Sector News

Weetabix set to be swallowed by US cereal maker Post

March 29, 2017
Food & Drink

Weetabix, the British cereal brand that carries a royal warrant, looks likely to be gobbled up by the American ­cereal giant Post Holdings in a £1bn-plus deal that could be announced as soon as this week.

Post Holdings, which is listed in New York and sells Grape-Nuts and Cocoa Pebbles, is understood to be close to clinching the deal after other bidders dropped out of an auction.

The UK’s second biggest cereal brand, according to Euromonitor, has been put on the blocks by China’s Bright Food, five years after the Shanghai-based company bought a majority stake for £1.2bn.

At the time of the deal, Bright Food highlighted China’s increasingly rapid adoption of Western tastes.

However, the company has failed to crack the Chinese market, with most consumers preferring hot, savoury breakfasts such as congee and dim sum. Jianjun Pan, the head of marketing for Bright Food, had previously described eating Weetabix with sips of hot water “to make a kind of porridge in my mouth”.

Around 80pc of Weetabix sales still come from the UK, although it has recently been hit by the pound’s fall. Weetabix has also come under pressure from an intensely competitive supermarket price war.

The company has attempted to diversify by launching a breakfast drink to tap into an increasing trend for smoothies and protein-shakes, which has made £100m of sales to date. However, Weetabix pulled a range of biscuits after dismal sales.

Associated British Foods, which owns Jordans cereals, expressed an interest in buying Weetabix, while the Italian pasta maker Barilla was in the running along with Nestlé, whose cereal brands include Cheerios, and General Mills through their existing Cereal Partners Worldwide joint venture.

It is thought that Bright Food had been hoping to fetch £1.5bn for Weetabix, but industry experts said that the sale process had been “challenging” given the cereal company’s recent declining sales and profits.

The last available accounts show that Weetabix sales fell by 2pc to £346.4m while profits slumped by 13pc to £94.3m. A Weetabix spokesman said that the company was enjoying “record market share” up from 15.3pc to 16.4pc in the past year while 2016 sales in China had doubled.

Goldman Sachs declined to comment while Bright Food did not return request for comment.

By Ashley Armstrong

Source: The Telegraph

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