August 3, 2010

 

Chinese feed additives industry set to reform

Increased competition and falling demand have driven many small-scale Chinese feed additives manufacturers to adjust their strategies for survival, which inevitably, spells a wide swath of mergers, acquisitions and restructuring underway in the current fragmented industry.

 

The severe overcapacity in Chinese feed industry with the equipment utilisation rate below 50%, coupled with waning demand have greatly undercut companies' profits, leading to numerous small and medium enterprises (SME) stop operating altogether over the past few years.

 

According to industry experts, production from the top 10 companies in the country accounts for 27% of total output. The Tongwei Group, a major player in the Chinese feed additives market, outputs approximately 4.2 million tonnes of products per year. In stark contrast, the annual production of one average feed producer is well below 10,000 tonnes, an industry research showed.

 

Increasingly, more feed additives enterprises are under pressure to reduce production, sales and management costs, mainly through moving toward larger-scale, value-added industry chain.

 

This essentially denotes transferring from product competition to value chain competition as well as from the single feed production to the supply of solutions for numerous raisers. The key factor for success would be to provide services with higher value for raisers.

 

Analysts predict that in the following three to five years, China's feed enterprise number will continue to decrease to only several hundreds, while the market concentration will be improved, leading to mergers and acquisitions and reorganisation in this industry.