State-owned, foreign giants fight for rice

COFCO's stands at the Fifth China International Fair of Organic Food and Green Food in October. COFCO has seen considerable growth this year. Photo: CFP

By Chen Yang

State-owned companies and major multinationals continue to expand their shares in China's domestic rice market, pushing out smaller producers.

China National Cereals, Oils and Foodstuffs Corporation (COFCO), the country's largest food processor, manufacturer and trader, opened a new rice processing plant in Dalian, Liaoning Province Saturday, with an investment of 314 million yuan ($46 million) and an annual processing capacity of 230,000 tons.

The plant is a part of COFCO's strategy to focus on the domestic market, said Chairman Ning Gaoning, at the opening ceremony.

COFCO already has three plants in Jiangxi, Jiangsu and Liaoning provinces, with combined annual processing capacity of 340,000 tons, according to a 2009 interim report of China Agri-industries Holdings, a Hong-Kong listed company under COFCO.

The company sold 149,000 tons of rice in China in the first half of the year, a 335.3 percent increase year-on-year, and its sales revenue increased 315.2 percent year-on-year to HK$572 million ($ 73.8 million) during the period, said the report.

COFCO's President Yu Xubo said at an April press conference that the group aims to occupy 15 to 20 percent of the country's small-packed rice market in the future.

COFCO's move strengthens its competitive edge in the rice processing sector with Yihai Kerry Group, a member of Singapore-based Wilmar International, said Chen Chen, an analyst at Shenzhen Zhongzhe Investment Consultants (SZIC).

Currently Yihai has rice processing plants in Jiamusi, Heilongjiang Province with a processing capacity of 200,000 tons and Panjin, Liaoning Province. It also plans to build more in Heilongjiang, Jiangsu and Jiangxi provinces, according to Wu Zhihua, general manager of Yihai (Jiamusi) Grains and Oils Industries.

COFCO's advantage lies in its State-owned status and abundant grain resources, while Yihai has rich experience in brand promotion, said SZIC's Chen, adding Yihai may target high-end consumers and COFCO may focus on the mid-range customers.

There were 7,698 rice processing plants in China as of the end of 2008, 90 percent of which are privately owned companies, according to China National Association of Grain Sector.

However, the capacity utilization rate of the rice processing industry is only 42 percent, Beijing-based China Times quoted an anonymous official from the State Administration of Grain at a July conference.

Small-sized rice processing companies will be washed out as food giants increase their market shares, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant.

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