Hershey is gobbling up Chinese candy maker Shanghai Golden Monkey for $600M

Hershey takes big bite of Chinese sweet seller

An hour ago

Hershey is buying 80 per cent of the somewhat brilliantly named Shanghai Golden Monkey Food, a Chinese confectioner. The iconic US candy company did not reveal the price it is paying for Shanghai Golden Monkey. But it said the Chinese business expects to record net sales of more than $225m in 2013. Shanghai Golden Monkey, according to its website, sells products Hershey fans would probably eat, such as milk chocolate, and some that may only be suitable for the Chinese market, such as its “strawberry cheese” candy.

Hershey to Buy China Candy Maker

Chocolate Giant Seeks a Stronger Hold in the Fast-Growing Chinese Sweets Market.

LAURIE BURKITT

Updated Dec. 19, 2013 7:44 a.m. ET

BEIJING—Chocolate giant Hershey Co. HSY +1.80% is gobbling up Chinese candy maker Shanghai Golden Monkey Food Joint Stock Co. in a nearly $600 million bid for a stronger hold in China—one of the world’s fastest-growing markets for sweets.The Pennsylvania company, known in the U.S. for its chocolate Kisses and namesake Hershey bars, plans to acquire 80% of privately held Shanghai Golden Monkey in a deal that is expected to close in the second quarter of next year, according to a Hershey statement released Thursday. A spokeswoman for Hershey said the company will pay $498 million in cash, as well as an estimated debt of $86 million to acquire the candy maker.

Hershey’s bid for the Shanghai-based company—which sells candy and snacks such as malt balls, honey-peach hard candies and Xylitol-branded chewing gum—is expected to boost sales and is part of a broader goal executives have laid out to expand international sales to 25% of global sales by 2017, up from its current 10%.

Shanghai Golden Monkey’s sales are expected to reach $225 million this year, according to Hershey. Last year, it had a 1.4% market share of confectionery sales, making it the ninth-largest confectionery and the sixth-largest chocolate company in China, according to Euromonitor.

China is a sweet spot in the global industry, and foreign candy makers have long targeted it as a potentially lucrative market. Sales of chocolate, candies and gum in China climbed 46% from 2007 to 2012, then reaching more than 79.6 billion yuan, or about $13 billion, according to market research firm Euromonitor International.

But industry insiders say foreign players have often struggled to develop flavors that work for Chinese consumers, who like combinations that would seem like monkey business in Western markets—yogurt with aloe chunks, blueberry-flavored potato chips and sweet-onion cookies.

That is where Shanghai Golden Monkey comes into play for Hershey. It has won over local fans with items such as strawberry-flavored cheese chews and red-bean milk candies sold in packets that are decorated with red-cheeked cartoon monkeys. It also sells snacks such as Munching Monkey-branded seaweed-flavored wafer sticks and dried tofu in fragrant numb and spicy flavor.

“If you’re a Western company, you look at these flavors and think, ‘This could never work,’ ” said James Button a senior manager at Shanghai-based consultancy SmithStreet. Mr. Button said because Chinese consumers are largely new to candy, they have few set expectations and are willing to experiment—as are Chinese companies.

Yet the play for Shanghai Golden Monkey won’t open up major distribution channels for Hershey, Mr. Button said, noting that the Chinese company primarily sells in grocery stores in cities along the coast and in southern China, where Hershey already has a growing presence. Shanghai Golden Monkey has 130 sales offices and 2,000 distributors nationwide, according to its website.

Swiss food maker Nestlé SA expanded its distribution when it made a similar move in 2011, acquiring a 60% stake in Chinese candy maker Hsu Fu Chi International Ltd. At the time of the acquisition, Hsu Fu Chi directly distributed to more than 16,000 retail outlets. It also broadened Nestlé’s flavors beyond its Kit Kat and Crispy Shark chocolate wafer bars to such new products as lychee-flavored gelatin custard cups and cucumber cookies.

Hershey has already started revving up its efforts to win Chinese tastes. It launched in May a condensed-milk candy brand sold only in China known in English as the Lancaster and in Chinese as the Yo-man. The rollout was Hershey’s first candy product specifically designed for a market outside the U.S., where the company plans to start selling them early next year.

Hershey plans to increase the number of stores in China by 32% and its sales force by 60% in 2013 from a year earlier and will in the future unveil other goodies, like its peanut butter and chocolate candy Reese’s and its hard fruit candy Jolly Rancher brand in China, according to a company spokesman.

Hershey, which had total net sales last year of $6.6 billion and has a goal of reaching $10 billion in annual sales by 2017, says it wants to increase sales by a factor of seven in China over the next five years.

 

Dec 19, 2013

Golden Monkey Food

ALEX FRANGOS

What does every chocolate company want under the Christmas tree? Golden Monkey Food, of course.

Hershey announced a deal Thursday to take a majority stake in closely held confectioner Shanghai Golden Monkey Food. The Chinese sweets maker sports a munching monkey mascot who sells delectable treats such as sweet cheese candy, corn hard candy and spicy dried bean-curd snacks. Golden Monkey’s Wuxi chocolate-processing facility claims to be one of the largest in China, according to a company website.

Americans probably shouldn’t expect the deal to cause a backflow of Golden Monkey Food products to the U.S. market. Rather, Hershey sees potential in using Golden Monkey’s distribution channels to sell Hershey’s Kisses and Jolly Ranchers to curious Chinese customers. It could also learn something about local tastes. The companies didn’t disclose the deal price.

Golden Monkey is expected to have sales of around $225 million this year and is growing at a double-digit rate annually, the companies say. That’s dwarfed by Hershey’s estimated $7 billion in revenue this year. While it’s a nice addition to Hershey’s collection of brands, Golden Monkey Food sounds like more of a stocking stuffer.