Diversification of Large-scale Grain & Food Processors

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					Diversification of Large-scale Grain & Food Processors

Summary: Recently, several large-scale grain & food processors have made steps towards
further diversification – a sign of trends in the market which seem likely to accelerate in
the future.

Tags: dairy, dairy product, grain and food processor, Yihai Kerry, soy milk powder, liquid soy milk,
Mengniu, Wahaha, food industry, beverage

Recently, a number of leading grain and food processors have moved towards increasing
diversification and vertical integration. This is a signal of the growing integration of China’s food
industry, a trend which is expected to pick up pace in the future and impact dairy markets as a
result, according to CCM International’s April issue of Dairy Products China News

The prime example is Yihai Kerry, a leading agribusiness and food company processing oilseeds,
grains, edible oils, palm and laurics into a wide range of high-quality food products, feed
ingredients and oleochemicals at ~170 plants. The company is a leading player in multiple market
segments in China, such as oilseed crushing, edible oil refining and consumer cooking oils as
well as rice and wheat flour milling, etc.

On 3 March, Yihai Kerry announced the commissioning of its production lines for soy milk powder
and liquid soy milk with capacities of 8,000 t/yr and 12,000 t/yr respectively: the resulting products
will be launched in the East China market first, during June.

This is the group’s first involvement with liquid soy milk. It originally entered the soy milk industry
early in 2009 when it acquired a soy milk powder processor in Heilongjiang with a capacity of
6,000t/yr; later, in 2011, it set up an 8,000t/yr soy milk powder production line in Qinhuangdao
City, Shandong Province.

There are other similar examples, such as V V Group. On 9 March this leading grain and food
processor announced that it will participate in the reconstruction of a white spirits company in
Guizhou: it is to hold a 51% share of the new company once the deal is completed, which will be
by the end of April. Investors seem supportive: after releasing the news, the company’s share
price rocketed, reaching the upper circuit limit (10% in China) in the following days.

Also in March, the beverage giant Wahaha indicated its intention to expand into dairy farming in
Australia, as well as to grow its health food and beverage business and supermarket operations
in China (please see the following article in this issue, Wahaha to Invest in Dairy Farming in

Previously we have seen COFCO buying into China’s largest liquid milk processor Mengniu. In
July 2009 it acquired a leading stake of about 20% together with Hopu Investment Management–
and this year has stepped this up to 28.09% after the quality scare hit Mengniu’s products. This
has been the key example of diversification affecting China’s dairy sector: its involvement since
then has undoubtedly allowed Mengniu to accelerate its expansion in China and overseas
(please see Dairy Products China News Vol.2 August Issue, p7 & Vol.4 January Issue, p9).

The key goal of these large-scale grain & food companies is to optimise their product mix and
increase their profitability and competitiveness: such diversification builds an increasingly
integrated supply chain. There are also varying specific motives behind the expansion of these
large-scale companies into new sectors. For example, for Yihai Kerry,the launch into liquid soy
milk can help the company take full advantage of its upstream soy processing. For V V Group, its
efforts to develop its white spirit business since 2009 have played an increasingly important role
in the company’s development. In H1 2011, the company’s liquor business achieved sales of
USD158.64 million – 41% of its total revenues and equaling the proportion of sales made up by
its soy milk powder and soy milk business!

Expansion of this type exemplifies the integration of China’s food industry over the last 2 years,
and fits well with the 12th Food Industry 5-Year Plan released on 31 December 2011. According
to that document, the government plans to perfect food companies’ organisational structure in
order to help them become more competitive, to enhance consolidation in the sector and to
eliminate businesses with outdated technology. The government also plans to “foster” around 23
food companies with annual sales in excess of USD1.58 billion (RMB10 billion) and 300 famous
food brands. It plans for integration to be accelerated in the next 4 years, and the larger
agribusiness companies will be the main beneficiaries of this approach (please see Dairy
Products China News Vol.5 February Issue, p6, Launch of the 12th Food Industry Five-Year Plan

Source: Dairy Products China News 1204

Content of Dairy Products China News 1204:
Diversification of Large-scale Grain & Food Processors
New Zealand Exceeds Trigger Levels Again
Government to Support Leading Agriculture Enterprises
Yunnan Launches Management Measures for Local Food Safety Standards
Yili’s Investment Programme for 2012
Wahaha to Invest in Dairy Farming in Australia?
North Dairy Expands in Ningxia
Xiaoxiniu Biological Faces Challenge to Go Public
Companies Increasingly Target Milk Production
Avante International Launches Infant Formula Products
OZ Care Formula Launch
Auscow Launches New UHT Milk

Dairy Products China News, a monthly publication issued by CCM International on the
30th/31st of every month, brings you the latest information on new market dynamics, company
dynamics, new dairy products and consumption trend, new legislations and policies and raw milk
supply dynamics that are shaping the market.

About CCM International

CCM International is dedicated to market research in China, Asia-Pacific Rim and global market.
With a staff of more than 150 dedicated highly-educated professionals. CCM International offers
Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis all
through its new proprietary product ValoTracer.

For more information, please visit

CCM International Ltd.
Guangzhou CCM Information Science & Technology Co., Ltd.
17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou
510070, China

Tel: 86-20-37616606


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Description: Recently, several large-scale grain & food processors have made steps towards further diversification – a sign of trends in the market which seem likely to accelerate in the future.