Century-old Dutch feed firm learns from Chinese partner

The first thing Co de Heus, CEO of Royal Dutch De Heus, did after flying from Amsterdam to China was to discuss plans for a pig slaughtering and processing plant in the outskirts of Fushun, Liaoning province.

The plant offers De Heus an opportunity to engage in the nation's pig industry with its Chinese partner, Wellhope Agri-tech Joint Stock Co Ltd.

"China has a population of (almost) 1.4 billion and is experiencing robust development. This promises hundreds of billions (of dollars) in market demand," said Co de Heus.

Wellhope, located in Northeast China, one of the country's key granaries, is a leading feed producer. De Heus bought a 15 percent stake in Wellhope for 150 million yuan ($22 million) in 2006.

This is probably one of the Dutch company's most successful investments because the initial investment has increased tenfold to nearly 1.5 billion yuan in 10 years.

Moreover, the Dutch company has learned about integrated business operations from its Chinese partner, which is the key to accessing emerging markets in Asia worth hundreds of billions of dollars.

However, the two sides differed on whether or not to expand the business. "Our successes and failures in the past 100 years show that a company must focus on its main business instead of diversification," Co de Heus said.

Royal Dutch De Heus, which was founded in 1911, has engaged in the feed industry for over 100 years and was awarded the title of Royal De Heus due to its good reputation.

But times have changed.

The total output of China's animal feed industry reached 181.3 million metric tons in 2018, the highest in the world for six consecutive years, according to the China Feed Industry Association.

"It is difficult to keep investing in the feed market. With improvements in breeding technology and feed quality, the market will decline instead of increase," said Jin Weidong, founder and chairman of Wellhope.

Unlike the fiercely competitive feed market, China has a huge demand for pork and chicken but fragile supply. Integrated operations mean increased sales and lower tax costs, Jin said.

"We need to learn from foreign partners' advanced technology, but we must find our own way of development in accordance with China's situation," said Jin.

The past year's success has proved Jin right as the broiler project is booming. Last year, the company's white feathered chicken produce ranked No 1 in China and its chicken products entered KFC's supply chain and were exported to Japan.

"We want to provide a 'feed-to-food' service. Our goal is to become the leader in this market," said Qiu Jiahui, vice-president of Wellhope responsible for the pig and broiler sectors.

Royal De Heus was surprised by the success of its Chinese partner and changed its development strategy. It acquired some European broiler production plants and expanded feed production projects into a whole-chain business in Southeast Asia.

"Jin has the entrepreneurial spirit of adventure. I am honored to have such a partner," said Co de Heus.