Fucheng, a publicly traded company involved in cattle breeding, meat sales, pre-made meals, and restaurants, announced it was expanding its cattle operations.
During 2021, the company imported German Simmental cattle for its breeding operations. At the end of H1 2022, the company reported having a herd of 9,822 head.
The company reported strong growth in demand for its pre-made meal products due to Covid control measures. The company also owns 32 restaurants focused on beef dishes in northern China including hot pot, Korean barbeque, and barbecue buffet restaurants. This side of the business was negatively impacted by Covid restrictions, and the company reported large volatility in customer flows and a large reduction in number of days the restaurants were open.
The impacts of Covid restrictions have also been an issue for the company to expand its cattle breeding operations. In March, the company contracted a construction company to build new breeding facilities with an estimated cost of 150m yuan ($21m USD) which were to be completed in May. The competition was delayed until September due to Covid lockdowns.
Unlike the hog industry, which has saw a large wave of consolidation and major players expanding in recent years, the beef industry is still relatively fragmented among small companies.
In an investor statement, Fucheng noted that “the scale and concentration of beef cattle breeding in China is low, and there is a lack of large or even super-large beef cattle breeding groups”.
The Ministry of Agriculture said earlier this year that the country should aim to be 85% self-sufficient in beef production as imports have risen sharply in recent years. This goal is likely difficult to achieve due to the relative lack of major companies in the industry and the country’s reliance on imported breeding stock.
As of 2019, the 20 largest cattle breeders accounted for just 0.5% of the national herd. There has been some consolidation more recently, with the number of farms with under 50 head falling by 4% in 2020, while the number of mid-sized farms with 50-500 head grew 17%, and the number of farms with over 500 head rising by 10%.
Fucheng announced this week it was planning to invest another 57 million yuan (7.9m USD) in further expansion of its breeding operations. This expansion into upstream assets which can benefit its pre-made meal and restaurant business is similar to trends seen in the hog industry where large companies are expanding upstream into feed mills and downstream into meat processing.