Tuesday, November 21, 2006

Consumer goods / Processed food / Pork product categories 2 comments

(P.S: Sorry for any disturbances the advertisements above may have caused you)
There are a number of pork processors listed on the SGX, and I have at various times been invested in one or two of them. Pork has traditionally been the most preferred choice of meat for Chinese, consistently exceeding the popularity of other choices, such as beef, lamb and poultry. Pork production accounted for ~65% of total meat and processed meat product production in China in 2004. Pork products are typically divided into clear-cut categories as listed and described below:

Processed Meat products
There are two main types of processed meat products: High-Temperature Meat Products (HTMP) and Low-Temperature Meat Products (LTMP).

HTMP: HTMP are cooked at high temperature and pressures, which enables them to be subsequently stored at room temperature and have relatively long shelf lives. A good example of HTMP is canned meat.

LTMP: LTMP are cooked at lower temperatures and pressures, and have shorter shelf lives. LTMP generally taste better than HTMP as they are able to preserve the taste and nutrients found in the ingredients, and generally cater to the taste of consumers in the city who have higher consumption power. They are generally priced higher than HTMP. Examples are ham products and fresh sausages.

There are also two main types of pork depending on the storage methods: frozen pork and fresh/chilled pork.

Frozen pork: Frozen pork is frozen and maintained at very low sub-zero temperatures, and have longer shelf life compared to fresh/chilled pork. Frozen pork can be used in many different ways. Food processing companies require frozen pork in their production of processed meats such as luncheon meat, canned stewed meat etc. A majority of the pork sold in markets, supermarkets and restaurants are also frozen pork. Hence, frozen pork appear both as intermediate products to downstream processors, as well as at the end of the distribution chain direct to the consumers.

Fresh/chilled pork: Room temperature pork is typically sold at room temperature in wet markets with no or little post slaughtering processing, while chilled pork is typically sold in supermarkets in the PRC because it must be refrigerated at low temperatures (>0 degC). Because chilled pork is chilled and not frozen, it minimizes the loss of nutrition and retains the natural taste of room temperature pork while at the same time benefiting from the hygienic advantages of frozen pork. As with the LTMP vs HTMP comparison, fresh/chilled pork tends to be preferred as consumers grow more affluent, compared with frozen pork. The price of fresh pork meat is approximately 20% higher than frozen pork meat.

Pig by-products
Pig by-products consist of all other parts of the pig that are left over in the production process. These include pig innards, pig skin, pig tails, lard and
pig heads. Edible by-products, such as pig stomach, are typically sold to suppliers of fresh markets while other by-products are sold for industrial use. For example:

Blood : Protein source in feed, fabric printing & dyeing
Brains : Medicine production
Skin : Garments, shoes
Bone : Animal feed
Hair : Artist brushes

Pig rearing/ slaughtering
Pig farming in China is generally not commercialised. The slaughtering sector is also very fragmented and dominated by mostly smallscale and low technology slaughterhouses. Different pork processors operate different business models. Some, like People's Food, concentrate on downstream processing and purchase their pig supplies from suppliers who aggregate output from pig farms. Others, like United Food, are more vertically integrated and operate pig farms as well.

(1) People's Food Prospectus
(2) United Food Prospectus
(3) China Yurun Prospectus




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11/21/2006 11:25:00 PM  
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