The food industry is in great action to roll each other is not as good as falling in love, and joint

Text|FDL Count Food Advocate Little Zhong is the father of mustard.

However, challenges often come with opportunities. Despite the ups and downs of the epidemic, geopolitical turmoil, and the overall economic growth slowdown, market sentiment has also improved to a certain extent with the promotion of industrial upgrading by digital development and strong guidance from industry policies, and investor confidence is gradually recovering.

In the new stage of development, as an important way of typical market resource allocation, there has been a wave of large-scale corporate joint ventures, mergers and acquisitions around the world.

In China, it is not only limited to large multinational enterprises and upstream and downstream first-chain enterprises, but also includes many local food and consumer goods brands; In foreign countries, many food and beverage and catering companies in Europe and the United States have also invested in other food startups to achieve business integration.

This year, on the raw material side, DSM and Firmenich International SA's "equal merger" completed a large-scale M&A business; In the new tea industry, Tea Baidao joined hands with Bawang Chaji, and registered a new company with a joint venture of 50 million; In the beverage industry, Wuhan No.2 Factory, a domestic soda brand, landed in the Hong Kong capital market through mergers and acquisitions and became a listed company on the main board of the Hong Kong Stock Exchange. In the field of casual snacks, the leading brands of mass merchandising snack store tracks, "Snacks are busy" and "Zhao Yiming Snacks", announced a strategic merger; In the restaurant sector, McDonald's will increase its stake from 20% to 48% after it buys a minority stake in Carlyle...

So what are the new trends in mergers and acquisitions in China's food enterprise market? Can this year's boom bring a new climax to the growth of the industry? How do companies that choose this path let go of their skills in mergers and acquisitions? And when endogenous development reaches the ceiling, will entrepreneurs adopt a more open attitude towards mergers and acquisitions?

01 Perspective on the M&A and restructuring market of food enterprises: Showing the four major trends of regionalization, diversification, digitalization and greening, from 1949 to 2023, New China has gone through 74 years, and China's food industry has also experienced several historical stages such as recovery, slow growth, rapid growth, and innovation-driven.

So far, with the disappearance of the demographic dividend and the upgrading of consumption, the food and beverage industry is also facing unprecedented changes. The stratification of consumers, the fragmentation of communication channels, and the gradual weakening of traffic dividends, the "Matthew effect" of competition in the entire industry is very obvious, which also makes enterprises fall into the dilemma of weak growth.

On the other hand, in an uncertain environment, both large multinational enterprises and start-ups are facing a complex investment and financing environment. However, in the long run, this also means that changes in the situation and fierce market competition will promote the possibility and opportunity of diversified development of the M&A integration market.

The person in charge of relevant enterprises also said that due to the influence of policy supervision and industrial form, this year's IPO and refinancing market has seen a phased contraction, and entrepreneurs and investors have begun to tend to find new opportunities in the merger and acquisition integration market. At the same time, affected by the positive factors such as the implementation of "going overseas", cross-border investment and development plans in various localities, some pent-up demand for joint ventures, mergers and acquisitions, and restructuring is being suppressed.

According to the data, in the first three quarters of 2023, a total of 6,101 mergers and acquisitions were disclosed in China's M&A market (including cross-border mergers and acquisitions of Chinese enterprises), with a transaction scale of about 1,311 billion yuan; Among them, the third quarter was a significant increase compared with the previous two quarters, with 2,319 mergers and acquisitions, an increase of 13 from the previous quarter29%, and the scale of mergers and acquisitions was 514.8 billion yuan, an increase of 3645%。

According to the latest data from Wind, more than 150 A-share companies have disclosed major restructuring events for the first time this year, exceeding the number of 109 in the same period last year (excluding companies with failed mergers and acquisitions). From the perspective of transaction size, among the 150 listed companies, a total of 117 companies disclosed the transaction size, with a total transaction size of 49315.1 billion yuan.

From a single main business to multiple main industries, every "vertical and horizontal" of the food industry chain has also brought great changes to the development of the industry. In the past two years, the "merger group" transactions in the food industry have been mainly concentrated in new tea drinks, snack stores, candy, beverages, catering and other tracks, and the market has generally shown a trend of diversification, regionalization, digitalization and health.

Diversified. In fact, in the development process of the times, joint ventures, mergers and acquisitions and integration are not uncommon, because this is not only a digital game, but also a redefinition of enterprise value, and an important way for enterprises to lay out new categories, broaden product lines, create new scenarios, break through their own development bottlenecks and enhance long-term competitiveness.

In recent years, under the background of favorable market and first-class support, joint ventures and mergers and acquisitions in the food industry have continued to appear, and are developing towards a trend of diversification. Competitive enterprises boldly take action, by investing in brands that are consistent with the original business or in the direction of horizontally expanding business, and integrating to achieve the expansion of industrial resources, ecological card positions and financial strength, so as to occupy the "mental position" of consumers.

Taking the increasingly serious "involution" of the new tea beverage track as an example, at the moment when the market growth is slowing down and the competition is becoming increasingly fierce, enterprises are facing the problem of further expansion, and some enterprises are struggling to find a breakthrough.

Among them, Heytea, as the head brand, invests by choosing brands that are in line with its own tonality and have development potential. In 2022, Heytea's Chiekong Beverage (Zhuhai) Co., Ltd. will make an equity investment in minority coffee (holding 12% of the shares) and invest heavily in coffee; Previously, Heytea injected capital into the plant-based brand "Wild Plant Yeplant", which is the second largest to B oat milk merchant in the country.

Hey Tea.

In addition, Heytea has also invested in different tracks such as the fruit tea brand "Hedi Taotao" in the sinking market, the lemon tea brand "Wang Ning", the low-alcohol wine brand "WAT", and the high-end molecular juice brand "Yecuishan" to broaden its layout in the consumer field.

There are similar cases in which Chayan Yuese invested in the fruit of the same Changsha brand; The dessert giant Manji Dessert merged with the cutting-edge tea drink "Xiaoman Tea Field" to open the road to the upgrade of "New Manji".

Regionalization. Not only that, joint ventures, mergers and acquisitions are also effective ways to promote the coordinated development of the upstream and downstream of the industrial chain, so that funds can be concentrated in high-quality enterprises with independent innovation capabilities, give full play to synergies, and promote win-win development.

From the perspective of future trends, joint ventures, mergers and acquisitions are still one of the main means of market resource allocation.

Therefore, for most enterprises, mergers and acquisitions of high-quality assets in the same industry or upstream and downstream high-quality assets, and the realization of the sharing and co-construction of the first chain can greatly improve profitability and enhance the status of industry giants.

Instead of letting go of confrontation, it is better to join hands and fall in love. In November this year, Tea Baidao announced the establishment of a new company called "Sichuan Rongshang Jiahe Technology ***" with Bawang Chaji, with a registered capital of 50 million yuan. Among them, Tea Baidao holds 25% of the shares, Bawang Chaji holds 20% of the shares, and the remaining 55% is held by Sichuan Huizhijie Enterprise Management. The cooperation between Chabaidao and Bawang Chaji means that the two sides may further deepen the first-class chain to share and build together to improve the management efficiency of the first-class chain.

Source: Overlord Chaji.

In addition to the new tea beverage track, the "merger group" is also frequently valued and used by corporate decision-makers and operators in the dairy product track. As one of the few enterprises in China with cheese-related independent R&D and production capacity, the "first cheese share" Microcolando has both raw cheese and processed cheese production technology, and Modern Dairy is a leader in the upstream market of China's dairy industry, covering the whole upstream dairy industry chain business from breeding, feed to raw milk production.

Combining the advantages of both parties, the establishment of a joint venture company is conducive to resource sharing and win-win cooperation. For Microcolando, the joint venture company can bring guarantee to the demand for milk, and at the same time hedge the risk of raw material fluctuations caused by international procurement, and further improve the stability and safety of the chain system.

Digitization. In the post-epidemic era, digitalization, intelligence, science and technology, and green development have become an important direction for the transformation and upgrading of = enterprises.

With the development of the industry market and the changes in consumer demand, more and more food companies are making every effort to promote digital and intelligent transformation with the help of "digital intelligence". The various systems of the enterprise are organically integrated through digital intelligence to form an industrial Internet ecology and open up all links of the manufacturing chain.

Specific to consumer brands, some companies have invested in **chain enterprises or built their own first-chain teams, and combined **chain with digital intelligence, and carried out comprehensive digital and intelligent reforms in raw material procurement and transportation, store operations, personnel management and other links.

Based on cloud computing, the Internet of Things, big data and intelligent algorithms and other technologies, the two sides will fully cooperate in smart pastures, smart factories, digital intelligence ** chain, consumer and marketing management, channel operations, etc., using digital intelligence to improve the production and operation efficiency of enterprises and enhance consumers' interactive experience in all channels.

Source: Adopt a cow.

In the catering industry, focusing on the layout of the digital economy, since 2022, Xiabu Group has successively launched digital systems in the first chain, store operation management, membership marketing, and production intelligence. In order to build a digital and intelligent industrial cluster center for healthy food, Xiabu Group and Richen Food jointly invested in Richen Food (Tianjin)**, aiming to further optimize the digital experience of consumers, provide new ideas for solving the safety, deliciousness and innovation problems of the food industry, and lead the overall update and iteration of the industry.

Health. After three years of the pandemic, Chinese consumers have begun to awaken to their health concepts. In the post-epidemic era, people's anxiety about health is still widespread, which also makes health care products and healing activities, which did not account for too high a proportion of consumption before, begin to be gradually paid attention to.

With the increasing attention of consumers to healthy diet, the trend of healthy consumption continues to remain strong in the food industry, for food companies that are deeply involved in the health industry, grasp the development trend of nutrition and health to carry out mergers and acquisitions, give full play to their respective advantages in technological innovation, health industry, international management, etc., is expected to find new growth points in the health industry in recent years.

In recent years, there has been an increase in "mergers and acquisitions" in the field of nutrition and health.

A typical example is the announcement that DSM and Firmenich will enter into a merger agreement to establish DSM-Firmenich, a leading creative and innovative partner in the nutrition, cosmetics and health sectors.

On the same day that DSM, an international nutraceutical, chemical and pharmaceutical conglomerate, announced its merger with Firmenich, DSM also announced another agreement to bring its Engineered Materials business to 38A corporate value of 500 million euros** goes to Advent International, a specialist polymer material manufacturer, and Lanxess, a specialty chemicals manufacturer. Upon completion of the two transactions, DSM will be transformed into a health, nutrition and biosciences company.

Source: DSM Firmenich.

02 To explore the way of market-oriented mergers and acquisitions, we should also be careful of stumbling blocks on the roadEconomist George Stiegler said: "There is no large American company that has not grown up through mergers and acquisitions to some extent or another." The theoretical community has always regarded becoming bigger and stronger as the ultimate goal of corporate mergers and acquisitions.

Overall, when the macro economy is subject to severe fluctuations, the "merger group" of the food industry will reshape the entire food market pattern. However, these actions are only the first step, because after that, how to integrate companies with completely different cultures, mechanisms, organizational structures, and business forms has become a common concern, and this is precisely the key factor that determines the results.

This also means that there is still a long way to go from the beginning of the "merger group" to the real synergy between the two businesses.

The plate becomes larger, which makes the decision more difficult.

After the joint venture, merger and acquisition, the plate becomes larger, and the difficulty of enterprise decision-making naturally increases, and it is easy to blindly promote the successful product model as the universal standard model, resulting in defeat in the business war.

Back in 2015, hj.The Heinz Company announced the merger of Kraft Foods Group***, a new company, Kraft Heinz to become the world's fifth-largest and North American-third largest food and beverage business. According to the two companies, the merger will provide significant synergies for intrinsic complementarity, ultimately enhancing investment in markets and innovation. It is reported that the new company has eight brands worth more than $1 billion, and five brands ranging from $500 million to $1 billion.

But in fact, due to the sluggish growth of the company in terms of revenue after the merger, and even fell back in 2017, Kraft Heinz's development did not go well. The main reason for this is the manipulation of the combined 3G capital, which, like most private equity firms, is not good at creating organic growth, but rather improving profit margins by cutting costs.

As a food FMCG company, Kraft Heinz blindly pursued cost reduction and lacked R&D innovation, and finally fell into a quagmire, with a net profit loss of 102 in 2018$5.4 billion, a record high.

The internal management of personnel and products is out of control, reducing the efficiency of reorganization.

Mergers and acquisitions, acquisitions and reorganizations of enterprises are all extensional ways to expand the scale of production. However, due to the different management systems before and after the merger, it is more difficult to manage the enterprise after expansion, thus increasing the business risk.

Take the recent strategic merger of "Snacks are Busy" and "Zhao Yiming Snacks" on the cusp of the storm as an example. It is reported that as the head brand of the domestic mass snack store track, the two companies will retain their respective brands and independent business operations after the merger, and the two sides will cooperate in product chain, brand building, and regional development coordination.

From the perspective of return on capital investment, both parties intend to present better market capitalization performance to strive for listing opportunities, so as to maximize benefits. From the perspective of strategic layout, in the sprint stage of the mass merchandising snack store track, sufficient scale effect and lower ** can win greater market competitiveness.

However, not long after the news of this merger landed, Zhao Yiming Snacks was sued by the former shareholder BESTORE. Ningbo Guangyuan Juyi Investment Co., Ltd. officially filed a lawsuit with the people's court on November 27 because the invested company Yichun Zhao Yiming Food Technology Co., Ltd. deliberately concealed the company's major matters and damaged the right to know of minority shareholders during the cooperation period between the two parties.

At present, the court has accepted the case, and if Guangyuan Juyi wins the lawsuit, it may have a great impact on the future listing of Zhao Yiming's snacks and snacks are very busy.

Source: Zhao Yiming snacks.

Improper or untimely adjustments distort each other's operating mechanisms.

In many cases, the acquired enterprise is likely to be poorly managed, on the verge of loss, bankruptcy before being acquired and reorganized, and the original enterprise in terms of corporate culture, management style, technical foundation, product quality, operation mode, personnel quality and other aspects inevitably have some differences.

If the adjustment is improper, it will seriously affect the good reputation and corporate image that the original enterprise has established, and even distort the operation mechanism of asset restructuring.

In the face of the complex market environment, in the process of reorganization, enterprises need to carefully analyze based on their own strength and the market environment they are facing, carefully distinguish different situations, take different measures, operate steadily, give full play to the synergistic effect of operation, finance and personnel, and make up for their shortcomings, so as to make the smooth implementation of the enterprise restructuring strategy and the continuous enhancement of the cohesion and competitiveness of the enterprise, so that the enterprise can be invincible in the fiercely competitive market tide.

In September this year, Chongqing Beer announced that Carlsberg, the controlling shareholder of the company, intends to obtain control of Shouyu Beer in its holding subsidiary Carlsberg Hong Kong at the same time, and at the same time, all beer assets in China held by Shouzhu Beer and Jinbei Hong Kong (a wholly-owned subsidiary of Shouyu Beer) (i.e., 100% of the equity of Beijing Shouzhuo Jinmai*** and Jinbei Asia-Pacific (Beijing) Catering***) will be given to Carlsberg Heavy Beer, a holding subsidiary of the listed company, for 2.5 million yuan and 600,000 yuan respectively.

In fact, the acquisition of "Jing A" was actually carried out by Carlsberg to fulfill its restructuring commitments in 2020. At that time, Chongqing Beer underwent a major asset restructuring, and Carlsberg injected all the beer assets and businesses in Chinese mainland controlled by Carlsberg into Chongqing Beer, except for Chongqing Beer (and Chongqing Beer Holding Subsidiaries), such as Wusu Beer and Dali Beer. Since Carlsberg is not yet the controlling shareholder of First Beer, the assets related to "Jing A" were not injected into Chongqing Beer when it was restructured in 2020.

"Jing A", which was acquired by Chongqing Beer, is a leading craft brewery brand in China, and currently operates 11 craft beer bars across the country. According to the data disclosed in the announcement of Chongqing Beer, even if it is already the head of the industry, "Beijing A" has also been in the red in the past two years. According to the data, Jinbei Asia Pacific (Beijing), which operates the "Beijing A" restaurant bar, achieved revenue of 69.54 million yuan and 36.53 million yuan in 2022 and from January to May this year, respectively, and a net profit of 11.72 million yuan and 4.71 million yuan respectively; The first brewed Golden Mai, which is responsible for production, lost about 1.22 million yuan and 80,000 yuan in 2022 and the first five months of this year, respectively.

Why did Chongqing Beer acquire this seemingly loss-making asset? Chongqing Beer announced that the Beijing A brand is a leading craft beer brand in China, and the craft beer bar is a rising format combining catering and bars, and its target company's brand and business are conducive to the development of the listed company's craft beer product distribution business and craft beer brand influence, and at the same time, it also complements the main business of the listed company, which helps the listed company to actively explore new growth tracks.

It is reported that the 27 proposals involved in the restructuring were all passed with 100% support, indicating that investors highly recognized the transaction plan. However, because Jing A Beer is still in the layout and adaptation period, its subsequent development still needs to be observed.

FDL Digital Food Advocacy noted that since the beginning of this year, the first-class department has repeatedly stated its position and introduced relevant policies to further optimize the market structure of mergers and acquisitions, promote the market-oriented reform of mergers and acquisitions in various industries and fields, promote the formation of industry-based mergers and acquisitions logic, revitalize the stock, and create increments.

In the face of market demand, joint ventures, mergers and acquisitions are important steps on the road to transformation of most enterprises. More importantly, how to speed up the layout of the industrial chain and form resource integration with the help of the resources of all parties in the next step is the ultimate way out.

With the gradual disposal of market business, in the future, whether the food enterprises that choose the road of mergers and acquisitions will have a turnaround depends to a large extent on whether the decision-makers of the enterprises will take further actions after the merger and acquisition.

Whether it is policy making or business decision-making, its core goal is to find effective response strategies to promote the sustainable development and long-term prosperity of enterprises in the current economic situation.

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