Consolidation strategy for COFCO in China

Chinese food giant COFCO is reportedly planning to divest some of its businesses to improve profitability in advance of more overseas expansions. The Beijing-based state-owned business, the largest supplier of diversified products and services in the agricultural products and food industry in China, last year posted sales of almost $32 billion, up 13 percent.

COFCO is active in 140 countries and controls assets valued at $57bn.

The Chinese President Xi Jinping is said to want more market discipline in state-owned enterprises and last year identified COFCO for a trial in efficiency improvements and return on investments.

It is considering the sale some of its peripheral businesses and expanding its investments overseas, according to Bloomberg news.

Likely divestments include the confectionery business of COFCO’s cooking oil producer China Foods.

In its portfolio is CPMC Holdings, the fast-growing manufacturer of steel food cans and aluminium drinks cans.

“Cofco has been very active in acquiring overseas assets,” says Liu Guanyu, a manager at Xiamen International Trade Group Corp.

“Its strategy now is to consolidate, to create a full industrial chain in the global agricultural market.”