High prices and consumer demand underpin China’s pork giant, Zhongpin

By Kacey Culliney

- Last updated on GMT

Zhongpin success underpinned by consumer demand and high prices, aggressive growth to continue in 2012
Zhongpin success underpinned by consumer demand and high prices, aggressive growth to continue in 2012
Stark price increases defined China’s largest pork processor, Zhongpin’s strong 2011 results but domestic demands are set to support the company’s 2012 expansion plans, according to the CEO.

China is the biggest pig and pork producer in the world and the meat is the most widely consumed in the country. Zhongpin confirmed this preference and noted that domestic demand will continue to underpin future company growth.

USDA data forecasts that China’s pork production will hit 51.3m tonnes in 2012. The USDA also forecasted a 2% increase in imports due to the rising domestic demands for the meat that cannot be catered to by local companies alone.

Zhongpin noted a 54% surge in sales revenues for 2011, up to US$1,456.2m from US$946.7m in 2010.

Xianfu Zhu, chairman and CEO of Zhongpin, said that this rise in sales revenues was a reflection of price increases throughout the industry.

“Our financial results in 2011 reflected new aggressive price competition in the markets and higher expenses in operations,”​ Zhu said.

Zhongpin raised its pork prices by 44% for the year and most of the revenue was a result of this, he said.

With the prices of both hogs and pork expected to decline in 2012, the 2011 results will be hard to match, he added.

Strong spate of investments

While the company is focused on deepening presence in current markets, like China, Zhu said it will also be aggressively seeking new markets.

The company’s main objectives are to increase brand recognition and sales, expand market presence, increase production capacity, expand and optimize product lines and continue to invest in technology, he said.  The company expects sales to hit between US$1.55-1.72b for 2012.

Zhongpin developed and launched 79 new products in 2011, “most of which focus on regional flavours and convenient preparation methods,”​ he said, and the company has more than 90 NPDs (new product developments) in the pipeline.

Zhongpin added 201,000 metric tonnes to its annual pork production capacity in 2011, placing final production capacity at 904,760 metric tonnes for the year, with chilled and frozen pork taking the largest chunk, followed by prepared pork, pork oil and fruit and vegetables.

September 2011 saw operations commence at its new Tianjin prepared pork production plant and in December 2011 work at two new chilled pork production facilities started.

The pork giant is investing US$10.5m in a by-product processing plant for sausage casings in the Henan province and US$9m in a slaughtering and processing plant for prepared pork.

It is also building a production, R&D and training complex and a processing and distribution centre for its chilled and frozen products.

While expansion is a focus for the pork firm, Zhu said that it will be at a slower rate, as the company places “focus on greater use of existing facilities.”​ 

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