Developer tries raising cows to milk earnings
Print Edition
When Xu Xiaobo decided to spend all his savings raising cows five years ago, his EMBA classmates thought the real estate tycoon had gone crazy.
Xu, 47, meant what he said. He spent 460 million yuan (US$70 million) in Gucheng County in Hebei Province, creating a massive pasture for more than 10,000 Australia-imported Holstein cows.
Getting into the dairy industry needs courage in China. The market is dominated by several giants such as Yili and Mengniu, and Chinese consumers are turning to overseas milk products, especially after melamine-tainted baby formula produced by China鈥檚 Sanlu Group killed six children and made 300,000 sick in 2008.
Sanlu, once a major dairy producer based in Hebei, went bankrupt after the scandal.
鈥淚t does not matter if China has one fewer real estate developer, but I do hope I can make a difference in China鈥檚 dairy industry,鈥 Xu said.
Xu鈥檚 decision was partly fueled by an unpleasant incident, when he was kept under investigation for four hours by Hong Kong customs authority in August 2012 as he was returning to the Chinese mainland carrying eight cans of milk powder for his new-born son. Each person was only allowed to carry two cans.
鈥淗ow come such a big country as China could not produce safe and affordable milk?鈥 Xu said. He decided to act.
He spent more than 3 million yuan touring a dozen countries to find the best solution before he chose Gucheng to start his dairy business. Xu started building the pasture in September 2014 and completed the project 15 months later.
The number of milking cows grew to 4,800 at present from just one in February 2016.
To ensure quality, all the cows and milking equipment, including some forage grass, were imported. Consumers can watch real-time videos of the cows through a mobile phone app.
鈥淓verything the cows eat is traceable. Cow dung is used to produce methane for power generation, and the solid waste produced in the process is turned into organic fertilizer,鈥 Xu said.
Xu鈥檚 two major products, packaged pure milk and yogurt, sell well due to the growing demand for quality dairy products from China鈥檚 growing middle class.
Xu walks a different way from his predecessors. He has no processing plant but outsources production to Bright Dairy, a major Chinese dairy producer, to cut costs.
Unlike traditional dairy giants that spend billions of yuan on TV and outdoor advertising, Xu spends little on traditional marketing channels.
Xu prioritizes social media platforms instead. His inspirational video and story went viral on several famous platforms, bringing him hundreds of thousands of followers who later became clients.
He initiated an 鈥渁dopt a cow鈥 program on social media in December 2016. Under the program, subscribers pay 2,999 yuan a year to get the milk from a cow, or a box of packaged yogurt, delivered once a week directly to their homes. They can also monitor the living condition of the cow, on their phones.
鈥淲e have no dealers and we do presale online,鈥 Xu said.
Since the launch of the program a year ago, sales revenue has reached 70 million yuan, though December is the first month to record a profit, said Xu, adding that the monthly profit is 3 to 5 million yuan.
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