March 2, 2015

 

Zhengchang:  Making a global name for quality and cost-efficiency

 

One of the largest feed milling technology companies globally, Zhengchang looks set to harness the advancement in Chinese know-how.

 

by CHAN Ngai Meng and F.E. OLIMPO

 

  

Pelleting mills, hammer mills, mixers, conveyors, elevators, cooling equipment, screeners, steel silos, even cleaning equipment are just some of the many feed milling equipment that Zhengchang designs and builds. "Our range of feed milling equipment is complete," the company's sales department manager for Africa, Derek Ge, told eFeedLink at the 2015 International Production & Processing Expo (IPPE) in Atlanta, Georgia, in the US in January.

 

For many years, the 97-year-old Zhengchang was a state-owned Chinese company importing rice milling and grain equipment.

  
Then in 1974, it developed the first 45  model pellet mill out of a need to extract grains oil and process rice bran. This marked the beginning of the company's venture into feed machinery.

 

In 1997, Jiangsu Huaiyin CP Feed Company, which had an annual output of 360,000 tonnes, invited international bidders to design and build a large-scale feed milling complex. Zhengchang won the bid. Six years later, in 2003, Zhengchang was privatised.

 

Today the highly diversified company also manufactures and builds agricultural equipment, agriculture-related processing facilities, environmental protection processing equipment, electrical control systems, among many other things.

 

Zhengchang also does feed research projects, and supplies feed formulation and premix technologies, adds Mr. Ge.

 

Home advantage

 

Despite its foray into the international market, it remains a market leader on the home front, especially on pellet mills, which it first introduced in the country in 1972. Mr. Ge says Zhengchang controls almost 70% of the Chinese market for pellet mills and most orders come from middle-sized and large feed companies.

 

Zhengchang has sold over 9,000 sets of pellet mills all over the world, says Mr. Ge.

 

Its production plants are currently located only in China, but the company plans to set up subsidiaries with manufacturing or fabrication centres in certain countries, within the next five years, according to Mr. Ge. "What we have now are supply centres, like in Egypt, which keep spare parts, which are all made in China."

 

Southeast Asia, a second home

 

Zhengchang started seeking growth opportunities overseas about 20 to 25 years ago. In 1998, Zhengchang took over CPM (California Pellet Mill) China company, which US conglomerate Ingersoll Rand had set up in China. This broadened Zhengchang's product portfolio to include more pellet mills, coolers and grinders, and Zhengchang Pellet Mill Die Co., Ltd was thus founded.

 

Southeast Asia remains the traditional market for Zhengchang, more particularly Vietnam, the Philippines, and Indonesia. In the Philippines, the company enjoys a strong presence for years. "Customers trust us there. This year we have some projects for some new customers," Mr. Ge volunteers.

 

In Thailand, CP (Charoen Pokphand) Group is a long-time customer. The partnership between the two companies goes back many years. "When they first entered China, we supported most of their projects," says Mr. Ge. "The Thai conglomerate is our

global strategic customer. We cooperate with them in many areas."

 

Profit motive is hardly the tie that binds between the two. In dealing with long-time partners like the CP Group, profit is no longer Zhengchang's main motivation. "We care more about building long-term relationships with our customers," Mr. Ge explains.

 

Dedicated customer service is a tool which the company uses to build those long-term relationships. "We have 24-hour after-sales service with a 24-hour hotline. In very important markets, we have our own service centres which also supply spare parts. Service is our priority. We treat customers like family," Mr. Ge emphasises.

 

Venturing into other high-growth markets

 

Other major markets for the company include Africa, the Middle East, Latin America, and Eastern Europe, particularly Ukraine, Romania, and Russia.

 

Political instability is the biggest roadblock to market entry into Africa and the Middle East. "Most of these countries want to grow economically, but they don't have political stability. They also have weak finances. They don't have enough foreign currencies to buy machines and equipment," Mr. Ge says.

 

In Latin America, Zhengchang has a strong customer base in Brazil. "Many large customers in Brazil look for us. So we have a branch company and special service centre there," Mr. Ge adds.

 

Asked about the Russian market, Mr. Ge says Zhengchang has some big customers there. "But we need to put more effort there. Russia is too big a market."

 

Western markets

 

Zhengchang's share in the US and Western markets remains negligible, thanks to lingering Western bias against anything Chinese.

 

"The prevailing Western mentality is that Chinese products are below par. This is unfair and not the truth. They should visit China and see our products for themselves. The truth is our products are on par with their Western counterparts in terms of quality."

 

To correct this negative perception, Zhengchang plans to have, within the next five years, service centres and show windows in Europe where customers can find out more about the company's products and services, Mr. Ge says.

 

The Chinese advantage

 

Instead of being a liability, being Chinese in fact contributes to Zhengchang's main strength against Western competition. Zhengchang builds on cost-efficiency as its major selling point.

 

China's lower labour costs make Zhengchang products a little cheaper. Outside of labour source, everything else is equal between Western and Zhengchang products.  "We use the same quality materials as European manufacturers do. For motors, we use Siemens, and Emersons for control systems – all top international brands," says Mr. Ge.

 

Besides being cost-efficient, Zhengchang products are also "performance-efficient." Compared with many other top competitors, Zhengchang's pelleting mills have 10% more capacity, using the same motor and same amount of energy.

 

The demand for cost-efficient, high-performance feed equipment is a result of the cut-throat competition among the hundreds of feed mills in every Chinese province. According to Mr. Ge, the profit margin for feed mills in China is very low. So this makes feed millers very particular about operational and maintenance costs of feed equipment.

 

This market reality challenges suppliers like Zhengchang to produce equipment with very high performance-efficiency at lower production costs.

 

With a current growth rate of at least 50% in the international market, and plans for further overseas expansion, Zhengchang looks set to redefine the global image of Chinese technology, by bringing more high-quality, cost-efficient products and solutions to the market out there.