Agricultural M&A will enter a golden period in the next five years
On January 4, when Xinba, founder of the relevant website's agriculture section, food industry consulting expert, founder of the New Agriculture Business School and initiator of the New Farmers Alliance, appeared as a guest on an online interview, the experts discussed the topic of “new agriculture and new farmers”, interpreting the current development situation of the new agriculture industry as well as the difficulties new farmers encounter in investing in agricultural projects and the solutions.
New farmers should guard against blind investment and should not go too far ahead
⟦NL> At present there are many explanations and definitions for the group known as new farmers. Xinba believes that modern farmers dedicated to producing and distributing safe food are new farmers, and this includes not only agricultural producers but also agricultural product distributors and some cross-sector investors.
He believes that when the new agriculture industry returns to the market, it is still a question of how to make money. The future of agriculture has room for imagination; now land can be transferred, and farmers can consolidate small plots of land to develop into large-scale growers, cooperatives and farms.
“But it is very important for farmers to decide what to plant. If they plant basic subsistence food ingredients, the added value may be relatively low. Returning to the market, they still cannot obtain market returns. When entering the new agriculture industry, investors should plan well, think about how to carry out scientific farming, and think about where the market profit points are; they cannot invest blindly.” Xinba said.
Huang Dejun believes that at present new farmers encounter some problems in the process of production and operation: first, the issue of positioning; second, the new agriculture industry itself is cyclical, and new farmers need to grasp the laws of cyclicity; third, the issue of sustainability in the new agriculture industry, because due to the limitations of agriculture's objects of operation and the limitations of its industry chain, its investment period and payback period are relatively slow, and new farmers entering this industry must consider their own financial resources and time, that is, the input of production factors.
Regarding Huang Dejun's views, Xinba expressed agreement. He believes that some new farmers who have come from other sectors do indeed encounter many difficulties when investing. “Many new farmers do this agriculture with a kind of obsessive cleanliness mentality, and even say that in order to achieve zero pesticides in the fruit they grow, they personally catch insects, believing that only in this way can they confidently bring the product to consumers. But in this way costs rise while efficiency falls.”
He also believes that when new farmers invest in agricultural projects they should still follow the market and should not go too far ahead. New farmers should grasp the pulse of market changes and adjust according to market changes.
There are relatively large opportunities in agricultural product e-commerce; logistics remains a weak point. At present, agricultural product e-commerce is developing rapidly. In this regard, Huang Dejun said that in developing agricultural product e-commerce, how to shorten circulation links and improve circulation efficiency has become an important issue. Through e-commerce websites such as Tmall and JD.com, six to seven intermediate levels can be greatly saved, and consumers can benefit. New farmers starting businesses are mostly doing so from the circulation field, using some new technical means such as the e-commerce model to realize their value. At present in China the original value and added value of agricultural products are roughly 1:1.8, but in developed countries they can reach 1:3.8. China's circulation efficiency is relatively poor compared with foreign countries, but China has the opportunity to overtake on the curve, and this opportunity lies in the internet.
Regarding Huang Dejun's views, Xinba also expressed agreement. “O2O is indeed a very good model for the future of agricultural product e-commerce. At present the Ministry of Commerce is also promoting an idea called industrial products going to the countryside and agricultural products entering the cities. Some high-quality agricultural products need to enter developed coastal cities and bring some vitality to the local economy. How these products can be sold to developed cities by internet means is missing a circulation channel along this path.”
The next five years will be a golden period for agricultural M&A
Huang Dejun also said that agricultural enterprises need sustainable development momentum. In addition to financing and setting strategy, they also need to make full use of investors' own advantages. “How to design this business model based on the internet and roughly how much money to invest are relatively closely related.”
As for the development trend of the new agriculture industry in 2015, Huang Dejun believes that the general direction of new agriculture in the next three years is M&A. Because enterprises in the new agriculture industry are still relatively small in scale, concentration is also very low, and market share is not high either, the next five to ten years will all be a golden time for M&A.
“M&A includes this mixed-direction M&A, M&A between brands, and also vertical M&A, and so on. In addition, the community O2O business form is also something that should be emphatically considered in 2015.” he said.