Food firm gets taste for growth
Updated: 2016-11-07 07:14
By ZHONG NAN in Shenzhen(China Daily)
An employee of Ziemann International GmbH, a subsidiary of CIMC ENRIC, adjusts equipment at a beer brewing project in Mexico. Photo provided to China Daily
Company, that also specializes in energy and equipment, brings its expertise in finance, tech and innovation to a clutch of industries across the world
China's specialist equipment maker CIMC ENRIC Holding Ltd will continue mergers and acquisitions in developed countries as part of its expansion into markets along the Belt and Road Initiative.
The energy, chemical and liquid food equipment company is a major subsidiary of China International Marine Containers (Group) Ltd, the country's largest transportation equipment producer by revenue.
In June, the subsidiary bought out the United Kingdom-based Briggs Group Ltd, a food equipment provider, for 23 million pounds ($28.6 million).
CIMC ENRIC's technologies are expected to double Briggs' revenue as well as profit over the next five years.
This is the third food equipment business that CIMC ENRIC acquired in Europe. The previous two pickings have seen substantial localization of their operations, which benefited their domestic markets.
Yu Jiamin, CIMC ENRIC's director for strategic development, said the industry worldwide had been upgrading.
The "Make in India" campaign is also expected to shake up the global manufacturing sector. So, traditional mass production of low-end goods, products and tools cannot meet the new demands of the global manufacturing sector.
"Chinese enterprises need to absorb excellent resources from global brands through overseas M&A and build core strengths in branding, technology and talent rather than low-end manufacturing; upgrade technologies faster; and localize global operations," said Yu.
The trade, service and infrastructure network proposed by the Chinese government in 2013 envisions a Silk Road Economic Belt and a 21st Century Maritime Silk Road, covering about 4.4 billion people in more than 60 countries and regions in Europe, Asia and Africa.
Countries along the Belt and Road Initiative, including Vietnam, South Korea, Mongolia, Nigeria, Angola, Ethiopia and Russia, are key to CIMC ENRIC as it increases its investment in marketing and resource integration over the next five years.
The Chinese company will deploy more resources in the ASEAN region, South America and the domestic market to compete with other established rivals in these fast-growing markets.
"We don't simply ship products or introduce technology, but acquire global advanced resources like management expertise, technology, talent and brands through M&A, to make the company efficient and effective in globalizing our business," Yu said.
Ding Lixin, a researcher at the Chinese Academy of Agricultural Sciences in Beijing, said it is reasonable for domestic beer and beverage equipment suppliers to seek new opportunities in emerging markets for sustained and sustainable growth.
For example, markets in the ASEAN region, Brazil and Nigeria are not affected by cold weather conditions because of their geographic location.
The Briggs deal will likely provide CIMC ENRIC with effective resources such as distilling and yeast for non-brewing industries, and boost efforts to build capability in the non-brewing equipment sector, he said.
CIMC ENRIC's sales revenue was 8.24 billion yuan ($1.22 billion) in 2015, with 26 percent of it coming from its liquid food equipment business.
So, the Briggs deal is key, and will give the company about 30 percent market share in the global brewing engineering equipment and make it one of the world's three biggest suppliers.
"The growing demand for beer and beverage products in countries along the Belt and Road Initiative will bring more choices to consumers to choose local beer or drink brands, as they have better and more options to pick products that they think are cheaper, safer and better in taste, instead of only selecting beer products from developed markets," Ding said.
Eager to enhance its earnings from the domestic market, the company began operations in September at its new brewery projects. It installed a mash filter, brewhouse, cold area and a big tank sourced from a top brewer in Baoding, in Hebei province.
The company also invested in another brewery project in Jishui, Jiangxi province, phase I of which began operations recently.
The two projects entailed investments of 2 billion yuan and 1.6 billion yuan respectively. They will together yield 1 million metric tons of beer and 2 billion yuan in sales annually upon full completion by Ziemann Holvrieka Asia Co Ltd.
The latter is the Asian production base of Ziemann and Holvrieka, which specialize in engineering, procurement and construction or EPC projects, a common form of contracting in the construction industry.
Ziemann and Holvrieka are two brands of liquid food equipment industry which have been acquired by CIMC ENRIC from Germany, the Netherlands, Belgium and Denmark in 2012 and 2009, respectively.
Ziemann and Holvrieka so far have delivered more than 120 brewing EPC projects in 33 countries and regions, including Mongolia, Singapore and Papua New Guinea. They have seven research and development centers in Asia and Europe and plan to build more marketing networks in countries along the Belt and Road Initiative.
"The most obvious opportunity is the modernization of beverage and food supply chains. That is a big area and there are lots of investments going on there," said Lars Roed, general manager of Ziemann Holvrieka Asia.
Roed said the demand for beer, milk, yogurt, juice and soft drinks will also offer new growth points for equipment and ingredient businesses.
"We have seen lots of potential in this sector, not only in China, but in many dynamic emerging economies," he said.
In addition to overseas market expansion, CIMC ENRIC is also working with its key customers in various countries to deliver innovation in areas such as key equipment and turnkey engineering services for distillation, pharmaceuticals, yeast and biofuels.
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