Global private equity giant KKR & Co. L.P. has agreed to invest around US$400 million for an 18% stake in Shenzhen-listed Chinese chicken meat producer Fujian Sunner Development Co. Ltd., according to a joint announcement.
At the same time, the two parities will form a strategic partnership to expand Sunner’s operations to provide safe and high-quality chicken products to Chinese consumers.
KKR’s investment comes after the scandalous revelation last month that a key meat supplier to fast-food restaurant chain McDonald’s and KFC in China, Shanghai Fuxi Food Products Limited Company, used meat that had expired and gone bad.
KKR’s investment is a huge bet on the potential future growth of meat consumption in China, as well as Chinese consumers’ increasing attention for food quality.
Chicken is the fastest-growing protein in China, yet it represents only 17% of its total meat consumption, versus nearly 40% in Taiwan and Hong Kong. Per capita chicken consumption in China is 10kg per year, at a very low level compared to 43kg in the U.S.
There is also a trend towards large-scale chicken breeders supplying the market. China’s large-scale producers only account for 30% of total supplies today, a significant increase from 12% in 2007, but still very low compared to mature markets like the U.S., where over 95% of supply comes from large-scale producers.
"Partnering with companies that meet China’s demand for increased food safety is one of our key focuses for China investments," says David Liu, CEO of KKR Greater China.
The transaction is still pending on customary approvals.
Fujian Sunner, based in Fuzhou city, Fujian province, is China’s largest breeder, processor and supplier of chicken products, providing fresh and frozen chicken for China’s fast food industry, food manufacturing industry and meat wholesale markets.