Smucker learning from Chinese oatmeal business

by Eric Schroeder
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ORRVILLE, OHIO — Less than three months after acquiring a 25% non-controlling minority interest in Guilin Seamild Biologic Technology Development Co., Ltd., a Chinese manufacturer and marketer of oats products, for $35 million, Orrville-based J.M. Smucker is encouraged by what was described as “a wonderful business.”

In a June 7 conference call with analysts to discuss fiscal 2012 results, Steve Oakland, president, International, Foodservice & Natural Foods, at Smucker, said the company has conducted research in China on categories and companies that fit its growth strategies.

Seamild’s products are distributed throughout China, and the company operates two manufacturing facilities in southern China with a third under construction in northern China.

“We all know hot cereal is a great category,” Mr. Oakland said. “But if you think about China and you think about the challenges as you market outside of just Shanghai, Beijing and Guangzhou, this is grain-based hot cereal that is made in boiling water. The Chinese consumer eats congee, grain-based, rice-based hot cereal that they make in boiling water. So we don’t have to change a lot of habits here to provide what they perceive as a more healthful, more western — and even though it is a premium to congee — grain-based relatively low-cost alternative.”

What makes Guilin Seamild unique, Mr. Oakland said, is the focus on marketing.

“They do things and they look at their business a lot like we do, and they do it in the tier 2 and tier 3 cities, things that are typically tough to do, especially for start-up Western companies,” he said. “Selling to Carrefour in Beijing is something we understand. The marketing in those smaller cities is something we can learn a lot from these folks.”

He said Smucker has begun putting a team in place, has opened an office in Shanghai and plans to open another soon in Beijing.

“We think this is a unique business,” he said of Guilin Seamild. “It gives us a chance to learn a lot, and whether we go forward and own more or the whole thing over time, I think quite frankly that we have tremendous respect for them. Our cultures are very similar, and we’ll work that out together.”

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