Chinese biscuit maker Jiashili in $48m IPO

By Oliver Nieburg

- Last updated on GMT

Domestic biscuit maker Jiashili aims to keep pace with the might of Mondelēz's Oreo with an initial public offering
Domestic biscuit maker Jiashili aims to keep pace with the might of Mondelēz's Oreo with an initial public offering
China’s sixth largest biscuit firm Jiashili Group has successfully listed on Hong Kong stock exchange and aims to innovate to grow its market share.

Yesterday it raised HK 370 million ($48m), representing 25% of the company’s total issued share capital.

Jiashili’s legal advisers Eversheds said the initial public offering (IPO) was over-subscribed by approximately 28 times.

Rising consumption

“We intend to capitalize on the fact that the biscuit consumption per capita in the PRC is approximately one seventh of the biscuit consumption per capita in North America…,”​ said Jiashili in its global offering document.

Chinese consumers spent around $6 per head on biscuits in 2013 compared to $37.2 and $43.3 for consumers in Western Europe and North America respectively, according to Euromonitor.

Financial focus

Jiashili History

The company was established in 1956 by Kaiping C&P Factory, which started manufacturing in Guandong province. Kaiping C&P Factory later became Jiashili Pasteries and established the Jiashili brand in 1985. The firm set up subsidiary Guandong Jiashili in 2005 the latest owners, the Huang family, took control in 2007.

Jiashili posted 2013 sales of RMB 748m ($122m) up 15% on the prior year and net profit for 2013 was RMB 69m ($11m), up 60% on 2012.

The company’s core brand Jiashili has four main categories: breakfast biscuits, its largest segment, as well as crisp biscuits, sandwich biscuits and wafers.

Chinese biscuit market

The firm operates in a very fragmented Chinese biscuit market. In 2013, Mondelēz was the market leader with a 13.6% share, ahead of Nestlé owned business Hsu-Fu-Chi on 6%, according to Euromonitor data. Jiashili was sixth place with a 3.1% share, behind Want Want, Orion and Ting Hsin.

In Feburary, Mondelēz blamed missed expectations on a slowdown in its biscuit category in China.

According to Euromonitor International, the biscuit market in China grew retail value sales 53.4% from 2009 to 2013 to reach RMB 47.8bn ($7.8bn), making it the third largest market in the world behind the US and Brazil. It is expected to grow a further 33.3% from 2014 to 2018.

R&D focus

breakfast biscuits jiashili
Breakfast biscuits are Jiashili's main operating segment.

Jiashili’s global offering document said that the Chinese biscuit market was highly competitive and said that the firm would need to constantly develop new products to respond to changing consumer demand. It spent RMB 5.2m ($898k) on R&D in 2013.

The company said it expected Chinese consumers to shift to healthier alternatives with reduced sugar and higher fiber as concerns mounted over obesity and diabetes.

“One expected focus will be savory biscuits, digestive crackers and fruit-jam based sandwich biscuits,”​ it said. “Further, in order to provide for the increasing demand for portability and to appeal to young consumers, there will also be a focus on developing bite-sized biscuits with more convenient packaging.”

Euromonitor also expects biscuit makers to launch more premium launches, raising overall retail prices, which have already been growing at a CAGR of 5.4% between 2009 and 2013 to reach RMB 15.8 per kg ($2.58).

Jiashili has three factories located in Guangdong, Jiangsu and Hebei and has production capacity of over 120,000 metric tons per year.

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