Uni-President to sell JV stake

The Hong Kong-based food company Uni-President China Holdings said Tuesday it would sell its 47.83 percent stake in the Beijing-based Jinmailang Beverage Co with the intent of more efficiently using assets.

This decision pulled down the closing share price of Uni-President China by 0.725 percent, while its main rival Tingyi (Cayman Islands) Holdings Corp, also listed on the Hong Kong Exchange, saw its closing price increase by 1.37 percent.

Uni-President China is undergoing negotiation with some potential third-party buyers but has not concluded any concrete deals yet, according to an announcement the company posted on the Hong Kong Exchange Tuesday, adding only that the goal was to use assets more efficiently.

Yan Qiang, an industry analyst from Adfaith Management Consulting, attributed the sale to Jinmailang's underperformance and Uni-President's disappointed hopes of expanding into China's northern beverage market.

Jinmailang was created as a joint venture between Uni-President and the Japanese-invested Nissin Jinmailang Foods Co in 2006.

Nissin Jinmailang, an instant noodle maker, once said it expected this cooperation to help it enter the Chinese beverage market, and that it aimed to control 20 percent of the tea drink market by 2009, news portal netease.com reported Tuesday.

But according to the US market research firm AC Nielsen, Jinmailang's tea drinks did not even account for 1 percent of the market in 2009.

Data from the National Bureau of Statistics (NBS) indicated that Tingyi's Master Kong held 40.2 percent of the tea drink market in China in the first nine months of 2012, followed by Uni-President, whose market share was 32.9 percent.

Uni-President, whose domestic performance is better in the south than in the north, wanted this investment to expand its business through access to the powerful northern sales channels Nissin Jinmailang had established from its base in Hebei, Yan told the Global Times Tuesday.

However, as a company that built its fortune out of noodles, Nissin Jinmailang's sales channels are mostly related to the domestic instant noodle sector and are less useful for beverage sales, he noted, adding that the domestic beverage market is mainly controlled by name brands including Master Kong and Coca-Cola.

Master Kong led the domestic fruit juice market for the nine months through September with 22.1 percent while Uni-President ranked third with 13.3 percent, the NBS data showed. In other beverage sectors like pure water drinks, herbal tea, carbonated drinks and other canned drinks, Uni-President was not even in the top four.

Apart from the unfavorable sales channels, sales of Jinmailang's beverages have been hurt by a lack of efficient brand promotion and involvement in safety scandals, Zhao Yong, a beverage analyst from Shanghai-based Haitong International Securities Group, told the Global Times Tuesday.

A Jinmailang beverage distributor in Jiangsu Province has alleged since May 2009 that the company's tea drinks have quality problems.

Jinmailang and Uni-President's business overlap may be another reason to separate the two, Zhao said. The former mainly makes tea drinks, while the latter makes a range of beverages including tea drinks.