China’s biggest food company, Cofco, plans to look at investments in the Australian dairy and beef industries as it moves to become the face of China’s transformation of its biggest state-owned enterprises into globally competitive corporations.
Cofco president Patrick Yu told a private roundtable forum in Melbourne, hosted by the Australian not-for-profit The Global Foundation, that Cofco was at the forefront of SOE reform and that more partnerships with Australian companies would help drive its new global, commercially focused mandate.
“For us it is very important to build a supply chain by working together with our partners. We are becoming a global citizen. We are not just a Chinese company any more,’’ Mr Yu told the forum during a rare visit to Australia.
In unusually frank comments for the CEO of a top government-backed Chinese enterprise, he acknowledged it was challenging for an SOE to become more market-oriented.
But he said the Chinese government planned to delegate more power to the commercial platform of Cofco and that his company’s “systems’’ were starting to change as a result.
He said Cofco’s management team and staff were learning to balance the demands of playing by global rules on the global stage while at the same time growing a local identity in the areas in which it operates, noting it “wasn’t easy”.
“While we have to be globalised, we also have to be in the local circle. You have to work closely with local industry, local people.”
Cofco — or China National Cereals, Oils and Foodstuffs Corporation — is one of the largest SOEs of the 49 directly administrated by China’s State Council.
Last year it was one of a handful of enterprises chosen by the authority to lead reforms of the SOE sector after a string of poor international investments by SOEs led to huge losses across a range of sectors in recent years.
As China’s largest food processing, manufacturer and trader, Cofco has bought several smaller domestic firms in recent years. Then last year it made its biggest steps onto the global stage with $US2.7 billion to acquire Dutch grain trader Nidera and 51 per cent of Noble Group’s agriculture unit, giving it new pathways into South America and central Europe.
In the interim, in 2011 it made its first acquisition in Australia, paying $145 million for Tully Sugar in Queensland, which supplies 10 per cent of Australia’s annual sugar crush.
Mr Yu said Cofco had learned plenty from its ownership of Tully that it was applying to other parts of its empire, including sending its Tully Sugar farming expert to Brazil in a bid to reduce the company’s sugar chain production cost from its South American operations.
Mr Yu added that Australia remained a prime target for investment “With Chinese consumers, today people are strongly aware that Australian food and agricultural products are safer, good quality, good products, good innovation to the China market,’’ he told the forum.
“We should have some local partners in Australia. Victoria is very strong in the dairy sector so we should look into that. The other area is protein — I think beef is the next potential area for Australia to China. Australia is in the best position for fresh produce.”
The Australian beef market is enjoying record high prices driven by increased demand from Asia for live cattle and boxed beef.
Last year, Cofco signed a memorandum of understanding for a landmark Asian Food Partnership with the Global Foundation.
It set the terms and understanding between the two for mutual co-operation in contributing to an Asian Food Partnership and to global food security.
“I believe that with the support of the Global Foundation, Cofco can have the chances and opportunities to grow our business not only in Australia, but elsewhere,’’ Mr Yu said. “We can bring China demand and Australian suppliers into China and Australia will become much stronger trading partners in the long run.’’
The Global Foundation is already working with National Farmers Federation chief executive Simon Talbot, who attended the Melbourne forum, to forge relationships with the food-focused parts of Cofco.
Cofco has four companies listed in Hong Kong: China Foods, China Agri-Industries Holdings, Mengniu Dairy and Cofco Packaging Holdings.
“We are putting a team around Simon that develops an innovation centre for SMEs to better understand the China market and work with Cofco as partner,’’ said Global Foundation secretary-general Steve Howard, who will visit Mr Yu again in Beijing early next month.
But Mr Yu said the partnership with the Global Foundation could also extend into other sectors.
“There is (also) much more potential for the Global Foundation to bring together players in the healthcare and education industries,’’ he said.
The Foundation’s Asian Food Partnership with Cofco is also complemented by a focus on supply chains and export infrastructure, which has been led by Aurizon CEO Lance Hockridge over the past 18 months.
Mr Hockridge plans to take a team to China in the coming months to meet with Cofco to examine the company’s supply chains and distribution systems.
As written by Damon Kitney in The Australian on October 27, 2015