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Going global helps to feed aspirations

By He Wei | China Daily | Updated: 2013-03-28 09:32

Going global helps to feed aspirations

After taking the helm as a top executive overseeing the company's overseas expansion, Ge sensed a growing demand for imported food, fueled by the burgeoning middle class with an increasing disposable income.

However, beyond the headlines about China's growing global clout, Ge believed that the establishment of world-class domestic companies was lagging behind the overall growth of the economy. This put China at a disadvantage, which led to limited bargaining power at industry-wide talks.

He referred to a visit two decades ago to the headquarters of Nestle, the world's largest food company by revenue. In addition to the various flavors of ice creams he tasted, Ge was most impressed by a poster outside a research and development laboratory.

"How could you let a girl with freckles on her face advertise for you?" Ge asked his French counterpart, puzzled. He was told the advertisement was designed for the Japanese market because girls with freckles were regarded as cute and beautiful in Japanese culture.

It suddenly occurred to Ge that to increase the number of China's equivalents of Nestle, The Coca-Cola Co, McDonald's Corp or Walmart Stores Inc required not only great financial resources but also management experiences in international marketing, high technology, as well as branding skills.

To beef up market vitality, Ge steered the company to make overseas acquisitions. He identified several channels to expand overseas, significantly through mergers and acquisitions.

Under his leadership, the company is rolling out a steady overseas plan. It aims to expand its major businesses - dairy, wines, sugar, branded food and distribution channels - overseas. Prioritized destinations are Australia, New Zealand and Europe. The company aims to boost overseas sales to as much as 30 percent of its total in five years. So far, Bright Food has completed four major international buyouts in the past two years. But Ge warns corporate decision-makers to balance their "passion and rationality" in international deals.

On the one hand, there is a spontaneous drive for Chinese companies to go beyond borders, as international costs for obtaining resources and financing keep dropping, while a high level of efficiency remains in place. On the other hand, companies should avoid making international transactions for the sake of going global and ought to stick to their own bottom lines.

"When we were in final talks with Diva Bordeaux, a major French wine merchant, Diva's financial consultant kept raising the bid price and insisted that Bright Food made corresponding changes to the new corporate structure," Ge recalled.

Even though Ge had been pursuing the potentially lucrative deal for months, he chose to pull out after unreasonable demands were made and took the next flight from Paris to Shanghai. "The internationalization of Chinese companies should never come at the expense of unfair treatment and losing dignity," Ge said.

The story ended in a rather dramatic way. The consultant flew all the way to Shanghai to apologize to Ge and accepted every clause the two parties had earlier agreed to.

"Chinese companies are embracing the world with friendliness and inclusiveness. But to seal any business contract, mutual respect is a precondition," he told his counterpart. That pretty much explained how Ge let go several major bids including the purchase of French yogurt maker Yoplait SA and the sugar unit of CSR Ltd.

Zhang Huiming, head of the Enterprise Research Institute at Fudan University, said Bright Food's previous failures were largely attributable to its insufficient investment plans. "Companies should always use financial institutions to diversify their investment portfolio, which increases the odds of success. Bright Food must have learned a lot from its seasoned rivals in terms of acquisition plans and negotiation skills," said Zhang.

But Ge said he didn't think of those as failed projects. "Bright Food made international movements by evaluating our needs and gains. We should never sacrifice our own interests."

In fact this is a universally applied principle. When finalizing the acquisition deal with Manassen Foods Australia Pty, a branded food business, Ge recalled the warm welcome he received from the minority shareholders in Australia.

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