DaChan pledges focus on core business
When investors questioned whether DaChan Food (Asia) was an attractive investment considering that it relied mainly on chicken processing, company chairman Mark Han Jia-hwan said after past failures at diversification, 'to be focused' was the best way to succeed.
'We should drill at our core competency to beat our competitors,' said Mr Han.
DaChan Food (Asia) is the first chicken meat supplier to go public in Hong Kong. The Dalian-based company - a joint venture between Taiwan's DaChan Greatwall Group and Japan's Marubeni Corp on the mainland - had once invested in securities and beverage businesses, but these had brought serious losses.
'These experiences told me diversification doesn't always work, though many corporations nowadays would like to try different businesses to enhance their competitiveness,' Mr Han said.
'We're good at the upstream business, which is feeding and processing. To concentrate our resources on core competency means we invest more than our competitors, who dilute their resources in multiple businesses.'
Facing competitors such as Beijing-based Chia Tai Group and United States-based Cargill, Mr Han believes DaChan Food's integrated supply chain can win over the market.
'This is important because integration provides traceability for food safety,' he added.
Even if there were an outbreak of avian flu, Mr Han thinks there is still massive growth potential in the mainland, especially since chicken is desirable in modern cuisine and has a much shorter growing cycle than a pig. It takes six to seven weeks to grow a chicken, but eight months to grow a pig.
'During the avian flu outbreak, we suffered only a narrow drop of 5 per cent in our prices compared with the average drop of 10 per cent for the industry. I think this is because our clients, such as KFC and McDonald's, are confident in our products,' Mr Han said.
According to company figures, chicken meat consumption per capita in the country is only four kilograms per year, while Taiwan's consumption per capita is 17 kilograms per year. DaChan Food has a 4 per cent market share in the mainland. It hopes to lift this to 8 to 10 per cent in three years.
'We look forward to attaining the same brand reputation as the US' biggest meat processor, Tyson, and China's Yurun,' Mr Han said.
DaChan Food, which has raised HK$899 million, plans to spend 415 million yuan building six feed production plants in the mainland, Vietnam and Malaysia, as well as three domestic processed-food operations by the end of 2010. The stock rose 13.9 per cent to HK$3.36 on Friday.