With reports flooding the wires that Heinz has agreed to sell its Chinese frozen food business, Long Feng Food, to Zhengzhou Sanquan Foods marks the second time in a decade the American major has lost money on a deal in the country.
The acquisition by the Chinese frozen food manufacturer is for an undisclosed sum but the fact it was completed in a hurry—in line with the company’s “global strategy to de- emphasise its non-core frozen food businesses outside the US”—has led the Shanghai-based First Financial Daily to suggest Heinz lost out on the deal, which was penned on February 22.
It is widely reported that back in 2002, Heinz also made a loss as a result of its acquisition of Meiweiyuan (Guangzhou) Food Co.
Not linked to US acquisition
Earlier this month, the ketchup maker agreed to be acquired for US$23bn by Warren Buffett’s Berkshire Hathaway and Jorge Paulo Lemann’s 3G Capital, although the company has stressed the China deal has not come as a result of the Sanquan move.
Heinz entered the Chinese market in the 1980s and has expanded several times through mergers and acquisitions, albeit with limited success.
In the nine months leading up to January this year, Long Feng's sales touched US$27m, compared to US$51m during the same period the previous year. Meanwhile, Sanquan accounted for 10.9% of China’s total retail market share, whereas Long Feng’s share was worth just 3.3%, according to the reports.
Sanquan sells frozen meals and snacks such as fried chive dumplings on the mainland, and in a statement said the purchase will help increase competitiveness and expand its market share. The acquisition will be financed using internal cash, it said, without giving a value for the deal.
The transaction is expected to be completed in up to four months, according to Heinz.