eFeedLink - Executive Talk: Wellhope-De Heus International - Formulating the perfect mix to move ahead

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October 11, 2010

Executive Talk: Wellhope-De Heus International – Formulating the perfect mix to move ahead

An eFeedLink Exclusive

Jan Cortenbach, Chief Technical Officer, Wellhope-De Heus International

As the Asian agribusiness industry undergoes transformation and moves towards higher efficiency, at some point of time, feed manufacturers in their bid to ensure commercial viability will need to clarify their direction as to whether the path ahead will be one of focus or divergence.

Collaborated in 2006, Wellhope-De Heus International has a total of 46 production sites in China, and is ranked the top 15 largest feed producers in the world. Feed is produced according to European quality standards, with formulation done in close cooperation with the Netherlands office.

In adapting to the winds of change, the company goes beyond "either/or" thinking and sets sight in poultry integration while maintaining its focus in feed manufacturing.

We, at eFeedLink, interviewed Jan Cortenbach, Chief Technical Officer, to find out what direction Wellhope-De Heus is heading for.

Since the joint venture was established in 2006, what were the key opportunities and challenges in the market that Well Hope-De Heus International encountered?

The joint venture provided a very good chance for rapid growth in the region. It was an opportunity to introduce Dutch standards of quality control to enhance the feed manufacturing process. Also, we were able to introduce new products and get our branding done.

The China market is very price-driven, and a key challenge is for us to produce quality products yet being price competitive at the same time. As a big company, we reap economies of scale and can get better prices for raw materials.

Addressing the challenge of keeping market share raises the question as to whether we should move towards integration or remain in the core business in feed manufacturing. While feed production remains our core business, the company is taking part in poultry integration, whereby we have our own hatchery and invest in breeding stock.

What are the complementary factors in this joint venture?

There is a mutual exchange of know-how from both sides in this partnership. For the European side, our relative strength lies in the aspects of feed formulation and mixing and milling technology. In addition, our sales team is not only into sales – they are very much technical people, who can analyse client problems and provide solutions.

For our Chinese counterpart, they are very familiar with the sourcing of raw materials in the country. Through them, we are able to identify good quality producers of key ingredients (such as vitamins and amino acids) and this has helped us to produce quality products at very competitive prices by joint purchasing.

What are the company's priorities as far as the Asian market is concerned?

Currently, the company has a strong presence in northeast China and we seek to consolidate our position in the country. Notably, we are one of the largest producer of cattle feed in China.

I am looking at a 35-40% increase in profits this year. With the increase in meat prices, it is expected that farmers will be able to buy good quality feed.

Do you see a lot of scope for integrating China's feed industry with its livestock sector?

Yes. Spurred by government regulation, integration will get more popular. I see greater potential in poultry integration rather than pig integration, as it entails lower business risk in the event of diseases.

Could you tell us more about the company's effort in developing new feeds?

We have a very big research department in the Netherlands and in terms of product development, our research focuses on feed during the livestock's most vulnerable periods in their lives, like for pigs during the weaning period. And in poultry, the first three days from birth, the animals are very weak and this is the most critical period and hence our research focus. Also, we are looking at the possibility of developing horse feed.

How does the company ensure sustainable relationships with clients?

Good quality and good service are very important. We seek to establish long-term relationship with our clients by offering all rounded service and aim to give them the best financial results.

What are your forecasts for the feed industry moving into 2011?

In China, I expect a growth between 10 and 15% in volume. Hopefully, the dairy sector will finally recover and see a bigger growth than the last two years. Many smaller companies will face difficult periods as raw material prices are expected to increase.