Bun Giant Goubuli Eyes US Coffee Chain
Chinese appetite for foreign food companies looks set to accelerate this year, with word that steamed bun giant Goubuli is nearing a deal to buy a major US coffee chain. The deal would mark the extension of a recent buying binge by Chinese food makers of overseas assets, including Shuanghui’s landmark $4.7 billion purchase of US pork products giant Smithfield last year. This latest deal is slightly different from the earlier ones because it involves a restaurant chain rather than a consumer products company, hinting at a new direction for China’s recent food-buying frenzy.
The bigger theme in this latest wave of outbound acquisitions is the desire by Chinese food companies to improve their quality and boost consumer confidence, following a series of food safety scandals dating back to 2008. In this latest instance, Goubuli’s move also reflects a desire by Chinese food companies to expand outside their home market, as part of Beijing’s broader push to go global.
I have some doubts about how this latest wave of acquisitions will fare due to inexperience of the Chinese acquirers. But I’m also slightly encouraged that at least most of the acquisition targets are relatively healthy, profitable foreign companies. That contrasts sharply with a preference by Chinese firms from other sectors to target sickly foreign firms that carry bargain price tags but are often difficult or impossible to fix.
All that said, let’s return our attention to Goubuli, a chain based in the northeastern city of Tianjin whose name is synonymous in China with big, pork-filled steamed dumplings known as baozi. Goubuli announced it has reached a preliminary agreement to purchase a US coffee chain and aims to complete the deal in the first half of this year. (English article) The company declined to name the target, but said the chain operates hundreds of stores in 40 countries around the world.
I did some quick searching on the Internet, and the only name I could find in connection with the news was a report citing donut chain Dunkin Brands (NYSE: DNKN) saying it was unaware of the Chinese reports. I seriously doubt that Dunkin is the target, since that company isn’t really a coffee chain even though it does sell coffee. Instead, a more likely target could be Coffee Bean & Tea Leaf, a US-based chain that lists about 30 global markets on its website and has entered China via a relatively strong presence of more than 2 dozen stores here in Shanghai. Such a purchase would be relatively large, probably valued in the hundreds of millions or even a billion dollars.
A Goubuli-Coffee Bean tie up would certainly make sense, as the US chain could use Goubuli’s connections to expand beyond its current China base in Shanghai. At the same time, Coffee Bean, or any other major US chain for that matter, could offer Goubuli some lessons on how to create trendy stores and develop new products and promotions like the ones that have helped rival coffee chain Starbucks (Nasdaq: SBUX) become hugely successful in China.
From a broader perspective, the Goubuli purchase would mark an extension of a growing string of offshore food purchases by Chinese firms. One of the earliest to kick off that trend was Shanghai’s Bright Food, whose recent buying spree reached a climax with its $1 billion-plus purchase of British cereal maker Weetabix in 2012. Chinese dairy companies have also been active in the market. Look for more such deals as the year progresses, including perhaps one or two worth $1 billion or more, as China’s appetite for foreign food makers continues to grow.
Bottom line: Bun maker Goubuli’s pending purchase of a major US coffee chain reflects China’s growing appetite for foreign food firms, which is likely to yield 1 or 2 blockbuster deals this year.
Related posts:
