Hershey hopes to expand China market with SGM purchase
The chocolate company wants to ensure long-term growth with the purchase of Shanghai Golden Monkey Food Joint Stock Co.
|Photo provided by The Hershey Co.|
In an effort to get a leg up in China’s candy and snack market, The Hershey Co. is purchasing Shanghai Golden Monkey Food Joint Stock Co., a confectionery company based in Shanghai.
Hershey, which completed the initial purchase Friday, now has an 80 percent stake in the Chinese company.
The American candymaker hopes that by pairing with SGM’s trusted brand name as well as its diverse offerings, the deal will help it expand Hershey’s reach in China. SGM also expects to benefit from the Hershey name and its global reach.
“This strategic acquisition advances our international growth agenda and builds on our commitment to the China market by providing world-class, quality products to Chinese consumers,” says Hershey International President Humberto Alfonso.
To do so, Hershey will continue to invest in SGM’s products to ensure its own popular brands can reach more consumers.
“Acquiring such an iconic and scalable brand increases our opportunity to drive top-line growth and create value for shareholders over the long term,” Alfonso explains.
China is of specific interest to Hershey as the company’s number one priority for international growth. Hershey has increased its investment in the region throughout the past several years to become one of the fastest growing confectionery companies in the Asian country.
Hershey and SGM will work together on integrating their brands, which are led by Hershey’s Kisses and Hershey’s chocolates for Hershey and Golden Monkey candy and snacks for SGM. The combined effort plans to continue the success of both companies and further boost sales.
Hershey expects its net sales in China in 2014 to be about $200 million, an increase of about 40 percent from 2013.
SGM is also growing; its sales grew about 7 percent from 2012 to 2013 for a net of 1.259 million yuan ($205 million). Hershey plans to buy the remaining shares Sept. 26, 2015, and aims to see sales of about $500 million by the end of that year, making China the company’s second-largest market.
The total price of the purchase after the second closing next year will be about $577 million.