Chinese Food Giant Exploring Deals In U.S.
In a few short years COFCO, or China National Cereals, Oils & Foodstuff Corp., has spent billions acquiring global agricultural assets making it one of the biggest food companies in the world with food processing assets on five continents. The company has grown beyond grain to include involvement in all stages of China’s food supply, from the farm to the fork, including organic edible oils, flour, dairy, additive-free bacon, and its Great Wall brand of wines. Now the Chinese giant is turning its attention to the U.S. It is reaching out to U.S. companies regarding possible deals that could include U.S. grain terminals, ports, partnerships, or acquisitions, according to COFCO head of North America, Paul Liu.
"We want to get more involved in other parts of the world, especially in the Americas, where a lot of the grain is grown, shipped and exported to other markets like China," Paul Liu, reported to the Wall Street Journal.
In 2014, COFCO spent $2.7 billion to acquire the Dutch grain trader, Nidera BV and 51% of Noble Group’s agricultural unit – giving the company entry to the key grain producing regions of South America and Central Europe and a few grain elevators in Chicago and Milwaukee. After the Nidera and Noble Group deal, COFCO’s estimated revenues last year stood at $63.3 billion – lagging behind the biggest global agricultural giants, ADM, Bunge, Cargill, and Louis Dreyfus. But COFCO is still buying.
Founded in 1952, the China National Cereals, Oils & Foodstuff Corp., or COFCO, was the arm of the Chinese government responsible for importing commodities at a time when the country was deeply isolated and dealing with persistent food shortages.
Although the company remained firmly focused on grain trade, political and economic changes occurring in the late 1970’s allowed for COFCO to branch out into globally branded deals that brought Coca Cola and Seagram Co. alcohol to China. By the early 2000s shifts continued, as China saw explosive economic growth, and the swelling of a massive middle class that caused a change in dietary demands. Now, the grain that COFCO was importing was increasingly being allocated to the country’s livestock sector in order to satisfy a growing demand for meat.
Since 2004, under the company’s new chairman, Ning Gaoning, and with the monetary resources of the Chinese state behind them, COFCO has transformed into a globally competitive giant approaching the big four ‘ABCD’ companies of ADM, Bunge, Cargill, and Louis Dreyfus.
Acquisitions began apace. Moving beyond grain trading, COFCO was aiming to gain scale in global food production. In 2010 the company acquired a Chilean winery, and another in Bordeaux a year later. That same year, COFCO made its big move, emerging onto the global stage with a bid of $145 million to acquire Australia’s Tully Sugar, and with it, 10% of Australia’s yearly cane crushing output.
Tomorrow Oilseed & Grain News will explore the specific challenges COFCO may face in trying to expand into the U.S.