Venture firms investing heavily in China's health food start-ups

Chinese venture capital and private equity funds are pouring hundreds of millions of dollars into local start-ups serving up snack food products of the healthier kind, and threatening the market share of larger Chinese and global food companies.

Backed by savvy marketing and online promotions targeting the increasingly health-conscious among China's burgeoning middle class, brands such as nuts seller Three Squirrels and Le Pur, a maker of Greek yoghurt, are nibbling away at the sales of the big corporations in the country's more than $500 billion food and beverage industry.

The start-ups are recording double and triple-digit sales growth leading to rocketing valuations as they dominate the rapidly growing online market in particular.

Investment by venture capital firms in China's food and beverage start-ups is close to doubling to nearly $2 billion over the past two years, said Wang Xiaolong, managing director of Hony Capital, one of China's biggest private equity firms and owner of PizzaExpress, a global pizza restaurant company.

"For local Chinese food and beverage brands to turn into international brands, it is only a matter of time," Wang told Reuters, adding that the trend was unstoppable.

Increasing numbers of Chinese taking up sport and exercise and a greater awareness of lifestyle diseases like obesity and diabetes has helped to accelerate the demand for healthier products, especially among the millennial generation.
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