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Meituan Ventures Into Upstream Food Supply as China Frets About Availability

By Dave Yin / Jan 04, 2020 04:36 AM / Business & Tech

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Meituan Dianping is jumping into China’s upstream food supply industry amid signals from central authorities that ensuring adequate availability following the African swine fever epizootic will be a major focus in 2020.

Longzhu Capital, the investment subsidiary of online-to-offline services giant Meituan, was the sole financier in the first funding round of Guangdong Meat Union Fresh Holdings Co. Ltd., Meituan said in a statement. It did not disclose the value of the round, but local media reported the amount to be hundreds of millions of yuan (tens of millions of U.S. dollars).

Meat Union is a food retail chain with about 500 locations in southern and eastern China whose founder runs an animal husbandry conglomerate. The company, Guangdong Yihao Foodstuff Co. Ltd., owns a 70% stake in Meat Union, according to public company listings.

Meituan said the companies would collaborate on supply chains, products, store operations, online-to-offline services, tech investments and more.

In recent weeks, China’s senior leaders, including Politburo members and party chiefs of first-tier municipalities, have attended inspection tours of grocery markets and urged other officials to help ensure sufficient supply and stable prices for pork and other foods in 2020, especially in the lead-up to the Lunar New Year celebrations.

The outbreak of African swine fever has slashed hog herds, causing pork prices to more than double in November from a year earlier and driving up the cost of other staples. China’s mom-and-pop pig farmers have also struggled to recover losses, leading to signs of consolidation in the industry.

To fund upstream food supply now could thus put Meituan in the government’s good graces, according to Even Rogers Pay, lead agriculture analyst at research firm China Policy.

“To be seen to be investing in the agricultural and rural sectors (especially pig production at the moment) will help build relationships with state and party at the highest level,” she told Caixin in a written note.

She cited national and local policies from as far back as 2013 that have signaled large-scale, high-tech food production as a long-term priority. In the years since, companies like computer maker Lenovo, game developer NetEase, and online video portal LeTV have all made forays into agriculture, though results have been mixed.

“There is likely direct pressure on some of the most profitable companies to [invest] right now,” she said.

Contact reporter Dave Yin (davidyin@caixin.com)

Related: One of China’s Biggest Worries for 2020 Is Pork

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