Bright wins knowledge but Weetabix won’t work in China: Analysts

By Kacey Culliney

- Last updated on GMT

Cereals won't work in China - analysts say Bright is focused on knowledge gain instead...
Cereals won't work in China - analysts say Bright is focused on knowledge gain instead...
China’s Bright Food has snapped up 60% of Weetabix for £1.2bn (US$1.95bn) but industry analysts say the breakfast cereal concept will flop in China and have coined the move as a mere knowledge buyout.

This purchase marks the state-owned firm’s largest overseas acquisition to date and follows its December 2011 acquisition of a 75% stake in Australian food player Manassen for A$530m.

Weetabix Food Company is the second largest branded cereal and cereal bar manufacturer in the UK boasting a product portfolio of its flagship cereal Weetabix, Alpen, Ready brek, Weetos, Oatibix and Alpen cereal bars.

Bright has said it will drive global growth of the brands but focus on Asia, especially China, “to take advantage of the growing appetite in the country for packaged and convenient healthy foods.”

A spokesperson for FTI Consulting, which represents Bright Food, told FoodNavigator-Asia Weetabix has, “recognisable, highly transportable brands”​ that can be moved over to China where Bright has a strong presence and local knowledge and there is ample retail potential.

“Keeping the brand as it is will be the strategy for Bright,”​ he said, but all the principle brands – Weetabix, Alpen and Ready brek – can “transform into all sorts of different products – that’s the potential within it.”

Euromonitor estimates peg China's cereal market at US$198.4m for 2012 but suggest that growth and volume sales are set to be depreciative over the next five years.

Cereals won’t float in China

Sam Mulligan, director of Data Driven Marketing Asia (DDMA), said that taking cereals to China will likely flop as the Western breakfast cereal segment hasn’t worked in the Asian market.

“It’s not a format anywhere near their diet – consumers are still very traditional,”​ he said.

James Roy, senior analyst at China Market Research (CMR) agreed that Chinese consumers have “very entrenched views and habits”​ when it comes to the morning meal and Western cereals is a segment unlikely to take off in the country.

“Breakfast choice tends to be hot meals such as rice porridge or eggs,”​ Roy said, and cereal doesn’t fit into the breakfast concept for Chinese consumers.

He noted that Bright could focus on the healthy snacks market, where there is strong growth potential, and compete with sector giants like Kraft.

“Food products will have to be adapted and mutated to fit the consumer market,”​ he detailed.

‘This is not about the Chinese market…’

“My gut feeling is that this acquisition is not about the Chinese market,”​ Mulligan said. “I think Bright is trying to expand into international markets to see what they can learn… it’s definitely about knowledge.”

Roy agreed that this acquisition formed part of a “learning process”​ for the company; “I think it’s about gaining branding expertise, internal process insight and knowledge from international established food brands.”

Bright will then apply learnt knowledge to operations in other developed international markets and China, both analysts said.

Roy pegged the acquisition a breakthrough for Bright, especially with such a large brand. It will send messages to the domestic market that it is a significant, internationally positioned business with higher credentials, he detailed.

Cheap, valuable knowledge?

“1.2 billion pounds is not a lot of money for a large Chinese company. It’s probably good value for money and probably a relatively cheap asset for them,”​ Mulligan noted.

Roy detailed that Bright is a very “cash rich”​ company that has been eyeing overseas acquisitions for some time.

The conglomerate bid for Yoplait and United Biscuits in 2011 and 2010 but lost out to competitors.

The FTI spokesperson working with Bright agreed that it was a “pretty competitive price”,​ especially “when you think of the potential of the brand.”

He suggested that further local-level acquisitions could be on the cards for Bright, as they work on funnelling the Weetabix brands through the Chinese market. “This should be seen as the first part of a long-term growth strategy,”​ he added.

Related topics Business

Related news

Show more

Follow us


View more

Food & Beverage Trailblazers

F&B Trailblazers Podcast