Legend applies its tech know-how to fruit
Computer maker Lenovo's parent company diversifies into the fruit business, hoping to capitalise on its trusted brand and IT skills
When the parent of the world's largest maker of personal computers announced it would start selling blueberries in China, some people assumed - with some justification - it planned to launch a new type of mobile phone to rival the better-known BlackBerry.
In fact it was just another step for Legend Holdings, parent of Lenovo Group, in its diversification into the food business as it seeks to bring its high-profile and widely-trusted brand into an industry that remains beset with concerns over food safety.
Chaired by renowned businessman Liu Chuanzhi, the company has invested more than one billion yuan in its agricultural arm, Joyvio Group, which will cover the complete industry chain from production to food processing, to distribution, and on to retailing. The sale of fruit is just a starting point.
After launching its own branded blueberries the middle of this year, Joyvio announced last week that around 4,000 tonnes of golden kiwifruit from its farms near Chengdu City will be available in supermarkets and online stores from this month. The fruit will be branded "Liu Kiwi" as a tribute to Chairman Liu, who has masterminded the shift in the group's focus to food.
"Mr Liu often said to us that agriculture is an industry that could greatly benefit the nation and the people, and it's also an area that we can make use of our advantages to do well," said Chen Shaopeng, president of Joyvio Group and senior vice-president of Legend Holdings. "He set no investment caps or revenue goals for the business."
Over the past two years, Joyvio acquired blueberry farms in Qingdao in China's Shandong province, as well as in Chile in South America. It has also become the largest kiwi fruit planter in China after purchasing planting bases in China's Sichuan, Shaanxi, and Henan provinces, as well as in Chile.
Cherries and grapes from its bases in the United States, Australia, and Chile, are scheduled to enter the market by the end of this year, and plans to introduce other fruits and vegetables are also in the pipeline.
"Modern agriculture is actually very much a high-technology industry. Our rich experience in the IT industry is of great help," said Chen, who was previously the former senior vice-president of Lenovo Group in charge of development in emerging markets.
Joyvio has taken advantage of its know-how in IT to set up a "tracking system" to ensure the quality and safety of its produce. By scanning codes on its product packages, customers can learn which field the fruit came from, who was in charge of its production, what tests it went through before entering the market, as well as information on soil and water in the fruit's "birth place".
It has also changed the traditional way of farming by holding "drills" with local farmers to get prepared for bad weather and extreme climates.
"We follow the advice of agricultural experts and teach farmers how to protect our fruit from hail or high-temperature weather before it really happens," Chen said.
The company is even trying to apply the ODM (original design manufacture) business model, which is common in the IT industry, to work with small family farms and agricultural co-operatives to increase production capacity.
Chen said the annual value of China's fruit industry is estimated at around 500 billion yuan (HK$631.9 billion) and is expected to grow by 8 to 10 per cent a year in the next few years. Though the agricultural company may not generate immediate profit for the parent company, he believed, it would be able to yield stable returns in three to five years.
Legend Holdings, founded by Liu Chuanzhi as an IT company in 1984, has grown into a global multi-industry investment conglomerate with total assets of 187.2 billion yuan by the end of last year. It is seeking to list either in A-share or H-share markets around 2015 and 2016.
"Compared to other sectors, agriculture will be a 'second-stage' rocket to provide momentum for the group's long-term growth after the initial public offering," Chen said.