Wen's Foodstuff goes high-tech

Wen's Foodstuff goes high-tech

Wen's is drawing on an in-house gene bank and breeding unit to create new varieties of meatier chickens for processing at slaughterhouses to better serve restaurant chains and supermarkets, said Wen Pengcheng, a director of the company and its largest shareholder. That represents a sharp departure from Wen's roots serving local markets, where the animals are sold alive to customers. "You need a certain weight, the body should look good, the taste must suit people's expectations," he said, describing the chickens the company was aiming for.

If successful, Wen's could start eating into the sales of companies like Fujian Sunner Development that sell broiler chickens bred for their meat efficiency.Wen's is making the move at a time when its main business, pork, is suffering from a dramatic slump in prices. Net profits in 2017 fell 42.6 per cent to 6.8 billion CNY on revenues of 55.7bn CNY. Earnings are set to fall further this year amid an oversupply of hogs in the market. First quarter profits were down 4.4 per cent to 1.4bn yuan, and Wen's shares have lost 15 per cent of their value since the start of the year.

But despite a price/earnings ratio that lags smaller, more specialised peers like poultry processor Fujian Sunner or the pig producer Muyuan Foods, Wen's was big enough to ride out prolonged losses from its pig business, said Chen Lu, analyst at Zhongtai Securities. "There has always been this cyclical volatility," she said, adding that the poultry unit would help to "flatten" the risk.

Wen's is China's leading producer of native breeds, also known as yellow-feathered chickens, which account for about 40 per cent of the country's poultry market, or 4.7 million tonnes last year. The slower-growing chickens are preferred over white-feathered broilers bred by global companies for their stronger taste in popular dishes like stewed hen soup, as well as their firmer meat and widely assumed superior nutritional merits.

Wen's plan is to develop native chickens that are meatier as well as being tasty. Some smaller producers of the native birds, like Hunan Xiangjia Animal Husbandry, already have growing sales in supermarkets and online grocers.