Where Am I?
 
Tag Cloud
 

The Food Partnership

The Food Partnership
 
     
Do you like this article? Share it with your friends!  
Like! Tweet! Weibo Share on LinkedIn
 

Associated British Foods (ABF) entered the China market as far back as 1985 with the Mauri Investment in Guangdong Province. How has the food and agriculture market in China changed since then?

Our yeast company, then owned by Burns Philp, first invested in China in 1985. Our sugar group first invested in 1995. This gives us a reasonably long experience of direct investment in China where we have steadily built-up our interests. But we have been involved with China for far longer than just the past quarter of a century as our specialist tea company – Twinings – has been buying Chinese tea since its creation in 1706 and has bought tea there each and every year since. So this gives us 306 years of buying Chinese goods.

You mentioned Twinings as one of ABF’s well-known brands. How is this brand expanding into China?

The tea that Twinings bought then and, indeed, the main tea sold by the first three generations of the Twinings tea dynasty – Chinese “Gunpowder Green” tea – we still sell today. Such was the novelty of tea when it first arrived in Britain that dockers refused to unload it. They feared it would explode as the tea leaves were rolled in balls which looked similar to the gunpowder shot used in muskets of the time.

As we have become more at ease in China and as the Chinese economy has matured and expanded, we have become increasingly willing to set-up solely owned production facilities. One of the latest is a Twinings tea packing operation for export from China, although there are also significant sales in China as black tea becomes more acceptable to Chinese palates. Twinings is now the largest single branded named tea buyer in China.

 

ABF has seen particularly strong growth in recent years in its sugar division. Why is the demand for ABF's sugar production technologies so strong in areas such as China?

We moved from buying Chinese goods for export to investing in China for the domestic market because of the dynamism and size of the Chinese market and its potential for further growth. As a previous ABF CEO said, a food company cannot ignore the needs of a quarter of the world’s population. One of the reasons that ABF has been able to prosper in China has been that many of our products suit the increasingly sophisticated and diversified tastes of the growing Chinese middle class. As anyone who has walked round the cities of China’s
Eastern seaboard can attest, levels of consumer orientation and market development are increasingly similar to those found in the West. Nowadays, more than half of our sugar production is from sugar cane in Africa and South China. In the last few years, however, we have extended our Chinese sugar interests by investing in the beet sugar industry of North China. This involves factory development and expansion, of course, but it also involves a major agricultural development project working as part of the Chinese beet sugar industry to improve sugar beet yields and increase acreage given over to the crop.
Food safety and sustainability seem to be at the heart of China's future plans for agriculture and food production.

How are companies within your group playing a role in this, and what are some of the challenges of making this plan for China a reality?

ABF companies are actively involved in these areas. At the company level, we have invested significantly in equipment and used internal expertise to introduce international standards. At a national level, examples include AB Sugar working with the China Sugar Association to host the WSRO Conference, and AB Agri co-hosting a conference on food safety.

Increased productivity is also clearly important for the Chinese market. Is this an area where AB Foods can help China to develop further?

Taking sugar as an example, there are many opportunities for the Chinese sugar industry to increase productivity to meet future demand. Some of these companies like AB Sugar can take the lead in development, but long-term structural changes in agriculture will require national level initiatives. Amongst these are consolidation of farming units into larger plots to support increased agricultural mechanisation, subsidies to introduce more machinery, and the wider use of efficient irrigation systems. These are all areas where AB Sugar has, and will continue to, lobby at all levels of government.

What are the next steps for ABF companies in China?

We are working hard with local communities, regional and national government and training and research institutions in China to assist in the acceleration of advanced agriculture so as to support the objectives laid out in the 12th National Economic plan for strategic crop development in China. We want to ensure our existing facilities are optimally loaded with sustainable raw materials. Additionally we intend to bring over some of the techniques we have learned in terms of process efficiency from other parts of the world to further improve costs and energy efficiency in our factories.
 

ABF has been working with China for a long time.What advice would you give to those UK companies that are just starting to do business with China?

I would say that building and developing local teams to develop the sustainability of the business is crucial. Also, given the wide regional differences and China’s size, both geographic and demographic, there is a need for continuous investment to get to the scale necessary to be competitive in China’s domestic markets and to retain market share. For ABF, this means we expect to remain a net investor in China for many years ahead with implicit time horizons 15 to 20 years out. Not many companies have this sort of view, but it is important to be committed to a long-term plan in China.

George Weston Career Chronology
Educated at New College Oxford, where he gained an MA in PPE
He also has an MBA from Harvard Business School
1992-1998 Managing Director, Westmill Foods
1999-2003 Managing Director, Allied Bakeries
2003-2005 Chief Executive, George Weston Foods Ltd (Australia)
2005 Chief Executive, ABF plc.
 

Follow us