Chapter 346 Protracted War

By the end of June, the spring rapeseed in major producing areas across the country had basically been harvested.

The beginning of July is the time for storage and processing.

The first increase in rapeseed production this year has driven down prices of other raw materials.

Although the decline is limited, it has made the oil and fat processing companies feel a lot better.

However, the joy only lasted for a moment, as the price butcher Jiahe Grain and Oil struck again!

Another drop of up to 5%!
The entire industry is in a daze.

No one was willing to follow up, but after just two or three days, price-sensitive consumers voted.

Market share is being eroded bit by bit.

Jinlongyu, Fulinmen, Luhua, Xiwang, Huifu and others followed suit almost with tears in their eyes.

Small brands are already collapsing...

In July, Jiuquan entered the hot summer again.

However, the red hemp flowers blooming in the Gobi Desert and the lush sea buckthorn forests diluted the heat.

The Jiahe Group building is bustling with activity.

There were also several people waiting inside and outside Guo Yang's office. In order to facilitate the understanding of progress and decision-making, each major section was re-assigned a secretary.

"The water-saving project in the Shule River Basin has been completed by about 70%, and the melting of ice and snow has also entered its peak period. The Shuangta Reservoir regularly discharges ecological water."

"The drip irrigation plant is already under construction and will be put into production by the end of the year."

"The Desertification Institute and the Sand Control Institute have also come up with an ecological management plan for the Dunhuang West Lake Wetland."

"Liu Xiang is in good physical condition."

"Hexi Dairy's full product line is already in place, and this time we have launched a lot of new products specifically for this purpose."

“The impact of dodder on the North American alfalfa industry continues, and global prices for high-quality forage have soared this year.”

"The seed production contracts signed with farmers have expired this year, and Mr. Yan means that they will not be renewed."

Having just returned from another trip, Guo Yang listened to work reports for the entire morning.

Find out the gaps and fill them in from the clues.

For example, the global market for forage is booming now, but after the financial crisis breaks out, the global economy will be affected, and export trade will certainly be affected.

In addition, we have to consider the aftermath of terminating the contract with seed-producing farmers, and Shahai Agriculture and Animal Husbandry will have to contact Zhangye for sand control in the future.

It was not until noon that I had time to rest for a while.

After taking a sip of iced carrot juice milk, you will feel refreshed.

Just as I was about to go to eat, the phone rang again, and Gao De's voice came.

"Boss, this time we hit our opponent where it hurts. There are all kinds of reports on the market."

Guo Yang asked: "Is there CCTV?"

“Just one message.”

"Then don't worry about it." After a pause, Guo Yang said, "How is the promotion of high-end edible oil brands going?"

"The Nutrition and Health Institute is still researching and will not be launched until the end of the year at the earliest."

Gao De thought for a moment and said, "The current research and development direction is sunflower oil. Last year, Tianhe launched a sunflower variety with high content of unsaturated fatty acids and vitamins, but it is not yet harvest season."

"Another area is corn oil, which is also a research and development focus."

Price wars are tempting enough for consumers and provide sufficient reasons for large companies to seize market share.

But this is ultimately a double-edged sword.

Even when you embrace it enthusiastically, you may be stabbed in the back.

From the perspective of long-term interests, edible oil companies must escape the quagmire of price wars and use brand as a magic weapon for competition.

Among them, strong products and marketing are the most powerful weapons.

There are not many such brands on the market.

King Dragon Fish’s dietary fatty acid balanced blended oil, Luhua’s fragrant peanut oil...the others are very niche.

After thinking about it, Guo Yang felt that the current progress was not slow.

In terms of grain and oil research and development, Jiahe is indeed a step behind, but the Nutrition and Health Research Institute with an investment of 10 billion yuan can make up for it.

In addition to sunflower oil, there will be another killer product, Xanthoceras sorbifolia oil, in the future.

What's important now is to gain more market share.

After communicating with AutoNavi about the layout of the third- and fourth-tier markets, Guo Yang hung up the phone.

Then I went straight to the cafeteria to eat and took a short rest before reading the news about the grain and oil industry.

There are really mixed reviews.

But Guo Yang liked to see his opponents get angry, so he deliberately looked for reports criticizing Jiahe Grain and Oil.

First is from Southern Metropolis Daily:

"Yesterday, following the previous two large price cuts, Jiahe Grain and Oil launched a new round of price cuts."

"Anyone with a discerning eye can see that Jiahe Grain and Oil is using the banner of expanding the market share of small-packaged branded oils and cracking down on bulk oils. In fact, it is in urgent need of a larger market share as support after expanding its production capacity."

"Branded cooking oil prices drop every year, but never as thoroughly, as quickly, and at such a high cost as this time."

"However, can Jiahe Grain and Oil, which is engaged in a price war, really achieve its goal?"

"Compared with established companies such as Golden Dragon Fish, Fortune, and Luhua that have been in the edible oil market for more than 10 to 20 years, Jiahe Grain and Oil is just a newcomer."

"The three major brands occupy an absolute market share."

"Jiahe Grain and Oil does not have the right to set its own prices, nor does it have the ability to dominate the market."

"Jiahe Grain and Oil is making wedding dresses for others!"

"The three major brands are happy to engage in a price war. Round after round of price wars will only push countless small brands into the abyss of losses."

“This will only increase industry concentration and create a high degree of control over edible oil prices in the future.”

"The ecology of the domestic edible oil market will inevitably be damaged, and farmers and consumers will still be the ones to pay the price in the end."

"The culprit is Jiahe."

“It’s time for the industry regulators to take action.”

After reading the whole article, Guo Yang felt that this was not a roar, but rather full of cowardice.

Are you screaming?
Why is it not interesting at all?

Guo Yang then looked at other reports or interviews.

Surprisingly, the statements of several major edible oil brands are completely contrary to that of Southern Metropolis Daily.

In an interview, Sun Dong, chairman of Luhua, said, “No, Luhua has never thought about engaging in a price war, but it will fight hard from the beginning.”

Fang Hong of Fortune House:

"The current price has caused even Fortune's industry chain to suffer serious losses, which is not what we expected."

Golden Arowana: "I wanted to raise the price."

China Business News also expressed its views:
Currently, grain and oil processing companies are facing a dilemma: making losses or losing market share.

No matter what choice you make, it's like cutting meat with a blunt knife.

Compared with the relatively mild attitude of big brands, small brands and some tabloids are very aggressive towards Jiahe Grain and Oil.

“It’s unfortunate that we’ve shut down and local residents have lost another reliable option.”

"While international grain and oil prices remain high, domestic edible oil prices have fallen to the bottom. This price inversion is extremely unreasonable."

“Big business and big capital are greedy hyenas.”

“Since they are spending hundreds of millions of dollars to cut prices and hit small brands, why not just use the money to buy small brands?”

Fight hard and risk your life.

This statement by the chairman of Luhua has become a famous saying in the market.

Almost all companies are suffering.

Some companies are on the verge of bankruptcy, but the biggest impact has been on those that have long relied on imported soybeans as raw materials.

These businesses are usually located close to the coast.

The cost of importing raw materials was high in the early stage because of the soybean turmoil in previous years, and investment was concentrated on docks and ports and overseas imports.

There are almost no purchasing channels for domestic soybeans and corn.

The losses in this wave of price cuts were also the heaviest.

Two days later, Guo Baichun, chairman of Yangcheng Zhizhiyuan Oil Co., Ltd., expressed grief and indignation in an interview.

"Jiahe Grain and Oil is a company without a bottom line." "Jiahe claims to serve farmers, but its drastic price cuts without a bottom line will ultimately harm the interests of the vast majority of domestic farmers."

There are many such remarks.

Attacks on Jiahe Grain and Oil can be seen almost everywhere in newspapers, television, and online new media.

It is getting worse in coastal areas.

However, Jiahe Grain and Oil did not pay much attention to this information and did not respond. Only the special promotion price tags in major supermarkets continued to exist.

...

On this day, Yao Richang, the editor-in-chief of the Farmers’ Daily, came to Jiahe’s headquarters.

"Mr. Guo, you are really hard to make an appointment with."

"Too busy." Guo Yang made Yao Richang a cup of freshly brewed red hemp tea. "I don't even know which city I'll be in the next day."

"It seems that the public opinion these past two days has not affected you." Yao Richang took a sip of tea and praised: "This tea is good, it is good for health."

"I'll have someone pack a few boxes when we leave."

"Then I would be disrespectful."

"Haha." Guo Yang laughed twice. From Yao Richang's attitude, it can be seen that today's interview will be gentle. After all, the price reduction of edible oil is what ordinary people are happy to see.

When asked by Yao Richang when the price war would end, Guo Yang was also full of confidence.

“We will continue to fight until imported soybeans lose the domestic market.”

"Can it be done?" Yao Richang was surprised. "The production cost of imported soybeans has always been lower."

"It's not necessarily the case now." Guo Yang said calmly: "In terms of the degree of mechanization, the domestic cost is higher."

"But from the perspective of yield per unit area, domestic production now has a cost advantage."

"In general, imported soybeans do not have an advantage over domestic soybeans, and this is before taking into account the freight costs."

Yao Richang asked: "Guo Bochun of Yangcheng Zhizhiyuan Oil Company said that Jiahe is harming the interests of farmers."

Guo Yang smiled contemptuously, "Editor Yao, have you ever heard of this company?"

"Appreciate further details."

Guo Yang said: "The raw materials used by this company are all imported soybeans. It has not processed a single domestic soybean so far. Its partner is Louis Dreyfus."

"This situation is very common in coastal areas, where there are very few companies processing domestic soybeans."

“It has always been Jiahe’s vision to help farmers become rich.”

"In fact, in addition to the production cost factor, the domestic soybean oil extraction rate has increased, the land area has increased, and the corn production has been in excess."

"According to Tianhe's survey, the domestic soybean planting area has increased significantly this year."

"We won't say that we will be completely self-sufficient this year, but we will definitely have no problem being more than 90% self-sufficient."

"Domestic companies including Fortune, Golden Dragon Fish, Luhua, Huifu, and a large number of grain and oil processing companies along the coast still maintain the habit of using imported soybeans due to the reshuffle in the past few years."

"If we remain content with the status quo, it will harm the interests of farmers."

"This price war is bound to come. Instead of responding passively, it is better to take the initiative."

Yao Richang left with satisfaction, and the next day he published the interview with the chairman of Jiahe in the newspaper almost verbatim.

Soon after, CCTV also issued a news flash.

The general idea is that domestic soybeans are regaining lost ground, and the price war is not only a brand cleansing, but also a clarion call for domestic soybeans to counterattack.

This caused a huge response in the grain and oil industry.

The authoritative industry media "Grain and Oil Market News", which had been silent for a long time, stood up for the first time and gave their judgment:

"In the past few years, the growth of Jiahe Grain and Oil has caught many people off guard and unexpectedly led to today's panic."

"At a time when domestic soybeans were in turmoil, Jiahe Grain and Oil invested 60 billion yuan, just like a reckless man, acquiring, building factories, expanding production capacity, and setting up storage and logistics in production areas... rushing around in the market."

"With a huge price gap between domestic and imported soybeans, grain and oil processing companies have embraced imported genetically modified soybeans."

"Only Jiusan Grain and Oil was struggling to survive, and even Jiusan Grain and Oil stopped production at one point, planning to build a factory in the coastal area."

"Then, Jiahe Grain and Oil came."

"What did he do?"

"He bought domestic soybeans at an equal price. At the highest point, he lost 900 yuan for every ton of domestic soybeans he processed. The losses lasted for half a year."

"The domestic non-GMO soybean planting area has finally been preserved. Otherwise, the country would be flooded with all kinds of GMO soybean oil."

"After that, Tiandou No. 1 began to be widely promoted in the northeast and coastal saline-alkali land, saving the company from collapse."

"From last year to this year, Jiahe Grain and Oil has continued to expand its production capacity while investing heavily in further improving its warehousing and logistics."

"Jiahe Grain and Oil was the first company to respond to the 'scattered' transportation policy, and was ahead of everyone else."

"Fortune and Golden Dragon Fish have both said that they have the largest production capacity, the most complete industrial chain, the most abundant and unimpeded international procurement channels, and the lowest costs in China."

"But when the Jiahe Jinmen Grain and Oil Comprehensive Base and the large grain and oil factories in Zhenjiang went into production, the situation had changed."

"Five years ago, multinational grain traders, with their raw material production cost and capital advantages, launched a price war and eventually dominated domestic soybean trade and processing."

"Now, the brutal price war has struck again."

"The difference is that this is a counterattack from the domestic grain and oil upstarts."

"In addition, during the interview, Gao De, general manager of Jiahe Grain and Oil, specifically emphasized Jiahe Nutrition and Health Institute."

"Soon, Jiahe will launch healthy, natural, nutritious and scarce high-end cooking oil..."

The continuous characterizations from Farmers’ Daily, CCTV News, Grain and Oil Market News… have rapidly changed the reputation of Jiahe Grain and Oil.

The counterattack against multinational grain traders, the final battle between domestic and imported soybeans...

It is a window period when the pain caused by the earthquake has not yet disappeared and the Olympic Games have not yet arrived.

A thrilling journey of soybeans without the smoke of gunpowder and the flames of war began.

After the report by Grain and Oil Market News, some peer companies finally responded to Jiahe.

Xue Liqiang said in an interview: "Jiu San Grain and Oil will firmly defend the position of domestic non-GMO soybeans."

However, Xue Liqiang did not comment on the current price war.

There are differences between people, and there are gaps between companies.

Jiu San also felt the pain from the loss.

But there are others who feel more pain.

Zhangjiagang, Donghai Grain and Oil Terminal, is the largest comprehensive grain and oil processing base of the State Grain Corporation.

It has an annual throughput of 300 million tons.

Even though it has been suffering losses in recent times, it still grits its teeth and imports soybeans from overseas.

But with the determination of the upper management and the nature of pursuing profits, Guoliang General Manager Yu Bo had to adjust his strategy.

The number of calls at the East China Sea grain and oil terminal began to decrease.

Domestic soybeans will have a bumper harvest in September. This year's area and output are far greater than last year, which will definitely have an impact on the market.

Because of such expectations, Fortune, Golden Dragon Fish and Luhua will follow suit in the price war, which will make them very uncomfortable, but small brands will be even more uncomfortable.

However, the national grain supply has always been purchased through ADM, and the procurement channels for domestic soybeans are not smooth.

To persist or to change?

Compared with state-owned grain, Fang Hong, general manager of Wilmar International, finally chose imported soybeans after consulting with chairman Guo Guangfeng.

Guo Guangfeng said to Fang Hong:

"It is still difficult to say whether the cost of soybeans from China or America is higher or lower. Yihai Kerry has an advantage in overseas channels."

"But in China, Jiahe has established a certain degree of ties with soybean farmers through seeds, and we cannot compete with them."

"We have to fight a price war, and it may even become a protracted war."

...

The outside world is in turmoil, but Jiahe is calm.

Guo Yang didn't even pay much attention to the news trends in the past two days, but instead started studying crude oil futures.

This was completely unfamiliar territory for him.

But the unreasonable rise makes the current trend seem so attractive.

dong dong.

Gao De knocked on the door and walked in. "Boss, crude oil futures just broke through $140 per barrel."

Guo Yang was eager to try, "Then buy some?"

(End of this chapter)