Chinese food giant Bright Food Group is poised to begin negotiations for a deal to buy Tnuva Food Industries, Israel’s largest food company.
Known locally for its diary products and White Rabbit confectionery, Bright is looking to expand the global reach of its dairy, sugar and wine products, according to Bright spokesman, Jianjun Pan.
“This potential deal is part of Bright Food’s goal of connecting more into the international market,” said Dangpeng Chu, researcher at Chinese Food Business Academy. “But the success of this negotiation also depends on whether they reach a consensus or not.”
According to Chu, a successful outcome would also enhance China’s influence in the Middle East. He said the company would also learn from Tnuva’s advanced management structure and production techniques, ultimately helping Bright to innovate through these and enhance the overall quality of its products.
However, several challenges remain as Bright its negotiations with Tnuva. For instance, its state-owned business model certainly isn’t appealing to foreign corporations like Tnuva.
According to Aihua Chien, of the China Investment Advisory Group, foreign businesses often hesitate while dealing with state-owned companies as they are skeptical about the amount of control that governments possess. In addition, finance is another challenge facing such Chinese corporations.
“While Chinese corporations are actively buying foreign businesses, they often encounter financial difficulties,” said Chien. “Business banks are not interested in overseas buying, so that limits the options for Chinese corporations.”
Despite the potential challenges, Bright already has specific goals toward this potential deal, including improving market integration between its existing overseas businesses and establishing a sustainable system based on this model.
It hopes to promote all of its products through the existing channels of its different overseas brands, which currently include Manassen Food in Australia, Weetabix in the United Kingdom, Synlait Milk in New Zealand, and Diva in France.
Bright is also aiming to establish a global business network that can sell all of its brands through existing channels in each of those five markets.
To analysts, Bright Food’s negotiation with Tnuva will be even more significant because of the potential of the Middle Eastern market.
“By buying over Tnuva, Bright will have a solid destination to expand its business in the Middle East,” said Chien. “However, the aforementioned challenges need to be put into consideration as they move forward in the negotiation process.”