Eggsactly right

With neatly cut hair and a pair of delicate glasses, Zhong Kaimin looks more like a scholar than an entrepreneur - partly because he worked in one governmental agency for 16 years.

Zhong is the chairman and founder of Beijing Deqingyuan Agricultural Technology Co Ltd, China's top branded chicken egg manufacturer. Deqingyuan has become the first choice for many Chinese households buying high-grade eggs. According to a survey by AC Nielson in 2007, Deqingyuan eggs accounted for 71 percent in the branded egg market in Beijing.

Speaking with a gentle voice and at moderate speed, Zhong says: "Our aim is to build Deqingyuan into the world's top egg manufacturer."

The company marks its eggs with distinctive packaging and stamps them with the date they were laid, the first time this has been done in China.

In Beijing, where the company's headquarters is based and the main market lies, Deqingyuan's posters can be seen in bus stops and subway stations and the company has also done some TV commercials.

Last year Deqingyuan produced around 247 million eggs and achieved a sales revenue of 140 million yuan. This year it is expected to produce 372 million eggs and achieve sales of over 250 million yuan, says Zhong.

"We plan to increase the number of our chickens to 10 million in the next two to three years. Our sales revenue will then reach over two billion yuan in a year," he says.

The company's business proposition is based on Chinese consumers growing willingness to pay for food safety. Expenditures on household consumption in the country have risen by almost 7 percent a year, much of it going towards better quality food.

"China is now the world's biggest egg consumer, accounting for 40 percent of the world consumption," says Zhong. "However, the country's egg production industry still lags far behind that of western developed countries. Now in China's 800,000 chicken farms, over 95 percent only have the capacity of less than 10,000 chickens, while in the US and Europe, farms with 500,000 chickens are commonplace.

"The industry will see some consolidations in the future, and we will take advantage of this to further expand our capacity."

Sustainable development

Forty-five-year-old Zhong founded Deqingyuan with five other partners in 2000. At that time the company's registered capital was only 500,000 yuan.

Today the company's registered capital is nearly 300 million yuan. "I devoted 80 percent of my time in the past years to fund raising."

Zhong's investors ranged from friends, private equities to overseas investors. But what impressed him most are the two co-operations with the International Finance Corporation (IFC) and the Washington-based Global Environment Fund (GEF).

"Besides testing my company's capability, they also asked me about my sustainability concerns, such as animal welfare and environmental protection," says Zhong.

Zhong's answers satisfied them and the two institutions together invested over 100 million yuan in the company.

According to IFC, it was impressed by Deqingyuan's vision of transforming China's egg production at the same time as it pioneered new standards of sustainability.

Deqingyuan's deeds include quality hatcheries for the chickens and good quality feed, thereby reducing the incidence of stress for the birds and disease.

Different from its few rivals, which outsource at least some of their production to others, Deqingyuan does everything itself and is in control of its chickens all the time. This has also protected the company from the recent melamine chemical scandal that began with infant formula and later spread to eggs.

In October several domestic egg companies were found to have melamine contaminated chicken feed, something that caused widespread fear among consumers.

Prices and sales of some branded eggs plunged and one of Deqingyuan's main competitors, Gegeda brand eggs, produced by the Dalian Hanwei Group, was taken off from shelves of many supermarkets in Beijing after melamine tainted products with another brand from Hanwei were found in Hong Kong.

But because Deqingyuan products were found safe after a series of tests the company was a winner in the scare. "Our orders increased sharply, and consumers trusted our brands more," says Zhong.

"Sustainable development, with healthy manufacturing and healthy competition, is important for China's chicken egg industry," he says.

"I hope we can help transform China's egg production industry, towards better food quality and safety."

Uneven start

Born in the Xiangtan city in the Hunan province, Zhong clearly recalls that when he was young, under the national quota system his family could only buy half a kilogram of eggs every month. At that time, only when he got good scores in exams or was praised by the teacher could he eat an egg.

Luckily, Zhong, the youngest child in his family, always had the most eggs. "I can never forget how delicious they were and how happy I was eating them."

Brought up in a family with a good education, Zhong studied chemistry in university and then joined the former Ministry of 5th Machine-building Industry. As part of his work he had opportunities to visit some foreign countries and to his surprise found many eggs sold with production dates and trademarks.

Zhong further learned that in many countries there are many standards to ensure the production and sales of quality eggs. However, in China at that time few people knew the importance of setting standards in the industry.

"I had been working as an engineer and there are lots of standards in my work and I began to think that egg manufacturing also needed standards," says Zhong.

In 1999 Zhong decided to start his own egg business. "I spent one full year persuading my family members, saying that I am doing a meaningful business for the country."

Clear future

Now Deqingyuan's business is growing by over 100 percent year-on-year, and Zhong says he 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 says, adding the move would give the company access to further capital to scale up its operations.

The company is now constructing a farm in Huangshan city in southern Anhui province. It is also planning another farm in Guangdong province. With two egg production facilities Deqingyuan is targeting the Yangtze River Delta and the Pearl River Delta, China's two most prosperous regions.

In 2007 Deqingyuan eggs entered Hong Kong, a city that has not traditionally sourced eggs from the Chinese mainland.

(China Daily 12/22/2008 page12)