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A consuming passion for quality eats away at the nation's heart

By Lyu Chang in Beijing and Qiu Bo in London | China Daily | Updated: 2013-10-14 06:32

In May, Mengniu Dairy Co, one of China's largest milk producers, struck a deal with French food products firm Danone SA to create a joint venture to expand yogurt production in a market where foreign brands are generally preferred. Oliver Barron, head of the Beijing branch of UK-based investment bank NSBO, says that more such deals are likely to be struck in the food sector between Chinese and foreign firms in the next few months.

These alliances, however, are not just about offering an up-scale range of products, experts say.

The fact that Shuanghui has decided to retain the US operations and brands and also uphold safety standards indicates that the deal is more about gaining access to technology and quality know-how.

"The deal will create a leading global animal protein enterprise," says Shuanghui chief executive Zhijun Yang. "Shuanghui and Smithfield have a long and consistent record of providing customers around the world with high-quality food, and we look forward to moving ahead together as one company."

Many safety scares in China have eroded trust among the middle class in domestic food products, ranging from pork to dairy products. In 2011, Shuanghui was allegedly found to be selling pork from pigs that had been fed banned additives, which made the pigs leaner but posed health risks to humans.

Melamine-tainted milk powder in 2008 that killed at least six children and sickened about 300,000 others, have further fueled people's concerns about the safety of domestic milk powder.

In response, the Chinese government called for efforts to make infant formula, ingredient milk, meat, vegetables, liquor and wine, as well as dietary supplement products traceable by building up a national electronic food-tracking system to boost food safety supervision.

Last year, in Jinan, capital of Shandong province, the Municipal Bureau of Commerce established a system for tracking pork. The bureau uses a bar-code reader to track meat in more than 80 stores.

Marcia Mogelonsky, a food and drink analyst at London-based research company Mintel Group Ltd, says Chinese companies can learn best practices through acquisitions.

"There are many companies in the West that have processes to guarantee the safety of food processing from start to finish. Chinese companies would benefit by seeking out Western companies with high-quality traceable food safety systems," she says.

In Europe, for example, obtaining best practices and technologies is an important factor behind Shanghai-based Bright Food Group Co's acquisition of a 60 percent stake in British cereal maker Weetabix Ltd for more than $1 billion last year.

At the time of the acquisition, Bright Food's chairman, Wang Zongnan, said Weetabix's "best-in-class production standards and excellent record for innovation" should bring in long-term profits.

This kind of guarded optimism has opened doors for many of the recent Chinese acquisitions of foreign food makers, underlining the growing appetite of Chinese food companies for foreign mergers and acquisitions.

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