New sales strategy for WH Group: No more cheap products!
One of the biggest meat processors in the world, WH Group China, is taking a new approach to the market by dumping the high-temperature sterilized meat products, informs Asian Nikkei Review.
This type of products, especially sausages, was promoted in China for the long shelf life, despite the fact that the nutritional value was low. Sales reported in the last three years and a half demonstrated that ready to eat sausages made by WH Group were a drag on the company revenue falling three consecutive years from 2014 to 2016, and making a new plunge of 0.37 %, that equals 1.04 billion dollars, in the first semester of 2017.
It is no surprise that Wan Long, the chairman of WH Group, decided to turn to the slaughtering business, a long key profit generator for the Chinese company along with the selling of fresh meat. WH Group chairman stated the last November that, in the long term, the company wants to reach a number 100 million pigs slaughtered annually, a seven-time fold increase reported to the current level. At that level, WH Group would be producing roughly 10% of the world's hogs.
That could be a real kick for the company as the Beijing new agricultural policy has already shut down 6,929 small private slaughterhouses since the end of 2013. "It is a historic opportunity for us to grow our slaughtering business", explained Wan Long
According to data collected by the Organization of Economic Co-operation and Development (OECD), China is the world's largest market for pork, consuming half of the world's supply with per capita consumption of 30.8kg in 2016. Pork represents 60% of the meat consumed in China. A decline in the prices of pork in 2017 accelerated the sales of fresh meat for WH Group which were up 26% in the second quarter of 2017 and 38% in the third quarter.
Still, the profit margin for the company's fresh pork business was 2.3% in the first three quarters of last year, compared with a 21.2% profit margin for packaged meats which prompted WH Group to invest heavily in new product development of packaged meats with a focus on frozen products and snack foods and to open 7 new research and development centers across China.
The interest in this sector made the company buy, in September, two packaged-meat producers in Romania for an undisclosed sum, a month after it bought three companies from Poland's Pini Group. Also, WH Group is the owner of Smithfield, U.S.'s biggest pork producer.
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