Cofco sees golden opportunity in pork processing

PUBLISHED : Monday, 22 September, 2008, 12:00am
UPDATED : Monday, 22 September, 2008, 12:00am

The country's largest food importer and exporter, Cofco Group, plans to establish a domestic pork processing facility with a hog-slaughtering capability of 30 million in five to 10 years as part of its transformation from agricultural trader and processor into a vertically integrated food company.

Cofco, or China National Cereals, Oils & Foodstuffs Import & Export Corp, will invest in the new business line because rising demand for quality pork products on the mainland provided 'a golden opportunity' for the industry, said president Patrick Yu Xubo.

'We aim to generate around one-fourth of the group's total revenue from this unit by then,' said Mr Yu, who added that although the development was still in its initial stages, Cofco envisaged that it would be engaged in every aspect of the pork processing chain from hog breeding to the marketing of their branded pork products.

China Yurun Food Group and Henan Shuanghui Investment and Development, the mainland's top two pork processors, slaughtered a combined 4.83 million pigs in the first half of this year.

Mr Yu's comments come after Cofco announced in July that it spent US$122.15 million for a 4.95 per cent stake in Smithfield Foods, the world's largest pork processor, and it was committed to spending 10 billion yuan (HK$11.4 billion) to build pig farms and have a 10 million hog-slaughtering capability in Hubei province in the next five years.

He said investment in Smithfield had now paved the way for further strategic co-operation on the mainland, although the form of the partnership would be finalised within a year.

'If Smithfield feels comfortable, Cofco is willing to consider increasing its stake,' said Mr Yu. 'But we will not rely on just one partner, the group will lead the unit's development.'

A company source said the group was reorganising the management structure of its various units to set up the meat business unit.

The mainland is the world's largest pork consumer with more than 140,000 tonnes eaten every day, according to statistics released by the China Meat Association. An outbreak of disease last year caused a shortage of pigs, pushing up pork prices some 68.6 per cent year on year in the first half and feeding through into a sharp increase in inflation.

The mainland's meat industry is quite fragmented with the top three players - Yurun, Shuanghui and Shandong-based People's Food - accounting for only an aggregate 5 per cent of the total market.

It is estimated that there are more than 448,000 meat processors on the mainland.