KKR invests in chicken producer

The booth of Fujian Sunner Development Co Ltd at a meat industry exhibition held in Beijing. Global investment firm KKR& Co LP is investing $400 million for an 18 percent stake in the Shenzhen-listed company. [Photo/China Daily]

Leading global investment firm KKR & Co LP is making a series of investments in China's consumer sector, seizing opportunities related to the nation's food quality.

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Its latest move is spending $400 million on an 18 percent stake in Shenzhen-listed Fujian Sunner Development Co Ltd, a leading vertically integrated chicken producer, according to a statement by KKR on Tuesday.

KKR (formerly known as Kohlberg Kravis Roberts & Co) and Sunner will form a strategic partnership to expand the Chinese company's operations in providing safe and high-quality chicken products to consumers, according to the statement.

"Partnering with companies that meet China's demand for increased food safety is one of our key focuses for China investments," David Liu, CEO of KKR greater China, told China Daily.

Liu said the company will offer capital, KKR's global resources and operational expertise to further strengthen Sunner's market leadership.

In June, KKR and three other private equity firms invested $270 million in Cofco Meat, a subsidiary of the State-owned COFCO Group. The investment will help the Chinese company establish and manage large-scale hog farms and meat-processing facilities in China.

In September of last year, KKR formed a new joint venture with CDH Investments and China Modern Dairy Holdings Ltd. Its first move was a $140 million investment to set up two large-scale dairy farms that will have 10,000 cows each within the next two years.

The main reason that KKR favors China's consumer sector is that the demand for high-quality food exceeds the supply, said Wu Li, research director of China Galaxy Securities Co Ltd.

"With consumption upgrading and food safety scandals, people have a strong demand for high-quality food, such as better meat, egg and dairy products," Wu said. "In the meantime, safety standards and food quality require that the providers need to be improved."

According to Wu, stock breeding farms are very fragmented in China, and integration will become a trend.

Other private equity firms are also seizing opportunities in the consumer sector.

For instance, Lunar Capital, which focuses on Chinese consumers, has made a series of deals in fast-moving consumer goods, such as beef jerky producer Yonghong Food Co Ltd, walnut beverage manufacturer Sichuan Zhiqiang Food Co Ltd and China Yeehoo Group Ltd, a Guangzhou-based baby products company.