Organization, technology and management innovations through acquisition in China’s pork value chains: The case of the Smithfield acquisition by Shuanghui

• Published in: Food policy Vol. 83; pp. 337 - 345
• Main Authors: Zhang, Yuehua, Rao, Xudong, Wang, H. Holly
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.02.2019
• Subjects: Acquisition; Brand capture; Technology transfer; Value chains; Vertical integration; Value chains; Acquisition; Technology transfer; Brand capture; Vertical integration
• ISSN: 0306-9192; 1873-5657
• DOI: 10.1016/j.foodpol.2017.08.004

•China’s pork value chain has low market concentration with labour intensive and low technology.•Consumer preferences for freshness may offset the quality and safety advantages of imported pork.•The midstream segments market share is determined by factors more than technology and management.•Shuanghui will streamline pork import from via Smithfield, and develop its cooked products.•It’s unclear if Shuanghui would expand its own farms, increase contracts, or rely more on import. This paper reviews the changes in Shuanghui’s operations after the Smithfield acquisition as well as transformations in China’s pork industries. As income grows and diets change, there has been an increasing demand for high-quality pork and more processed pork products. However, China’s swine and pork industries are still at an early stage of development as evidenced by the low market concentration, intensive use of labour, a proliferation of intermediaries, and low levels of technology. Bounded by the established consumer preferences for freshness and the status quo in the midstream and upstream segments, Shuanghui is in a slow process of upgrading its domestic operations with Smithfield’s leading brands, import of chilled and frozen pork, advanced technologies, and the vertically integrated business model after this acquisition. In particular, it remains unclear whether Shuanghui can follow Smithfield’s experience to establish stable and safe hog supplies by multiplying self-owned hog farms, maintain and expand its current contracts with large-scale commercial hog farms, or rely more on global sourcing of pork primarily from the U.S.