New Zealand honey business Comvita has entered into a conditional agreement to acquire the remaining 49 per cent of its China joint venture, Comvita Food Ltd and Comvita China Limited.
The acquisition will be funded through the issuing of 4.05 million new shares, as well as a payment of $3.19 million.
“This completes the ‘final piece of the jigsaw’ with respect to our China Strategy, which we have been working on for a number of years,” Comvita chief executive Scott Coulter said.
“Our goal has been to gain full control of our brand across all key channels into China. This acquisition significantly strengthens our direct to China business, the key building block in our China strategic plan.”
According to Coulter, China remains Comvita’s strongest consumer base, with its success in the region underpinned by its efforts to get closer to the Chinese consumer.
This was initially done through a distribution relationship for 12 years, before the business entered a 51 to 49 per cent joint venture in 2017. This acquisition is the culmination of that effort.
“China is moving into a direct trade and a formalised cross border e-commerce model, to ensure both consumer protection and fairness in taxation between online and offline ‘players’ are in place,” Coulter continued.
“This acquisition will provide Comvita with much more flexibility to optimise sales and channel profitability in this fast evolving environment.”
For the remainder of the year, the brand issued three goals for the China market: to achieve price harmonisation between its channels and markets, to supply key cross border e-commerce platforms directly, and to build its e-commerce and marketing capability in the region.
Comvita chair Neil Craig noted that while the recent period had been tough on shareholders due to the execution of the brand’s strategy in China impacting its short term earnings, the brand now expects revenue from its consolidated China business to be greater than $200 million in sales annually.