Aussie favourite makes beeline to China
IT'S been a favourite toast topping for generations of Australians. Now Capilano Honey's new China-focused investors are targeting the sweet tooths of an estimated 430 million middle class mainlanders.
The 65-year old Brisbane-based company this week announced it will be sold for more than $190 million to HoldCo, an entity owned by Wattle Hill and Roc Partners.
Sydney-based Wattle Hill was founded by Albert Tse, the son-in-law of former prime minister Kevin Rudd, and is focused on investments in Australia targeting Chinese consumers. Last year, it bought a stake in Sunshine Coast-based Buderim Ginger.
"The (takeover) proposal recognises the strength and leading position Capilano has in the marketplace," Mr Tse said.
Capilano, whose portfolio of brands includes its namesake as well as Allowrie, Wescobee, Smiths and Barnes, was established in 1953 as a beekeeper owned co-operative and until now the ASX-listed company has largely focused on the domestic market. It has annual sales of more than $139 million but exports made up little more than $20 million.
Capilano managing director Ben McKee said the takeover deal will help build the company's brands on a "truly global scale".
Wattle Hill will aim to expand Capilano into potentially lucrative markets such as China, where honey consumption lags behind developed markets.
China is the largest producer of honey but many Chinese remain suspicious of the local product, with fake honey a perennial problem.
That means honey from countries perceived to be safe producers including Australia and New Zealand can be sold for a premium.
Annual honey consumption per capita in China is expected to double over the next decade from about 250gm. By comparison, American honey consumption is twice that while Germans consume about a kilogram each year.
According to the Chinese Ministry of Agriculture, Australia is the third-biggest exporter of honey into China, with 1226 tonnes shipped between 2014 and 2016.
New Zealand was the top exporter, shipping almost 4000 tonnes.
It is not the first investment by Wattle Hill targeting the huge Chinese market with Australian food products. Last year, it made a $20 million investment along with Qia Qia Foods, in iconic Buderim Ginger, with the goal of breaking into the lucrative mainland snack food market.
Qia Qia supplies snacks to almost half a million retail outlets in the mainland China dwarfing the Australian domestic market.
Ginger is a traditional part of the Chinese diet meaning a big opportunity to develop ginger-based snack products.
Former Buderim Ginger chief executive Roger Masters, who also served on the board of Capilano, says Capilano's medicinal honey products, such as Manuka, would be of particular interest to Chinese consumers.
Manuka honey is produced by bees from the flowers of the Leptospermum plant.
Capilano established a joint venture in 2016 with global natural health products company, Comvita to operate a number of Leptospermum honey producing apiaries.
IBISWorld industry team leader Nathan Cloutman said Australian food products such as honey were perceived to be of high quality in Asian markets.
"Australia's strong reputation boosts demand in Asian markets such as China, Vietnam and Thailand where there are rising disposable incomes," Mr Cloutman said.
Mr Cloutman said the signing of the China Australia Free Trade Agreement in 2015 would support demand for products like honey in the mainland.
Prior to the agreement the Chinese tariff for natural honey was 15 per cent but that will drop to zero in January.
Mr Cloutman said Wattle Hill's investment in Capilano underscores growing interest by Chinese companies in Australian agribusiness.
"This trend is expected to continue in the future with rising demand from Asian middle class consumers," he said.
"Ongoing reductions in tariffs is set to boost the value of Australian agricultural exports over the next decade."