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economic observer reporter aruhan 51-year-old wan hongwei took over henan shuanghui investment development co., ltd. (000895.sz, hereinafter referred to as "shuanghui development”) takes over the baton from the chairman. this handover comes at a time when shuanghui, the “meat empire”, is entering its 40th anniversary year.

on august 30, shuanghui development announced the appointment of a new chairman, and its official website also released wan hongwei's inauguration remarks. he said that shuanghui has grown from a small local meat processing plant to "the world's largest, most extensive, most complete industrial chain, and most competitive pork food company", and he will do a good job of inheriting this legacy in the future.

wan long, 84 years old this year, joined luohe meat processing plant in may 1968 and became the general manager of the plant in 1984. he later managed the plant's restructuring and led the plant out of luohe, henan, turning the meat processing plant into a national food company. its "shuanghui" brand has also become a household name in china. in 2013, shuanghui international (wh groupthe predecessor of the company, walmart, acquired the american food company smithfield for $7.1 billion. this acquisition of "a snake swallowing an elephant" gradually made it a multinational company with businesses across asia, america and europe.

as shuanghui group continues to grow, the issue of second-generation succession has also attracted much attention from the outside world. wan long's strong style and the turmoil of his eldest son wan hongjian being dismissed from his post in 2021 have cast a veil of mystery over the handover of the shuanghui group. now, wan long has handed over shuanghui development (mainly china business), a listed company under wh group, to his second son wan hongwei. will this be the beginning of a bolder transformation for the 40-year-old shuanghui group?

second generation takes over

according to an announcement made by shuanghui development on september 2, after being elected as chairman, wan hongwei presided over the second meeting of the company's ninth board of directors for the first time as chairman and announced the list of the company's new management team.

the senior management team of shuanghui development is basically the same as before, with only one more vice president, wan zihao. according to the announcement, wan zihao, who was born in 1990, has served as assistant to the president of shuanghui development and general manager of luohe shuanghui import and export trading co., ltd., assistant to the president of shuanghui development and general manager of the foreign trade division, and other positions. there are also rumors that wan zihao is the grandson of wan long. as of press time, the news has not been officially confirmed by shuanghui development.

although wan long has stepped down as the chairman of shuanghui development, he is still a non-independent director of the company and also serves as the chairman and executive director of shuanghui development's parent company wh group. even so, wan long's handover is seen as a sign that the "meat industry empire" under the strong leadership of the 84-year-old man may gradually be transferred to the "second generation".

in fact, just three years ago, there was a conflict within the wanlong family that shocked the outside world. wan long's eldest son wan hongjian was dismissed from his positions as executive director, vice chairman of the board and vice president of the group. afterwards, wan hongwei, the second son of wan long, took over the position of executive director and vice chairman of the board.

insiders of shuanghui development mostly describe wan hongwei as "moderate". wan hongjian also once commented on wan hongwei, "his professional ability is feasible. he graduated from toronto, canada, has very good overall qualities, and strong english skills. he can span both china and the united states, but there is still room for improvement and training."

it is reported that wan hongwei was born in 1973. he has served as director of shuanghui group's hong kong branch, deputy manager of shuanghui group's import and export company, secretary of shuanghui group's chairman, manager of wh group's public relations department, and assistant to the chief executive officer.

shuanghui development's official website also released wan hongwei's statement after he became the chairman, in which the word "inheritance" was used the most. wan hongwei mentioned that in the future, he would do a good job in spiritual inheritance, cultural inheritance, management mechanism and system inheritance, and strategic inheritance. "we will not waver in meat processing and will not turn around the meat industry. we will not change our direction and goals in the future and implement the goals of the ninth board of directors' management work."

performance pressure

shuanghui development is still facing considerable challenges, and the performance of shuanghui development is related to the overall performance of wh group. according to wh group's 2023 annual report, the chinese market (mainly shuanghui development) contributed 33.3% of its revenue and 64.4% of its operating profit.

shuanghui development's 2024 semi-annual report released recently shows that its revenue is 27.59 billion yuan, a year-on-year decrease of 9.31%; its net profit is 2.296 billion yuan, a year-on-year decrease of 19.05%. from 2021 to 2023, shuanghui development's revenue has declined for three consecutive years; its net profit was 4.866 billion yuan, 5.621 billion yuan and 5.053 billion yuan respectively, with both increases and decreases.

from the perspective of business segments, shuanghui development's revenue is contributed by packaged meat products and fresh products, both of which account for more than 40% of its revenue. in the first half of the year, the revenue of the two business lines fell by 9.64% and 16.14% respectively. as for the reasons for the overall decline in revenue, shuanghui development mentioned in its semi-annual report that it was affected by "factors such as the decline in sales of packaged meat products and fresh pork products, and the low price of poultry products." shuanghui development further explained that the businesses that mainly affected the decline in profits were fresh products, poultry and other corporate income tax-exempt businesses.

specifically, among the three categories of fresh pork products, fresh poultry products and packaged meat products, only the sales and production of fresh poultry products achieved year-on-year positive growth, which partially offset the decline in other businesses. in this regard, shuanghui development said that with the continuous release of poultry industry production capacity, the company has also accelerated the development of market networks, and production and sales have increased year-on-year.

this is also one of the business adjustment directions of shuanghui development. in 2020, shuanghui development announced a private placement of shares to raise 7 billion yuan in funds. according to its plan, 3.33 billion yuan of it will be used for the construction of broiler industrialization capacity. shuanghui development has also explained that although the broiler breeding business has begun to take shape, it still cannot meet the demand for chicken raw materials in the meat products business. therefore, the implementation of this project will increase shuanghui development's upstream chicken product production capacity and stabilize the supply of raw materials for the downstream meat products processing business. in october of that year, shuanghui development's 50 million broiler full industry chain project started and laid the foundation. 2024 is also the first full year of independent operation of shuanghui development's poultry products division.

an analyst from a securities firm who has been paying close attention to shuanghui development told the economic observer that price is an important factor affecting revenue, whether it is fresh chicken or pork. in recent years, pork prices have been hovering at a low level, and chicken prices have also fallen in the past year, which has affected shuanghui development's revenue and also determined its future revenue level.

in addition, in terms of channels, wan long mentioned in his new year's message for 2024 that this year we will "accelerate the doubling of outlets, improve the pace of industrialization and diversified development, continue to expand the scale of the industry, and promote the common growth and strength of various industries." outlet development and expansion also appear in the 2024 work goals of several business units of shuanghui development.

however, according to its semi-annual report, the number of distributors, which had been growing in the previous three years, has decreased in the first half of this year. according to its semi-annual report, as of the end of june 2024, shuanghui development has a total of 17,305 distributors, a net decrease of 455 from the beginning of the year, a decrease of 2.56%.

according to shuanghui development's explanation at an investor research meeting, the reduction in distributors was due to a decrease in the number of distributors in the fresh food business. the fresh food channel was in fierce competition at low prices, and the company controlled the channels with low gross margins and poor operating efficiency. as for the changes in outlets and how to achieve further expansion, shuanghui did not respond to the economic observer as of press time.

seeking change

on september 2, on the investor relations platform, in response to investors' concerns about products, shuanghui development's secretary replied, "the company has launched products such as low-fat luncheon meat sausage, zhiquduo cod sausage, and qingka nengliang (chicken breast sausage) based on nutritional and healthy consumer needs. in the next step, the company will continue to conduct market research, continuously strengthen product research and development, and continue to provide consumers with healthy, delicious, convenient and safe high-quality products."

in addition to fresh meat products, more diverse packaged meat products, condiments, pre-prepared meals and other businesses have also appeared in shuanghui's business map. wan long once mentioned that it is necessary to "develop downstream industries and deep processing to make shuanghui's products closer to people's tables for three meals a day" and "entering families and tables" has also become the direction of its product structure adjustment.

pre-prepared meals are one of the focuses. in september 2022, the construction of shuanghui (luohe) third industrial park project started. the project focuses on emerging catering industries such as central kitchens, pre-prepared dishes, and noodle products, supplemented by branded meat products and snack foods. in july 2023, shuanghui development and taotian group also reached an annual business plan for the development of pre-prepared meals. the two parties agreed to develop pre-prepared meals with "eight famous dishes + henan cuisine" as the leading product matrix and "shuanghui master dishes" as the promotional positioning.

zhu danpeng, vice president of the guangdong food safety promotion association, said that for shuanghui development, pre-prepared meals may be an important growth point for it in the future. however, the national standard for pre-prepared meals has not yet been officially issued, which is related to the sustainable development of the industry, especially on the consumer side. he hopes that the issuance of the national standard will eliminate consumers' concerns about pre-prepared meals, thereby providing growth space for leading companies such as shuanghui development.

in addition to the adjustment of product structure, the information on shuanghui development’s official website also provides a glimpse into its trajectory of change.

in march this year, shuanghui development andjd.comshuanghui development held a working meeting with jd daojia, saying that “the two sides will use shuanghui’s many years of deep experience and industrial layout in the fresh food field, and at the same time use the jd daojia platform and distribution system to jointly explore ways to break the bottleneck of fresh food instant delivery”. in the same month, shuanghui development started cooperation with strategic marketing brand consulting company hua & hua, saying that “the two sides will jointly explore a new model of full-case marketing for meat products in the future and create a market-leading super single product”. in may and june thereafter, shuanghui development also participated in the china convenience store conference and discussed brand co-branding, food supply, and product co-creation with the hot pot chain brand xiaolongkan.

it is worth mentioning that vice president guo yunlong frequently appeared in these major events of shuanghui development. it is reported that guo yunlong was the vice president of yili and the senior general manager of key customers. he took office in shuanghui development in march this year. in an exchange with alliance merchants, guo yunlong said that in the current new consumption form of "consumer-centric", we must have the wisdom, courage and determination to "build and then break".