Author: Wu Rong (original)
Not long ago, Mondelēz, the parent company of Oreo, announced an additional equity investment in Enxi Village, a bakery manufacturer, in China. Now, more interesting details have emerged.
Today, Xiaoshidai learned from the official website of the Shanghai Municipal Administration for Market Regulation that Mondelēz Food Enterprise Management (Shanghai) Co., Ltd. (hereinafter referred to as "Mondelēz Shanghai") acquired the equity of Enxi Village (Shanghai) Industrial Co., Ltd. (hereinafter referred to as "Enxi Village") and is in the process of publicizing the summary case of concentration of operators.
This means that the acquisition has gone through the approval process. The above-mentioned documents disclose for the first time Mondelēz's intention to acquire the equity ratio of Enxi Village: the documents show that after the completion of the transaction, Mondelēz Shanghai will hold 72.3546% of the equity of Enxi Village and control Enxi Village alone.
It is worth noting that, according to the self-disclosure of the applicant, in 2023, Enxicun will account for 10-15% of the market share of the frozen cake OEM production market in China. Previously, it was rumored in the industry that Enxi Village's revenue in 2022 was close to 2 billion yuan, and Sam's became its largest customer with the supply of Switzerland rolls since 2015 and the subsequent supply of durian mille-feuille.
Let's take a look at the details of the deal and see how big the coffee spot in the cake field is.
Transaction Details
In a recent announcement, Mondelēz announced that it had signed an agreement with Enxi Village to "significantly increase its equity investment in Enxi Village", but did not disclose details, including whether it will take control of Enxi Village.
Different from the circular, this newly disclosed public document has a clearer equity ratio. According to the public documents, Mondelēz Shanghai signed an agreement with Enxi Village and its existing shareholders to acquire a total of 67.8174% of the shares of Enxi Village.
The documents further show that Mondelēz Shanghai is ultimately controlled by Mondelēz International. Before the transaction, the natural person directly held 45.1438% of the equity of Enxi Village and controlled Enxi Village alone, and after the transaction, Mondelēz Shanghai will hold 72.3546% of the equity of Enxi Village and control Enxi Village alone.
What impact will this acquisition have on the frozen bakery market?
This can be seen from the sum of the market shares of the two parties in the sub-categories. According to the above-mentioned public documents, in 2023, Enxi Village will account for 10-15% of the market share of the frozen cake OEM market in China, and Mondelēz Shanghai and Enxi Village will have a combined market share of 0-5% in the frozen cake market in China.
Behind this additional investment, Mondelēz is increasingly optimistic about the development of the frozen baking field.
Xiaoshidai has reported that Enxi Village, headquartered in Jinshan District, Shanghai, was founded in 2013 and claims to be a large-scale enterprise focusing on the R&D, production and sales of mid-to-high-end frozen baked goods, including mille-feuille cakes, cake rolls, mousse cheesecakes, puffs, snow skin Daifuku and cookies, etc., and its cooperative customers include Sam's Club, Nai Xue's Tea, OLE, Freshippo, China Resources Vanguard, RT-Mart, etc.
Eight years after its founding, Enxi Village received investment from Mondelēz, which was also Mondelēz's first investment in a local food company in China. At that time, the two parties signed a minority stake and a strategic joint investment. Tianyan check shows that Mondelēz only holds 4.5372% of the shares of Enxi Village, ranking fourth among shareholders.
Joost Vlaanderen, President of Mondelēz International Greater China, said, "This is Mondelēz's first major equity investment in the Chinese market since it entered the Chinese market 40 years ago, and it is an important part of Mondelēz's 2030 strategic goal and an important step towards this vision." ”
In addition, Mondelēz global CEO Dirk Van de Put is also optimistic about this layout, and he commented after the transaction, saying, "We look forward to accelerating the growth of cakes and pastries through continuous innovation, leveraging our delicious brands such as Oreo and Filet to make our products more accessible to Chinese consumers." ”
Operates independently
If the next transaction to acquire a majority stake in Enxi Village is successfully completed, how will Mondelēz arrange its relationship with Enxi Village?
After the transaction was announced, Mondelēz held a special meeting with Chinese employees to communicate. According to the communication information learned by Xiaoshidai, Mondelēz promised that Enxi Village will still maintain independent operations, and relevant executives will be retained, and a three-year transition period has been set.
Choosing to keep Enxi Village operating independently, Mondelēz may have no shortage of such considerations.
Today, an unnamed catering investment institution said that from the perspective of brand protection, Enxi Village has established good customer loyalty and market share in the frozen baking market, and maintaining independent operations will help it continue to maintain its brand value and market position.
Secondly, for the sake of market adaptability, this person believes that "after years of exploration, Enxi Village has a deeper understanding and insight into the local Chinese market, and independent operation can allow it to better respond to the needs of the local market to develop new products, and at the same time, it can also help to carry out more localized cooperation with Mondelēz in the future." ”
In addition, from a management perspective, "independent operations and the retention of senior executives are conducive to maintaining the existing operational efficiency and stability of Enxi Village, and can reduce integration costs and risks after the acquisition." An investment institution in Guangdong said to Xiaoshidai.
In his view, the transition period may be set up to integrate incrementally and achieve synergies between the two companies without disrupting existing operations. "Of course, in some cases, due to legal and regulatory considerations, the acquired company will be required to maintain independent operations for a certain period of time to ensure fair competition in the market." He said.
Go with the flow
Let's go back to Enxi Village itself, what kind of "charm" does it have that is worth Mondelēz's "spending a lot of money"?
As a consumer, you may not have heard the name "Enxi Village" at all, mainly because its products are mainly oriented to the B-end. But its customers are famous, whether you have bought frozen bakery products such as mille-feuille cakes and cake rolls at Sam's Club, Nayuki's tea, or Hema and other places.
For these supermarkets or catering stores that are trying to diversify their product categories, while focusing on cost savings and efficiency, frozen baked goods meet their needs.
For large supermarkets, although they can build their own frozen baking production lines, bakery products often have the characteristics of a large number of SKUs and complicated production processes, which leads to a large cost of self-built production lines. For small bakeries, coffee shops, tea shops, etc., the use of frozen bakery products can save labor costs and store rental costs.
In 2023, a report by industry analysts at Everbright Securities shows that the ex-factory value of frozen baking in 2023 will be about 14.3 billion yuan, of which bakeries/supermarkets/restaurants account for 43%/21%/36%, and there is still room for improvement in the penetration rate and market share of bakeries and restaurants, and the growth momentum of supermarket channels is considerable.
In his latest insight into the acquisition, Mondelēz Global CEO Justin Feng also said, "We are seeing retailers in many markets increasingly moving to a similar freeze-and-thaw model, where finished cakes and pastries are frozen, shipped to stores, thawed during transportation, and then presented fresh to consumers in the bakery department. ”
"With this approach, we are able to help our retail partners reduce production costs and complexity, while at the same time bringing exciting new flavor combinations to our consumers." ”
The development of Enxi Village, in addition to conforming to the trend of frozen baking being popular, is also inseparable from its large-scale single product strategy.
Judging from the official website, Enxi Village focuses on six major products: mille-feuille cake, cake roll, mousse cheesecake, puffs, snow skin Daifuku and cookies, which are mostly familiar to consumers, and each single product is divided into about 4-5 flavors, with a total of about 30 SKUs. Focusing on a small number of core products means that Enxi Village can concentrate its resources and energy to give full play to its professional advantages in specific product areas, and at the same time, it is also conducive to ensuring the standardization of products and facilitating large-scale production.
The previous bright market feedback also verified the success of this strategy.
Xiaoshidai noticed that there were previous industry sources that the sales of Enxi Village in 2021 would be about 1.4 billion yuan, and by 2022, it would reach 1.9-2 billion yuan; Among them, in the Sam's channel, the main product supplied by Enxi Village in 2021 is durian mille-feuille cake, which has been made 400 million in the Shenzhen factory, 300 million in the original earl, about 2-300 million cookies, 3 billion in tiramisu, and about 1 billion in others, basically around 1.4 billion.
In addition to product strategy, Enxi Village also pays attention to capacity reserves, and improves technology and processes.
Up to now, Enxi Village has self-built frozen baking factories in Shanghai, Shenzhen and Dongguan. Some small and medium-sized enterprises are also imitating the company's products, but the difficulty is that they are made by hand and the shape is different from that made by the company's machines. It is said that the ovens in Enxi Village are tunnel ovens, so the texture and delicacy of the cake base will be better, and the frozen tunnel used to ensure that the flavor is not lost at -18 degrees Celsius.
After Enxi Village is acquired by Mondelēz, what kind of chemical reaction will the two sides have in the future, and work together to embark on the fast track of development in the field of frozen baking, it is worth observing for a long time.