August 16, 2013
China - Update on recent industry developments (week ended August 15, 2013)
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Mengniu increases stake in joint venture with Danone to 80%
China Mengniu Dairy Co., Ltd. (Mengniu) has finalised the agreement with Danone, the French food-products giant, to set up a joint venture in China.
According to the agreement, Mengniu owns an 80% stake in the joint venture, with Danone holding the remaining 20%. The joint venture will take charge of the acquisition, investment and management of chilled yogurt products of the two companies in the Chinese market.
Earlier in May, Danone signed a deal with Mengniu through Mengniu's parent company COFCO to set up the joint venture, in which COFCO owns a 51% stake and Danone owns a 49% stake. COFCO continued to be the largest shareholder in Mengniu, and Danone became a strategic shareholder and owns an indirect interest of about 4% at the initial stage, with the intention of increasing the interest in the future.
Chen Lianfang, a dairy products analyst at Beijing Orient Agribusiness Consultant Ltd. (CnAgri) - the top agribusiness consulting firm in China - says that the change in the stake is likely because Mengniu has an advantage over Danone in terms of market share in China.
According to the data from Euromonitor International, Danone's share in China's yogurt market plunged to 1% in 2009 from 11.4% in 2008. Currently, Danone's market share stayed at about 2% in China, while Mengniu has taken up about 19%.
Dongshun to start full operation of Tongliao broiler facility
Development of Shenyang Dongshun Feed Co., Ltd.'s (Dongshun) broiler project in Tongliao City is well on track. Donshun expects to start full operation of the facility by October this year.
Dongshun initiated the broiler project in December 2010 at a total investment of RMB500 million (US$81.62 million), with a plan to build a broiler farm, a hatchery, a slaughtering plant and a feed processing plant, and set up four new companies, including Inner Mongolia Huixinyuan Food Co., Ltd., Inner Mongolia Shunyinada Animal Husbandry Co., Ltd., Inner Mongolia Shengyufeng Poultry Breeding Co., Ltd., and Inner Mongolia Jietongmeng Logistics Co., Ltd..
The facility, which spans 837 Mu (55.80 hectares), is located in the Ganqika Industrial Park. When fully operational, it will be capable of slaughtering 36 million broilers, processing 300,000 tonnes of feed, storing 100,000 tonnes of grain, breeding 300,000 parent stock broilers, and hatching 33 million chicks a year.
Operation of the breeding farm and hatchery started in August 2012, and that of the slaughtering plant and the feed mill is scheduled to start in October this year.
When fully operational, the facility is expected to generate sales revenue of RMB1.22 billion (US$199.16 million) and turns in taxes of RMB120 million (US$19.59 million).
Beingmate Group invests US$21.25 million in high-quality dairy project
Hangzhou Beingmate Group Co., Ltd. (Beingmate Group) plans to invest RMB130 million (US$21.25 million) in its Heilongjiang subsidiary to develop a high-quality dairy project.
Beingmate Group says that the project aims to build a dairy farm for the supply of high-quality milk, which will be used for infant milk powder manufacturing. Construction of the farm is expected to take nine months.
When the farm is fully operational, it will have an inventory of 1,100 head of dairy cattle, and an annual production capacity of 23,800 tonnes of milk. The farm is expected to rake in sales revenue of RMB78.98 million (US$12.92 million) a year, with RMB12.40 million (US$2.03 million) being net income.
Beingmate Group's financial results for the first half of 2013 indicate that the group generated RMB3.2 billion (US$523.43 million) in operating income, increased by 25% on-year, while its profit reached RMB510 million (US$83.41 million), soared by 72% on-year. Its net income in the same period hit RMB380 million (US$62.15 million), jumped by a staggering 94% on-year.
Yili to start full operation of Luan County's dairy farm in March 2014
Phase two of the Inner Mongolia Yili Industrial Group Co., Ltd.'s (Yili Group) dairy cattle farm project in Luan County is well on track, and full operation of the farm is expected to start in March 2014.
Phase one of Yili Group’s project was completed in May 2009 at an investment of RMB210 million (US$34.33 million), with an initial annual production capacity of 175,000 tonnes of fresh milk. Phase two started in May 2012 at an investment of RMB1 billion (US$163.51 million), with a goal of producing 450,000 tonnes of high-end dairy products a year.
When the dairy farm is fully operational, it is expected to produce a total of 600,000 tonnes of milk and dairy products, generate an output value of RMB4.5 billion (US$735.83 million), and turn in RMB150 million (US$24.53 million) in taxes a year.
New high-quality dairy cattle farm built in Qingdao Demonstration Park
Qingdao Animal Husbandry Science & Technology Demonstration Park has launched a 190-head high-quality dairy cattle farm at an investment of RMB8.09 million (US$1.32 million), and has scheduled to start operation in October this year.
The dairy cattle farm features a RMB1 million (US$163,492) Israeli-made Afikim milking equipment and digital monitoring system, which helps monitor cows’ temperatures, estrous cycle, and assists in the management of feed rationing and milk production.
The farm also includes a RMB2 million (US$326,977) ecological waste management system, which uses the floating plant duckweed to treat the water pollution and animal waste. A 20-kilowatt photovoltaic power generation system has also been installed to cut down the pollution from the farm operation.
Located in Jimo, Qingdao Animal Husbandry Science & Technology Demonstration Park was established with an investment of RMB10 million (US$1.64 million) in 2006. The park has introduced a green broiler exporting farm from CP Group, a high-quality dairy cattle demonstration farm of New Hope Group, and has showcased projects from other companies including Qingdao Lantian Ishi Agricultural Development Co., Ltd., Qingdao Cambridge Bay modern cattle industry Co., Ltd., Shandong Xinkang Quarantine Field for Importing and Exporting Animals, Shandong Xinkang Improved Seed-breeding Centre for livestock and poultry, and Research and Internship Base of Qingdao Agricultural University.
Wens Group to build a 1-million-head hog farm in Ruicheng
Wens Group and Ruicheng County government have reached an agreement on a 1-million-head hog farm project. Wens Group will invest RMB1.2 billion (US$196.21 million) to build a hog farm in the county, in return, Ruicheng County will provide preferential policies to the group in the areas of land resource and fund allocation.
When the hog farm is fully operational, it will have an inventory of 50,000 hogs, an annual production capacity of 1.06 million piglets, 1 million commercial hogs, and generate an output value of RMB2.1 billion (US$343.34 million) a year.
The project will also benefit 1,100 local farmers, whose total annual income is expected to increase by RMB150 million (US$24.53 million) within the next three to five years, equivalent to a 20% rise in their per capita net income.
Ruicheng County government invited Wens Group to a field trip earlier this year, and the group inked the deal with the county government after studying the investment opportunities.
* 1 hectare (10,000 sq. meters) =15 Mu
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