UHT cream launched for Chinese bakeries
Fonterra has introduced a new UHT bakery cream for its booming foodservice business in China.
Speaking through an interpreter Shanghai Maling president Weiping Shen told Rural News that SFF farmer shareholders would be "very happy" with his company's investment in the meat co-operative.
He says his company understands the Chinese market and believes its insight and reach into that market will improve returns for red meat farming in New Zealand and to SFF shareholders.
Shanghai Maling, a subsidiary of state-owned food giant Bright Food Group (which owns a 38% stake), was the first food processing company to list on the main board of the Shanghai stock exchange in 1997.
Until now pork has been its major focus, but Shen believes a coming "boom" in beef and lamb demand – driven by younger, Chinese consumers – is just around the corner. Traditionally, pork was the most widely consumed red meat in China, but beef and lamb has been growing fast and he expects it to be ''booming'' in the next few years.
The company has been looking for opportunities in overseas markets for a few years – including Australia, New Zealand, Argentina, Brazil and Uruguay.
Shen says Silver Fern Farms' 'plate to pasture' strategy aligns with his company's values and vision. Over the past few months there have been comprehensive discussions with Silver Fern Farms' board and management and this alignment of strategy has grown. He sees NZ as the right place to build the partnership and SFF as the right partner.
Shen says SFF enjoys the strongest brand recognition in red meat in China and that the firm is the strongest exporter to the region. Further, he believes a Silver Fern Farms Shanghai Maling partnership will make the brand the best recognised red meat name in the Chinese market.
He predicts huge growth in red meat consumption in China during the next 10 years – greater than the 7% forecast.
"Imports into China of beef and lamb have grown by 30% year on year. Chinese consumers, especially the younger generation, appreciate the value and taste of NZ-sourced beef and lamb."
Asked why his company would want to invest in the NZ red meat sector when it has barely been profitable all these years, Shen said the same question has been asked by
shareholders and market commentators back in China.
"This investment is not attractive in the short term, but our long term view is with the joint vision and strategy through this partnership the investment will be significantly different."
Questioned about the concerns expressed in some quarters about Chinese investment in the NZ agri sector, Shen claims this deal is "different".
"This partnership is different from most Chinese investments in NZ, where they are just buying land," he says. "Shanghai Maling brings value to SFF, not just money."
He says his company is a leading player in Chinese red meat distribution, with access to 1000 supermarkets, and the parent company Bright Foods reaches another 60,000. This new joint venture will put SFF brand names "on the map" in China.
"There is no better investment than this for SFF shareholders," Shen adds. "It will mean better returns to shareholders and farmers and we also see the potential of creating more jobs in NZ."
Silver Fern Farms chairman Rob Hewett says the deal is not just a "financial transaction" and he is excited by the prospect of the joint-venture opportunity, which includes the expectation of no debt and cash in the bank.
He admits Shanghai Maling comes across as SFF's proposed business partner from central casting. "As I tell shareholders at our meetings, 'if you get married only for money it usually ends up in tears'."
Hewett claims the deal will mean no other meat company has the same access into China, and a supply chain vertically integrated and deep into retail.
The deal is subject to Overseas Investment Office and Chinese regulatory approval.
While it does not need shareholder approval, either by law or company rules, Silver Fern Farms decided it wanted a buy-in by farmers and is seeking 50% shareholder support. Hewett is confident shareholders will approve the deal.
Shareholder meetings are being held before a special meeting in Dunedin on October 16. Five meetings have already been held, attended by 650 farmers; Hewett was delighted with the high degree of interest and turnout.
"When the venture is explained to them, they can see the value. This is a great opportunity for Silver Fern Farms.
"We've got alignment on strategy. We've got an opportunity for a privileged position inside China. If this is not an example of a good investment, what is?''
If the deal is approved, the new company will be governed by a 10-person board: five directors from Shanghai Maling, three farmer directors and two independent directors from SFF.
Shen and Hewett will co-chair the joint venture board.
70 years of change
The company was established in 1948 as the Primary Producers Cooperative Society, based in the South Island as a meat marketing cooperative, mostly of sheep.
It became known as PPCS Ltd but remained small in the meat industry until the early 1970s when new management was appointed.
In the 1980s it expanded by taking over meat processing cooperatives and companies first in the South Island and later the North Island.
In 1986 released asset value was returned to the farmer shareholders by the creation of a holding company, Apex Limited. Apex was a vehicle that allowed the acquisition of Canterbury Frozen Meat.
In 2006, it took over Richmond Meats, Hawkes Bay, after a long and acrimonious battle. This move saddled the cooperative with huge debt.
The company was renamed Silver Fern Farms in 2008. A takeover by PGG Wrightson that year fell through due to the global financial crisis.
Since then the cooperative has suffered big losses, barely making a profit most years and leading to a restructure in 2013.
In 2015 Chinese investor Shanghai Maling offered $261 million for a 50% stake.
Who is Shanghai Maling?
- Shanghai Maling Aquarius Co Ltd (Shanghai Maling) was founded in 1997.
- It is a listed subsidiary of Bright Food (Group) Co, processing and distributing chilled and fresh meat, value-added beef, and candy and bottled honey.
- Shanghai Maling directly controls 800 supermarket and retail stores including 56 meat retail stores in Shanghai.
- Its meat sales network covers large-medium size cities in Shanghai and Chinese provinces.
- It has a presence on most Chinese online shopping websites.
- It has a market cap of $3.2 billion, total assets of $1.65b and revenue of $2.65bn.
- Owner Bright Food Group was founded in August 2006. This multinational food and beverage company, based in Shanghai, is the largest China-based food company; it is owned by the Shanghai Government.
- Bright Food has four listed subsidiaries: Bright Dairy & Food Co Ltd, Shanghai First Provisions Store Co Ltd, Shanghai Maling Aquarius Co Ltd and Shanghai Haibo Co Ltd.
- Bright Food directly or through subsidiaries manages 800 hypermarket and 8000 retail stores in China. It also distributes product to 60,000 third party supermarkets and stores.
