Nestle to buy stake in Chinese sweets maker for $1.7bn

Nestle has been looking to boost its share of the fast growing Chinese consumer market

Food giant Nestle has taken a big step towards expanding its operations in China, one of the world's biggest consumer markets.

It has agreed to buy a 60% stake in the Chinese sweets and snack maker, Hsu Fu Chi International, for $1.7bn (£1bn).

The deal comes as Nestle is looking to boost its sales in fast-growing emerging economies.

Nestle is the world's largest food company and China is the world's second largest economy.

"The investment is good for Nestle as Hsu Fu Chi has a very good distribution network in China and a decent brand profile with a 6% share of China's candy market," said Tan Han Meng of DMG & Partners.

Growing interest

The growth of China's economy has seen the rise of a more affluent middle class, turning the country into one of the key consumer markets in the world.

That has seen some of the leading global companies try to make a foray into the Chinese market.

Analysts said that companies are also keen to increase their presence in fast-growing emerging markets, in an effort to offset a slowdown in demand from developed markets, such as the US or Europe.

Last month, UK drinks group Diageo got approval to increase its stake in the Sichuan Chengdu Quanxing Group.

The deal gave Diageo indirect control of Shui Jing Fang, a famous brand of popular Chinese spirit Baijiu.

However, Nestle's deal will require approval from China's commerce ministry, Cayman Island courts, where the company is incorporated, and shareholders of Hsu Fu Chi.

"If the Chinese commerce ministry doesn't give approval, we won't be able to go ahead with the joint venture," said Christine Sun, spokeswoman of Hsu Fu Chi.