report
from China Daily 2004
Eastocean Oils & Grains
Industries (Zhangjiagang) Co Ltd, one of China's largest edible oil
producers, is setting its sights on the high-end market with the
launch of Vitoil, a high-end range of refined vegetable oil.
The firm has invested 40 million yuan
(US$4.83 million) into the new production line, which will have an
annual capacity of 1,000 tons of camellia seed oil, walnut oil and
safflower oil, said Zhang Dongfeng, general manager of Eastocean, a
joint venture between China National Cereals, Oils and Foodstuffs Corp
and US food giant ADM.
"More investment will be made in
the high-end products, and new products and a new brand will be
promoted in the next few years," Zhang told China Business
Weekly.
The firm's new products are five to
eight times more expensive than ordinary oil, such as peanut oil and
soybean oil.
For example, a 500-millilitre bottle
of Vitoil walnut oil costs 90 yuan (US$10.87), the same amount of
soybean oil costs about 12 yuan (US$1.45).
"Our survey shows that market
demand is increasing for high-end oil, which is unpolluted and
natural, as living standards improve. However, the varieties of such
products remain very limited," Zhang said.
Eastocean, whose medium-end brand
"Fortune" already has a 20-per-cent market share, has
decided to develop new products for high-income customers, with ADM's
technical and financial support.
Zhang is confident that the company's
new product can take on other high-end products, especially imported
olive oil, which has been enjoying a growing market share in recent
years.
"The Vitoil series has similar
ingredients to olive oil, and they are more suitable to Asian tastes.
"All our raw materials are from
China, and the quality can be guaranteed," Zhang added.
The domestic market needs to be
cultivated before seeing rapid growth, he said.
"Although people earning high or
low incomes may wear different types of clothes or eat different types
of food, it is likely that they will use the same type of oil,"
Zhang pointed out.
Chinese consumers do not attach much
importance to oil, since they think it is a subsidiary part of their
diet.
"The concept of healthy oil
needs to be instilled in customers," Zhang said.
He said the firm, at the initial
stage, will focus on improving the quality, rather than input large
amount of money on advertisement.
"We aim to make steady
progress."
The products will first be launched
in Beijing, Shanghai and Dalian, and then in Guangzhou, Shenzhen and
other developed regions of the Chinese mainland.
The firm also has an eye on the
overseas market, especially East and the Southeast Asia, such as
Japan, South Korea, Singapore and Hong Kong, Zhang said.
"Japan will be the first
destination of Vitoil series, and Eastocean has already started
applying for the relevant certification to enter the Japanese
market," he added.
"Japan has the strictest food
safety systems in Asia. Successfully entering this market will
encourage us to improve our production standards," Zhang said.
"Vitoil's profit margins in
Japan will be much larger than in the domestic market."
Europe, which has a mature market for
walnut oil, is Eastocean's next target.
"Europe has even higher
requirement on food imports, and it will take years for Vitoil
products to enter the market," Zhang said.
Eastocean's sales revenues are
expected to hit 10 billion yuan (US$1.21 billion) this year, compared
with 7 billion yuan (US$845.41 million) last year, according to
company statistics.
Its export volume will reach US$100
million this year.
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