COFCO Limited
SWOT Analysis
Strength
1. Market leader in the food industry
COFCO is one of the China's largest
companies in the agribusiness and food industry.The company
is the largest agro-products and food
importer and exporter, with a leading market share in wheat,
corn, rice and sugar import and
export. The company has been ranked on the American Fortune
Magazine's Global Fortune 500
companies list for 17 years in a row. The company was ranked 13th
in the Most Recognized Chinese
Companies List for the year 2010. These rankings reflect the
company’s competitive position in
China. COFCO’s market leadership position also provides
economies of scale and bargaining
power.
2. Strong brand recognition
COFCO has developed a good reputation
of quality and taste on the market with its value proposition:
Pure nature, quality food and quality
life. The company offers brands including Fortune edible oils,
Jellee candies, Jojok meat, Great Wall
wines, the Gloria Hotel Group, and Le Conte chocolate.
COFCO ranked 28th among China’s 500
most valuable brands, as stated by World Brand Lab (WBL)
in June 2009. Fortune, one of COFCO’s
premium brands ranks 106th, Great Wall wine ranks 121st,
COFCO Limited and Le Conte chocolate ranks 258th. A
strong brand portfolio coupled with strong brand equity enhances the company’s reputation.
3. Diversified product offerings
COFCO is a strong regional player with
a product/service offering in diverse industries. Holding a
monopoly on mainland China's grain
trade, the company’s interests are diversified to include tea,
wine, edible oils, canned food,
confectionery, ingredients, livestock and meat. Besides food
manufacturing and retail, COFCO is
engaged in a variety of businesses such as biological energy
development, hotel and tourism, financial
and packaging. The company also offers services in real
estate development and property
management. COFCO’s diversified product portfolio enables it to
cater to various customer needs and
enhance its top line.
Weakness
1. Geographic concentration
COFCO’s business is concentrated geographically. Majority of COFCO's operations are in China.
This geographical concentration significantly limits COFCO's customer reach and exposure to
developing markets in comparison to some of its competitors like Nestle and Unilever. In addition,
this increases in general the company's overall business risk and in particular its operational risk
associated with specific geographic markets.
Opportunities
1. Acquisition of Marverick Food to expand business
The company acquired Marverick Food, a meat product company which was jointly established by
US Smithfield Foods and Belgian Artal Group, in December 2009. Marverick Food primarily focuses
on meat products and frozen bakery goods. After acquisition Marverick Food became a wholly-owned
subsidiary of COFCO. The acquisition was to build the whole value chain of its meat business. With
Marverick’s experience in R&D and operation in the meat business, this acquisition will invigorate
COFCO Meat Investment for development to a higher level. In addition, the acquisition will bring
COFCO not only Marverick’s market share but also its expertise. In turn, it will also promote
Marverick’s brand image and its expansion in China’s mainland market. Therefore, the acquisition
of Marverick Food will expand the company’s market share and provide more revenues
2. Agreement with Xinxiang Government to develop a grain storage and logistics system
In mid 2009, COFCO signed an agreement with Xinxiang Government of Henan Province for the
development of a grain storage and logistics system at China’s premium wheat producing region
(Xinxiang). With the total storage capacity of 380,000 tons, this project is expected to generate an
annual transit capacity of 1 million tons of wheat. It is set to become China’s first wheat logistics
complex integrating storage, transit, blending, seed processing, testing, and research and
development.The project will serve as COFCO’s base to develop its grain business on a whole-chain
basis.
3. Launch of online shopping
Similar to the trend in advanced economies, the online shopping market is expanding rapidly in
China. In response to this trend, COFCO launched its own online shopping website, www.womai.com,
in August 2009.The website will cover Beijing and later expand to other metropolises like Guangzhou
and Shanghai.The website currently offers a variety of private label products and imported food and
beverages, such as snack food, grains, oil, instant food, bakery products, baby food, fruit juice and
alcohol. COFCO also introduces new products that are tailored to customer needs based on online
customer feedback. COFCO’s new website launch will add a new revenue stream for the company
and significantly increase its top line.
Threats
1. Labor shortage in China
Many Chinese companies are facing labor shortage. For example, about one third of Hayidai Toys
Factory production lines have been hit due to shortage of workers (as per a news article dated August
2009). Similarly, companies in China's Pearl River Delta region, one of the world's largest
manufacturing bases, are facing a serious shortage of migrant workers. If COFCO faces labor
shortage issues, it would affect the business operations adversely.
2. Food safety and food-borne illness concerns
The company has to ensure that food safety and quality are of the highest standards as there is
always a scope for food borne illnesses such as E. coli, Hepatitis A, Trichinosis or Salmonella to
occur. If such instances of food-borne illness or other food safety issues were to occur by usage of
its products, then the company may face negative publicity, which could adversely affect the sales
and profitability. Moreover, Asian and European countries have experienced outbreaks of Avian Flu,
and some commentators have hypothesized that further outbreaks could occur and reach pandemic
levels. Any occurrence of food-borne illnesses or food safety issues could adversely affect the
company’s business and brand image
