Spending big to roll out pork products in China’s Yunnan province, the firm has flown in 2,080 pigs from the US to help meet a big expansion demand in the southwestern China region which is one of the few areas allowed to increase piggeries under China’s increasingly stringent environment laws on pollution.
Receiving the second batch of 1,000 great grandfather boars from the PIC company at Kunming Airport, company chairwoman He Qiaogang said the company would use the pigs to expand its herds of quality pigs to meet growing demand for pork. That was also the pledge of company executives this week launching sponsorship of a professional World Boxing Association series of tournaments in the city of Kunming as a marketing tool for company pork products.
The company turned to PIC because it wants “leaner, faster growing” pigs to meet retail demand, said He.
Shennong, she added, wants to ramp up sales in Yunnan, a province whose capital, Kunming, is positioned to become a business hub for southeast Asia under China’s ‘One Belt One Road’ blueprint for economic expansion. Mountainous, sprawling Yunnan borders Laos, Myanmar and Vietnam and has a population of 45 million but has long been one of China’s more remote regions.
Headquartered in a Kunming suburb, Yunnan Shennong Group purchased the breeder pigs from the PIC group – part of the UK-headquartered Genus group - with which it signed a “strategic cooperation” agreement in 2016 that will see 50,000 sows for what PIC described as a new Shen Nong “production pyramid”. To signal her firm’s ambition, He pointed out that Shen Nong has also invested significantly in equipment from German meat processing systems provider BANSS as well as a ‘Hi Cook’ processing system from Korea.
Located in one of China’s lesser tapped but economically fastest growing regions, Shennong had long focused on selling feed and pigs to farmers but now appears to increase its margins by moving into the packaged meats segment. It supplies retail chains WalMart and RT Mart but also has a distribution deal with Yurun, one of China’s leading pork processors, which sees the two firms distribute for each other in their respective regions. Shennong also supplies kitchens and catering companies at industrial facilities.
A large slogan in Mandarin characters at the company’s headquarters reads “Help Farmers Breed Good Pigs, Help the People Eat Safe Quality Meat”.
Driving the move into value added meat products is the relentless growth of China’s middle class, helped along by government-driven urbanisation and fostering of a consumption-driven economy. While there are various definitions of middle class in China a study by management consultancy McKinsey predicts by 2022 over 75% of urban consumers (urbanites make up 60% of the population currently) will earn between USD9,000 (what it terms ‘mass middle class’) and USD34,000 (upper middle class) per year.
However while demand for pricier and western-themed pork products may rise at the mass priced end of the market China’s pork processors appear to be facing a less certain long-term outlook for mass pork consumption in a country where consumption at an average 45kg per capita is already very high next to developed nations like the US (23kg) and Japan (10kg). Big players like Shuanghui (WH Group) and COFCO have already been shifting to high value packaged meat products and western style hams – a ploy Shen Nong appears to be following.