Chinese Mandarin - Beyond the bean

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Beyond the bean
By SONG WENWEI and DIAO YING (China Daily)
Updated: 2007-09-24 07:21

Soy has been a part of the Chinese diet for thousands of years. But it's
only in recent decades that the bean's production has been transformed
into an industry, initiated by an enterprise in East China's Jiangsu
Province.

Cui Guiliang, chairman of VV Group Co Ltd, still remembers the days when
the company first invented soy milk powder, and how people reacted with
skepticism. But today VV is the biggest soy milk maker in China.

"We still believe that the soy industry is very promising," says the
45-year-old Cui, dressed in a black T-shirt and trousers worn when
performing taiji, a traditional martial art. "In many countries soy is
believed to be a gift that God has given to the human beings."

Soy might be a promising industry, but the company has expanded beyond
the bean in the past two decades. Apart from soy milk, the company also
has its feet in mining, dairy and baijiu, or white spirits, another
traditional Chinese drink. The company today is one of the biggest food
makers in the country, with a sales volume of 9.8 billion yuan.

The beginning

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Cui Guiliang

Cui attributes VV's success to the good timing of his age. Although he
was born in the 1960s, when the country was stricken by hunger and
poverty, he says, "I was a baby, taken care of by the whole family. So I
did not suffer."

As a teenager he got the chance to enter university and receive an
education, a rarity for people of his age. Armed with knowledge of
business management and economics, and an innovative mind, he was elected
head of the local grain factory at age 26, when most workers at
State-owned enterprises had to work until their forties or fifties to get
promoted.

Cui's promotion was also at the right time: In 1988 China was in a
transitional period from a central planning economy to market economy,
the year he was elected head of the factory. According to the planning
system, Cui's company's products, including grain and edible oil, had to
be collected throughout the country and distributed to each State-owned
provincial-level sales network before reaching each family. The economic
reform allowed some of these products to be traded in the domestic
market. Cui saw an opportunity.

The product that he first put his eye on was soy and he decided to use
the bean to make something accessible to the common consumer. Together
with scientists from Shanghai, he worked out a formula to turn soy into
powdered milk. VV's soy milk soon became a nutritious product that
millions of Chinese parents purchased for their children.

The soy milk market grew rapidly during the 1990s, driven by a government
campaign to raise public awareness about the health benefits of soy
products. Around this time, VV launched a major advertising campaign on
CCTV and received a lot of media coverage, which helped it become the
market's dominant player, with up to 70 per cent of market share.

VV has faced many followers in the soy milk market since, but none has
reached the same position as VV, and it remains the main soy milk
producer until today.

Business expansion

Unexpectedly, VV's main competition today does not come from other soy
milk makers, but from the overall beverage market, particularly the dairy
industry, which offers liquid milk at much lower prices. VV recently
experienced a decrease in brand exposure. Although Cui said VV still
sticks to the soy industry as its core business, the business has entered
into other sectors.

In 2000, they entered the milk industry, purchasing dairy from Northwest
China's Xinjiang Uygur Autonomous Region and other areas.

VV's latest move is to enter the baijiu sector, buying shares in a
Jiangsu-based company called Shuanggou, a well-known liquor brand
nationwide. Cui builds the confidence based upon his belief that as
China's economy develops, the drink will soon grow in global popularity
and its market value will increase.

According to a CCTV report, Shuanggou had sales of 850 million yuan in
2006. VV Group became the firm's major shareholder with an 80 million
yuan acquisition of 38.27 per cent of the State-owned firm.

In 2000, VV was listed on the Shanghai stock exchange, a major step for
the company. The listing has helped the company to have a more
transparent management and therefore the company has put an eye on coal,
milk and other products, Cui says.

Despite the expansion, Cui still believes that there is "great potential"
in the soy milk market. "People are more and more concerned about health,
which will definitely create a huge demand for soy milk, as long as the
quality can be guaranteed and taste be improved," he says.

Stick to the essence

Cui remembers that as a student he would read through textbooks, get a
general idea and then throw away the content he deemed unimportant. To
distill key things from the sea of knowledge has also become his life and
business philosophy.

The key thing for VV, Cui believes, is the brand, of which he has always
been protective. The recent conflict between the French food giant Danone
and China's water maker Wahaha has been put under the media spotlight.
But Cui says Danone has been talking with VV, which Cui has refused. He
insists upon the ownership of the brand.

Cui is a great fan of taiji, a form of traditional martial arts that he
had performed ever since he was a college student. Every night before he
sleeps, he performs taiji for a few hours, which he believes contributes
to his health and brings sound sleep.

And when it comes to business, he applies a concept familiar to taiji:
stay down to earth.

(China Daily 09/24/2007 page12)

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