- PepsiCo is buying a 26% share in Natural Food International Holding for $131 million, according to CNN. The natural foods company is based in Shenzhen, China.
- Natural Food International, which makes products from grains, nuts, berries and beans, is China's second-largest natural food producer by retail sales. The deal will make PepsiCo the company's second-largest shareholder, Natural Food International said in a statement.
- Annual sales of Natural Food International products doubled to about $230 million between fiscal years 2015 and 2018, Food Business News reported. The transaction is expected to close July 30.
Like other food and beverage manufacturers, PepsiCo is looking abroad to boost growth and sales, so this deal makes sense from a number of perspectives. Natural food is a growing segment in the states, and, as the U.S.'s largest trading partner, China is an important and expanding market for any CPG company wanting to enhance its global footprint.
Ram Krishnan, CEO of PepsiCo Greater China, told The Global Times newspaper that Natural Food International has "a strong growth and profitability track record." This undoubtedly is part of what attracted PepsiCo to take a minority stake in the company.
"Our investment marks an important step in our commitment to grow 'in China, for China,'" Krishnan said. The Hong Kong Exchange seemed to agree since shares of Natural Food International jumped 14% after the news came out, CNN noted.
The natural food and drink market is expected to post a compound annual growth rate of 13.7% from 2017 to 2023, according to Allied Market Research. Given consumer demand for plant-based products such as those made with grains, nuts, berries and beans — all products in which Natural Food International specializes — those items are likely to make up a big slice of the market. The Hong Kong Trade Development Council Research reported China's share of total health food sales climbed from 4.6% of the global market in 2010 to 11.6% in 2018, so PepsiCo seems positioned to take advantage of the opportunity.
The company is making other foreign investments as well. It recently entered the African market with a $1.7-billion acquisition of Pioneer Food Group of South Africa, which makes cereals and juices under a variety of brands. The deal could help PepsiCo move further away from its core soda business and more into snack offerings.
Such investments help U.S. manufacturers differentiate their portfolios, attract a new customer base and bolster sales by buying into popular local products. Other food makers have taken a similar path to grow in recent years. With its acquisition of Keystone Foods last year, Tyson Foods invested in processing plants and innovation centers in China, South Korea, Malaysia, Thailand and Australia. The company's international sales comprised approximately 12% of its total revenue in fiscal 2018, at $4.8 billion.
Mondelez, the maker of Oreo cookies, Milka chocolate and Ritz crackers, now has more than 75% of total sales coming from outside the U.S. In addition, Coca-Cola pledged last year to invest $100 million in Kenya over the next five years to improve infrastructure and launch 50 new products.
Kellogg has also looked outside the U.S. for growth opportunities and has acquired a number of international companies in recent years. According to an analyst quoted by Bloomberg, emerging markets now make up about 15% of the cereal giant's total sales.