Chinese interest in Weetabix and snooker: what's next?
The world is constantly changing. This is perhaps an obvious statement. The question is therefore not whether change exists but the pace at which it occurs and, crucially, whether we are able to embrace it.
So, take two very British 'brands', Weetabix and snooker. Anyone who grew up in in Britain in the 1970s and, especially, the 1980s will probably have been exposed to both.
The announcement last week that a majority stake in the makers of Weetabix has been sold to Bright Food, China's second largest food company will probably come as no great shock. It is part of a growing trend for cash-rich Chinese companies to buy western brands.
Weetabix is the latest British company to be bought by a Chinese company (which is state-owned). And it certainly won't be the last. A source close to Bright Food which is based in Shanghai has suggested that there are many other British brands that they would like to buy.
Bright Food has already tried to purchase stakes in United Biscuits, maker of much-loved British staples such as Jaffa Cakes, Hula Hoops and Twiglets and has shown interest in Campbell's Soups and Premier Foods.
The list of companies already purchased by the Chinese is interesting. As well as being highly diverse, it suggests that there is both desire to some as vehicles by which they can exploit the rapidly developing market at home and others simply to raise revenue.
So, for example, Gieves and Hawkes the Saville Row tailor was also sold last week to Trinity which paid £32 million but could rise to twice that depending on sales in China.
Water companies are popular. Thames Water was sold for £600-£700 million in January to China's sovereign wealth fund and Northumbria Water for £2.4 billion last year to Hong Kong based tycoon Li Ka-shing . Additionally, Felixstowe Port is owned by Li Cheung Kong Infrastructure.
As we know only too well here in Birmingham, there has been Chinese interest in local businesses. Birmingham City Football Club is owned by the now infamous Hong Kong businessman Carson Yeung. And after its collapse MG Rover was taken over by Shanghai Automotive Industry Corporation.
Imminent deals of British companies to the Chinese said to be in the offing include Lotus Cars and Horizon Nuclear Power which is being considered by state-owned Guangdong Nuclear Power.
But back to Weetabix and snooker.
Some commentators have questioned why the fact that it is now majority owner of Weetabix has not attracted the same publicity that Birmingham-based Cadbury did when purchased by Kraft food. Perhaps part of the reason is that there is a belief that this is such a great brand that its production will not be moved to China where breakfast cereals have little presence.
Weetabix, which also makes Alpen and Ready Brek, was invented in Australia in the 1920s but has been made in Northamptonshire since before the second world war by the George family.
Weetabix currently own two factories in Burton Latimer and Corby and employs over 2000 workers. Weetabix is exported to over 80 countries and generates sales of more than £420 million.
Weetabix is the biggest selling breakfast cereal in this country (on average we consume336 of the individual biscuits each year). This made it a very attractive proposition for Bright food.
However, if the intention of Bright Foods is to use Weetabix as a way of breaking into the Chinese breakfast cereal market there is a challenge. As we all know, because of its population, China provides huge potential for any producer wishing to increase market share.
Given that last year the Chinese spent some £410 million on breakfast cereals compared to our £1.43 billion suggests as much. The thing is, the Chinese population have high levels of lactose intolerance which means that there may be reluctance to consume Weetabix in the way that we do.
However, Bright Food's chairman Zongnan Wang, who completed the Weetabix deal, believes that there is great potential in wheat cereals to the increasingly wealthy citizens of China (and greater Asia) who have always existed on the traditional breakfast of rice and steamed bread.
Nonetheless, Bright Food will rely on existing markets for Weetabix to ensure continued return on investment. And Bright Food will continue to use the incredible cash reserves it has to complete other takeovers.
As Marcia Mogelonsky from market researcher Mintel, and who is an expert on food and drink, suggests, they will use Weetabix as a "toehold" to develop markets in Western Europe and the world, followed by the world.
There is a belief that eastern companies are looking to purchase ready-made brands that have global recognition.
Some commentators believe that we are witnessing something profound. Clive Black, who is an analyst at Shore Capital, sees Bright Food's acquisition of a majority share in Weetabix as part of a shift of the Western hegemony:
"...[it's an example] of the global power shift from the west to the east. It's similar to how the bourgeoisie took over from the aristocracy 200 years ago"
This might seem alarmist but there is an undoubted shift in economic power. Remember that the Chinese were largely not exposed to the consequences of the global financial crisis caused by, among other things, the American sub-prime market.
Indeed, there are some who suggest that this would not be the first time that China has considered conquering the world. Gavin Menzies in his book, 1421, The Year China Discovered the World, argues that in March of that year a large fleet of ships set off.
As Menzies suggests, China discovered counties that the great European nations would not achieve for another couple of generations.
There has been criticism of Menzies' book; most particularly the basis of his research. Others ask why the Chinese didn't continue their quest to discover other counties and, of course, their resources.
Economically, in contemporary terms, at least, the quest is very much continuing. China has been securing supplies of raw materials (minerals and ore), from Africa for a number of years. British companies are simply a continuance of this trend.
So, what about snooker?
The first bank holiday weekend has become traditional for the 'World' snooker championships that take place at The Crucible Theatre in Sheffield.
That the world championships have been played there since 1977 means that The Crucible is synonymous with that tournament. However, there are some who suggest that the future of this most quintessential British game lies elsewhere; China.
For those who remember the early 1980s there seemed to be almost continuous coverage of snooker. Its retinue of players, 'Hurricane' Higgins, 'Interesting' Steve Davis and 'Whirlwind' Jimmy White, to name just three, were household names.
But we grew tired of the constant coverage. Sponsors recognised this and withdrew which, of course, meant that the game was less televised. Coupled with the ban on tobacco advertising, the game's authorities looked elsewhere to attempt to for ensure that it could recreate the revenues it once enjoyed (one of the reasons we see players wearing advertising on waistcoats).
It is China that snooker looks to in order to secure survival. The game is extremely popular and the potential viewing figures are phenomenal. So, it seems, we are likely to see even less snooker in the future; certainly on free-to-view channels.
As the quotation goes, 'money makes the world go around'. This has never been truer. The recent acquisitions of companies like Weetabix by the Chinese and the move eastwards of the 'sport' of snooker clearly demonstrates that traditional brands are not sacrosanct as far as British ownership is concerned.
It begs the question, what brands will be next to create interest from China?