China’s Sunner becomes official McDonald’s supplier

By Mark Godfrey

- Last updated on GMT

McDonald's plans to open 1,250 stores in China as it focuses on growth markets
McDonald's plans to open 1,250 stores in China as it focuses on growth markets

Related tags: Livestock, Beef, Poultry

Chinese poultry-focused Sunner Development Group has celebrated with much fanfare its first dispatch this week of value-added and pre-cooked chicken products to McDonald’s. 

Done up in bunting and red ribbons, a large truck carrying 20 tons of chicken drumsticks and McChicken sandwich burgers left the firm’s plant in He Cheng city, Jiangxi province, headed for McDonald’s outlets in the region.

The consignment is the first to be delivered since Sunner became an official McDonald’s supplier in September 2014: the firm claims to be the first mainland Chinese company to have secured an official supply contract with McDonald’s, which had previously sourced some bulk meat locally in China, but value-added product was sourced from international suppliers.

Getting its breaded and pre-prepared products into the fast-food chain’s China operations is a major boost for the firm’s global ambitions and puts it into the league of the big multinational players, like OSI in China. “We went through 29 difficult tests and inspections to be named an official McDonald’s supplier,” ​noted an official Sunner statement to local press. “We have always paid a great deal of attention to entering the McDonald’s supply system.​”

Multinational clients

In 2003 the firm made the shift up the value chain to food processing and claimed to have spent RMB800 million on five plants using “European technology​” and “advanced quality management​” and testing systems. An annual capacity of over 150,000 tons of cooked and pre-prepared products includes heat-treated sausage products as well-breaded meat products.

The company credited its integrated business model and self-operated fattening, slaughtering and processing operations with “consistent quality​” that has allowed it to supply retailers like Walmart, Trust-Mart and Carrefour. It also supplies local restaurant chains such as Di Ke (Dicos). Sunner has made much of its commitment to clean, safe food – its plants in Jiangxi, where the McChicken burgers are made, are located in what the firm has called the China Ecological Food Demonstration Town.

Sunner also claimed to supply export markets as diverse as the US, Japan, South Korea and South Africa: the firm’s 2015 exports amounted to US$53.35 million. Yet the firm’s international ambitions are not confined to exports from China – or poultry. In January, the company’s New Zealand subsidiary started its sheep slaughter and processing operations at a plant in Stratford – some of which is shipped to the Middle East, according to Sunner.

Strong poultry player

A search for better margins may have prompted the overseas ventures by Sunner, which has signalled to investors that it expects to make a loss of US$60.96m for 2015, reversing a profit of almost US$10m in 2014. As one of China’s leading poultry players Sunner lost significant sums in recent years due to the outbreak of bird flu, but has remained bullish about the long-term demand from Chinese consumers. It claimed that chicken was the fastest-growing protein in overall consumption terms in China and accounted for nearly a fifth of total meat consumption.

In 2015, the company took US$400m for an 18% stake from US private equity firm KKR: while signing the deal Sunner projected it would breed 750 million white-feathered birds per year by 2019. The firm has competed for McDonald’s business with other major poultry players like Henan Huaying Agricultural Development Co, Shandong Yisheng Livestock & Poultry Breeding Co, and Shandong Minhe Animal Husbandry Co.

Related topics: Business, East Asia, Supply chain, Meat, China

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