Growing by leaps and bounds
Sept. 25, 2012
by Arvin Donley and Fengcheng Wang
When Mr. Hong Dan of Wudeli Flour Mill Group decided in 1989 to enter the milling business by acquiring a 15-tonne-per-day short flour milling unit from Hebei Zanhuang Machinery Factory for 30,000 Yuan ($4,700), he surely could not have imagined that two decades later the family-owned company would be the largest in China’s fiercely competitive flour milling industry.
That’s no small accomplishment in a country that has nearly 6,000 flour mills, including 200 with daily milling capacity of 400 to 16,000 tonnes per day, and is reportedly building nearly 100 new mills per year.
Wudeli Flour Mill Group, which has been China’s largest flour miller for 10 years and is one of the world’s largest millers, operates 11 mills with a combined milling capacity of 20,000 tonnes, and the company has three other milling facilities that are currently under construction and four existing facilities that are undergoing expansion.
Mr. Zhiguo Dan, president and co-owner of Wudeli Flour Mill Group, in an interview with World Grain, said once these projects are complete, the company’s milling capacity will double to 40,000 tonnes by 2015. Quite amazing for a company that 23 years ago was a very small mill processing 15 tonnes of wheat per day with a short flour milling unit.
“For years the (noodle roller machine) manufacturing business had been good and allowed my family to accumulate some money,” Zhiguo Dan said. “During the beginning of China’s (economic) reform, my father felt the marketplace for small noodle machines would soon be limited, and therefore he proposed to create new products, open new markets and make the enterprise bigger. But there was no response from his other business partners. For these reasons, my father made a big decision, in his unusual keen insight and vision, to have my whole family, including my mother, an older brother and sister, get into flour milling, which was a more stable industry.”
For the first 11 years, the facility in Daming County, Hebei Province was Wudeli Group’s only flour mill. But the construction of a new mill in Shenzhou City, Hebei Province in 2000 launched an explosion of activity over the next decade in which 10 mills were built by Wudeli.
Remarkably, most of the recent expansion has been paid for with profits from the company’s flour milling business.
Relying on local high quality wheat sources and utilizing advanced technology and equipment has been the key to Wudeli’s development, Zhiguo Dan said.
“We have especially focused our attention on the quality and stability of flour products,” he said.
With the task of feeding the world’s largest population, the Chinese government is committed to policies that enhance agriculture and food development, and there has been very supportive of the flour milling industry since economic reforms began in 1989.
“The flour milling industry has been given significant financial support with some tax deductions and receiving priority in obtaining land for construction projects,” he said.
Since 2004, Wudeli Group has been recognized by the government as a “National Agricultural Processing Leading Enterprise.”
“As the largest milling company, Wudeli Group has been very welcome anywhere in China for investment in building mills and received a lot of preferential policies by the local governments,” he said.
Wudeli said the growth it has displayed in a relatively short period of time is due to four key factors.
“These factors include: utilizing the advanced milling technology and new equipment, producing good and stable quality flour products, managing well, and adhering to, the development philosophy of the five-party gains (customers, farmers, employees, employers and the National).”
Wudeli’s primary technology partners in this massive expansion are the Chinese milling professors at the Henan University of Technology and Bühler China.
“Wudeli Flour Mill Group started its relationship with Bühler in 1995,” Zhiguo Dan said. “Today, Bühler is the largest supplier of equipment for our mills. In the latest expansion, over half of the equipment investment is from Bühler.”
Compared to most flour mills in China, Wudeli is ahead of the curve in terms of utilizing the latest milling technology, he said.
“In China, only some of the well known flour mills utilize the newest technology and equipment,” he said. “Most mills still use older equipment.”
He said one thing that sets Wudeli apart from most of the competition is the automation systems it has installed in its facilities.
“Our company is at a relatively higher degree of automation, especially in the newer mills,” Zhiguo Dan said. “We have focused on reducing our workforce by using more automated machinery systems in areas such as wheat receiving and unloading, and flour bag packaging and stacking.”
Energy savings is a top priority of the Chinese government, and Wudeli has taken steps to improve energy efficiency in its mills. “Our company is now using high efficiency and low energy consumption equipment such as Bühler roller mills and conveyors, SEW gear motors, ABB motors, SKF bearings, LED lights,” he said.
Emphasizing energy efficiency is just one aspect of the company’s quest to operate in an environmentally friendly manner, he said. Wudeli has also taken the following actions protect the environment:
•Omitting the wheat washing machine to prevent production of dirty waste water.
•Employing a two-step dust system to remove more dust and finer particles.
•Using a high-performance Bühler Jet Filter and filter cloth manufactured by BWF Group in Germany.
•Keeping the equipment enclosed to reduce dust pollution.
•Taking measures to reduce noise in the plant.
Wudeli is also designing its mills with food safety in mind, installing stainless steel equipment wherever possible.
“As the largest flour milling group in China, we are very careful to have the highest level of sanitation in our mills and to have the best quality control measures of our flour products to avoid any food safety problems,” he said.
Wudeli’s flour is all bagged, mostly in 25-kilogram sacks, and shipped by both truck and rail. However, in the near future the company will start transporting some of its flour in bulk to food plants.
“Currently, our mills are all located in the main wheat production area and close to our local flour consumers,” he said. “However, we still have to ship our products long distances to our resellers to reach our other customers.”
Wudeli ranks ahead of two formidable competitors in Chinese flour production. COFCO, a state-owned company that is China’s largest domestic food processor, ranks second. It operates 10 mills in six provinces. Ranking third is Singapore-based Wilmar Industries, the largest agribusiness group in Asia, which just entered the Chinese flour milling industry a few years ago and operates five mills with others scheduled to be built.
Zhiguo Dan said Wudeli has the leading market share in China at 7%. By most estimates, there is about 250 million tonnes of annual wheat milling capacity in China, but only about one-third of that capacity is being utilized.
“All of our mills source locally grown wheat from the main wheat production area in China,” he said. “We import very little wheat, but as our company expands we may have to increase imports for production of higher quality, specific flour.”
Zhiguo Dan said Wudeli processes mostly “mixed wheat” with medium strong gluten. He said the company’s customers desire flour that has a strong degree of whiteness and a high level of quality stability. Customers are also demanding flour with ash content that is much lower than the 1% level that was required when the company started in the flour milling business in 1989.
Zhiguo Dan said noodles and steamed bread are the most popular flour-based products in China. “In terms of flour and bread consumption, they are demanding more flour varieties with good quality and high stability,” he said. “To meet the higher requirements, Wudeli Flour Mill Group will be developing more flour varieties with special purposes better suited to make different Chinese flour-based foods by improving the whiteness, taste and operability. Wudeli Flour Mill Group will continue to focus on the wheat flour milling business with the production of better and more specialized flours for Chinese consumers and the Chinese flour-based food industry, and therefore will become stronger and bigger.”
The co-author, Fengcheng Wang, is the China correspondent for World Grain and a professor at Henan University of Technology in Zhengzhou, Henan, China. He can be reached at email@example.com.
Wudeli Flour Mill Group facilities
•Site: Daming County, Hebei Province; Founded: 1989; five plants, seven milling lines, daily processing capacity 2,500 tonnes.
•Site: Shenzhou City, Hebei Province; Founded: 2000; three plants, six milling lines, daily processing capacity of 2,000 tonnes.
•Site: Dongming County, Shandong Province; Founded: 2001; three plants, six milling lines, daily processing capacity of 2,500 tonnes.
•Site: Xinxiang City, Henan Province; Founded: 2003; two plants, four milling lines, daily processing capacity of 2,000 tonnes.
•Site: Zhoukou City, Henan Province; Founded: 2005; three plants, six milling lines, daily processing capacity of 3,000 tonnes.
•Site: Xianyang City, Shanxi Province; Founded: 2007; two plants, four milling lines, daily processing capacity of 2,000 tonnes.
•Site: Suqian City, Jiangsu Province; Founded: 2008; one plant, two milling lines, daily processing capacity of 1,000 tonnes.
•Site: Xinghua City, Jiangsu Province; Founded: 2008; one plant, two milling lines, daily processing capacity of 1,000 tonnes.
•Site: Baoding City, Hebei Province; Founded: 2009; two plants, four milling lines, daily processing capacity of 2,000 tonnes.
•Site: Shijianzhuang City, Hebei Province; Founded: 2010; one plant, two milling lines, daily processing capacity of 500 tonnes.
•Site: Yucheng City, Shandong Province; Founded: 2010; two plants, four milling lines, daily processing capacity of 2,000 tonnes.
•Xinxiang City, Henan Province; two mills each with 1,800 tonnes capacity.
•Suqian City, Jiangsu Province; milling capacity: 1,800 tonnes.
•Xinghua City, Jiangsu Province; milling capacity: 2,000 tonnes.
•Daming County, Hebei Province; milling capacity: 3,000 tonnes.
New facilities under construction
•Site: Shangqui, Henan Province; milling capacity: 5,000 tonnes.
•Site: Baixiang, Hebei Province; milling capacity: 3,000 tonnes.
•Site: Bozhou, Anhui Province; milling capacity: 3,000 tonnes.
Flour consumption flat in China
Total wheat flour consumption in China has been flat for a number of years due to the decline in per capita consumption and a leveling off of population. Increases in market share by the largest milling groups have coincided with the closure of thousands of mills in villages and small towns. This trend has been accelerated by the shift in population from rural areas to bigger cities in all parts of the country.
While there has been a general homogenization of the urban diet throughout China, it is probably safe to say that northern city dwellers have increased their rice consumption at a faster rate than their southern counterparts have decreased theirs in favor of wheat-based products.
A recent study of China’s wheat industry conducted by Beijing-based agricultural consultant BOABC estimates that 45% of Chinese rely on wheat as a staple food, and in the primary wheat-producing region that figure increases to 80% and even to 90% in rural areas of the wheat zone.