China's Bright Food seeks to expand Australian ties

SYDNEY—Bright Food Co. plans to target deals in Australia as it looks to grow its wine, dairy and sugar businesses to meet increasing demand from Asia's powerhouse economy, an executive of the state-owned company said Monday.

Chairman Wang Zongnan, who was in Sydney following Bright Food's acquisition of a 75% equity stake in Manassen Foods Australia from Champ Private Equity, said that the group's first priority is to see Manassen become operational and gain access to the Chinese market. Once that is achieved, he said, the focus will shift to acquisitions in Australia.

Bright Food, China's second-largest food company, has attempted several other overseas deals in the past two years but without success. In March, it lost out on a bid to buy 50% of French yogurt maker Yoplait to General Mills Inc. That followed failed bids late last year to buy U.S. vitamin retailer GNC Holdings Inc. and Britain's United Biscuits (Holdings) Ltd.

The plan is eventually to create a food group that owns multiple international brands.

"We really have to take a combination of approaches. For instance, with regard to those food enterprises with abundant resources and mature brands we will take them into the Chinese market, as long as there is such a demand in the market," Mr. Wang said through an interpreter. "We will try to export to countries and regions world-wide where there is such a demand for the Chinese-branded products."

Australia, one of the largest global suppliers of sugar outside of Brazil and India, presents several opportunities for Bright Food.

The firm twice bid for the sugar division of CSR Ltd., but lost out to Wilmar International Ltd., which secured that asset a little over a year ago.

China's growing middle classes is demanding higher-quality products and favoring the convenience of processed and packaged food.

Organic foods—nearly nonexistent in China a decade ago—are now in demand. Sales of packaged organic food are expected to hit 543 million yuan ($85 million) by 2014, from about 170 million yuan in 2009, according to Euromonitor International, a market-research firm based in London.

Interest in wine is also increasing, the Chinese market for table wine has grown in excess of 20% annually over the five years to 2010, according to Rabobank.

And China's demand for sugar is booming. Several analysts forecast Chinese imports could rise as much as 50% in the 2011-2012 season to three million metric tons—making it the world's second-largest importer behind Europe.

Bright Food was China's third-largest dairy company by sales in 2009, according to the most recent data from Euromonitor. The same year, the Chinese company was the eighth-largest packaged-food maker by sales, ahead of Mars Inc. and Nestlé SA.

Bright Food operates more than 3,300 retail stores across China.

In terms of fund raising, Mr. Wang said Bright Food is considering an initial public offering of its sugar unit, but not before the end of this year, and is working on a bond deal that he expects will raise 3 billion yuan (US$470 million) by the time the deal is completed.

—Caroline Henshaw and Laurie Burkitt contributed to this article.