Chinese pork firm benefits from diversity
The company last year scored an income of RMB44.95bn, a year-on-year increase of 13.21%, with net profit of RMB3.858bn, up 33.72%. An earnings report published by Shuanghui’s listed subsidiary credits the firm’s performance to its increasing range of packaged and cold-chain packaged meat products.
Weaker pig prices in 2013 helped boost Shuanghui’s figures by lowering costs. In its official report the firm points to average gross margins of 25.32%, up 2.73% year on year, while gross margins from its slaughtering activities rose 0.8% to 11.35%. Shuanghui’s best gross margins (26.86%, up 2.63%) however were from the ‘heat-treated meat products’ (HTMP) segment. This was higher than the low-temperature meat and ‘fresh frozen’ category, which returned margins of 22.78%, up 2.82% year on year.
Visits to retailers across Beijing show the firm has been busy rolling out new products to suit various pockets. Even as it builds a portfolio of Western-style vacuum-packed pork products for refrigerated aisles of local supermarkets, Shuanghui has got around the lack of refrigeration in more remote parts of China by offering low-cost sticks of meat paste, with its ubiquitous 125g sticks of pork- and chicken-flavoured meat retailing for as little as RMB2.50, wrapped in red with a distinctive cartoonish friendly lion.
The firm’s vac-packed sticks of sweetcorn-flavoured pork spam sell for RMB5.30 per 160g pack, and appear to be particularly popular in convenience-oriented stores located near schools and transport hubs. A retailer located next to Beijing’s huge central railway station said the non-refrigerated products were very popular with travelling migrant workers, who have become used to Shuanghui’s products in home villages, where refrigerated retailing is often limited.
Shuanghui and peers have also adapted to recent food safety and health priorities: "no starch" is prominently displayed on the labelling of packaged cooked hams in the refrigerated section of supermarkets in Beijing. Among its offerings, Shuanghui sells a 445g "sandwich sausage" for RMB18.60 as well as "reformed elbow" ham (260g, RMB12.50). Others targeting the demand for ready-to-use hams include Jinluo Meat Products Co, which sells a garlic-flavoured 300g ham roll for RMB17.20, and Shandong Delisi Food Co, which charges RMB21.90 for 350g rolls in Beijing outlets of WalMart.
In the sliced bacon category the completion for Shuanghui comes in the form of state-run conglomerate China National Cereals, Oils and Foodstuffs Corporation (COFCO), which sells under the ‘Joycome’ brand. The firm has clearly studied overseas products, offering "original Canadian bacon" at RMB16.80 per 200g pack in Beijing outlets of Auchan, Carrefour and WalMart. Another leading Chinese pork brand, Yurun, sells 800g packs of ‘Western bacon’ slices for RMB49.90 in those same stores.
Other refrigerated Joycome products on sale in Beijing supermarkets include US-style black peppered hotdog sausages (RMB16.50 for 250g packs) and Taiwan-style roasted pork sausages (RMB19.80 for 250g packs).
With competitors chasing its heels, Shuanghui has promised new products, new technology and a larger distribution network as part of its strategy to expand sales in 2014. The firm plans to invest RMB4.07bn this year on capacity expansion, with the Wuhu Shuanghui project coming into production along with production plants in Zhengzhou and Nanning. There will also be cash coming in from its expected listing in Hong Kong, which has been predicted to total US$6bn.
Even as it expands it product portfolio, Shuanghui’s slaughtering margins may tighten again this year: Shuanghui is predicting upward pressure on pig prices in the second half of 2014, driven by rising feed costs. Shuanghui killed 13.3 million pigs in 2013 but plans to increase that to 17 million in 2014. However, this looks like a difficult target, given Shuanghui last year adjusted its 2013 kill target from 17.5 million to 15 million hogs. Sales of meat products in 2013 totalled 3.25 million tons – of which 1.75 million tons were packaged heat-treated and refrigerated products.
