Summary: In March, Zhongding Dairy Farming
gained a fund injection of USD65.1 million in total. This will facilitate its
integration of domestic dairy farms.
Source: Baidu
On 10 March, Zhongding Dairy Farming Co.,
Ltd. (Zhongding Dairy Farming) and CDH Investments jointly made an announcement
in Beijing that CDH Investments had injected USD22.8 million (RMB140 million)
into the milk producer. Together with USD42.3 million (RMB260 million) from
other investment institutions, the enterprise gained an overall fund injection
of USD65.1 million (RMB400 million).
Zhongding Dairy Farming was founded on 23
May, 2013. From its 8 key executives, 7 are former executives from China
Mengniu Dairy, including its general managers of milk sourcing Sun Guoqiang
(central China) and Bao Guoku (western China). The company has registered
capital of USD7.8 million (RMB48 million). It is engaged in dairying and
agricultural technology promotion, and is the largest dairy farming enterprise
in Hebei Province. The new funds are designed to accelerate its strategy of
consolidating these farms to achieve economies of scale and to provide high
quality dairy products.
In addition to Zhongding Dairy Farming,
other enterprises set up by former Mengniu staff (and enjoying stable
partnerships with Mengniu) include:
-
China Modern Dairy Holdings Ltd. (Modern Dairy), Inner Mongolia
Shengmu High-Tech Farming Ltd. (Shengmu Farming) - both dairy farming
enterprises
-
Inner Mongolia Saikexing Reproductive Biotechnology Co. Ltd. (
SK·Xing) - specialised in breeding and production of forage grass
The company's dairy farming activities are
based on 3 core strategies:
-
Farm management
-
Farm acquisitions
-
Strategic investment into dairy farms
Amongst these, farm management is the most
important by far. The company sends 6-person teams (director, veterinarian,
accountant, etc.) to its partners. These are small- and medium-sized dairy
farms and collective dairy farms, and the process involves the team taking over
their entire management, across areas such as forage grass, feeds and farm
equipment, breeding, milking and sales. Any profits achieved are shared between
the partner farm owners and Zhongding Dairy Farming.
Zhongding Dairy Farming boasts strong
competitiveness:
-
Construction funds and operating cost are reduced. "When we make an
investment into a dairy farm, this covers 10% of the capital required for
constructing a new farm', said Sun Guoqiang: "The operating costs also decline
by 20%'
-
Construction time is cut, so that when cooperation agreements with dairy
farms are signed, the farms can be put into operation quickly
To date Zhongding Dairy Farming has
"integrated" 32 dairy farms in one of the above 3 ways. These contain
25,000 cows and produce 260+ tonnes of milk daily; they are centred in North
China, with a total investment of USD32.5 million (RMB200 million). Its milk is
supplied to Yili, Mengniu, Bright Dairy and Shijiazhuang Junlebao Dairy, each
taking 25% of the total. By the end of the year, it plans to have integrated
100 farms in total (100,000 cows), and expects the full-year profit to reach
around USD4.9 million (RMB30 million).
The farm management strategy offers a means
of easing the pressure on small- and medium-sized farms. The company contends
that 70% of China's dairy farms have the potential to accommodate <1,000
cows, but run into problems such as high capital outlay and operating costs,
low output, inconsistent quality and weak financial resources which can leave
them exposed - hence the culling and milk dumping seen since late 2014. Li
Shengli, Chief Scientist of the National Dairy Industry and Technology System,
has stated that professional farm management will enable small- and
medium-sized farms to achieve stable earnings and improve their output and
quality.
About CCM:
CCM is the leading market intelligence
provider for China's agriculture, chemicals, food & ingredients and life
science markets. Founded in 2001, CCM offers a range of data and content solutions, from price
and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a
brand of Kcomber Inc.
For
more information about CCM, please visit www.cnchemicals.com or
get in touch with us directly by emailing econtact@cnchemicals.com or
calling +86-20-37616606.