseas, while allowing for greater distribution of Weetabix and its Barbara’s brand in North America.

The sale comes just five years after Chinese state-owned Bright Food took control of Weetabix in a deal that valued it at £1.2bn at the time of a major overseas push stretching from Australia to Israel.

The brand has struggled to grow significantly since as cold cereals in western markets face more competition from breakfast bars, Greek yogurts, and fast-food chains.

Concerns over the sugar content of some cereals has also hit sales of such products.

The Weetabix brand had global retail sales of $310m in 2016, according to Euromonitor International, up only 1.4% from 2012, the year in which Bright Food took control.

In China, which had been key to Bright Food’s purchase, retail sales of cold cereal have nearly doubled over the past five years, but it remains a relatively small category, worth just $933m, according to Euromonitor, as most locals prefer hot breakfasts.

"It’s probably going to be a much better fit with Post," said Liberum analyst Robert Waldschmidt, noting that there would be cost savings and that the brand should benefit from being owned by a company with particular expertise in cereal.

Internationalisation

For Bright Food, which makes dairy products, candy and other foodstuffs, the sale did not signal the end of its international ambitions, said Bright spokesman Pan Jianjun, who is based in Shanghai.

"This is a part of our internationalisation strategy.

"Selling assets enables us to expand better. Going forward Bright will stick to our overseas push," he said.

The sale of Weetabix would give Bright extra firepower should it want to bid for any other food assets on the block. The global packaged food industry is in the midst of a wave of dealmaking, with giants Unilever and Reckitt Benckiser both selling multibillion-dollar food assets.

Weetabix, which also makes Alpen muesli, is Britain’s second-largest ready-to-eat cereal maker overall and the 85-year-old Weetabix brand is the nation’s top-selling cereal. Globally, it ranks seventh.

Bright Food took control of Weetabix from private equity firm Lion Capital, which had held its stake for over a decade.

Baring Private Equity Asia subsequently bought Lion’s remaining stake in 2015.

The latest sale price, £1.4bn, is about 11.6 times the £120m of adjusted annual ebitda (earnings before interest, tax, depreciation and amortisation) that Post said Weetabix would contribute before cost savings. It estimates those savings to reach £20m per year by the third full fiscal year after the deal is completed.

Post, headquartered in StLouis, the US, said the deal would immediately add to its adjusted operating profit margins and its free cash flow, excluding one-time transaction expenses. The company expects to fund the deal with cash on hand and borrowings under its existing credit facility.

Post Holdings has moreover agreed in principle to establish a joint venture with Bright Food and Baring to manage the Weetabix China operations.

Post also affirmed its 2017 outlook and reported financial results for the second quarter ended March 31.

It posted net sales of $1.25bn, a net loss of $4m and adjusted ebitda of $228m.

It said it still expected 2017 adjusted ebitda of $920m-$950m, excluding any contribution from Weetabix.

© BusinessLIVE MMXVII 

Read more about: weetabix | retail | consumer

Related News

New retail report reveals South Africa's most customer-centric retailers
26/04/2017 - 12:20
A recent survey conducted by the global leaders in customer science, dunnhumby, titled the Customer-Centricity Index (CCI) reveals that South Africa’s most successful apparel retailers are those with a high focus on ‘customer-centricity’ defined as focusing on creating a positive customer experience by placing your customer in the centre of your retail decisions. According to the recent study, the local retailers that scored the highest on their overall customer-centricity score include Fabiani, Woolworths, H&M, Miladys, Markham, Cotton On and Mr Price.

Woolworths celebrates 10 years of the Good Business Journey
26/04/2017 - 10:37
Woolworths Holdings Limited (WHL) is pleased to announce the 10th anniversary of its Good Business Journey (GBJ), a flagship South African sustainability programme that was launched in 2007 by Simon Susman, now Chairman of WHL, as a commitment by Woolworths to make a difference to people, communities and the environment.

Walmart offers discount for store pickup
26/04/2017 - 10:21
In a move designed to save on shipping costs while offering flexibility to customers, Walmart will begin offering discounts when shoppers opt to pick up an online order in store.

Retail sales drops to lowest rate in 7 years
25/04/2017 - 14:14
Retail sales have taken the biggest fall in seven years during the first quarter of the year, as rising living costs had an adverse effect on disposable income spending.

Below-forecast earnings erode Pick n Pay shares
25/04/2017 - 11:25
While local grocers have in general seen a decline in their share prices in the past month, Pick n Pay has been hit the hardest.