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Freedom Foods Group Ltd (ASX:FNP) shares race higher on China deal

The Freedom Foods Group Ltd (ASX: FNP) share price has been a strong performer on Wednesday.

At the time of writing the diversified food company’s shares are up 4.5% to $5.40

Why are Freedom Foods’ shares racing higher?

This morning Freedom Foods announced that it has entered into an arrangement to establish a strategic partnership with Theland New Cloud Digimart Co.

Theland is a China-based brand owner and distributor that is majority-owned by ecommerce giant Alibaba Group.

According to the release, the strategic partnership with Theland is in relation to its Arnold’s Farm range which is currently stocked by Woolworths Group Ltd (ASX: WOW) supermarkets amongst others.

The release explains that the two parties will work together on the development of the Arnold’s Farm range of cereals and snacks in the China market.

Investors appear optimistic on the partnership due to Theland’s extensive sales capabilities across both online and offline channels in more than 25 provinces in China. In addition to this, its strategic relationship with Alibaba is expected to provide for deeper customer focused integration into online channels and for accelerated distribution into Alibaba’s offline “new retail” strategy.

Under the arrangements, Theland will become the exclusive distributor for Arnold’s Farm branded cereal and snacking products in the China market including online and offline channels.

In addition to this, after an initial startup period the two parties will establish 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 joint venture will own the Chinese language trademark for Arnold’s Farm and be responsible for all sales marketing and distribution of its products in China. Though, Freedom Foods will remain the exclusive long-term manufacturer of the range.

Should you invest?

I’ve been a big fan of Freedom Foods for a while now and think it is a good long-term buy and hold option.

While I think it is a little too soon to get excited by this latest partnership, in time it could provide a nice boost to its sales growth.

This could make it worth considering the company’s shares along with industry peers A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Freedom Foods Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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