Case Study: Deqingyuan - IFC
5Market MoversCompany profileDeqingyuan, based in Beijing, China, produces high-quality eggs for the Beijing and HongKong markets. Deqingyuan was established in 2000 with the recognition that local eggquality was poor, and it became the first company in China to sell fresh eggs bearing aproduction date and trademark.key dataFoundedBeijing Deqingyuan AgricultureTechnology Co. Ltd wasfounded in 2000 by the currentchairman, Zhong Kaimin.Ownership structureOwned by: Individualshareholders includingZhong Kaimin (14.9%),DQY Agriculture TechnologyCompany (27.7%), GlobalEnvironment Fund (15.9%),Capital Today (15.9%),Innobiz Hong Kong (8.8%),Shanghai Yi Bei (8.6%) andIFC (8.2%)SectorAgribusinessHeadquartersBeijingOperationsBeijingMarketsBeijing, Hong KongMain competitorsFollowing Deqingyuan(71% share of brandedegg market in Beijing),competitors are Gegeda (25%),Liuminying (1%), Gazige (1%)and Xiaonong (1%)Employees335Market share71% of branded egg marketin Beijing3.6% of total egg market inBeijing 14Awards and recognition– National High-Tech ModernAgriculture Demonstration site– National Food SafetyDemonstration EnterpriseRevenue (USD MN)6.18643.376.74Net income (USD MN)220.127.116.110.65.601.1220.371.22.30 0.030.08FY02 FY03 FY04 FY05 FY06FY02 FY03 FY04 FY05 FY06CAGR from 2002 to 2006: 107.3% CAGR from 2002 to 2006: 150.4%US dollar figures for revenue and net income calculated by authors based on renminbi figures supplied by company and average annualRMB:US$ exchange rate from the Economist Intelligence Unit.14Calculation of total market share, based on branded eggs accounting for 5% of all eggs in Beijing. However, this figure is growing fast.
Market Movers 6The Deqingyuan business case – the three most important factorsHere we highlight the three most important ways in which sustainability performance at Deqingyuan is influencing businessdrivers and supporting business strategy.1. Higher sales and market accessfrom better environmental andsafety standards– Based on Deqingyuan’s reputationfor quality and safety, sales grewfrom $0.4 million in 2002 to $6.7million in 2006.– Deqingyuan has 71% share of thebranded egg market in Beijing.– Deqingyuan entered HongKong market, which does nottraditionally source eggs frommainland China.2. Brand value and reputationbuilt on good environmentaland safety standards– High food safety based on soundenvironmental approach allowsDeqingyuan to create a trustedbrand.– During SARS crisis, which deflatedegg sales throughout China,Deqingyuan’s sales increased -evidence of high level of trustDeqingyuan enjoys with consumers.3. Access to capital from goodcorporate governance– Although industry has difficultygaining access to capital,Deqingyuan tapped intointernational investment fromGEF and IFC.– Investors are attracted by thecompany’s pioneering vision,quality and environmentalperformance, and seriousapproach to governance.– Deqingyuan commands higherprices per egg in Beijing (0.9 RMBper egg vs average of 0.3 to 0.4RMB per egg) and Hong Kong.Deqingyuan business case matrixEnvironmentalPerformanceSocialPerformanceGovernancePerformanceSales &Market AccessOperationalEfficiencyAccessto CapitalRisk Mgmt &Licence toOperateTalent &Human CapitalBrand Value &Reputation