On 7 November 2018, Freedom Foods Group Limited (ASX: FNP) announced that it has entered into an arrangement to establish a strategic partnership with Theland New Cloud Digimart Co for the development of the Arnold’s Farm range of cereals and snacks in China. Following this news, the share price of the company increased by 4.75 percent as on 7 November 2018 (1:30 PM AEST).
Theland New Cloud Digimart Co is a China-based brand owner and distributor and its product range includes meat, dairy, water, cereals and supplements. Majority of Theland is owned by Alibaba Group and its strategic relationship with Alibaba provides for deeper customer focused integration into online channels and for accelerated distribution into Alibaba’s offline new retail strategy. Theland is having extensive sales capabilities across both online and offline channels in more than 25 provinces in China.
Freedom Foods Group’s arrangements with Theland were signed during the opening stages of the China International Import Expo (CIIE) in Shanghai; and under the arrangements, Theland intends to become the exclusive distributor for Arnolds Farm branded cereal and snacking products in the China market including online and offline channels, further leveraging the integration between online and the “new retail” strategy being developed by Alibaba.
Under the terms of the Arrangements, after an initial startup period, both the companies will start a local China-based joint venture to develop and market the Arnold’s Farm brand across a wider capability of cereal and snack formats. The JV will own the Chinese language trade mark for Arnold’s Farm and it will be responsible for all sales marketing and distribution of the Arnold’s Farm range of products in China and the JV arrangements with Theland will be similar to the strategic equity partnership established between Freedom Foods and JLL for Australia’s Own Kids Milk. Freedom Foods will continue to be the exclusive long-term manufacturer of the Arnold’s Farm range and it will use its manufacturing and product development capabilities in Australia to drive new innovation across a wider range of products under the Arnold’s Farm brand for both online and offline sales channels.
Freedom Foods has been selling into China for over five years and has built a dedicated online and offline sales capability to establish the initial distribution capabilities for brands such as Arnold’s Farm. As per Freedom Foods Group’s CEO Mr. Rory Macleod, Freedom Foods is having a good footprint in China and its strategic long-term partnerships like this with Theland will help the company to continue its strong trajectory for driving its brands and products into China, supported by the company’s unique supply sources and scaled manufacturing capabilities in Australia.
Freedom Foods has also initiated supply of an A2 protein milk product in UHT format to Theland, under its own brand and it is expecting to build on this initial UHT milk product launch with additional products and formats to be launched into 2019.
In the last six months, the share price of the company decreased by 9.47 percent as on 6 November 2018, and traded at a PE level of 86.290x. FNP’s shares traded at $5.405 with a market capitalization of circa $1.26 billion as on 7 November 2018 (1:30 PM AEST).
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