PepsiCo Inc announced on Feb 23 that it has entered into a definitive agreement to acquire Hangzhou Haomusi Food Co Ltd, better known as Be & Cheery, one of the largest online snacks companies in China, from Haoxiangni Health Food Co Ltd for $705 million. The move is believed to help PepsiCo, which has been operating in China for nearly 40 years, to get closer to its goal of becoming China's leading consumer-centric food and beverage company.

Based in Hangzhou, Be & Cheery is the country's top three local snack food companies (the others are Three Squirrels and Bestore). It has many product offerings across nuts, dried fruits, meat snacks, baked goods and confectionery. It predominantly sells online through the major e-commerce platforms in China. Its first offline store was founded in 2003 and it set up its operations on Taobao.com in 2010. In 2016, Haoxiangni Health Food Co Ltd had acquired Be & Cheery for 960 million yuan ($136.6 million).

Be & Cheery's strengths in data-led innovation capability and flexible manufacturing and sourcing have enabled it to quickly adjust its product portfolio to respond to changing consumer trends, according to PepsiCo.

"Be & Cheery is highly complementary to our existing China business with its broad product portfolio, asset light model, and focus on e-commerce," said Ram Krishnan, CEO of PepsiCo China.

"As we look to accelerate growth in key markets around the world and further grow 'in China, for China, with China', Be & Cheery adds direct-to-consumer capability, positioning us to capitalize on continued growth in e-commerce, and a local brand that is able to stretch across a broad portfolio of products, through both online and offline channels. We also expect to leverage Be & Cheery's innovation and consumer insights capabilities to drive innovation in other key PepsiCo growth markets."

Haoqun Qiu, Chairman of Be & Cheery, said: "We believe PepsiCo's strong branding and route-to-market capabilities as well as global supply chain network will help us deliver and expand on that mission. PepsiCo and Be & Cheery are jointly confident in the prospects for China's snacks industry and share a commitment to invest in consumer-led and digitalized capabilities."

Jubin Shi, Chairman of Haoxiangni, said Haoxiangni will focus on developing red dates and local specialty agricultural products in the future. "We aim to expand our value chain and supply chain to support rural revitalization and achieve win-win outcomes for all.

Zhu Danpeng, a food and beverage analyst, said the deal is expected to give a boost to PepsiCo's revenue in the country. "The potential for quick growth for PepsiCo's beverage business is limited and overall profits for its beverage sector have been stagnated. Therefore, its future growth lies in the food sector," said Zhu.

The transaction is subject to a Haoxiangni shareholder vote, certain regulatory approvals and other customary conditions.