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Business

Pork giant WH Group beefs up Europe, US segments

Chinese meat supplier swallows trio of Polish peers amid soft home market

WH Group subsidiary Smithfield acquired three meat companies from Poland's Pini Group in June.

DALIAN, China -- WH Group, the world's largest pork processor, looks to feed its overseas operations through acquisitions in Poland and a partnership in the U.S. amid thinner demand in China.

American subsidiary Smithfield Foods in June purchased three companies from Poland's Pini Group: Pini Polska, a meat processor; Hamburger Pini, a meat packaging company targeting retailers; and Royal Chicken, a poultry processing concern.

Smithfield also intends eventually to boost its stake in Pini Polonia, a Pini unit that processes 4 million hogs a year, from 33.5% currently to 66.5%. The Chinese parent has not disclosed the prices of the acquisitions, saying that they are undergoing antitrust clearance.

The U.S. unit has four locations in Poland, including a meat processing plant, and boasts close relationships with hog farmers there. The triple takeover, if cleared, will let Smithfield cut costs by combining facilities. The three acquisitions also strengthen the company's supply chain from farming to processing to sales, which will "improve meat quality and enhance its competitive edge in Europe," as a WH Group official said.

Smithfield, based in the U.S. state of Virginia, also forged a strategic partnership this month in the U.S. with Chef'd, a meal-kit delivery service, by investing $25 million. The deal made Smithfield the service's largest external investor, though the exact size of the stake is unclear.

Chef'd provides over 1,000 ingredients through partnerships with renowned chefs and food brands. The alliance gives Smithfield a seat on the California-based service's board and also provides sales and consumer trend data. Smithfield will share product development and procurement techniques.

WH Group, based in Henan Province, offers meat products including sausage and engages in fresh pork processing and hog farming. Its 2013 acquisition of Smithfield gave the Chinese company a steppingstone to the global market, and WH Group emerged as the world's top pork processor.

But Chinese demand for pork has fallen lately amid growing consumer appetite for healthier choices. WH Group's domestic business recorded disappointing results for the first six months of 2017, as sales declined in both the meat product and fresh pork segments. On a consolidated basis, sales rose 2% to $10.65 billion and net profit edged up 1% to $557 million.

To compensate for uncertain prospects in China, WH Group is looking beyond the home market for further growth. Overseas operations already contribute more than half of the company's sales, and WH Group now targets Europe, where it maintains a relatively small presence.

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