China’s Delisi moves into beef farming

By Mark Godfrey

- Last updated on GMT

Delisi want to open butchers shops selling high-end beef and pork
Delisi want to open butchers shops selling high-end beef and pork

Related tags: Cattle, Meat

One of China’s best-known pork producers is aiming to have processing capacity for 300,000 head of beef cattle online by the end of 2018.

Construction has begun on phase one of the Shandong Delisi Food Co’s ambitious plan to process one million head of cattle per year, according to company management speaking at the firm’s recent annual strategy meeting. 

Delisi hasn’t detailed what percentage of that figure will be cattle slaughtered on-site or imported carcases but the company’s backers in the project include a major supermarket operator. The slaughter and processing facilities will be built in Delisi’s home base of Zhucheng city in Shandong province, with the backing of the giant Bai Lian retailing conglomerate and the Xiang Tai Industry Co, a real estate developer, as investors.

Shandong Delisi made headlines in 2015 with the apparent purchase of a 45% stake in the Australia-based Bindaree Beef group for AUS$140 million. But that deal ultimately fell through and Bindaree was bought late last year by Hong Kong investor Hui Ming Mao.

It now appears the firm has bigger plans, with its one million head beef plan. Given its lofty ambitions, the firm has had modest profitability: net profits at the company’s listed wing totalled RMB9m for 2016, but the firm has notified shareholders that it expects 2017 profits to drop by 50% year on year.

High-end butchery shops

But the company has secured some key backers: in February, Delisi entered an agreement for a RMB100m joint venture in production – in which it (Delisi) will take a 51% stake – and a RMB30m joint venture in sales with the Bai Lian Group, in which it (Delisi) will own 49%. Bian Lian has significant real estate and retail interests across China.

Speaking recently at the company’s annual strategy conference Yu Rui Bo, chairman and general manager of Delisi’s listed arm, also outlined the company’s plans to open fancy butchers’ shops in malls run by the Parkson Group, a mall operator with a long track record in China. One such ‘Delicious Fine Butchery’, with cooking areas, opened in the firm’s home city of Zhucheng in late 2017. The company is also working on a “national kitchen​” – a processing base supplying processed and pre-cooked meats to the convenience food sector.

Shandong Delisi Food Co focuses on processed pork, but also has subsidiaries producing fast food and condiments including for the thriving hot pot restaurant sector. Its market capitalisation of RMB4.4bn makes Delisi a smaller player than Henan Shuanghui with its RMB90.9bn capitalisation.

Beef has become a hot investment theme among Chinese investors and stock analysts, given explosive growth in Chinese consumption. While average per capita consumption, at 7kg, is low by western standards, China’s imports of beef rose 22% in 2016 to 579,800 tonnes, though that figure doesn’t include a massive grey trade including Indian beef smuggled in across China’s southern borders.

While a handful of local firms kill cattle from their own feedlots there has been a large mismatch between processing capacity and local supply of beef cattle. Live cattle from Australia are being shipped into slaughterhouses in China, but several Chinese firms – including companies with no background in beef – have sought to purchase beef processing and breeding assets abroad. Among them, the automotive-focused Tianma Bearing Group Co purchased Wollogorang Ranch in Australia for AUS$47m.

Related topics: China, Livestock, Pork, Beef

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