China Consumer

Scramble for Zhong’s eggs

Wealthier shoppers are paying a premium for organic eggs

It's no yolk: China eats 40% of the world's eggs

China is no stranger to egg-on-face incidents in consumer safety, be it toys, drugs, or most notoriously, infant milk formula. Following last year’s widespread Sanlu milk scandal, melamine – the chemical used to bloat up protein level in milk powder– was also discovered to be present in some of the nation’s eggs too, triggering fresh fears of unhealthy eating among an increasingly paranoid public.

China accounts for 40% of the world’s egg consumption – making it, like in many things, the world’s largest consumer.

The egg farming industry, however, is highly fragmented. Producers are predominantly small enterprises with little budget for quality control and production standards. Only a couple of farms in the whole country can boast more than a million birds. In Europe and America such farms are commonplace.

Enter Zhong Kaimin. After a 16 year career as an engineer at the Ministry of Defence, Zhong makes for an unlikely ‘egg entrepreneur’. Despite his family’s early opposition, Zhong founded his own firm, Deiqingyua in 2000. His laudable goal: to provide safe and reliable eggs in China.

His determination has paid off. A business founded with seed money of Rmb500,000 is now estimated to be worth over Rmb300 million ($43.8 million).

Enthused by Zhong’s vision, the International Finance Corporation (IFC) and the Washington-based Global Environment Fund (GEF), together invested over Rmb100 million in Deiqingyuan. “These days, we get more and more investment with less and less effort convincing investors,” says Zhong.

Unlike his rivals, who outsource at least some of their activities to others, Deqingyuan is closely involved in every step of egg production. To secure safe and high quality chicken feed, it also works closely with local manufacturers, providing training in the latest technology to support quality and boost efficiency.

The hands-on approach has paid off. Deqingyuan was unscathed by the recent tainted-egg scandal; “Our orders increased sharply, and consumers trusted our brands more,” says Zhong.

Deqingyuan has more than a 70% market share in the branded egg market in Beijing, according to AC Nielsen. The company was the first to brand its eggs with distinctive packaging, stamping them with a fake-proof code listing the day on which the egg was laid and even the hen which did the laying.

Zhong’s branding strategy has struck a chord with Chinese consumers. With the growing affluence and burgeoning environmental consciousness amongst wealthier Chinese, more shoppers are willing to pay a premium – especially where food for their children is concerned. While an egg in the market costs about Rmb0.3, Deqingyuan charges Rmb1-2.

In spite of the price difference, Deqingyuan continues to sell its entire output. The company forecasts Rmb200 million in revenue for 2008, up from Rmb140 million in 2007, says China New Time.

Zhong has an ambitious plan for the company’s future: “We are thinking of a stock market listing in the next two to three years,” he reveals. “Our aim is to build Deqingyuan into the world’s top egg manufacturer.”


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.