Case study: Feed industry in China and Russia

Challenges to feed industry in countries with fast-growing economies

Interview with Hans van der Waal

Hans van der Waal has been working for some years now on the Asian and Russian market as Market Development Manager for BESTMIX® - Feed Formulation software. In this job he also co-ordinates the activities of the distributors in Korea, Russia, China and Poland.

Before he took up this job, Hans worked 20 years on the Western European Feed Industry for ADIFO, so he has been a close witness to the development of the feed industry over the years and can compare his experience to what is going on in Asia and Russia.

You have been in the feed business for many years now and witnessed the development in the European feed industry. Now you have been working on the Asian and Russian feed markets for some years. Do you see many differences in these growing feed markets?

Hans van der Waal:
The main differences lay in the stage of market development the countries are in.

For instance: The Korean market has known a steady growth over the years, but it is already far in its development and cannot grow much further. This means consolidation and takeovers. The industry will emphasize on efficiency.

Russia is yet another story: Shortly after the communist period, the industry suffered a serious setback and for a long time no money was invested in the market. In recent years, the feed industry has been growing and improving again, due to local and foreign investors. For quite some time now, the Russian industry realises that they can only improve itsr business by means of new technologies. So they are very open to it. The money needed for machinery, software and consulting was only recently made available, so now they are catching up very fast.

China is still in an early market development phase. It is a sleeping giant that is rapidly awakening now. A huge growth is to be expected in China. In China a lot of money is going into the industry, but the focus is on creating bigger market shares and short-term profits. Nobody really bothers about efficiency and manageability in the long run.

Raw material costs are a hot issue these days. Feed companies need to focus on the production of high-quality feed at competitive prices. How is the feed industry meeting these challenges?

Hans van der Waal:
It is critical is to find the “best” low-priced (local) raw materials and “mix” them together with additives as to obtain a nutritional optimal feed for each species and for each age or performance stage. So feed companies need BESTMIX® Feed Formulation software and an experienced nutritionist (in- house or external). The European feed industry has come a long way in this process, but China and Russia are still at the early start. One of the main problems both countries encounter is that they do not have accurate databases with average nutrient values per raw material (like the CVB in Holland is publishing) and lab analyses of their own raw materials. If they have no knowledge of the actual contents of the raw materials, it is impossible to make high quality feeds.

What do you see as the main challenges for the feed industry in countries with fast-growing economies, like China and Russia?

Hans van der Waal:
In these countries, the feed industry is rapidly evolving. The industry benefits from the growing wealth and the high need for protein. However, this growing wealth not only leads to higher consumption of animal products, but also to higher quality and food safety demands. Traditionally, the feed industry has always been a conservative industry. They should really be aware of changes in time. If companies focus too long on volume and low prices, then others will pass them.

In a growing market, the first priority often goes to gaining the greatest possible market share. Plants pop up like mushrooms. However, at a certain moment the market is not growing anymore. We saw the same in Europe in the past. At this point, the focus needs to be redirected to efficiency and maintaining the gained market share. This leads to business mergers, an increased scale of operations and a focus on nutritional customer support. To meet these challenges, feed companies should keep a helicopter view of their activities, thus boosting efficiency and decision support.

More concretely, independent departments should be centralised in one organisation. Independent plants need one integrated production planning and individual nutritionists should work closely together in R&D centres. The company’s own knowhow should be reinforced by partnerships with research centres.

Also the purchase departments should be centralised. As well as the production and sales departments. To facilitate this process, staff members need to base their work on mutual trust. The organisation should invest in tools for integrated solutions. By means of these modern tools, data can be shared with suppliers, customers and research institutes, keeping in mind user profiles (access control) and data security. I would advise feed companies to use the best there is today as to be prepared for the future.

If you are interested to learn more about the activities of ADIFO in those countries please contact Hans van der Waal directly. E-mail: hans.van.der.waal@adifo.be Mobile: +32.495.363675

Author: Bea Van Deynse Updated: 04.02.2008 10:46