Eastocean to 'taste' high-end oil mart



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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