by Lynda Kiernan

Japanese global conglomerate Mitsui & Co. and Japan’s Starzen Co. have agreed to form a three-way joint venture with a local Chinese partner to establish ShenZhen, a meat and seafood business in China. Located in the southern city of Shenzhen, China, the new venture plans to begin operations in September of this year, and will initially focus on Australian beef, which has lower import duties than U.S. beef. 

In a release announcing the deal, Mitsui said that its paid-in capital totals CNY30 million (JPY500 million, approximately US$4.5 million). Under the structure of the agreement, Mitsui will hold 55 percent of the joint venture, Starzen, 25 percent, and its local Chinese partner, 20 percent. 

Population growth combined with domestic supply limitations indicate that Chinese importation of meat and seafood products are expected to increase, according to Mitsui, which has been tracking market demand in China. 

Indeed, climbing incomes and improvements in the standard of living for China’s burgeoning middle class are the engine behind expectations that Chinese meat imports will soar by 3,500 percent to a value of US$150 billion by 2050, according to the Australian Bureau of Agriculture and Resources Economics and Sciences (ABARES). 

This shift would place China in the position of accounting for more than 40 percent of the increase in total global food demand, according to Patrick Vizzone, head of food and agribusiness, Asia, for the National Australia Bank. 

“The shift from a rice to meat diet has already happened in China. Even small changes in the way China consumes can have a large impact overseas,” Vizzone told the South China Morning Post. 

Likewise, China’s consumption of seafood is on pace to soar over the coming decade. Identifying seafood as a more efficient protein, in the report “2018-2027 Outlook for Agriculture”, China’s Agriculture Ministry projects the country’s per capita consumption of aquatic products will increase from 14.3 kilograms in 2015 to 25 kilograms on average, and 30 kilograms in urban areas. 

Mitsui and Starzen have been in partnership since 2010, and established a capital tie-in in 2016, with Mitsui now being the top shareholder in Starzen. To this latest venture, Mitsui will bring its global network and business management experience to play, while Starzen will bring to the table its expertise in meat distribution, and client base to develop an integrated business that reaches from raw material procurement, through processing, and sales of value-added products. 

Beginning with Australian beef, the partners plan to enhance their product lines with tuna, shrimp, and salmon farmed by Mitsui in Chile, Japan, and Vietnam. 

In May of this year, Mitsui announced its agreement to acquire a 35.1 percent stake in Vietnam-based Minh Phu, the largest shrimp integrator in the world, for $150 million. 

At the time, Mitsui said that the deal aligned with its medium-term management plan to focus on agriculture and nutrition as targeted sectors for growth.

 In 2013 the conglomerate invested in Minh Phu Hau Giang Joint Stock Company (“MPHG”), a processing plant affiliated with Minh Phu. Over the past six years, Mitsui has contributed to optimizing both the management and operations of MPHG, and now, with this investment in its parent company, Mitsui plans to bring these initiatives from MPHG to the entire Minh Phu Group.

Part of this plan is to help Min Phu to meet rising demand through the application of digital technology including the use of AI in its farming ponds and processing plants, to increase efficiency along its entire shrimp supply chain, and to improve productivity, and stability of supply from farm to market.

In China, the partners in ShenZhen plan to focus on the southern province of Guangdong, later expanding to inner provinces and Hong Kong. Within the first year of operation beginning in September 2019, the partners expect the business to generate sales of $28 million (JPY3 billion), and within the first four years, expect sales to increase fivefold to US$140 million (JPY 15 billion).

 

– Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.