London-based CVC Capital has acquired 100 percent of Malaysian snack company Munchy Food Industries (MFI) through its CVC Asia IV Fund in a $250 million deal.
Prior to the completion of the deal on June 8, Munchy’s founders held a 70 percent stake in the business with the balance of ownership held by Southeast Asia-focused private equity firm TAP Crunch.
Founded in 1991, MFI has grown to be a leader in the region’s biscuit and confectionery sectors, holding a 21.5 percent share of Peninsula Malaysia’s biscuit market as of last year. Its product line includes Munchy’s, Oat Krunch, Lexus, Muzic, and Choc-O, which it distributes to more than 50 countries.
“As a homegrown Malaysian brand, the Munchy team is proud that our hard work and product innovation over 25 years has enabled us to grow into the regional business we are today,” said LK Tan, co-founder, MFI.
A Sweet Deal
Global sugar confectionery sales are forecast to jump from $65.11 billion in 2015 to $78.31 billion in 2020, reflecting a CAGR of 3.76 percent, reported Confectionery News. However, it is the Asia-Pacific region that is expected to be the engine driving growth for the category, according to Technovio.
Asia Pacific ranks as the fastest-growing snack food market in the world, according to Retail Asia Online, and over the five years between 2012 and 2017 Asia Pacific overtook North America to be the top market for sweet biscuits, snack bars, and fruit snacks, according to Euromonitor.
Burgeoning middle classes and rising levels of disposable income are driving surprisingly impressive growth for snacks across Asia Pacific, which with comparable lower per-capita sales to other more developed regions, reflects the growth potential therein. One of these markets is India, which is expected to see its confectionery market valued at US$2.2 billion by this year, up from a value of US$1.3 billion in 2013, according to data from Canadean.
This potential has been noted by Hershey, which in 2013 announced it was investing $250 million to build a confectionery plant in Malaysia to serve the 25 markets in the region. Another is Sydney, Australia-based Quadrant Private Equity, which in January of this year acquired Darrell Lea, an iconic Australian confectionery company, with the goal of gaining advantageous position to capitalize upon the expected growth in Asian markets.
Home Team
The one key factor to being successful in the Asian confectionery space is being a domestic player, according to Euromonitor – something that the deal for MFI will gain for CVC Capital. Meanwhile CVC will give MFI the resources and ability to expand beyond Asian markets.
“This is an exciting opportunity to invest in a leading player with a consistent track record of growth and a highly cash-generative business,” said Alvin Lim, managing director, CVC Capital Partners. “Over the years, MFI has built an exceptional platform with proven scalability to meet the demands of the company’s growing consumer base.”
“There were many offers from potential investors in the past, but CVC’s vision for the brand aligned extremely well with our identity,” said Tan. “Their global network and experience will be invaluable in growing the Munchy’s brand into a global name – with new markets, new technology and new innovations. We are excited to see CVC take the Munchy story into the next phase, becoming a global powerhouse.”
CVC has also made a concurrent move in Indonesia’s savory snack market – investing $150 million into GarudaFood before the company pursues an initial public offering.
With a product line including peanuts, wafer sticks, and crackers, GarudaFoods is currently the top savory snack company in the country, which is expected to grow by 40 percent by 2020 to reach a value of US$2.4 billion, according to FSM News.
-Lynda Kiernan