Hershey Takes a Bite Out of China Candy Giant
Hershey Co. (NYSE:HSY) is hungry — and it wants to take a bite out of Chinese candy maker Shanghai Golden Monkey Food Joint Stock Co. That’s what the Wall Street Journal says at least, as it reported Thursday that the chocolate giant is getting ready to buy Shanghai Golden Monkey for nearly $600 million. According to a Hershey statement released Thursday, the Harrisburg, Pennsylvania-based company plans to acquire 80 percent of Shanghai Golden Monkey in a deal that is expected to close in the second quarter of 2014. Hershey will pay $498 million to Shanghai Golden Money in cash up front, and then sign off on an $86 million debt.
Hershey now joins the likes of many other global retailers that have worked to increase their presence in China, one of the world’s most lucrative markets for retail. Thanks to a growing middle class, retailers are now enjoying more success in the country, and Chinese consumers have proven that they also have a sweet tooth, as China currently hosts one of the fastest-growing markets for sweets. According to the Journal, sales of chocolate, candies, and gum in China jumped 46 percent from 2007 to 2012, and reached more than 79.6 billion yuan or about $13 billion. Shanghai Golden Monkey has benefitted significantly from these sales, boasting a 1.4 percent market share of confectionary sales last year, and now Hershey is ready to join forces with the Shanghai-based company as it works to expand its international sales to 25 percent of global sales by 2017, up from its current 10 percent.
Hershey can profit from a fruitful partnership with Shanghai Golden Monkey not only because the Chinese company can help Hershey gain a more solid footing in the country, but also because the Shanghai-based candy giant specializes in candy and snacks while Hershey specializes in chocolate. Hershey enjoys significant success in its home market thanks to Americans’s hearty appetites for its dark, milk, and white chocolate offering, but foreign players like Hershey have had more trouble cracking the Chinese market, and that’s where Shanghai Golden Monkey comes into play.