Following the news that PepsiCo Inc has entered into a definitive agreement to acquire Hangzhou Haomusi Food Co Ltd, better known as Be & Cheery, for US$705m;

Shagun Sachdeva, Consumer Insights Analyst at GlobalData, a leading data and analytics company, offers her view:

“PepsiCo’s move to acquire Be & Cheery is in line with its strategy to become the leading consumer-focused food and beverage company in China. The transaction will not only allow Pepsico to strengthen its snacks portfolio but also further widen its customer base in the Chinese market by leveraging Be & Cheery’s longstanding brand presence, manufacturing and sourcing expertise along with innovation and consumer insights capabilities.

“Also, amidst the carbonates industry facing global environmental and health challenges, the decision by PepsiCo to acquire Be & Cheery is potentially a smart and well-planned move. Post the acquisition, Pepsico will be more equipped to meet consumer’s needs for healthier products and consumers can recreate the famous Pepsi brands they are already familiar with and enjoy.

“According to GlobalData, China represents the largest market for savory snacks in the Asia-Pacific (APAC) region, with values sales of US$28.38bn in 2018. The sector is expected to grow at a compound annual growth rate (CAGR) of 6.2% over 2018–2023 in China.

“The Chinese savory snacks sector ranks ninth in terms of per capita expenditure in US dollar terms among the top 10 countries. Due to longer working hours, commutes and hectic social lifestyles, consumers are increasingly seeking savory snacks between regular meals to boost energy and relieve their stress.

“However, in the times when Coronavirus outbreak is gripping the world, its impact on the savory snacks sector and quarterly earnings of fast moving consumer goods (FMCG) companies are still unknown. China wasn’t the behemoth economy it is now, therefore, the investors are waiting for companies trading results to surface and how the deal between the two companies will pan out is worth keeping an eye on.

“PepsiCo already offers Lays potato chips under the Chinese name ‘Le Shi’ along with its Lucky nuts line and post the acquisition, Be and Cherry’s snack offerings including nuts, dried fruits, meat snacks, baked goods and confectionery will complement its existing China business. Pepsi’s snack food segment has been outgrowing its beverage segment for more than a year, and the company was focussed on gaining an edge in the Chinese market through its localized procurement and production, adaptation of local flavors, and continually diversifying its product.

“Therefore, companies such as PepsiCo understand the importance to clearly target specific consumer needs as a variety of consumer demands can conflict with each other. Some Savory Snacks products such as bars can be positioned as nutritious and healthy, yet others such as crisps often place emphasis on indulgence and flavor.

“It is clearly evident that PepsiCo will bring a strong identity to Be & Cheery in the emerging markets, as consumers today seek strong brand narratives and images, allowing them to experience an emotional engagement with the product.”