February 22, 2016
Zhengchang: Growing together with customers
While the feed milling industry is relatively stable with no revolutionary changes in recent times, according to Zhengchang, the company is nonetheless constantly learning and growing with its customers.
by Ngai Meng CHAN
"A mixer will look like a mixer, and a pelletiser will look like a pelletiser. You won't find something that looks radically different the next time you visit a trade show. But this is just the way things are in the feed milling industry," quips a young and affable Hao Yun, president of Zhengchang, in an interview with LIVESTOCK and FEED Business at the International Production and Processing Expo (IPPE) in January at Atlanta, Georgia. But that does not mean that one does not need to change with the times. Despite the heavy title bearing on her shoulders, Hao Yun humbly admits that she is constantly developing her professional knowledge to keep up with market changes, even though she had been hearing about her family business from her dad since she was small.
This is the same spirit behind the 98-year-old Zhengchang enterprise, which has been learning and growing with its customers.
In 1997, Jiangsu Huaiyin CP Feed Company with an annual output of 360,000 tonnes invited international bids, and Zhengchang won the bid, becoming the first Chinese enterprise which can independently design and build large-scale feed milling equipment. But that was after all strictly a Chinese project, according to Hao Yun, and the real watershed came at the turn of the millennium when the company proactively went out to take on projects internationally. Previously though, Zhengchang had simply waited for customers to go knocking on its door, for example when it met customers from Africa at the Canton Fair in Guangzhou.
This fundamental shift in business mindset was influenced by the market trend which emerged at that time – Chinese feed milling companies themselves like New Hope Group began venturing abroad.
Today, one can easily spot Zhengchang exhibiting at international trade fairs like VICTAM and VIV, as the company spends most of its time now seeking out new customers.
"Before internationalisation it was perhaps true that Chinese technology was not on par with Western technology, but the same cannot be said now, as our equipment standards and degree of automation have improved a lot. I believe that Zhengchang today has its own strengths in the international market," Hao Yun points out.
"From the feedback we have been getting from our customers, it is clear that their demands have also risen. Generally speaking, we are seeing requirements for faster service and a higher degree of automation to reduce labour costs. As an example, to be closer to our customers so as to provide quicker service, we have an office and factory in Brazil to serve the North and South American markets," she adds.
Indeed, from product development to after-sales service, Zhengchang listens closely to its customers to gain a better understanding of their needs. This does not necessarily mean recommending its most expensive product to the customer, according to Hao Yun. For instance, there were customers who approached the company at IPPE to work on projects that they had not embarked on before; for some of those customers, Zhengchang advised them to start off small as it "cared for their investments" and "wanted to grow with them". Hao Yun proudly cited the example of how one of its customers in Vietnam who approached them for its first feed production line 10 years ago, still regularly goes back to them to work on its expansion plans following its public listing the year before.
Further on the company's product development strategy, Hao Yun goes on to talk about how Zhengchang is constantly working with customers to tailor its feed machinery products to meet the requirements of feed for different livestock species. For example, generally speaking, swine feed has to be more steamed and cooked than poultry feed, and the latter has to be produced with a higher compression ratio.
Currently, while all of Zhengchang's research facilities are located in China, the company is confident that it is better able to maintain its design standards in-house.
"If you look closely at the designs of ring dies and rollers from different companies, they are all different. It is hard to say which design is best, as it all depends on which design is best able to meet a customer's specific needs. It often boils down to which design maximises the customer's productivity and power efficiency," Hao Yun explains.
On the subject of the trend towards extrusion technology for aqua feed, she made an interesting note. Does the production of all aqua feed really require an extruder? "We don't think so. Again, we have to study the prevailing market conditions, and see how we can best meet the customer's needs. In fact, sometimes we also have to consider the views of engineers hired by the customer," stresses Hao Yun.
Beyond its customers, Zhengchang also works closely with the industry at large, including academia, feed associations and other organisations. The company offers scholarships and has contracts on talent development with a number of universities in China. In addition, Zhengchang has worked with a particular university to publish two books on the growth of China's feed industry, where it is also the first in the country to conduct research into cooked feed technology for piglets.
In terms of animal welfare, like many other companies in the feed industry these days, Zhengchang has to address customer concerns related to feed safety for animals. As an example, according to Hao Yun, Zhengchang uses European design for its mixers, which process feed by batches, leave minimal residue, and are therefore clean and free from harmful bacteria like Salmonella. This design particularly benefits piglets which have a relatively weak digestive system and are prone to diarrhoea.
Moving on to Zhengchang's developments in its key markets, Hao Yun says that the breakdown of the company's revenue in the Chinese and overseas markets are roughly fifty-fifty. She would like to see a "healthy and stable growth" of 20% annually for the company.
For its standard machinery products, Zhengchang's main export destinations are Southeast Asia, Africa and South America. This is not without reason.
The feed industries in regions like the US and Europe are already very developed. For instance, according to Hao Yun, the heyday of the US feed industry was probably in the 1960s to 80s, when many new projects were launched, leading to rapid growth in feed production.
However, today the US feed industry has matured, and most growth comes from brownfield projects. These projects are where Zhengchang still comes in to supply new equipment to increase the productivity of old feed mills.
Hao Yun then brings in the concept of "feed per capita", which she had read in a report that 350 kilograms of feed per capita is generally required for a healthy diet. The US and Europe and already way past this figure, suggesting that there is little room for meaningful growth in feed production in these two regions. Even China is closing in on this figure and reaching market saturation. However, Southeast Asia, Africa and South America are still far off from this figure, so there should be ample opportunities for growth in feed production. In short, Hao Yun says, population growth should be a key indicator of growth in feed production, meaning that future export opportunities for feed milling equipment will lie in regions where there is high population growth. Of course, other indicators like the state of a country's economy, and the stability of its political situation, will also affect export opportunities.
As Zhengchang ventures into new markets, Hao Yun admits that it is not realistic to have service centres in every new market. However, Zhengchang is committed to training its agents in new markets, have agreements to supply them with spare parts, and hopes to have a service team in every market one day. The company currently also has an in-house online platform for customers to easily order accessories, which is again another example of how Zhengchang is changing with the times and growing with its customers.