Nestle buys 60% stake in Chinese candy firm

Nestle, the world’s largest food company, is paying $1.7 billion for a 60% stake in candy maker Hsu Fu Chi International Ltd. to move deeper into fast-growing markets in China.

Nestle’s biggest deal in China will take it closer to its target of 45% of sales from emerging markets in about 10 years, and analysts said Monday that securing growth opportunities in China was worth a relatively high price.

“It is certainly not cheap, but that is the price you have to pay to get access to this high-growth market,” Vontobel analyst Jean-Philippe Bertschy said.

International companies have been rushing to expand in Asian markets, where buoyant economic growth has boosted consumers’ purchasing power.

The Swiss maker of Kit Kat chocolate bars and Nescafe coffee strengthened its dairy business in China this year when it took a 60% stake in Yinlu Foods Group.

The deal will enable Nestle to increase its footprint in emerging markets and get closer to catching rivals Danone and Unilever.

Gaining access to Hsu Fu Chi’s comprehensive distribution network was also key for Nestle, which has been present in China for more than 20 years, operates 23 factories and employs 14,000 people.

Hsu Fu Chi, which makes candy, cereal-based snacks, cakes and the traditional Chinese snack sachima, employs 16,000 people.

Nestle’s offer came at a time when a series of accounting scandals at foreign-listed Chinese companies have triggered a sell-off in China-based stocks, prompting owners to consider mergers or partnerships.