Archives 2014

Mengniu agrees nutrition products tie-up with US firm

China Mengniu Dairy Co Monday announced that it has signed an agreement with leading US consumer food and beverage company WhiteWave Foods Co to jointly expand into the Chinese nutrition market.

In order to produce and sell nutrition products in China, a joint venture will be set up with the Chinese dairy producer holding a 51 percent stake and 49 percent to be held by WhiteWave, according to a statement filed by Mengniu on Hong Kong Stock Exchange on Monday. The venture formation is expected to obtain approval from Chinese authorities in the first half of this year.

Meanwhile, the venture has agreed to offer 376.7 million yuan ($62.2 million) to purchase Chinese infant formula maker Yashili’s nutrition plant, which is still under construction currently in Zhengzhou, Central China’s Henan Province, said the statement.

Mengniu is Yashili’s majority owner.

Mengniu has to diversify its product range, as the company’s core business – liquid milk – does not have much room for growth amid fierce competition from imported brands, Chen Lianfang, an analyst from Beijing Orient Agribusiness Consultant Ltd, told the Global Times Monday.

“China has seen a fast annual growth rate of more than 100 percent in imported liquid milk amounts in the past two years, as domestic consumers tend to prefer foreign dairy brands in the wake of the powdered milk scandal in 2008,” Chen said.

The latest financial information about Mengniu’s operation is not available to the public on the company website, but its mid-term financial results ending June 30, 2013 showed that the company gained 20.7 billion yuan, while its major rival Yili raked in more money over the same period, totaling 24 billion yuan.

According to the two companies’ mid-term financial reports, the sales of liquid milk products contributed to 88.3 percent of Mengniu’s overall revenues, with the rest mainly coming from ice cream.

Yili got about 75 percent of its revenue from liquid milk, but also makes money from products such as ice cream, milk powder and mixed animal feeds.

Mengniu also has been in the domestic milk powder market since 2006, but the company does not have a fairly satisfactory performance in this segment, resulting in its embrace of the country’s nutrition market this time, Yan Qiang, a researcher from Beijing-based Hejun Consulting, told the Global Times Monday.

An April report by Shenzhen-based market research firm China Competition Information stated that sales in the domestic nutrition industry reached 113 billion yuan in 2012, 32 percent growth year-on-year, forecasting the amount will surpass 430 billion yuan in 2018.

As China’s aging population is getting larger and the central government will implement the new second-child policy announced last November around the country in the near future, the demands for high-quality, especially foreign-branded or -invested, nutrition products will spike, said Yan.

Gregg Engles, CEO of WhiteWave, also sensed the potential boom in China’s nutrition market, as he expects that the tie-up with Mengniu could help his company access China, a promising market “with a rapidly growing, multi-billion dollar nutritious products segment,” according to a press release issued Sunday.

Mengniu could benefit a lot from the cooperation with WhiteWave in terms of technology as well as establishing its brand in the nutrition sector, Yan noted.

WhiteWave sells various goods such as plant-based foods and beverage as well as dairy products throughout North America and Europe.

However, Chen held a wait-and-see attitude toward the prospect of Mengniu’s nutrition operation, as the sector in China is faced with loose regulations and fairly chaotic competition.

“Mengniu, widely known as a liquid milk giant, will have to spend a fairly long time and lots of vigor in gaining consumers’ trust in the nutrition market,” Chen said.

Time for Xiaomi to end hunger game

Last week, Xiaomi Inc revealed its major achievements for the past year. In 2013, the tech up-and-comer sold 18.7 million handsets, up 160 percent year-on-year and well above the 15 million unit production target it set at the beginning of last year.

Based on its recent successes, Xiaomi founder Lei Jun promised to turn out 40 million handsets in 2014.

Enhancing productivity is now a top priority for Xiaomi, according to internal e-mails which also state that the company can’t keep up with demand.

Xiaomi appears to be breaking away from the starvation marketing strategy it has employed so skillfully to build a name for itself over the past three years. At this juncture, this is a wise move for the company.

In the beginning, Xiaomi could have made a convincing case that its limited output was the natural result of its limited production capacity. But now that Xiaomi has earned billions and is one of China’s largest tech brands, such a lame argument would only hurt the company’s reputation.

Moreover, scarcity is no longer a useful tool now that the market is overflowing with inexpensive, feature-packed smartphones.

Pudong Development Bank earns $6.7b in 2013

Shanghai Pudong Development Bank’s net profit jumped 19.8 percent year on year to nearly 41 billion yuan ($6.7 billion) in 2013, according to a filing to the Shanghai Stock Exchange late Friday.

The financial institution is the first listed commercial bank in China to disclose its 2013 results, Shanghai Securities News reported on Saturday.

Earnings per share stood at 2.195 yuan, up 19.8 percent from a year ago, according to the statement. Operating revenue stood at just over 100 billion yuan, up 20.61 percent year on year.

The lender’s total assets reached 3.68 trillion yuan, up 17 percent from a year earlier. Its total liabilities stood at 3.47 trillion yuan, up 17.1 percent from a year ago.

The lender’s non-performing loans ratio was at 0.74 percent, 0.16 percentage points higher than that at the end of 2012.

Its outstanding deposits totaled 2.42 trillion yuan by the end of 2013, up 13.41 percent from a year earlier. Outstanding loans reached 1.77 trillion yuan, up 14.37 percent from the end of 2012.

Tsingtao Brewery accelerates expansion

Tsingtao Brewery acquired a local beer producer in North China’s Hebei province, and launched a joint venture with another in Shijiazhuang, wrapping up a storm of expansion in 2013.

In a press release, Tsingtao said it would acquire Xinzhonglou, a 64-year-old brewery in Zhangjiakou on Dec 29.

Huang Kexing, president of Tsingtao, said the company will integrate and reengineer Xinzhonglou’s branding and distribution network. In addition Tsingtao will work with Xinzhonglou to invest 400 million yuan ($65.57 million) in a new brewery with an annual production capacity of 600,000 kiloliters.

Earlier, on Dec 16, Tsingtao entered a joint venture with Jiahe Brewery in Shijiazhuang to integrate Jiahe’s marketing network and seek mutual success. Tsingtao and Jiahe will each have a 50 percent interest in the joint venture.

The two projects will enable Tsingtao to enhance its competitiveness in North China by connecting its network across the northern and southern parts of Hebei province and increasing its exposure in neighboring Shanxi province and the Inner Mongolia autonomous region.

Huang said the company now puts more focus on the market network and is striving to ensure continued quality growth and innovation.

“Only with market expansion can we build more factories to expand production capacity,” he said. “As we uphold the principle of rational investment and value investment, the company’s strategic expansion has been yielding delightful market performance.”

In March, Tsingtao broke ground for a new brewery with a capacity of 600,000 kiloliters in Luoyang, in Central China’s Henan province. It began operations in December.

A 400,000 kiloliter brewery started in August in Jiujiang, Jiangxi province. Three relocation projects in Suqian, Wuwei, and Harbin were also completed before the end of 2013. Its breweries in Qingdao and Jinan have increased production capacity to meet strong market growth.

China’s beer industry slowed in the past two years. According to the National Bureau of Statistics, China produced 24.98 million kiloliters of beer in the first half of 2013, a 5.85 percent increase from the same period last year. The growth from January to June 2012 was 4.85 percent while the same period in 2011 saw growth in beer production of 11.4 percent.

Despite the countrywide slowdown, Tsingtao’s yield hit 7.53 million kiloliters from January to September 2013, up 11 percent from the same period in 2012. Net profits jumped 28.7 percent in the first three quarters from last year.

Tsingtao’s stock price at A shares and H shares also hit record highs, according to the company’s Q3 financial report for 2013.

Alibaba’s ‘Leftover Treasure’ hits 43 mln users

Yu’ebao (Leftover Treasure). an Alibaba personal finance product, had 43.03 million users with aggregate deposits of 185.3 billion yuan (30.4 billion U.S. dollars) at the end of 2013.

Yu’ebao is an online fund established by Alipay, China’s largest third-party payment platform and subsidiary of Alibaba, part of China’s biggest online shopping mall, togetheer with the private Tianhong Fund.

“Investments” in the fund have brought 1.79 billion yuan in profits to users since its launch in June 13 this year, according Alipay on Wednesday.

Yu’erbao allows Alipay customers to invest any balance in thier accounts with the Tianhong Fund and has already become the largest fund of its kind in China.

Its users come from all over China: more than 2,000 counties and cities in 31 provincial-level administrative regions with an average deposit of 4,307 yuan per user.