Strategy New factory in China for Danish Crown
There is very high demand for pork in China right now. China’s domestic pork production has plummeted due to a serious outbreak of African swine fever. While these circumstances are unfortunate, they provide Danish Crown with a unique opportunity to establish itself in the awareness of Chinese consumers.
“The factory enables us to supply both fresh and processed products derived from Danish livestock to consumers in and around Shanghai. Building a factory to supply just a single city might sound extreme, but there are over 24 mill. people in Shanghai alone, and over 80 mill. people live in a radius of 200 km from the factory. This is equivalent to the entire population of Germany,” says Niels Knudsen, Director of Danish Crown’s activities in China.
The company has successfully exported pork to China for the past 20 years. To date, customers have been largely Chinese distributors and the Chinese meat processing industry, but the consumption pattern in China is rapidly changing. The majority of sales has moved from the traditional ‘wet markets’ to supermarkets and e-commerce over just a few years.
“Positioning Danish Crown as a premium brand in China is a huge undertaking. Yet it is absolutely essential that we succeed. With the cost level we have in Denmark, we have to sell our products at a better price than our European competitors if we are to offer value to our owners – the Danish farmers – in the longer term,” says Jais Valeur, Group CEO of Danish Crown.
Danish Crown has found a strong partner in the Alibaba group, which has both online sales and physical stores. In November 2018, Alibaba secured the right to buy everything Danish Crown produces in the new factory for a five-year period.
“However, the contract with Alibaba is no guarantee of long-term success. So right now we are working closely with Win-Chain – our bridgehead into Alibaba – to pave the way for Danish pork. It will demand targeted marketing, supply security and consistently high quality for consumers to choose products from Danish Crown every time they want to buy pork,” says Valeur.
If it successfully establishes itself as a premium brand in China, Danish Crown plans to build similar factories near other Chinese cities within a few years.