COFCO eyes deals for sugar, wine overseas

China National Cereals, Oils and Foodstuffs Corp, known as COFCO, will focus its overseas acquisition drive in the wine and sugar sectors to meet growing demand at home, a senior company official has said.

Wan Zaotian, vice-president of the State-owned food-processing giant, said on Thursday that the company will continue to expand through sugar and wine-related overseas mergers and acquisitions.

"These two areas are easier for acquisitions compared with grain-related mergers," he said.

Regarding grain M&A deals, he cited the example of land purchases in countries such as Brazil, which have ownership restrictions for foreign companies.

In November 2012, COFCO announced plans to invest in overseas M&A deals in the next five years, adding that companies in the United States, Australia and countries in Southeast Asia will be major targets.

In 2011, the company took control of Australian sugar producer Tully Sugar Ltd, but it lost a bid for Proserpine Cooperative Sugar Milling Association, another Australian company, in November of that year.

In the wine sector, the company bought Chateau Viaud in Bordeaux, France, in February 2011 after a previous purchase in Chile.

Meanwhile, Wan said that COFCO does "not exclude the possibility" of stepping up overseas M&A deals in the milk powder industry.

"It's quite unusual for a country to rely on overseas brands for 78 percent of its baby-formula supply," he said.

Yashili International Holdings Ltd, which is owned by China Mengniu Dairy Co Ltd of which COFCO is the largest shareholder, is building a factory in Waikato, New Zealand, with an investment of 1.1 billion yuan ($178.95 million) and an estimated annual production volume of 52,000 tons of milk powder.

Wan said the company will support Mengniu's decision to further boost its milk powder business, despite low consumer confidence in domestic milk powder brands.