Uni-President Group Expands Aggressively in China

Source: Taiwan Economic News

China`s rapidly growing consumer market has attracted the Uni-President Group, Taiwan`s largest foodstuff conglomerate, to invest heavily in the expansion of its already widespread operations there.

Because of this investment, plus spending on an aggressive advertising campaign, Uni-President China Holdings reported a 35% drop in profit for the first half of this year, to only NT42.2 billion (US$71 million at NT431:US$1), despite a revenue growth of more than 50%.

Uni-President`s charge into the Chinese market is being spearheaded by the Uni-President Logistics Subgroup, a unit of the President Chain Store Corp., which operates 7-Eleven convenience stores in Taiwan.

Much of the investment in China is aimed at supporting the rapid proliferation of 7-Eleven outlets there, following the belated opening of the first 7-Eleven store in Shanghai last year as a wholly owned President Chain Store venture. There are now 30 7-Elevens there and the number is expected to reach 50 by the end of the year. President Chain Store plans to have 300 7-Elevens in Shanghai within five years.

According to chain headquarters, the 7-Elevens in Shanghai are doing remarkably well, despite fierce competition from the large number of other convenience stores there, partly because of technological support provided by the parent firm in Taiwan. The stores there offer buffets prepared on-site, for instance, bringing in crowds of customers and twice the daily turnover of competing stores.

Uni-President also plans to expand the number of its supermarkets in Shandong and Sichuan provinces. That will give a strong boost to the Chinese operations of the Uni-President Logistics Subgroup, which now include 10 brands as well as a logistics firm with consolidated revenues of 2.5 billion yuan (NT$11.4 billion or US$356.3 million) last year. Revenues are expected to grow 25% this year, enabling the operation to break even.

One mainstay of the Chinese operations is Starbucks Shanghai, which came into being in 2000 as a joint venture between President Chain Store (with a 30% stake), Uni-President Enterprises (20%), and Starbucks Coffee International (50%). The company currently has 167 outlets in Shanghai, Hangzhou, Suzhou, Ningbo, and Nanjing. While this is fewer than the number of Starbucks outlets in Taiwan, the Chinese operation contributed more profit—more than NT$100 million (US$3.1 million)—last year.

Another Uni-President operation in China is Mister Donut, which landed in Shanghai in 2000 as a 50-50 joint venture between President Chain Store and Duskin, the Japanese owner of the brand. Mister Donut now has more than 42 outlets in China. Another venture, Cold Stone, debuted in Shanghai in 2007 as a wholly owned venture of President Chain Store and now has 35 outlets in Shanghai, Beijing, Shenzhen, Tianjin, and Suzhou.

The Uni-President Group also has manufacturing operations in China, with 24 beverage and instant-noodle plants as well as 10 food factories of other kinds there. The operation is expanding to remote inland areas, with plans to establish 12 manufacturing plants in Gansu and Xinjiang provinces in 2011.

The group`s foodstuff operations in China recorded revenues of 9.1 billion yuan (NT$42.7 billion or US$1.3 billion) last year, almost as much as the NT$45.6 billion (US$1.4 billion) it racked up in Taiwan.
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