On 28 September, China Evergrande Group
(CEG, stock code: 03333) announced that its fully-owned subsidiaries Evergrande
Group Co., Ltd. and Ace Capital Ventures Limited have signed 2 agreements with
independent 3rd parties Shenzhen Mingsheng Duling Commercial and Trade Co.,
Ltd. (Mingsheng Duling) and Sunlight Property Management Limited to sell its
Evergrande Dairy Co., Ltd. (Evergrande Dairy) and Challenger Global Investments
Limited and their affiliated companies (combined as a dairy business) for USD44.8
million (RMB300 million). For 5 years from the settlement day, the dairy business will have the right to continue using the “Cowala” and “Evergrande”
brands providing these are supported and not damaged through over-extension or
mis-application.
Source: Baidu
Mingsheng Duling, founded in 2007 with a registered capital of USD7.5 million
(RMB50 million), is indicated as mainly involved in goods and materials supply
and marketing.
Evergrande Dairy history
-
September, 2014: Evergrande Dairy was
established and successfully acquired New Zealand based Cowala Dairy Co., Ltd.
(part of GMP Pharmaceuticals Ltd), which is dedicated to producing
pharmaceutical grade infant formula
-
26 October, 2014: “Cowala” infant formula advertised at Chinese Football Association Super League matches
-
28 October, 2014: “Cowala” infant formula
opened its Tmall.com flagship store
-
12 June, 2015: “Cowala” OPO infant formula
was launched, targeted at the premium formula segment
-
10 August, 2015: sales of “Cowala” infant
formula exceeded USD29.8 million (RMB200 million)
-
September 2015: 27 provincial sales
companies were established, and a marketing network covering traditional
channels, supermarkets and online platforms was built
-
10 December, 2015: it introduced a system
of full process traceability, from the pant through exports to the ports and
the end consumers
-
September 2016: CEG announced the sale of
its infant formula business
Seemingly, Evergrande Dairy had positioned
itself clearly, established a complete marketing system and had sufficient
funding, which should have enabled it to operate in the infant formula market
profitably. However, it suffered losses: by 31 August, 2016, the net
liabilities of Evergrande Dairy, Evergrande Grain & Oil Group and
Evergrande Spring Group totalled about (USD492.5 million (RMB3.3 billion).
A key factor for its poor performance is its inexperience in this business.
“Word-of-mouth” is of great importance in the food business, requiring
companies to guarantee quality, establish strong consumer awareness and support
and to develop sales channels. Simply providing the funding may often be
insufficient: setting up a dairy business from scratch takes at least a couple
of years and the acquisition of an overseas company and brands can provide a
short cut - this was Evergrande Dairy's approach, but lack of industry knowhow
and positive “word-of-mouth” seem to have hindered its development.
“In the future, we will focus on real estate and other businesses,” stated CEG.
Reportedly, the other businesses include finance, Internet, healthcare and
tourism.
This article comes from Dairy Products China News 1610, CCM
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Tag: infant formula dairy