Yonghong Food seeks to expand with PE backing

Customers buy snacks at the China-Northeast Asia Expo on Sept 7 in Changchun, Jilin province. The leisure food business has attracted increasing investment in the country.[Photo by  Zhang Nanshe/For China Daily]

Beef jerky seen as 'next big thing' in China's rapidly evolving food sector.

In the mind of manager Yi Ming, no matter how niche a market is in China, if a type of consumer product can achieve a leading position, the economic benefits can be huge.

Yi, who led operations for brands including Marlboro, Heineken, Tiger and Dole Juice in the past 25 years, is the new chief executive officer of Yonghong Food Co Ltd, one of the top three players in the Chinese beef jerky market.

"I have missed opportunities for water and herbal tea products that were huge successes in China; beef jerky can be the next opportunity and I must seize it," Yi told China Daily.

Yi was referring to water brand Wahaha and herbal tea brand Jiaduobao, two of the most successful products in China in terms of sales performance. In 2009, Jiaduobao's annual sales totaled 19 billion yuan ($3.1 billion).

Four months ago, the China-focused private equity firm Lunar Capital Management invested $50 million in Yonghong to buy a 70 percent stake in the company. Yi was then invited by Lunar Capital to lead Yonghong.

Set up in 1984, Yonghong is headquartered in Huishui country, Guizhou province, and owns the Niutou, or Bull Head, brand, which is recognized as a China Famous Trademark.

However, as the company's three founders - rural entrepreneurs Tang Kelin and Tang Kexiang and their neighbor Liu Zhongying - became older and the second generation didn't want to take over the business from them, they started to seek outside talent. Lunar Capital as well as Yi were their choices.

Lunar Capital has advanced management experience, which may allow the company to go public and boost exports, said Liu.

Derek Sulger, founder of Lunar Capital, said that after controlling a company, the private equity firm seeks to improve its management.

In the past 14 years, Lunar Capital has focused on the Chinese market. The firm has invested in Beihai Perfuming Garden Co Ltd, a leading processor of tropical fruits; Yeehoo, the largest domestic babywear brand by sales; and Sichuan Zhiqiang Group, which sells beverages under the brand name Joysun.

Yi said that for nearly 30 years, Yonghong has been synonymous with quality and taste, but it's not popular among younger customers.

"So our goal is to make the brand younger, change the packaging and strengthen promotion efforts," said Yi.