November 1, 2011

Xiwang Foodstuffs Co Ltd expects to dominate China's corn oil market by 2015, with its small-package corn oil output targeted to hit 500,000 tonnes each year and annual sales revenues to exceed RMB10 billion (US$1.57 billion) at the end of the 12th Five-Year Plan period.

The Shenzhen-listed company will stop selling bulk unpacked corn oil, a senior executive said, adding that by the end of June, revenue from small-package corn oil and unpacked corn oil accounted for 46.9% and 37.9%, respectively of the company's total.

Currently, Xiwang Foodstuffs' five-litre corn oil price is RMB10-20 (US$1.57-3.14) higher than that produced by its rivals - agribusiness and food companies Yihai Kerry and COFCO.

China's crude corn oil production theoretically can reach over one million tonnes per year but the actual production is over 600,000 tonnes, where the four major rivals are Yihai Kerry, COFCO, Xiwang Foodstuffs and Hong Kong-listed China Corn Oil Company Limited. Yihai Kerry now takes the first place in small-package corn oil market and Xiwang Foodstuffs ranks No.2.

Yihai Kerry and COFCO, which have no corn oil press machines or just have small corn oil production capacity, mainly rebottle the corn oil purchased from specialist producers and then sell it in own brands.

Xiwang Foodstuffs and China Corn Oil Company are the largest corn oil producers in China each with approximate 300,000-tonne production capacity and used to principally provide OEM production for Yihai Kerry and COFCO. In the first six months of 2010, Yihai Kerry and COFCO remained to be Xiwang Foodstuffs' largest and fifth largest corn oil buyer.

China Corn Oil Company is building corn oil press plants in Liaoning province and Inner Mongolia in addition to the existing production base in Shandong province, which will add its production capacity by 200,000 tonnes.

Shandong-headquartered Xiwang Foodstuffs currently produces 300,000 tonnes of corn oil per year with corn germs supplied within Shandong province. To expand the production capacity, it will probably build corn germ base in northern China and construct small-package corn oil production lines in southern China, according to the senior executive.

Despite Yihai Kerry and COFCO's established brand recognition in the edible oil market, Xiwang Foodstuffs believes corn oil can meet consumers' demands for more nutritious oil, thus it will become a bellwether in the Chinese corn oil market.

The company has set up a marketing centre in Beijing in a bid to narrow the gap with Yihai Kerry and COFCO in marketing channels. It spends about RMB100 million (US$15.7 million) on advertisement every year and strengthens cooperation with around 100 distributors across the country.