China's top pig farmer Guangdong Wen's Foodstuff Group is pushing into processing meat, broadening its operations to limit the impact from tougher competition and falling pork prices in the world's biggest market for the food.
Hog and pork markets have tumbled in recent months as suppliers rushed to cash-in on last year's record prices for the meat, a staple form of protein at the heart of Chinese cuisine.
That is driving Wen's to branch out into livestock slaughtering and meat processing, Luo Xufang, a vice president at the company, said late on Tuesday.
"Large-scale companies are increasing, so Wen's has to consider the issue of competition. In the second-half of this year, we will push ahead into the slaughter and processing industry," Luo said in a presentation to an industry conference in China, without giving details.
When prices for hogs fall, slaughterhouses and processors typically benefit, boosting the incentive to become more integrated, said Luo.
Live hog prices, currently around 15 yuan ($2.18) per kg, are expected to fall further after dropping from a record 22 yuan per kg last June.
But tapping the potentially lucrative processing market could also be risky, as rivals, including WH Group Ltd, have ramped up investment in processing in recent years, leading to overcapacity there too.
Meanwhile, the company also plans to build more than 5,000 retail outlets in southern China to sell Wen's-branded food products, a move that fulfils government policy to focus more on consumption rather than simply production, said Luo. It was unclear how many such shops are already operating and what the time frame for this would be.
China's 10 largest pig farming firms accounted for only 5.8 percent of hogs sent to slaughter last year, but that was up by 2.8 percentage points on the previous year, said Zhang Guangan, director of the China Swine Industry Association.
Their share is set to keep growing, with groups like state-owned Cofco Corp and Wen's building huge new farms in less developed parts of the country.
Wen's, which produced 17 million pigs last year to rival U.S. company Smithfield, is aiming to lift output to 27.5 million hogs in two years.
But that comes as China's meat industry grapples with stagnating demand-growth and changing tastes, with many younger people willing to splash cash on Western-style meats like bacon and burgers.
Luo said that pork demand had been lackluster.
"We haven't done a very detailed study, but from our sales situation, we get the impression that consumption has dropped," he said, referring to volumes sold to slaughterhouses.