Global chocolate maker
The Hershey Company
) is geared to bolster its presence in the growing market of
China. As part of this strategy, Hershey's wholly owned
subsidiary Hershey Netherlands B.V. has inked an agreement to
take over 80% interest in Shanghai-based chocolate maker,
Shanghai Golden Monkey Food Joint Stock Co., Ltd. ("SGM").
Although the company has not made any comments on the purchase
consideration for the deal, as media reports Hershey is taking
over the Chinese company for a cash consideration of $584 - $600
million. The deal will add popular Chinese brand Golden Monkey
honey-peach hard candies, strawberry-flavored cheese chews, and
seaweed-flavored wafer sticks into Hershey's already rich
portfolio. Moreover, this is a strategic fit for Hershey's as the
former has similar strategies related to brand building and
selling capabilities with Hershey. The takeover is expected to
add to Hershey's earnings on an adjusted basis in 2014.
Among the emerging countries where Hershey is boosting its
presence, the company's special focus is on China. China is
emerging as an economic powerhouse with its large population,
largest consumer bases given its growing number of middle-class
and affluent households. According to market research firm
Euromonitor, the chocolate confectionary industry in China is
expected to grow by a 6% compound annual growth rate (CAGR) for
the coming five years.
Hershey plans to add manufacturing capacity and resources to
drive growth in China. The company expects China to become the
fifth largest global confectionary market by 2016. However,
Hershey will have to compete with Brussels, Belgium, based Mars
Foods Mars Foods which is the leading player in chocolate
confectionery with a 43% share of retail value sales in 2012.
Though Hershey's is accelerating investments in overseas
markets, particularly in Mexico, Brazil, India and China,
Mondelez International, Inc
) have a stronger presence outside North America. Mondelez's
purchase of Cadbury in Jan 2010 has opened new sales channels for
the company through the latter's vast distribution networks in
developing markets such as India, Brazil and Mexico. In contrast,
markets outside the U.S. have accounted for only 14%-16% of the
company's net sales between 2010 and 2012.
Other Stocks to Consider
Hershey carries a Zacks Rank #3 (Hold). However, better-ranked
food companies are
Green Mountain Coffee Roasters Inc.
The Hain Celestial Group Inc.
). Both the companies carry a Zacks Rank #2 (Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
HERSHEY CO/THE (HSY): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
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