Company eyes food supply for growth as home sales dip due to COVID-19

A Chinese property giant's decision to try its hand at hog raising has led to in-depth discussions about the major move, especially as the coronavirus outbreak continues to come under control.

China Vanke Co Ltd announced a plan on Thursday to recruit managers and professionals for its hog farms in Guangdong province, thus revealing its foray into the agricultural sector.

The job description for the new unit's general manager says the employee will participate in formulating a plan to raise 250,000 hogs.

The real estate group also recently announced the establishment of a new food supply business unit in March, following the setting up of other core units related to property projects, property management, warehouse logistics, resorts, rental apartments and education. The new unit covers hog raising, vegetable cultivation and enterprise catering.

However, Vanke is not the first developer in China to enter the hog sector. Country Garden Holdings Co Ltd stepped into the ring in 2018. It focuses on high-tech and modern agriculture, agricultural industry zones and fresh food stores in residential areas.

The hog farms of China Evergrande Group and Wanda Group were built even earlier as part of poverty alleviation efforts.

Vanke said it was inconvenient for residents living in its properties to purchase food during the coronavirus outbreak so it decided to set up the new business unit to "provide safe, healthy and affordable food for ordinary families".

Following quarantine measures, people have had to rely on nearby stores or online channels for grocery purchase during the height of the pandemic, causing sales of many food e-commerce providers to soar.

Listed hog breeders also enjoyed a remarkable upswing in profit. Industry behemoth Muyuan Foods Co Ltd reported a first quarter net profit of 4.1 billion yuan ($580 million), making a U-turn from last year's first-quarter loss.

In comparison, the property sector has been hit hard during the pandemic. In the first quarter, home transaction volume in China declined by almost 24.7 percent year-on-year, said the National Bureau of Statistics.

The move to diversify operations is also in line with Vanke's upgraded position as a "service provider of urban and rural living and construction", a transformation proposed in 2018 due to gloomy growth prospects at the time.

Vanke Chairman Yu Liang said at the time that "the era of unilateral rapid increases in home prices has ended".

Yan Yuejin, director of the E-house China Research and Development Institute, expects Vanke to regard the agricultural sector as an important driver of future development.

In fact, the agricultural sector is gaining traction as an additional business undertaking among property developers and the direction could be a new growth point for them if they combine agriculture production with residential community management, Yan said.

He expects more property developers to follow suit as they are currently under profit pressure growth and an industrial transformation could be taking shape.

Zhang Hongwei, chief analyst at Tospur Real Estate Consulting, said the decision to enter the agricultural sector is not inconsistent with developers' overall development strategy of the future property market.

It will become a key component of developers' next growth stage while the urbanization of the population is speeding up, Zhang said.

However, the new undertaking can have a potential downside, said economist Ma Guangyuan, who believes companies' transformations should focus on their core business.

Ma said on his public WeChat account that "Hog raising is actually a very high-tech profession－even higher than the property industry－so it should not be regarded as an easy task."