Agricultural Enterprises Accelerate the Process of Urbanization

On September 16, Li Keqiang, member of the Standing Committee of the Political Bureau of the CPC Central Committee and Premier of the State Council, presided over the symposium to promote pilot work on new urbanization and made an important speech. He said that China’s economy must maintain its high-speed growth and move toward the middle and high-end level, and it must use the powerful engine of new urbanization. The pilot project of new urbanization in China has been established in 62 regions, focusing on small and medium-sized cities and small towns.

Based on the economic downturn in the first half of the year, Li Keqiang’s mention of urbanization again is not only a structural adjustment but also an effective means to boost the economy. In addition to building materials, real estate, machinery and equipment and other industries, agriculture will accelerate the process of modernization, and form a new interface for scale production and large-scale markets, and achieve a substantial increase in domestic demand, specifically from the following aspects.

First, the concentration of land circulation has accelerated the advancement of large-scale farming and aquaculture in modern agriculture. China’s land has long been scattered among small farmers, although many reports indicate that farmers are increasingly inclined to work in cities and get out of the land. However, the dependence of the traditional farmers on the land is still a great obstacle to the scale of many agricultural enterprises. Once a company engaged in modern agriculture, because a farmer refused to subcontract the land, the entire project could not advance.

Under the government-led urbanization, the difficulty of land transfer will be greatly reduced, and land concentration will be the basis for large-scale development of modern agriculture.

Secondly, the small-scale peasant economy that has been produced and sold by itself has been broken down. Large-scale products have been accelerated into new peasant households, and large-scale markets, especially in the third and fourth tier markets, have seen heavy volume. Li Keqiang said that the new type of urbanization is highlighting the word "new" and the core is writing the word "human". It is necessary to focus on solving the problem of "three hundred million people" as the entry point. In the overall economic downturn in the first half of this year, the accelerated increase in peasant income has become one of the bright spots. If urbanization can proceed smoothly, the basic problems such as living, housing, and employment of peasants entering the city will be solved, and the income of farmers will be further enhanced. At the same time, after detachment from the land, the small-scale peasant economy that was produced and sold by itself was gradually broken down, providing a broader market space for large-scale agricultural products.

In fact, in many rural markets, small packaged oils have already replaced small workshops for oil extraction, rice noodles and other types of small packaged products are gradually advancing, and urbanization will greatly accelerate this process, which is why urbanization will become an important engine for stimulating the economy.

Third, the obstacles to sinking channels have been greatly reduced, and the first-line brands have entered the market. The pressure on the second and third-line brands has increased, and the brand upgrade has created the key again. For the majority of FMCG products, channel sinking is an important interface to open the market. However, due to the characteristics of China's vast rural areas such as decentralization and geographical protection, there are many obstacles in the third and fourth line. Urbanization allows farmers to concentrate on cities or small towns. Since urbanization is led by the government, it is highly planned and planned, houses are concentrated, and channels are focused, which greatly reduces the difficulty of products entering the third- and fourth-line channels. Consumer products represented by a variety of categories, future sales volume can be expected.

At the same time, it also puts tremendous pressure on some second and third-tier brands. Wong Lo Kat and JDB War, the first and second tier markets, and its sales are being squeezed, but based on channel sinking, and it is still in the third and fourth tier markets such as Hebei and Henan. If Wang Laoji and Jiaduobao will infiltrate the third and fourth lines in the future, their future will be worrisome.

Urbanization is a good thing for modern agriculture, but the opportunities are never fair. For different companies, this benefit will have to be analyzed at multiple levels.

First of all, leading agricultural enterprises are good. The original agricultural leading enterprises, large-scale agricultural enterprises, and those big brothers who come from across the border to give priority to this benefit.

This is because agriculture is an industry that needs long-term investment. The so-called "Chinese characteristics" are particularly manifested in agriculture. At the same time, agriculture is a very "heavy" industry. Compared with other industries, agriculture is under the same financial conditions. More difficult to shake. Therefore, the leading enterprises that have taken root in agriculture have seized this opportunity to become bigger and stronger and have more advantages.

Second, branded agricultural enterprises are good. With the reduction of channel barriers and the opening up of market interfaces, more products have flooded into the third and fourth line markets, and the brand will become an important basis for the selection of new farmers.

This is also an important opportunity for companies to build brands. Compared with the highly dispersed cities in the first and second tier cities, the concentration of media in rural areas and small towns has higher transmission efficiency. The second and third tier brands, especially some mid- and low-end brands, can grasp this opportunity and enter the brand first. Both strength and sales force will be fully enhanced.

As a mid-to-low-end brand, the old village head wine has long been deep-growing the third and fourth line market. In the case of not being sold nationwide, sales have reached billions of dollars each year.

Third, fast-moving consumer goods companies have an upstream layout. The upstream layout has become an important means for FMCG companies to strengthen their competitiveness and improve their industrial chain.

Compared with Wahaha and Nongfu Spring, Huiyuan has been weak in terms of brands, channels, and products, but it has been able to stand out in the juice industry, especially high-fruit categories. The gross profit rate of medium-density juices has been above 30%, which is higher than The secret of Master Kong and the unification of equivalent drinks lies in the upstream industry layout that Zhu Xinli began years ago.

Huiyuan has signed a protection agreement with the local government when it plans to build a high-quality orchard. In 2011, the Ministry of Industry and Information Technology issued relevant industrial policies, strictly limited the approval process for concentrated fruit and vegetable juice production projects, and prohibited the production of a second company within the specific geographic scope of different species.

Master Kong had tried to enter the high-concentration juice business, but due to the lack of a stable supply of upstream resources, the high cost caused Master Kong to dispel this business plan. Many brands are also optimistic about this category, but also because of the lack of control of the upstream resources of this core, there is no one to go, Huiyuan has thus always maintained a high concentration of juice this core category monopoly.

Now, with the advancement of urbanization, a large amount of land tends to be concentrated, and the government will actively promote the use of these lands in large-scale. Agricultural enterprises have the inherent advantages of policy support, integrate resources, and lay the upstream industrial chain to become a large-scale FMCG company. Important strategic opportunity.

Having said this, everyone should more clearly see the variables of agricultural enterprises in urbanization.

1) For professional farmers, this is a strategic opportunity given by the times. This is also the most important boss opportunity I have repeatedly reminded entrepreneurs.

2) Although the high-end market in the first and second tier cities looks beautiful, but in the process of urbanization, the majority of middle and low-end markets will focus on volume. This is a target market that should be highly valued by large-scale enterprises.

3) Urbanization has opened up new interfaces for scale production and scale markets to some extent, and the brand will become the starting point for its docking.

4) The barriers in the third- and fourth-tier markets will be reduced. A large number of leading enterprises and first-tier brands will intrude into the market. Small enterprises with an anticipation of security will face enormous competitive pressure and industry consolidation will be imperative.

The promotion of urbanization will bring about the transformation of the whole industry model from species breeding to consumer markets. In the future, in addition to breeding and processing enterprises, the modern agricultural industry chain will spawn more professional operating companies, and the brand will become an agricultural enterprise. The important assets have become one of the landmark elements of agricultural modernization.