Chinese beef firm refocuses priorities

By Mark Godfrey

- Last updated on GMT

Fortune Ng Fung Food has turned its attention to restaurants to drive its growth
Fortune Ng Fung Food has turned its attention to restaurants to drive its growth

Related tags: Beijing, Beef, Lamb, Pork, Poultry

Restaurants, rather than meat counters, are the road to profits for a major Chinese beef processor, which operates high-end outlets across Beijing.

Located in Jing Wang Jiayuan, a residential compound in Beijing’s Chaoyang district, Fucheng Fei Rou is popular with well-heeled diners who choose the house’s signature dishes, such as fatty beef, cumin beef and skillet lamb from trays of elaborately decorated Chinese specialities.

The restaurant is one of 20 opened in Beijing by Fortune Ng Fung Food (Hebei) a beef-focused processing firm and feedlot operator. An outlet located in the shopping district of Xidan charges diners RMB58 ($9) for a buffet meal of barbecued beef and lamb, but also bacon and ribs. Signage over the door states that the meat served comes from Fucheng factories. From the company’s factories in Hebei province, the company’s trucks are a one-hour drive to downtown Beijing eateries. The restaurant also operates to halal standards.

Fucheng Fei Rou’s wood-panelled walls and seats with deep-pile cushions and modern dishware make for a markedly updated version of the beef noodle shops common in Beijing. The first floor is a barbecue buffet while the second and third floors are divided into private rooms for hot pot banquets and are popular with families and office groups.

China’s consumption boom

Listed on the Shanghai Stock Exchange in 2004, Fortune Ng Fung Food is part of the Fucheng Group, a conglomerate. In the past Fucheng has enjoyed a lucrative business supplying live cattle and meat to Hong Kong (through its connection to Ng Fung Hong, a subsidiary of the giant China Resources conglomerate.

But a boom in mainland China consumption, based on rising incomes and urbanisation, has refocused the company’s attention on its home base. A research note on the company by Everbright Securities in Shanghai notes how, under new general manager Li Guosheng, the firm has put a fresh emphasis on beef processing, after aggressive investment in milk has soured in China’s over-supplied dairy market. “Investing in restaurants and catering is an extension of this trend.​”

With a market capitalisation of RMB12.5 billion ($1.9bn) and nearly 5,000 employees, Fortune Ng Fung Food (it also uses the Mandarin name Fucheng Wuyuan) has reported comparatively healthy profit margins at 12.37% for 2015, while the operating margin (revenues minus overheads excluding interest repayments) was 15.56%.

Frozen steak

However, as the Everbright analysis noted, yields have tightened since company patriarch and chairman Li Fucheng started out in 1987 with a small feedlot. Over the past decade the Fucheng Group invested heavily in real estate and the firm has also acquired one of northern China’s largest funeral service providers.

Sourcing meat abroad is another company priority. As well as operating its own feedlots in Hebei province, the Fucheng Group bought the 30,000 hectare Woodlands estate in Australia, but the Li family has also invested separately in two smaller cattle farms in the Victoria region of Australia.

Fucheng has also sought to tap into rising demand for convenience-style frozen meat products with a ‘Sharon’s Steak House’ line of US-style steaks sold frozen in local supermarkets. It’s not all about beef. Roasted legs of lamb are a top-seller in the Jing Wang Jiayuan store, according to staff. But Chinese diners can be demanding. "Fucheng restaurants serve meat out of the freezer and you know this by the taste; very little is really fresh beef,” notes Li Mingxia, a user on the popular Dianping.com dining reviews and reservations site.

Related topics: Meat

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