Huiyuan Rises on Report of Coca-Cola Stake Bid

April 24-- China Huiyuan Juice Group Ltd., the country’s biggest maker of pure juice, climbed the most in a month in Hong Kong trading after the Wall Street Journal reported Coca-Cola Co.

may buy a minority stake.

Huiyuan rose 13 percent to HK$5.74 in Hong Kong trading, the most since March 25, making it the biggest gainer on the MSCI Asia-Pacific Index. The gain trimmed the stock’s decline to 31 percent since March 18, when China’s government blocked Coca- Cola’s $2.3 billion bid for Huiyuan.

Coca-Cola is exploring options for a deal with Huiyuan that will satisfy Chinese regulators, the Journal reported yesterday, citing people familiar with the situation. Coca-Cola and PepsiCo Inc., which together control 86 percent of China’s soda market, are in a race to buy juice and dairy-beverage brands in developing markets.

“The talk definitely will be a short-term catalyst to the share price,” Jacqueline Ko, a food and beverage analyst at Kim Eng Securities (Hong Kong) Ltd. said in a report today. “There are numerous challenges facing China Huiyuan going ahead due to the slowdown in demand for their core 100 percent juices and nectars as well as the stiffer competition in the juice-drink market.”

Huiyuan’s Suitors

Huiyuan said today it’s unaware of the source of newspaper reports saying it resumed discussions with Coca-Cola. The company “is not in possession of any price-sensitive information which would require an announcement,” it said in a statement to Hong Kong’s stock exchange.

Coca-Cola declined to comment on “speculation” in a statement sent by e-mail late yesterday. “We were disappointed, but we also respect the Ministry of Commerce’s decision not to approve our proposed purchase of the Huiyuan Juice business,” said the statement sent by Coca-Cola spokesman Kenth Kaerhoeg.

Zhu Xinli, chairman and president of the Beijing-based company said April 15 that Huiyuan Juice had been approached by “many more suitors” after Coca-Cola’s bid was blocked. He declined to provide further details.

“Even if Coca-Cola finally takes some minority stakes in China Huiyuan, we see that the deal is simply more beneficial to Coca-Cola and the Chairman Zhu Xinli than to China Huiyuan,” said Ko, who recommends selling the Chinese juicemaker’s shares.

China’s Ministry of Commerce has denied that its decision to block Coca-Cola’s takeover bid was aimed at protecting a national brand. The biggest foreign takeover of a Chinese company would have hurt competition by strengthening Coca-Cola’s control over China’s juice and beverage market, enabling it to abuse its dominance, the ministry has said.

(Bloomberg)

Yum Vows To 'Slug It Out' In Recession

NEW YORK - Yum Brands Inc. (YUM) vows to "slug it out" with competitors in 2009 after reporting a 14% dip in first-quarter profit amid a decline in U.S. sales from increasing pricing competition and slumping dinner sales for its KFC and Pizza Hut brands.

Yum's international divisions produced stronger results than did the U.S., with same-store sales gains in both China, where it is pinning hopes for growth despite a slowdown in the economy there, and other international markets.

Effective cost management across all three divisions and deflating commodity costs helped the world's largest fast-food chain, with more than 36,000 restaurants, top analyst first-quarter estimates with per-share earnings of 48 cents, excluding special items, compared with expectations of 40 cents a share, according to Thomson Reuters.

The quarter also gave greater certainty to analysts that the company can hit its full-year goal of growing per-share earnings without special items 10%, sending shares up $2.33, or 7.3% in recent trading, to $34.42.

That growth is expected to be back-half loaded as sales, costs and foreign- exchange rate comparisons make it easier to lap the prior-year periods. Yum expects the current quarter to be the toughest of the year due to a low tax rate and record sales growth in China for the year-ago period.

"This is a slug it out year," Chief Executive David Novak said on an earnings call. "You got to take your gloves off, slug it out, take on competition, keep building your brands and be strong as you go into 2010."

That's not a write-off for 2009, as Yum is launching initiatives to both drive sales in addition to managing costs. It will especially look to focus on rejuvenating sales in the U.S., its largest and more mature market, where same- store sales fell 2%, compared with gains of 2% in China and 6% in other international markets.

Yum's sales during dinner are taking a huge blow as families, eager to save money, cook more meals at home. That is taking its toll at both KFC and Pizza Hut, which derive a majority of their sales during the dinner hours.

KFC's new grilled chicken platform was recently launched to drive more sales at the lagging brand, while Pizza Hut is relying on more sales of pasta, lasagna and chicken wings, as it tries to become more than a pizza chain.

Taco Bell, the top performing brand, which contributes 60% to U.S. profits, is seeing more competition from other fast-food chains pushing their value menus harder as they try to attract customers, and plans to fortify its own "Why Pay More" value menu in response.

International markets remain in better shape, even as the economic slowdown spreads worldwide. KFC's same-store sales in India, for instance, were up more than 30% in the quarter, and Yum plans its first Taco Bell locations there later this year. The company is also continuing to rapidly open units in China.

Fast-food chains have been more resilient in the economic slowdown than casual-dining restaurants due to their lower-priced food and convenience. But the higher-priced chains are cutting prices to win back customers, leading some to believe that the quick-service industry may resort to a "zero sum industry" highlighted by intense competition for fixed pool of customers.

(Dow Jones)

China's Coke Decision Threatens to Chill Investment

Lawyers and investment bankers said China's rejection of Coca-Cola Co.'s $2.4 billion bid for China Huiyuan Juice Group Ltd. could prompt a backlash against Chinese investing abroad as it risks chilling investment within the country.

China's Commerce Ministry said Wednesday that the combined company's market power could "narrow the room for survival" of smaller players in China's beverage industry and lead to higher prices for consumers. Coke might use its dominant position in the carbonated-beverage market to restrict competition in the juice business, the ministry said.

Coca-Cola is the largest seller of carbonated soft drinks in China, with a 52.5% market share, according to research firm Euromonitor. Huiyuan, meanwhile, is China's largest maker of 100%-juice drinks, with a 33% market share. Coke also sells juice drinks, and the two companies' combined share of the fruit-and-vegetable juice market last year was 20.3%, according to Euromonitor.

The ruling -- the first major test of a new antimonopoly law -- sends "a very negative message," said Lester Ross, an attorney in U.S. law firm WilmerHale's Beijing office, who wasn't involved in the deal. "I think it was driven by protectionism, fueled by popular resentment against a foreign company acquiring a popular Chinese brand."

Mei Xinyu, a researcher at the Chinese Academy of Trade and Economic Cooperation, which is affiliated with the Commerce Ministry, said the ruling had "nothing to do with trade protectionism."

The deal did, however, block what would have been the largest-ever takeover of a Chinese company by a foreign buyer.

Merger-and-acquisition lawyers who weren't involved in the deal said the ministry's statement indicates that officials appeared to rely on broader definitions of anticompetitive harm than used by their counterparts in the U.S. The ministry's statement implied that a company's overall size, in addition to its share of any given market, should be taken into account, these lawyers said.

Yi Xianrong, a researcher in the finance and banking section of the government-backed Chinese Academy of Social Sciences, criticized the ministry's rejection, saying it was "groundless" given the intense competition in the industry.

Lawyers and bankers said higher antitrust barriers from Beijing could further hinder companies trying to conduct deals and invest in China, where it long has been difficult to acquire assets from state-owned companies. The Finance Ministry on Wednesday announced rules that make it harder for foreign investors in financial-services businesses to buy or sell their stakes. This follows moves by some foreign banks in recent months to sell holdings in Chinese banks.

Meanwhile, perceptions that China is hostile to foreign investors could hurt Chinese companies looking to take advantage of low prices to invest abroad, particularly in oil, metals and other natural resources that Beijing sees as critical to sustaining the nation's economic growth.

The government is looking to loosen those reins further, issuing rules Monday that reduce regulatory hurdles for Chinese companies looking to invest overseas. Last week, China's minister of commerce, Chen Deming, called on the global community to "jointly oppose trade protectionism." In the past two years, the value of deals struck by Chinese companies overseas has far exceeded that of deals made by foreign companies in China.

The Commerce Ministry said Wednesday that it had attempted to negotiate with Coca-Cola for a more limited deal that would ease the anticompetitive effects of the acquisition but that the company's response didn't go far enough to address its concerns. Coke didn't comment beyond its prepared statement expressing regret the deal was killed.

Coke's effort to acquire Huiyuan met with public criticism in China. Shortly after the deal was announced, a poll of about a half-million people by Web portal Sina.com showed that nearly 80% of participants opposed the transaction.

Chinese executives also were critical. Yang Xiulin, the marketing director of beverage company Hangzhou Wahaha Group Co. said "if national brands are gone, for the long term, it's not good for the Chinese industry."

The roles have been reversed, however. In 2005, state-controlled Cnooc Ltd. attempted to acquire Unocal Corp. of the U.S. for $18.5 billion, only to withdraw within weeks amid intense political pressure in the U.S. While Cnooc's deal-making inexperience contributed to its difficulties, opposition from U.S. lawmakers surprised China and left many in the country believing the U.S. wouldn't stand by its own open-markets rhetoric.

(WSJ)

Coca's bid for Huiyuan rejected by China's Gov't

March 18 -- China’s rejection of Coca-Cola Co.’s $2.3 billion bid to buy the country’s largest juice maker leaves the company to compete with PepsiCo Inc. the hard way, by building sales of existing products.

China’s Ministry of Commerce barred Coca-Cola’s purchase of China Huiyuan Juice Group Ltd., saying it might have used its “dominant position” to push up prices and limit choices for consumers. Coca-Cola would have roughly doubled its juice market share with the deal, said Jason Pride, director of research for Haverford Investments.

“It would have given them better access to China when they are going head-to-head with Pepsi,” said Pride, whose Radnor, Pennsylvania-based firm has $5 billion of assets under management including shares of Coca-Cola and PepsiCo. “It slows Coca-Cola down in China.”

Coca-Cola and PepsiCo are in a race to buy juice and dairy-beverage brands in developing countries to diversify beyond soft drinks and win customers by catering to local tastes. PepsiCo and its chief bottler agreed last year to pay $1.4 billion for a 75.5 percent stake in Russia’s largest juice maker, OAO Lebedyansky and are seeking to buy the rest.

Coca-Cola, based in Atlanta, controlled 52.5 percent of the Chinese soda market by volume in 2008, compared with PepsiCo’s 33 percent, according to market research company Euromonitor. Coca-Cola had 12 percent of the fruit- and vegetable-juice market, while Huiyuan had an 8.5 percent share. The Chinese beverage company controlled 33 percent of the nation’s pure-juice market.

“We will now focus all of our energies and expertise on growing our existing brands and continuing to innovate with new brands, including in the juice segment,” Chief Executive Officer Muhtar Kent said today in a statement.

Pulpy Orange

Minute Maid Pulpy Orange is one of Coca-Cola’s best-selling juice drinks in China, where it was developed before being introduced in 2004. Sales were expanded to India in 2007.

Coca-Cola plans to invest $2 billion in China over the next three years as part of its attempt to win more of the nation’s 1.3 billion consumers, it said this month.

The investment plan includes a $90 million technology center that opened in Shanghai March 6. Coca-Cola’s proposed investment is 25 percent more than the $1.6 billion it has spent in China since returning in 1979.

China’s denial of the acquisition is the first under an anti-monopoly law that’s been criticized for a lack of openness.

“Having two companies with way under 25 percent market share come together and try to make efficiencies is not anti-competitive,” Pride said. “Protectionism is an evil beast that destroys overall global economic prospects.”

Coca-Cola rose 20 cents to $41.65 at 4 p.m. in New York Stock Exchange composite trading. The shares have declined 8 percent this year. PepsiCo climbed 22 cents to $49.47.

(Bloomberg)

Coke will pump a further $2 billion into China

The Coca-Cola Company opened a $90 million innovation and technology centre in Shanghai on Friday. The company also announced that it will pump a further $2 billion into China over the next three years. The news comes just weeks before the deadline for the completion of Coke's proposed takeover of domestic drinks company Huiyuan Juice.

The new research centre, Coke's largest in Asia, will look at developing new products suitable for Chinese tastes—where drinks like juices and teas are preferred over Coke's traditional mainstay, carbonated beverages.

The $2 billion of further investment will be spent on new plants and distribution infrastructure, sales and marketing, and research and development. The investment announced is greater than all the money the US drinks giant has put into China since it returned to the country in 1979, estimated at $1.6 billion.

The timing of the announcement is likely to be linked to the imminent deadline for Coke's takeover of Huiyuan Juice, which is due for completion on March 23. In September, Coke revealed a $2.4 billion offer for control of Huiyuan and has since been waiting for regulatory approval under China's new anti-monopoly law. The regulator's decision is critical because it will signal China's attitude towards inbound M&A deals.

Coke is advised on the Huiyuan deal by the Royal Bank of Scotland, while Huiyuan Juice is advised by Goldman Sachs. The controlling shareholder of Huiyuan, Huiyuan Holdings. is advised by UBS.

The regulator's decision is likely to be watched from all corners of the world as China is also aggressively pursing outbound targets. China is awaiting approval from Australia's Foreign Investment Review Board (FIRB) for the acquisition of stakes in two mining assets and China may not want to send a message that it plays by different rules on its home ground.

As for Coke, the US soft drinks compnay will be hoping that by injecting large chunks of cash into China, its third largest market, it will be corroborating its long-term commitment to the country. The acquisition has proved controversial, with accusations that Zhu Xinli, the man behind Huiyuan, has sold out to a foreign multinational.

In terms of multiples, $2.4 billion is six times Huiyuan's 2007 revenues and 26 times its trading profits. At HK$12.20 a share, it represents a premium of 195% to the price of the target's shares before the deal was out. Although shares in the company rocketed after the deal was announced, reaching HK$10.94, six months of market turmoil have pulled the price down again to HK$9.1, suggesting that perhaps Coke could have got away with paying less. Indeed, some sources suggest that if the deal were to unravel it would be a blessing for Coke. Market conditions have worsened in the time since the deal was announced and a couple of billion dollars on Coke's balance sheet could be welcome in these uncertain times.

But Coke president and CEO, Muhtar Kent, presented a picture of confidence in February when he spoke to analysts about the company's fourth quarter 2008 and full-year financials. In a transcript posted on seekingalpha.com, Kent highlighted that the company had delivered another quarter of strong performance, marking its ninth consecutive quarter of double-digit earnings per share growth and the third straight year of meeting or exceeding targets. "Simply said, we were built for times like these," said Kent referring to Coke's ability to weather the recession which has adversely impacted results at a number of companies.

China's importance was apparent on the call which mentioned the world's most populous country time and again. Sprite sales reached two billion units in annual volume, driven by China; the Olympic sponsorship allowed Coke to connect with half a billion consumers; Coke's product Minute Maid Pulpy was deemed a "huge success in China" reaching a volume of a couple of hundred million cases; and China's volume growth of 19% in 2008 was highlighted.

Coke's bullishness on China is not surprising. Per capita consumption of Coke beverages in 2008 was 24 units per person per annum, compared to over 400 in North America. Even accounting for the difference in purchasing power and consumption preferences, the potential for Coke to further penetrate China seems indisputable. If the money spent on Huiyuan takes Coke a little closer to that goal, even the expensive deal it has struck may be worthwhile.

(FinanceAsia.com)

Baskin-Robbins expands in China

Ice-cream chain Baskin-Robbins opened its first two stores in Shanghai over the weekend and plans to open a third location in the Chinese city in late February, the retailer said Monday.

Canton, Mass.-based Baskin-Robbins said store openings were part of the chain's plan to open 100 new shops in China over the next 10 years. The company already has 47 shops in mainland China.

(Boston Business Journal)

Starbucks brews first China blend to perk up business

SINGAPORE - U.S. coffee chain Starbucks, keen to boost business in China, is brewing ahead of the Lunar New Year a limited-edition blend that includes, for the first time, Chinese beans.

The "South of the Clouds" blend, named after the Mandarin meaning of the semi-tropical, southwestern Yunnan Province, was unveiled in Singapore on Monday, a week after its Greater China debut, said Starbucks' Beijing spokeswoman Caren Li.

The coffee blends arabica beans from Latin America, Asia Pacific and the western Baoshan region of Yunnan, the main coffee-growing province in China, the ancient homeland of tea.

"Our priority is local relevance," Li told Reuters. "We are very proud of this coffee and we have full confidence that it will be popular with our customers."

Coffee grown in Yunnan, which borders Asia's top coffee producer Vietnam, has been available in China for over a decade. It is often sold as a cheaper alternative to imported beans.

Li said the blend offers an opportunity for Starbucks to expand further in one of the world's biggest economies.

"We spent more than three years working in Yunnan with local farmers and local coffee suppliers. The coffee has gentle acidity, medium round body and a soft herbal flavor in the finish and a cocoa mouthfeel."

Li declined to give any figures on production or details about the blend, which she said is being sold in a "preview launch" before any Yunnan-sourced lines may be rolled out.

The blend is on sale as "coffee of the week" in Starbucks' 700 outlets in Greater China, as well as stores in Singapore and in Malaysia ahead of the Lunar New Year which starts next week. It will be on sale in China until February 19.

Starbucks opened its first outlet in mainland China in 1999 and its president, Martin Coles, told Reuters last week the company sees China as one of its fastest growing markets, even as it closes down stores in other markets racked by recession.

(Reuters)

Starbucks thrives in China, attacked in Beirut, London

Starbucks has seen no drop-off in its China business, its top international executive told Reuters.

The good news comes as the Seattle coffee company struggles in the U.S. and other foreign markets. It closed most of its Australia stores last year and reported flat same-store sales in Canada and the United Kingdom during its fourth quarter ended Sept. 28.

Following a 97 percent drop in fourth-quarter profit, Starbucks scaled back expansion plans for fiscal 2009 to include 700 new international stores, down from 900. It has more than 5,100 stores outside the U.S.

But in China, where it has just over 350 stores, business is strong.

"We have not seen a drop-off at all in the demand for Starbucks in China," Martin Coles, president of Starbucks Coffee International, told Reuters at an event marking the firm's first 10 years in China. "We have seen an acceleration in our (China) business."

Coles said it will take less than 10 years to open the next 350 stores in China.

In honor of the anniversary, Starbucks introduced its first blend including Chinese coffee to stores there until mid-February. It also will sign cooperation agreements in the next couple days with local governments in southern Yunnan province aimed at helping farmers increase coffee yields and improve quality.

A Starbucks spokeswoman declined to confirm Coles' positive comments, saying it is company policy not to breakout individual market performance except for the U.S.

The news came as Starbucks was forced to close a store in Beirut on Tuesday because of about 100 demonstrators shouting anti-Israel slogans and causing customers to flee, The Associated Press reported.

Earlier this week, a Starbucks shop in London took the brunt of vandalism by pro-Palestinian demonstrators who ripped out fittings and equipment after clashes with riot police, according to the Evening Standard in London.

Protesters in Beirut told AP that they targeted Starbucks because they claim Chairman and CEO Howard Schultz donates money to the Israeli military.

They hung several banners on the shop's window and used white tape to paste a Star of David over the green-and-white Starbucks sign, AP reported. They also distributed a letter saying Schultz "is one of the pillars of the American Jewish lobby and the owner of the Starbucks," which they said donates money to the Israeli military.

Starbucks spokeswoman Deb Trevino pointed to its Web site for a comment it has used before to address attacks and rumors regarding Starbucks, Schultz and Israel.

It reads in part, "Rumors that Starbucks Coffee Company and its management support Israel are unequivocally false. ... Starbucks is a nonpolitical organization and does not support political causes. Further, political preferences of a Starbucks partner [employee] at any level have absolutely no bearing on Starbucks company policies."

Starbucks has been operating in Lebanon for several years and has 16 branches around the country, AP reported.

(The Seattle Times)

Russia, China spur worldwide demand for wine

PARIS — With consumers in Russia and China developing a taste for wine, worldwide demand is expected to climb until 2012 despite the economic downturn, a French study said Tuesday.

"We believe that the effects of the economic crisis will be limited" in the wine sector, said Robert Beynat, director of Vinexpo, one of the world's biggest wine fairs held annually in Bordeaux.

Russia and China are expected to see a "fantastic increase" in demand for wine from 2008 and 2012, soaring by 24.4 percent and 36.6 percent respectively, the study by Vinexpo showed.

Wine lovers in those two countries will account for 58 percent of the growth in the international market and by 2012, Russians and Chinese are expected to drink more wine than Spaniards.

Worldwide demand for wine jumped six percent from 2003 to 2007, according to the study covering 114 wine-drinking and 28 producer nations.

Over the next four years, the United States is expected to become the number one wine market, surpassing France and Italy which have seen demand drop recently.

Global wine production is expected to increase by 3.83 percent over the next four years to reach 36 billion bottles.

(AFP)

Starbucks stops serving milk as China crisis snowballs

BEIJING — Starbucks stopped serving drinks with milk in many Chinese outlets Friday as a crisis over poisoned dairy products that have left four babies dead and thousands of others sick spiralled.

The move by the US coffee chain came amid a government-ordered mass recall of dairy products after an industrial chemical, initially reported to be only in milk powder, was also detected in regular milk, yoghurt and ice cream.

Supermarket shelves across the country were emptied of many products made by Chinese dairy giants Mengniu, Yili and Guangming after the government said the chemical melamine had been discovered in some of their regular milk.

Singapore, meanwhile, said it was suspending the import and sale of all milk and milk products from China after melamine was detected, as the latest in a string of scandals to hit the "Made in China" label snowballed.

Singapore removed Yili brand iced yoghurt and Dutch Lady strawberry flavoured milk from shelves after testing found the chemical in some samples, the Agri-Food and Veterinary Authority of Singapore said late Friday.

"As a precautionary measure, AVA is also suspending the import and sale of all milk and milk products from China with immediate effect," it said.

Mengniu is one of the main suppliers for Starbucks, leading to two-thirds of the chain's 330 outlets in mainland China to stop serving drinks with milk.

"Though the milk we received from Mengniu is not included in the contaminated lots, due to the serious nature of this warning, Starbucks pulled all Mengniu milk offerings until further notice," the Seattle-based company said in a statement.

"The safety of our customers and partners (employees) is of utmost importance." At some Starbucks outlets in Beijing, customers were told only black coffee and tea was being served on Friday.

The Chinese government agency in charge of product quality supervision on Friday issued detailed findings from a comprehensive national check, showing 24 of the 295 batches it tested from the three dairy brands were contaminated.

"The manufacturers should of their own accord recall all products where melamine has been detected," the agency said on its website.

Officials at the firms could not be reached for comment.

The recall came after the government announced on Wednesday that baby milk powder from 22 dairy companies contained traces of melamine, leading to the deaths of four babies and sickening more than 6,200 others.

Symptoms have included kidney stones, failure to pass urine as well as vomiting, although there have been no reports of adults suffering such problems from drinking tainted milk.

Melamine is normally used to make plastics but it can also make milk and other products appear to have a higher protein content than they actually do.

It has become apparent in recent days that people in China have been deliberately watering down the milk to cut costs, then adding in the melamine to boost the protein content and make the product look normal.

Some Chinese press reports said the scam had been going on for years, with China's chaotic and corrupt food safety system unable either to detect or prevent it.

Starbucks customer Cathy Wang called for the government to take the toughest action possible against those responsible.

"The criminals deserve to be sentenced to death and there should be a public trial. They are more evil than murderers," said Wang, a jewellery retailer, as she sipped a cup of black tea in a Beijing Starbucks outlet.

At a Beijing supermarket, Cui Hongchun, 36, expressed concern and fury over previously buying milk for his eight-year-old son from one of the suspect brands.

"I'm very worried about the milk we bought because it claimed to contain high levels of protein," he said. "I will sue them if the milk causes any problems for my boy."

After a meeting late Friday, China's State Council or cabinet issued a circular urging all-out effort to stem the crisis, including more checks on the dairy industry and free medical treatment for sick babies, and vowed to find those responsible, Xinhua news agency said.

The government has already announced the arrest of 18 people for their roles in allegedly providing the melamine or mixing it into milk.

(AFP)

Tyson Enters Third Poultry Joint Venture in China

SPRINGDALE, Ark., Sep 10, 2008 (GlobeNewswire via COMTEX) -- As part of its continuing international expansion, Tyson Foods, Inc. has finalized a joint venture agreement involving vertically integrated poultry operations in eastern China, company officials reported today.

The agreement is with the Shandong Xinchang Group, one of China's leading poultry producers with estimated 2009 sales of U.S. $345 million. Once the deal receives the necessary government approvals, it will give Tyson 60% ownership in vertically-integrated poultry operations consisting of Xinchang's existing assets and include the acquisition of a new poultry processing complex on the east coast of the Shandong Province. The name of the venture will be Shandong Tyson Xinchang Foods Company, Ltd.

"Poultry is the second leading meat protein source in China behind pork and continues to make significant gains in consumption," said Rick Greubel, group vice president and international president for Tyson Foods. "This joint venture will enable us to help meet China's appetite for poultry, which has been growing faster than the existing domestic supply."

Xinchang's business includes chicken and duck breeder and broiler farms, feed mills, and hatcheries. With the addition of a new chicken processing complex, the business also consists of four chicken processing facilities with a maximum capacity of three million birds per week and a duck processing facility capable of handling of 350,000 birds per week.

Most of the chicken and duck products are sold frozen through foodservice and wholesale channels. A small percentage is sold through retail outlets under the Xinchang brand and under private label. In addition, some is exported. A majority of the sales are to customers in the region surrounding the Shandong province, which includes the cities of Beijing and Shanghai.

"It's our intent to expand the production and sales of these operations and use our extensive experience in the food industry to serve the rapidly growing quick service restaurant and modern retail food business in China," Greubel said.

This will be Tyson's third joint venture poultry operation in China. The company also has majority interest in a chicken further processing facility in Zhucheng, Shandong, and majority interest in a vertically integrated poultry operation being developed in Haimen City in the Jiangsu Province near Shanghai.

China represented 9% of the $3.8 billion Tyson generated in international sales in fiscal 2007.

(Market Watch)

Monsanto gets OK to export soybeans to China

Monsanto Co. has received regulatory approval in China for the importation of its Roundup Ready 2 Yield soybeans, the company said Thursday.

This is welcome news to farmers, who say that as the standard of living continues to rise in China, so too will the demand for soybeans.

China imports accounted for approximately 38 percent of U.S. soybean exports in 2007, making it the largest purchaser of U.S. soybeans.

These soybeans are designed to be resistant to Roundup herbicide, another Monsanto product, and have larger crop yields. They demonstrated a yield about 7 to 11 percent larger over Monsanto’s earlier version, the company said, and will be introduced on one to two million acres for the 2009 season as part of a controlled commercial release.

Johnny Dodson, a soybean producer from Halls, Tenn., and first vice president of the American Soybean Association applauded the news. "China's approval of the Roundup Ready 2 Yield soybean prior to the 2009 seed-buying season is welcome news to U.S. soybean farmers," Dodson said in a statement. "Timely overseas regulatory approvals are critical because growers have rapidly adopted new biotech-enhanced seed varieties as they became available.

Creve Coeur-based Monsanto Co. (NYSE: MON) develops insect- and herbicide-resistant crops and other agricultural products.

(St. Louis Business Journal)

Olympics soar sales of snacks in China

The Olympic Games have sent the sales of snacks soaring in China.

Sports fans here are stocking up food at home so that they do not have to go out to eat when their favourite Olympic event is on television.

Carrefour, the largest foreign retailer in China, said sales of snacks and imported beer have increased significantly since the Games started.

The sale of snacks at the supermarket's Fangyuan branch in Beijing has risen by nearly 16 percent in the past two weeks. Prunes, in particular, have seen a 60 percent growth in sales.

More people are also buying food from online stores to save time. Taobao.com, a popular online market, said intra-city transactions have increased by more than 20 percent.

Shanghai, Beijing and Hangzhou have seen the most significant growth. Various kinds of nuts and pastries top the list.

Concluding ceremony to be performed unrehearsed

The concluding ceremony of the Olympic Games on Sunday will be performed unrehearsed unlike its spectacular opening ceremony which was repeatedly rehearsed at the National Stadium.

The men's marathon will end at the stadium at about noon, leaving only eight hours for the organisers to prepare for the closing ceremony, China Daily reported.

Also, the time has also been allotted to the London 2012 team to rehearse an eight-minute handover ceremony.

However, small rehearsals are being held at training sites away from the stadium.

Olympic village, also a window to Chinese culture

The Olympic Village in Beijing besides being an athlete's compound is also a place where the players can get to know Chinese culture.

The Chinese Traditional Arts and Crafts Show, located in the international area of the village, is part of the effort to offer the delegation members a full experience of Chinese culture. 27 Chinese folk artists are selected to demonstrate their skills in the Olympic Village from July 27 to Aug 27.

Live craft making ranges from New Year painting to paper-cuts, kites, embroidery, cloth artefacts, clay figurines, facial masks and much more.

(Indo-Asian News Service)

Starbucks to Boost China Investment

July 16 -- Starbucks Corp., the world's largest coffee-shop chain, will expand in China after announcing plans to close underperforming U.S. stores and slash jobs.

The chain's changes will affect Starbucks' China operations ``more positively,'' the Seattle-based company's Greater China President Wang Jinlong said in an interview today in Hong Kong. ``There will be more innovation, more new products, more resources, not only investment.''

U.S. consumers are spending less on so-called affordable luxuries like gourmet coffee as they face a contracting economy and record gasoline prices, forcing Starbucks's biggest closures and job cuts in its history, announced on July 2. The company will close 600 U.S. outlets and eliminate 12,000 jobs, slowing its domestic expansion after doubling in size in four years.

Starbucks will instead turn to China, Canada, the U.K. and Japan for growth.

Starbucks expects to gain as more-affluent Chinese are drawn to gourmet coffee. There are now 100 million middle-class consumers in China and this may grow to 200 million by 2020, Wang said today at the Retail Asia Congress in Hong Kong. Retail sales in China gained 21.6 percent in May, close to the fastest pace in nine years.

China, where more people drink tea than coffee, ``has the potential to become the largest market outside the U.S.'' for Starbucks because of the nation is the world's largest with a population of 1.3 billion people, Wang said.

Starbucks has more than 300 stores in China and had set plans to open at least 80 outlets this year.

``We still have a long way to go,'' Wang said. ``We'll continue to expand. The number of stores will not be in the hundreds, but in the thousands.''

The company plans to expand in cities including Beijing and Shanghai, as well as smaller cities including Wuhan in the country's eastern and western regions.

(Bloomberg)

InBev becomes the largest brewer in China

Even though InBev is the largest brewer in the world, it has lagged behind in the world's largest beer market: China. Perhaps nothing highlights InBev's laggard status in China more so than this summer's Olympics. The Beijing Olympics will have three official beer sponsors: Beijing Yanjing Brewery, Tsingtao Brewery, and Anheuser-Busch (BUD). No InBev.

Now, InBev is no longer playing catch-up in China. Its $52 billion takeover of Anheuser-Busch has created not only the largest brewer in the world but also the largest one in China. "The sale of Anheuser-Busch to InBev will not alter Anheuser-Busch's leading position in China, but it will dramatically strengthen InBev's presence in the Chinese market," Zhigang Tao, professor at the University of Hong Kong's Faculty of Business & Economics wrote in an e-mail.

Before the merger, InBev was stuck in fifth place among breweries in China, behind China Resources Snow Breweries, Tsingtao Brewery, Yanjing Brewery, and Anheuser-Busch. With the merger, InBev not only gains control of Anheuser-Busch's breweries in China, but also two of the American brewer's crown jewels: its 27% stake in Tsingtao and 100% ownership in Harbin Brewery, which combined dominate China's mid-tier beer market. "One of the things that makes this deal attractive for them, in terms of a China perspective, is that there's a shoo-in with that relationship with Tsingtao," points out Matthew Crabbe, director of Access Asia, a British market research firm based in Bristol.

Fragmented Market Hurts Margins

China's title as the world's biggest beer market, with 1.3 billion thirsty Chinese drinking 39 million kiloliters last year, has been deceptively alluring to foreign brewers. In reality, most breweries are having a have time earning healthy profits because the market remains incredibly fragmented. A number of foreign breweries have already pulled out after failing to make any money. Only a handful of China's 400 or so breweries have managed to build up a nationwide presence, such as Tsingtao.

Even InBev's presence has been limited primarily to southeastern China. The Belgian-Brazilian brewer first dipped its toe in China in 1984, when it provided technology transfers to Zhujiang Brewery in the southern city of Guangzhou. So far, InBev has accumulated 33 breweries, through various joint ventures, and its 100% acquisition of Fujian Sedrin Brewery. But InBev has not had much success expanding north or west.

On the other hand, Anheuser-Busch's operations are spread more broadly across China. A-B brews Bud in central China, in Wuhan, Hubei province, but also is focused in the eastern and northeastern parts of the country with its equity investments in Tsingtao Brewery in the eastern province of Shandong and Harbin Brewery in the northeastern province of Harbin. In the press statement announcing the merger, InBev says: "The two companies' footprints in China are complementary. InBev's China Business in southeastern China will be enhanced by Anheuser-Busch's strength in northeastern China."

Bud has a Valuable Sales Network

Anheuser-Busch has also been gradually building up its network in China to sell Budweiser, Corona, and Harbin premium beer nationwide, instead of just in the northeast. This, analysts say, is Anheuser-Busch's most valuable asset in China. After making a fact-finding trip to China, Credit Suisse (CS) beverage analysts Carlos Laboy and Anthony Bucalo wrote in a research note to clients: "It was clear that InBev is executing an inferior model to both SAB and A-B, and this has implications for all parties in light of recent speculation" about the merger of Anheuser-Busch and InBev.

The integration of Anheuser-Busch and InBev's China operations will allow the two foreign brewers to build up economies of scale by mass producing and mass distributing their beer, making it easier for them to earn fatter profit margins. But this could spell trouble for smaller, local Chinese brewers. "The merger of two major international brewers will have a major impact on China's brewery industry," says Xiao Derun, chairman of the board of directors of the China Alcoholic Drinks Industry Assn.'s beer chapter. "This may force more Chinese brewers to expand overseas," (BusinessWeek.com, 2/19/08) he says.

(Business Week)

COFCO invests in Smithfield foods

Smithfield Foods' capital-raising plans are making investors nervous as grain prices increasingly crimp food companies' margins. Shares slipped more than 12.0% on Tuesday despite news that the China's largest agricultural trading and processing company, COFCO, agreed to invest in the Smithfield, Va.-based company.

Shares of Smithfield Foods fell to a new five-year low during Tuesday's session, down 15.2% at $16.85. At Tuesday's closing bell, the company was down by $2.43, or 12.2% $17.45. On Monday, Smithfield said it would sell its main European subsidiary, Groupe Smithfield Holdings SL, to a Spanish meat-processing company and also offered $350.0 million in convertible senior notes. The company said it plans to use the proceeds to fund planned convertible note hedge and warrant transactions and to pay down debt.

Analysts say the deals show how challenging it is for agricultural companies to keep up with the rising working capital costs as grain prices skyrocket and now that debt-financed credit is more difficult to obtain as a result of the global credit crunch.

By agreeing to buy a 4.95% stake in the world's largest hog breeder and pork processor, Smithfield Foods of the United States, China's largest food importer and exporter, the COFCO Group, is signaling its intention to upgrade conditions for the hogs it plans to raise in a newly launched green initiative. The fully state-owned COFCO Group, whose full name is China National Oils, Foodstuffs and Cereals Corp., will purchase 7 million Smithfield shares, whose value will be based on the closing stock price on the pricing date of a concurrent offering by Smithfield of $350 million worth of convertible senior notes.

Smithfield late last year started selling pork to China as part of China's policy of expanding imports from the United States. Smithfield's announcement last August that it would begin exporting to China, together with a confirmation of the same in January by rival Tyson Foods (nyse: TSN - news - people ), caused pork prices to rise in the United States.

The Chinese people have been altering their dietary habits to reflect the country's newfound economic prosperity. As demand for animal protein grows, agricultural producers are turning their attention toward the country's pig population of some 500 million, looking for best practices even as swine raising is intensified.

"China is experiencing rapid growth in pork consumption and consumes more pork than the rest of the world combined. COFCO has introduced Smithfield to many opportunities in China and we look forward to continue working together," said Smithfield President Larry Pope.

In announcing the latest deal, Smithfield said that COFCO's investment is passive in nature and that the purchase agreement contains standstill provisions. COFCO Chairman Gaoning Ning will be nominated to serve as a director at Smithfield's 2008 annual shareholders' meeting. A COFCO spokeswoman, Zhang Xin Yue, said that the company does not intend to raise its stake in Smithfield; the purpose of the investment is to enlist Smithfield's expertise in growing "healthy hogs" on a commercial scale.

China is a major producer of pork but relies on small farmers to raise pigs. COFCO went into pig farming in October 2002, setting up a small operation in central Hubei province that maintains a breeding stock of 20,000 animals and raises half a million hogs commercially, under contract with local farmers. Its products have won the government's green certification. Still, more systematized commercialization and better hygienic standards are called for: pork costs have risen sharply in China, in part because an outbreak of the mysterious blue ear hog disease is estimated to have wiped out as much as 20% of China's pig population.

Under its commercialization initiative, called the Ecologically Healthy Live Hogs Breeding Program, COFCO has earmarked a total of 12 billion yuan ($1.74 billion) this year for investment to improve the conditions under which hogs are raised, affording 1.5 square meters (16.15 square feet) for each animal. The project also looks to secure adequate water and electricity supplies and will be deploy recycling technology.

The goal is to make COFCO the largest pig farmer in China, with a national market share of between 2% and 3% in three to five years' time. That would translate into annual production about 10 million and 15 million hogs, raised in accordance with standards and practices prevailing in the United States.

In a separate development, Smithfield Foods announced Monday that it would sell its principal European subsidiary, Groupe Smithfield Holdings, to Spain’s Campofrio Alimentacion, a meat processor in which Smithfield already holds a substantial stake. Smithfield will end up with 36% of the combined company, which will have annual sales of $3 billion and a presence in Romania and Russia, in addition to the Iberian and Benelux countries and France. The sale is subject to Spanish regulators waiving a requirement that a stakeholder with more than 30% of a company launch a full takeover bid.

(Reuters & AP)

Lotte to expand chocolate sales in China

SHANGHAI, June 5 South Korea's Lotte Confectionery Co plans to expand its chocolate sales in China this year beyond its test markets in three major cities to take advantage of surging consumer demand, a senior executive said on Thursday.

Lotte, which last year set up a China venture with Hershey Co , will begin sales in several affluent coastal provinces, including Guangdong in the south and Jiangsu and Zhejiang in the east, mainly through supermarkets and hypermarkets such as Carrefour, Lotte China President Lee Kwang-Hoon told Reuters.

The company's sales are now limited to Shanghai, Beijing and Tianjin.

Lotte had a 6.5 percent market share in Shanghai and 7.7 percent in Beijing as of December 2007, only two months after its first product launch, the company said, citing AC Nielsen data. It gave no sales figures or forecasts.

"Chocolate consumption has been growing rapidly in China in recent years," Lee said. "China's chocolate market may exceed its candy market in size in the next three to four years."

China's 6.46 billion yuan (922 million) chocolate market is growing more than 10 percent each year, fuelled by rising wealth and increasing Western influence on consumer tastes, according to market intelligence company Euromonitor International.

That compares with only 1 to 2 percent annual growth in Europe, making China an attractive target for major global chocolate brands including Mars Inc, Hershey and Cadbury Plc .

Lotte is targeting its chocolate mainly at China's sweet-toothed youth while studying a possible roll-out of higher-end products for the much smaller but more profitable gift market, Lee said.

(Reuters)

China eyes overseas land in food push

Chinese companies will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security under a plan being considered by Beijing.

A proposal drafted by the Ministry of Agriculture would make supporting offshore land acquisition by domestic agricultural companies a central government policy. Beijing already has similar policies to boost offshore investment by state-owned banks, manufacturers and oil companies, but offshore agricultural investment has so far been limited to a few small projects.

If approved, the plan could face intense opposition abroad given surging global food prices and deforestation fears. However an official close to the deliberations said it was likely to be adopted.

“There should be no problem for this policy to be approved. The problem might come from foreign governments who are unwilling to give up large areas of land,” the official said.

The move comes as oil-rich but food-poor countries in the Middle East and north Africa explore similar options. Libya is talking with Ukraine about growing wheat in the former Soviet republic, while Saudi Arabia has said it would invest in agricultural and livestock projects abroad to ensure food security and control commodity prices.

China is losing its ability to be self-sufficient in food as its rising wealth triggers a shift away from diet staples such as rice towards meat, which requires large amounts of imported feed.

China has about 40 per cent of the world’s farmers but just 9 per cent of the world’s arable land. Some Chinese scholars argue that domestic agricultural companies must expand overseas if China is to guarantee its food security and reduce its exposure to global market fluctuations.

“China must ‘go out’ because our land resources are limited,” said Jiang Wenlai, of the China Agricultural Science Institute. “It will be a win-win solution that will benefit both parties by making the maximum use of the advantages of both sides.”

In the first quarter of this year, food prices in China rose 25 per cent from a year earlier, the highest level of farm inflation since the early 1990s, said UBS.

China is still a net exporter of agricultural commodities but is increasingly reliant on soybean imports and is about to become a net buyer of corn.

It imported up to 60 per cent of the soybean it consumed last year and the crop would be a focus of policy support for companies acquiring land overseas, along with bananas, vegetables and edible oil crops, said an official familiar with the ministry’s proposal. The ministry is already talking to Brazil about the possible acquisition of land for soybean, according to this official.

Some countries would find it particularly problematic if Beijing supported Chinese firms to use Chinese labour on land bought or rented abroad – common practice for most companies operating overseas.

(FT)

China experts identify gene for yield, height in rice

KABUL, May 5 - Scientists in China have identified a single gene that appears to control rice yield, as well as its height and flowering time, taking what may be a crucial step in global efforts to increase crop productivity.

In an article published in Nature Genetics, the researchers said they were able to pinpoint a single gene, Ghd7, which appears to determine all three traits.

Previous studies identified a region on chromosome 7 which seemed to be responsible, but they were not able to zero in on any specific gene.

"Our study shows that a single gene can control several traits with major effects. It can double the yield, determine flowering time and plant height," said Zhang Qifa of the Huazhong Agricultural University in Wuhan province in China.

"Previously, we thought we needed to change many genes to change rice yield, now we just need to manipulate a single gene to increase productivity," he told Reuters by telephone.

Zhang and his colleagues studied 19 rice varieties in Asia and found that plants that were shorter, had fewer grains per cluster of flowers, and flowered earlier were lacking in the gene Ghd7.

When the gene was restored, the scientists saw sharp changes of increased yields, a doubling of the time to flowering and a 67 percent increase in height.

The scientists also found five different versions of Ghd7.

"The most highly active versions were present in warmer regions, allowing rice plants to fully exploit light and temperature by delaying flowering and increasing yield. Less active or inactive versions were found in cooler regions, enabling rice to be cultivated in areas where the growing season is shorter," they wrote.

(Reuters)

Papa John's to add 500 stores in China

SHANGHAI, April 16 - Pizza delivery chain Papa John's plans to add 500 restaurants in China in the next five years, making the country its biggest market outside the United States, the company's chief financial officer said on Wednesday.

China, now home to 100 Papa John's restaurants, is expected to account for more than 20 percent of the company's total revenue this year, David Flanery told reporters in Shanghai.

"China is a very important market for us and pizza has become an important part of culture in China," Flanery said.

This year, Papa John's plans to open 40 to 50 restaurants in China, out of as many as 190 net new outlets planned globally.

Papa John's and U.S. rivals such as Pizzahut and McDonald's Corp are targeting China's increasingly affluent consumers, betting that the country's 200 billion yuan ($28 billion) a year fast-food market can offset stagnant sales at home and fuel long-term growth.

Papa John's is ramping up expansion mainly through franchises in China as it seeks to narrow its gap with Yum Brands Inc's Pizza Hut in the world's fastest-growing major economy.

Pizzahut, which entered China in 1990 and had a 13 year head start over Papa John's, directly owns more than 350 restaurants in the country and is adding about 80 outlets a year.

Yum also owns more than 2,000 KFC restaurants in China, more than double the 900 McDonald's outlets.

(Reuters)