Monday, March 11, 2013

Baolingbao enjoys large development potential in 2013

Baolingbao Biology Co., Ltd. (Baolingbao), one of the few large-scale corn deep-processing enterprises that may have seen both revenue and profit increase in China in 2012, may see continuous increase in 2013 due to the large potential increase in the sales of its products, according to CCM’s February Issue of Corn Products China News 1302

High fructose corn syrup (HFCS)
Domestic HFCS underwent decreasing performance in 2012 because of the declining market price of sugar, competitor of HFCS. However, Baolingbao's HFCS experienced a 10.27% year-on-year growth in revenue and merely a 0.92% year-on-year decrease in gross profit margin in H1 2012 despite the increasing cost from corn because a large part of Baolingbao's HFCS was sold to Coca-Cola, who had made a price commitment with Baolingbao. On Dec. 28, 2012, Baolingbao announced that the company had earned the pride of "Annual Platinum Supplier Award", the first honor that domestic HFCS suppliers of Coca-Cola have ever got, which would enhance the cooperation between Baolingbao and Coca-Cola. Miss Lv, Board Secretary of Baolingbao, predicted that the sales volume of the company's HFCS to Coca-Cola would increase by about 20% in 2013 compared with that in 2012. In 2011, Baolingbao's sales value to Coca-Cola was USD42.7 million, accounting for 50.8% of the sales value of the company's HFCS according to its 2011 annual report. Accordingly, Baolingbao's HFCS will perform better than others' under the expectation of unsatisfactory performance of HFCS caused by excessive supply of sugar in 2013. But the sales quantity of Baolingbao's HFCS will not see considerable increase because its HFCS production line has already reached full production.

In Aug. 2012, Baolingbao was approved to be the unique feed-grade IMO producer in China in the next five years. And feed-grade IMO, a substitute for antibiotics, enjoys a promising market because Chinese government is cutting down the application quantity of the latter in feed. In Dec. 2012, China Central Television exposed "Fast-growing Chickens Event"–chicken raisers still used antibiotics to keep chickens healthy a week before being sold for meat, which enabled the public to know more inside stories about chicken cultivation and stimulate the consumption of feed-grade IMO in the future. Actually, as of middle Jan. 2013, Baolingbao had built cooperation relationship with more than ten feed producers such as Qilu Animal Health Products Co., Ltd. and the company's sales volume of feed-grade IMO had exceeded 2,000 tonnes, according to Baolingbao's official website. And Miss Lv predicts that the sales quantity of the company's feed-grade IMO will exceed 10,000 tonnes in 2013 and that of IMO (including food-grade and feed-grade ones) would reach about 40,000 tonnes this year, up 50% year-on-year. 

Miss Lv predicts that the sales volume of Baolingbao's FOS will reach 4,000-5,000 tonnes in 2013 while it was less than 1,000 tonnes in 2011 thanks to increasing demand for it. In April 2012, Chinese government approved FOS with sucrose as feedstock (content≥95%) to be added in infant and baby formulae, which will maintain increasing demand for FOS in 2013 in China.

Miss Lv estimates that the sales volume of Baolingbao's erythritol will see rapid growth in 2013 thanks to the increasing awareness of the product in downstream industries. Recently, Guangzhou Wanglaoji Pharmaceutical Company Limited, a leading herbal tea producer in China, indicated that it had invested USD578 million to build a new production line for herbal tea with no sugar and low content sugar in Yucheng, Shandong. The herbal tea will use erythritol as sweetener, which will increase demand for Baolingbao's erythritol which Is located in Yucheng as well. Moreover, Baolingbao plans to launch a new end-product containing erythritol and oligosaccharides, which may be put into the market in H1 2013. Actually, erythritol of Baolingbao has seen rapid growth in recent years. The 176.11% year-on-year growth in the revenue of sugar alcohol of Baolingbao in H1 2012 was mainly attributed to the surging sales volume of erythritol.

However, there are some risks in the growth of sales volume of Baolingbao's products. On one hand, Coca-Cola has not guaranteed the purchase quantity of HFCS from Baolingbao, so Baolingbao still has to compete against other HFCS suppliers of Coca-Cola even though its product has been highly praised by Coca-Cola. On the other hand, feed-grade IMO, herbal tea with no sugar or low content sugar and Baolingbao's new end product are new to consumers, which require a great deal of promotion, and the growth of these products will be lower than expected if their market promotion is unsuccessful.

Table contents of Corn Products China News 1302:
USDC preliminarily finds dumping of imports of xanthan gum from China
Chinese corn products Imp. & Exp. analysis in Dec. 2012
2012 review of Chinese corn products Imp. & Exp.
Domestic market price of HFCS remains downtrend in Feb. 2013
Market prices of corn products as feed keep steady in China in Feb. 2013
Baolingbao enjoys large development potential in 2013
Market price of corn oil fluctuates in China in 2012
BCAAs develop slowly in China in recent years
2012 review of corn market in China

Corn Products China News, a monthly publication issued by CCM on 20th, features “Supply and Demand”, “Import and Export Analysis”, “Price Update”, “Market & Company Dynamics”, “Policy”, “Corn Supply” and other more information researched and reported by CCM’s professional journalists. It is a reliable intermediate for you to know more about the corn industry in China even in the globe.

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