Ex-banker likes to see the fruit of his labours
Fresh orange juice has long been seen as a healthy beverage in many places around the world, but it is a relative newcomer to drinks lists on the mainland.
Daniel Liao Yuang-whang, the new chief executive of frozen-concentrated-orange-juice maker China Tianyi, believes the changing beverage culture on the mainland portends big business for companies such as his.
Half the mainland's 1.3 billion population are farmers, but they don't grow many oranges. China imports most of its frozen orange-juice concentrate from the United States and South America.
Increasing demand from the fast-growing middle class, however, is likely to mean more oranges will be grown at home, Liao says.
Orange juice has been popular on the mainland for only about a decade, and consumption is growing at about 20 per cent annually, he adds.
China Tianyi grows orange trees in Chongqing, Sichuan province, and in Fujian province. The company, which is listed on the Hong Kong stock exchange, processes frozen concentrated orange juice and supplies it to other companies, such as Coca-Cola, which uses it for its orange juice brand Minute Maid, sold on the mainland and elsewhere.
Born and raised in Taiwan, Liao, 42, doesn't come from a farming background. He began his career at Citibank in the corporate department, looking after Asian customers and direct investment. He quit banking after 10 years to become chief financial officer of a furniture company in Dongguan, Guangdong province, in 2003. The furniture company, Samson, grew into the largest in Asia, and Liao helped take it public in Hong Kong in 2005.
Next, he joined a lottery company, China LotSynergy, in 2007 as an executive director and executive vice-president. He left after four years to become chief executive of China Tianyi in March this year.
Liao talked to the South China Morning Post about tending trees, managing a 700-strong team, including 400 farmers, and coping with food-safety issues on the mainland.
How did your career path lead you to orange juice?
As a banker, I earned a good salary, but I didn't have a sense of achievement. Working for companies in the furniture or lottery business, or for Tianyi, gives me a better sense of achievement. I can establish the business plan day by day, hire the right people to execute the plan and deliver the products to consumers. It creates a lot of job opportunities and I feel good about that.
China Tianyi has a unique business. Currently, 75 per cent of the frozen concentrated orange juice is imported from overseas, mainly from Brazil or Florida, with only 25 per cent produced in mainland China. This is because drinking orange juice is a new concept in China. Traditionally, the population drank tea. However, with a rising middle class adopting Western-style living, I believe the orange juice company has a lot of room for growth.
What type of person is suitable to work at a juice company such as Tianyi? How do you recruit staff?
As a juice-processing company, of course we need agricultural experts who know how to run an orange farm effectively to ensure good quality from the upstream. We have about 400 staff working on our farms planting orange trees for us. In China, farmland is leased from farmers with the help of village co-operative associations. China Tianyi does not own any farmland. Normally, the farmland is leased for a term of five to 15 years. China Tianyi leases not just the land from farmers, but also the orange trees. All the fruit produced is for processing by the company. In addition, we have staff to take care of the production process and quality assurance. Most important of all, the senior management is dedicated and experienced.
The food industry deals with food quality every day. Therefore, we emphasise the commitment to food safety and quality of every employee, and cherish the long-term relationship that the company has with its staff. Many employees have been with the company for 10 years or more.
One of your orange farms is located in Chongqing. Do you worry about earthquakes, and has the downfall of the municipality's party secretary, Bo Xilai, affected your business?
Not really. The central government is keen on promoting farming. Our Chongqing farm is not located within an earthquake zone, so we do not need to worry about a natural catastrophe. In addition, we also have farms in Fujian, diversifying the risks. If there is a natural catastrophe, we have another farm to support our output.
How do you keep costs down and increase productivity?
A major cost is transport, so we build our processing plants close to the farms. To keep costs down and scale up the production base, we also contract and hire farmers to grow oranges for us. Most orange farms in China now grow the fruit for eating. Those are called navel oranges, which are different from the sweet oranges we need for making orange juice. We encourage the farmers to produce the juice-making oranges by offering them different forms of incentive, including a purchase guarantee. This provides business opportunities, helps us form long-term relationships with the farmers, and also diversifies our sources of oranges. This will increase our own production capacity to 210,000 tonnes this year, up from 120,000 tonnes last year.
There have been scandals involving food companies on the mainland. How can you prevent your company from having any problems?
We introduce the highest standards at our plants to make sure the products are made in a hygienic way. Orange juice is also less likely to turn bad than other food products, such as milk. For frozen concentrated orange juice, we have to keep it at minus 16 degrees Celsius so it can be preserved for a long time.
What about the weather? How do you manage such risks?
We have farms in Chongqing [in the southwestern hinterland] and Fujian [on the southeastern coast]. We can make sure the quality of the orange juice output from all farms is consistent by mixing juice. The oranges we harvest in October would be sour, while those harvested in March would be sweeter. We mix the different types of juice harvested at different seasons so as to make sure the quality of the output is consistent.
What is your management nightmare?
There are bad times for any business, but I do not think there would be nightmares as long as you prepare well. For example, our business is facing the challenges of bad weather, but as long as we have risk management measures - to have different farms around the country to handle that - we can cope with that problem. The management always has to prepare for the worst so as to prevent any management nightmares. We review our business and processing schedule every year to make sure we can cope with the unexpected.
Do you drink only fruit juice products made from the orange juice supplied by Tianyi?
Yes, I drink the orange juice produced by our company every day to keep myself healthy, and to make sure I know the quality of my product.