Chinese food giant COFCO has formed a strategic partnership with a consortium of private equity investors, led by KKR, that will allow the firm to increase its investment in large-scale industralised hog farms and meat processing plants in the country.
PE firms KKR, Baring Private Equity Asia, HOPU and Boyu will invest in COFCO Meat, alongside existing shareholders. Terms of the deal were not released.
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COFCO Meat, a subsidiary of COFCO, is an integrated food company engaged in hog and poultry production, processing and distribution. The business was established five years ago and, CFCO said, it is now “one of the largest hog producers in China”.
Through offering an integrated model, COFCO said it is able to ensure “effective quality control” and “address increasing food safety issues in China”.
China’s food supply is plagued by ongoing safety issues. In the pork sector, Chinese producers are struggling with disease problems resulting from high pig density and the predominance of small-scale farms in a national herd of 50m sows.
According to the US Department of Agriculture and the China Animal Industry Yearbook, China accounts for more than 50% of global pork consumption. Large-scale farms with an annual output of 50,000 or more hogs contribute less than 1% of total domestic supply.
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By GlobalDataLarge-scale farms are expected to increase “more than six-fold” in China by 2020 given their “food safety and quality control capability” as well as their “greater operational efficiency”, COFCO predicted.
“Meat is the single-largest food category in China’s diet and meeting this demand is a critical link and a natural extension of our company’s value chain. Chinese consumers demand of COFCO to promote the meat industry and provide safe meat products,” Ning Gaoning, chairman of COFCO Group, said.
“Bringing in the four strategic investors is an action by COFCO to diversify our equity ownership and enhance our corporate governance. We look forward to creating synergies among the shareholders to improve the operations and management of COFCO Meat, and together grow COFCO Meat into a much bigger actor in China’s meat industry.”
