China’s Xiamen Baofeng is planning to become the world’s leading manufacturer of aluminium ends for beverage cans.
After selling a 60 percent stake in China’s Yinlu Foods Group to Nestlé in 2011 for an undisclosed sum, which analysts estimated at between US$600 million and $1 billion, Chen Qingyuan, company president and one of its founders, could have slowed down and enjoyed the proceeds.
Far from it: Chen is still heading the growing Yinlu Foods, established in 1985 at Xiamen in Fujian province, since when it has become a well-known household brand in China for ready-to-eat canned rice congee and ready-to-drink peanut milk.
Nutritious Yinlu products fit into Nestlé’s global food portfolio. The partnership combines local knowledge with the Swiss food giant’s global research and development capabilities, and since the joint venture was set up around $480m is being invested in building two new plants in Anhui and Sichuan provinces.
Chen said in 2011: “This partnership represents a very important landmark in Yinlu’s long-standing aspiration to be a relevant and favourite brand for consumers. Nestlé’s proven expertise will undoubtedly provide solid support for Yinlu’s continued growth. Together we will continue to develop our brand and manufacturing capabilities, in particular in the central and western part of China.”
The Chen family also invested $240m in a new business venture, Xiamen Baofeng Industry Co Ltd, where Chen Qingyuan is chairman and son Chen Yanfu is vice chairman.
As a buyer of can ends for the Yinlu business, the Chen family saw a business opportunity by manufacturing ends itself, and has built a facility with capacity to make 18 billion aluminium ends a year at Xiamen, China’s fourth largest port.
Baofeng’s 240,000sqm plant employs 700 and currently features 15 end-manufacturing lines for two-piece cans used for carbonated drinks and for three-piece cans used for juice and food products. There is also space for another seven lines to be added from 2015 as demand increases.
Of the eight lines dedicated to making ends for carbonated drinks, five are for 202, two are for 206, and one for 200 diameter ends, with Stolle coil-fed systems that operate four-out at 750 strokes a minute.
For juices and food products, four lines make 209 ends (mostly for the soup and congee sectors), one makes 206, one makes 200, with one for 113 stay-on-tab ends (for niche markets like coffee and milk). These use Stolle sheet-fed equipment that runs four-out at 500 strokes a minute, along with Suzhou SLAC Precision Equipment’s coil- and sheet-fed systems that operate four-out at between 500 and 750 strokes a minute.
Baofeng’s current leading customers in China include Yinlu Foods and Tsingtao beer, and most of the leading beverage canmakers in the country.
Although a recently-established company, Baofeng’s workforce benefits from years of technical and sales expertise in the sector. Based in Thailand, David Williamson heads export sales, and joined Baofeng in 2013 after four years at Saudi Arabia’s National Factory for Can Ends (Nafcel) in Jeddah.
“Our sales increase is setting new records almost every month, and we are using well over 50 percent of current capacity,” says Williamson.
“The dynamics of the market will be our biggest driver this year, as the move away from 206 to 202 and even 200 ends accelerates. This will require us to re-tool presses to accommodate customer needs.”
Says Chen Yanfu: “The big trend we are seeing is the rapid move in Asia from 206 to 202 and 200. This takes cost out of the chain, because less metal is used, [with a] lower gauge and smaller size. And the biggest growth across all markets is herbal tea in China. The growth in sales of this beverage far exceeds any other in any country.”
Baofeng now makes more than 800 million ends a month, with equipment from the world’s leading easy-open end industry suppliers.
Inspection equipment providers include Sencon and Versatile Technology, and the plant features six sheet-coating and printing lines supplied by Crabtree of Gateshead with capacity to process 60,000 tonnes of aluminium sheet a year.
Baofeng also has one coil coating line made by Changzhou Dinglong Environment Protection Equipment Co. “Once metal is coated we can then sheet it as required,” says Williamson. “It is a very important machine as we are unique as an end manufacturer in being able to produce bespoke coloured tab stock ourselves for customers.”
Acreditation from beverage companies is key to operate in the business, he adds, and the process has delayed the company’s entrance in the global market.
“We sell our ends to canmakers, who then make a can and end package to supply to the fillers. Thus for us to be of interest to canmakers they need ends in their warehouses that they know they can use for a majority of their customers.
“Many beverage companies stipulate that they must audit and approve suppliers. One of our early successes was Tsingtao Beer, and they were the driving force, along with suppliers to the Yinlu group. It has taken time to get approved by global brands such as Coca-Cola, Pepsi and Heineken, and this has delayed our arrival on the international stage. Without accreditations canmakers cannot use us for a majority of their businesses.
“Happily we have now passed audits and are in the process of line testing. Once we have full accreditations, our customer base will increase significantly as our exports increase from their current low level.”