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Danone re-buys China infant-formula firm Dumex as Mengniu tie-ups end

The French group, which had offloaded Dumex in 2016, has brought the business back into ownership as part of three deals in China.

By Dean Best

Danone is to acquire Dumex, the China infant-formula supplier, six years after selling the business, as part of a clutch of transactions that will see the end of the French group’s links with Mengniu.

All three transactions are subject to regulatory approval. However, if waved through, Danone is to buy Dumex from Hong Kong-listed infant formula and soy milk producer Yashili International Holdings.

When Danone sold Dumex to Mengniu-controlled Yashili in 2016, the company said Dumex’s sales had failed to recover from a safety scare two years earlier. In 2013, Dumex suffered from a scare involving supplier Fonterra when there were concerns an ingredient could be contaminated with botulism. It transpired that the recall was a false alarm.

Separately, Danone is to sell a 25% stake it owns in Yashili to co-shareholder China Mengniu Dairy Co. Danone bought the shares in Yashili, already then majority-owned by Mengniu, in 2014.

The third deal will see Danone sell a 20% stake it owns in a chilled-dairy products venture called Inner Mongolia Dairy.

In a statement, Danone said it is not necessary for the three transactions to close at the same time. The company added the earliest they could be finalised would be this year.

If the deals are sealed, they would mark the end of Danone’s partnership with Mengniu, which was first established in 2013 on fresh-dairy products.

Last year, Danone sold a 9.8% stake it held in Mengniu for HKD15.4bn (US$1.96bn).

“China remains highly strategic for Danone, and today’s announcement will notably allow the company to further expand its ability to locally manufacture infant milk formula products,” Danone said. “In line with Danone’s capital allocation priorities, the expected proceeds will be dedicated to further deleveraging the company.”

According to Mengniu, it will pay CNY1.6bn (US$237.9m) for the Inner Mongolia Dairy stake. Danone is to pay CNY850m to Yashili for Dumex.

Mengniu, meanwhile, plans to take the publicly-listed Yashili private by buying the remaining circa 24% of the business. The Yashili privatisation transactions are worth HKD1.4bn.

Buying Dumex gives Danone two domestically-labelled infant-formula products and a factory in Shanghai, Pascal Boll, an equity analyst covering the French company, said.

Boll praised Danone for the three transactions, explaining the company “walks the talk and starts to rotate its portfolio”. In March, the group had told analysts up to 10% of its business could be up for “rotation” through acquisitions or disposals.

“The transaction simplifies the balance sheet, fortifies the strategy in specialised nutrition and frees up additional capital,” Boll said.

In 2021, Danone’s specialised nutrition business, which houses its infant-formula interests, generated sales of EUR7.23bn (US$7.6bn), up 0.5% on a year earlier, or 1% on a like-for-like basis. The recurring operating profit from the division stood at just under EUR1.7bn, compared to EUR1.76bn in 2020.

In the first quarter of this year, Danone grew its sales from specialised nutrition by 11.7% to EUR1.92bn, or by 9.5% like-for-like. The Nutricia owner said the division benefited “from a low base of comparison” as demand grew. In China, its infant formula business grew at a “mid-teens” rate.

“We closed the quarter with another strong market share performance on both China and international labels, which bodes well for the resilience of our Chinese infant milk nutrition platform moving forward,” CFO Juergen Esser said.

Just Food analysis, April 2022: China backs local infant formula – but weak birth rate threatens whole market

AFRICA’S FOOD, DRINK AND HOSPITALITY TRADE EXPO SINCE 1984 26 to 28 June 2022 @ Sandton Convention Centre, Johannesburg

Dear Sir’s
We are delighted to invite your esteemed participation in the premier Food & Beverage and Hospitality Exhibition in South Africa – HOSTEX 2022 in Johannesburg happening from 26-28 June, 2022.

HOSTEX is a fully REFRESHED industry platform to launch your INNOVATIONS. The event gives you access to the African market with RENEWED opportunities for business transactions. USE this chance to REINFORCE your RELATIONSHIPS and FORTIFY YOUR BRAND!

Why exhibit HOSTEX?

Access to the African market
Face-to-face engagement with decision makers
New customers to interact with your brand
Driving sales and brand awareness to industry specific visitors
Schedule meetings at the show with buyers

South African Food Market:

The South Africa fast food market size was valued at $2.7 billion in 2018 and is expected to reach $4.9 billion by 2026, registering a CAGR of 7.9% from 2019 to 2026. South Africa is the largest foodservice market in the sub-Saharan Africa with a large and highly competitive hospitality industry.
The country has a large number of domestic as well as international restaurant chains; thereby, fueling the growth of the fast food segment. This is attributed to increase in demand for different types of fast food products from the target customers.
According to Southern Africa Food Lab, over the past five years, there has been an increase in consumption of convenience food due to rise in availability of take-away vendors. Moreover, easy availability of fast food products is anticipated to influence the cooking practices, that is, decrease the frequency of home cooking; thereby, increasing the dependency on fast food products.
Urbanization is one of the major factors that drives the demand for fast food products in South Africa. More than 60% of South Africa’s population lives in urban areas. Out of which, more than half of the population relies on fast food products, owing to increase in rate of employment and adoption of busy lifestyle. This has resulted in an increase in number of transactions from fast food chains in recent decades.
Food and beverages account for the majority of the country’s imports. Beverages, spirits, vinegar, sugar and residual foodstuffs in particular are imported. In 2017, the total value of these imports was approximately €2.2 billion.
The demand for imports is increasing. Beer, cereals and poultry meat in particular are areas where demand for imports from all countries of origin is growing. The opportunities export products to South Africa is immense, especially on the B2B market and in E-Commerce.

HOSTEX Statics:

5000+ visitors
300+ exhibitors
30+ participant countries
86% influenced decision makers

Participation charges:

9sqm built up stall: INR 300,000/-
6sqm built up stall: INR 200,000/-

We invite your esteemed participation as an exhibitor in Hostex and look forward to hearing from you.

Regards
Thomas James
Director Wegvoraus
Mob/WA: +91 7827202718
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Plant-based jerky opening gambit from Beyond Meat, PepsiCo tie-up

The US manufacturers have unveiled the first products from a partnership announced last year.

Beyond Meat plant-based jerky range — Beyond Meat and PepsiCo are to market plant-based alternatives to beef jerky in the US.

A range of three flavours is the first set of products to emerge from a partnership announced last year between the meat-alternatives supplier and the food and beverage giant.

The jerky, sold under the Beyond Meat brand, is available at retailers including Walmart, Kroger, Albertsons and 7-Eleven.

As well as three flavours (original, teriyaki and hot and spicy) the jerky, made from peas and mung beans, is on offer in three sizes – a one-ounce pack, a three-ounce SKU and the largest, ten ounces.

The respective manufacturer’s suggested retail prices for the different sizes are US$2, $5.29 and $14.99.

With Beyond Meat’s own products, the company focuses on the refrigerated and frozen aisles. The jerky is its first shelf-stable offering.

Dan Moisan, the CEO of the venture, which has been dubbed Planet Partnership, said the launch of the jerky “will make plant-based meat accessible to millions of households”.

Asked to point to the consumer and category data that informed the launch, the venture told Just Food: “Consumers are increasingly looking for sources of nutritious, sustainable protein, and this was the perfect opportunity to meet those needs in a plant-based snack that’s delicious and convenient.”

According to research by GlobalData, Just Food’s parent, published in November, the US meat snacks market was worth $3.41bn in 2020. The London-based data and analytics group forecasts the category could hit $4.67bn in 2025, which would represent a compound annual growth rate of 6.5%.

Data, insights and analysis delivered to you

Sales of plant-based jerky options remain tiny by comparison. The Good Food Institute (GFI), an NGO advocating for alternative proteins, has published SPINS data that estimates plant-based jerky sales reached $3.9m in the year to the end of April 2019. Just Food has approached the GFI for more recent figures.

Proponents of plant-based meat argue alternative options to meat jerky can prosper, although there have been recent concerns about the growth rate of the overall plant-based meat market in the US.

Recent sales figures from Beyond Meat and Maple Leaf Foods have led some industry watchers to reassess how quickly the meat-substitutes market may grow in the country.

The Very Good Food Company founders depart loss-making plant-based business

Mitchell Scott “terminated” as CEO, while co-founding partner James Davison has resigned.

The Very Good Food Company has “terminated” co-founder and CEO Mitchell Scott’s employment at the Canadian plant-based start-up.

Scott co-founded the business in 2016 with James Davison before instigating an IPO and gaining a listing in Canada. Both men are now no longer at the loss-making company. Davison has resigned as chief research and development officer, the owner of The Very Good Butchers brand announced in a statement today (4 April).

Very Good, which made plant-based dairy firm The Cultured Nut Company its first and only acquisition last year, has not posted a profit since its founding. On Friday, Very Good revealed a CAD54.6m (US$43.6m) loss for the year to 31 December, widening from a CAD13.9m loss.

The shares closed down 4.7% on Friday at 61 Canadian cents. They have lost more than 80% over the past 12 months.

Two weeks ago, the business announced it would “establish a path towards profitability” amid plans to reduce headcount, pause “non-critical” capital investment and cut production due to excess inventory, which Very Good put down to supply chain issues and retailer resets.

As a short-term measure, the company has established an executive committee to “review and approve key organisational, financial, operational and strategic decisions” as a search for Scott’s replacement begins.

Ana Silva, Very Good’s president and a member of the committee, said today: “Very Good is at an important juncture, and we are taking decisive steps. Our focus is to continue to build on our brand and reputation and grow our market share in the plant-based meat segment, while optimising our operations towards a path to profitable growth.”

Very Good, which operates out of two factories in Canada and one in the US, has made no reference to slowing in demand for plant-based meats in any of its recent announcements. However, there is a general perception sales in the category are not reaching the lofty heights that some had envisaged following robust growth rates in the past few years.

Maple Leaf Foods, a Canadian operator in fresh meat and plant-based alternatives, recently launched a review of the latter after consecutive quarters of slowing sales for its Field Roast and Lightlife chilled meat-free brands. US heavyweight Beyond Meat has also seen sales tail off.

Michael McCain, Maple Leaf’s president and CEO, noted back in November that the “marked slowdown” in plant-based meat sales might indicate a “systemic change in the extremely high growth rates expected by the industry.”

In February, he revealed the early conclusions of the review on the back of a fourth straight quarter of declining sales: “The results to date confirm that the very high category growth rates previously predicted by many industry experts are unlikely to be achieved given current customer feedback, experience, buy rates and household penetration.”

In Very Good’s case, the departed Scott announced in the 16 March business reset statement: “As a result of the supply chain environment, we undertook certain stock safety measures to protect against stock outages.

“This, in conjunction with retailer reset timing delays, has resulted in inventory being at levels that require us to lower production at some of our locations. This decision was made after a long and careful review of our options and will impact some of our production team members.”

The statement also revealed Very Good’s plan to move “from a focus on top-line growth, to a focus of balancing top-line growth and profitability”.

Revenues in the latest financial year rose 164% to CAD12.3m mainly driven by e-commerce, where sales were up 174% at CAD9.2m.

However, Very Good suggested it had faced a “cash burn” as the business ramped up production and is now expecting e-commerce sales to slow.

The challenges prompted the company “to review our online strategy and marketing expenditures to optimise our return on investment. As such, we expect our growth will slow down in the near term in this channel”, it said.

“Very Good will continue to focus on the wholesale and foodservice channels, particularly in the US, which the company views as critical to realising its vision to scale. Very Good experienced a greater-than-expected cash burn in the last several months as the company scaled its operations to meet its growth targets, which has reduced its cash position and has strained its short-term liquidity.”

Don’t miss these key dates!

Don’t miss these key dates!

Are you as excited for this year’s MeatEx Canada trade fair as we are? We look forward to welcoming meat, poultry and seafood producers, and anyone else involved in the meat industry!

To help exhibitors prepare and know what to expect, we’d like to share a few key dates surrounding the event, which runs Sept. 28-30, 2022, at Enercare Centre in Toronto:

Aug. 2: Deadline for stand confirmation
Aug. 26: Deadline for exhibitor registration; submission of stand construction plans, subject to approval
Sept. 26: Advanced setup (based on request)
Sept. 27: Exhibitor permits, setting up and dismantling badge (on-site); regular set-up and move-in
Sept. 28 at 11 a.m.: Opening ceremony

For additional dates, check out Exhibitor Information on the MeatEx Canada website. While you’re there, discover more information on becoming an exhibitor, and the great reasons why you’ll want to be one!

Already know you’re going to join us? Then pre-register now and our colleagues will contact you to finalize your registration.

September 2022

28-30

Post-Pandemic
Unique Opportunity