Sealed for freshness in orange and blue with a $5.1m target

Canned pork products made by Shanghai Maling Aquarius Co Ltd at a supermarket shelf in Beijing. The Shanghai-based canned meat producer has built a strong foothold in the Czech Republic. [Provided to China Daily]

Shanghai meat producer's Czech operations continue to grow, despite rivals' copycat efforts

Heng Qidong, managing director of Shanghai Maling (Czech) A.S., says it was a combination of luck and insight that led to the Chinese canned meat producer's tremendous popularity in the Czech Republic.

"It was certainly a case of being at the place at the right time," says Heng, sitting in his spacious conference room in Maling's 40,000 square meter factory, about 80 kilometers northwest of the capital, Prague.

The factory employs about 100 workers, and has a production target of 4 million euros ($5.1 million) worth of canned meats this year, of which half is for the Czech market. Heng has the ambitious plan of increasing production to 12 million euros next year.

In fact, with a strong future focus on automation, he says his workforce could potentially increase that output to 30-50 million euros in the future.

The luck in Maling's success story comes from the strong historic trading relationship between China and the former Czechoslovakia, during which the company's products where a regular part of the average Czech's diet.

At the time, barter was the main method of product exchange between the two countries.

Czechoslovakia offered China heavy machinery, and China sent smaller, light industrial items in the other direction, including Maling meat, which developed a strong following in other Central and Eastern European markets, too.

However, the insight came from Heng's own decision to create import arrangements for Maling products into the Czech Republic in 1993, four years after canned meats from China were banned in 1989 during the break-up of the country.

"At the time, Czech consumers really liked Maling products and so creating a market-driven sales channel was quite easy as we didn't really have to work at brand promotion," Heng says.

Originally from Changchun, capital of Jilin province, Heng first arrived in what was to become the Czech Republic in 1991 in the hope of creating his own business.

Within a year he had set up local distribution deals for various Chinese food products, and in 1993 the Maling opportunity came along.

He distributed its meats in the Czech Republic until the late 1990s, when the import of meat products from outside the EU was banned, and again the meats disappeared from Czech shelves.

It was not until 2005 when along with a new growing wave of Chinese companies looking for manufacturing opportunities overseas, Maling decided to open a factory in the country, and Heng was chosen to run it.

He also invested personally in the new venture, with Maling remaining the majority shareholder.

Success was swift. Within four years the factory producing luncheon meat and premium ham was exporting all over the world, but the products remained especially popular in the Czech and Slovakian markets.

However, other Eastern European countries, such as Poland and Hungary, proved tougher markets to crack, the former already having its own quality brands, and the latter importing much of its canned meat from Romania, Heng says.

"In the Czech Republic and Slovakia, the quality of local competitors' meat is a lot lower than ours, so it is easier to win customers," he adds.

Heng says that in his business, quality counts, and his company's products use locally sourced meat, whereas some other rivals may use other often-discarded parts of the animal.

"In Europe, food safety standards are very high, but that does not necessarily mean the meat source is great. We use the best meat available and you can taste the difference."

When Maling first decided to invest in the Czech factory in 2005, it had expected that meat prices in China would rise, but not nearly as high as they did.

With Czech prices remaining comparatively low, it meant its locally produced products proved competitive in many Southeast Asian markets too, including Singapore, Malaysia, the Philippines and Indonesia.

With slightly different packaging, the Czech-produced Maling meat became branded as "premium", while its China manufactured meat was aimed at the average pocket.

A series of food safety issues in China hurt domestic sales of a number of goods, but Maling's products were seen as safe, given they were produced abroad and met strict European food safety standards.

A twist to its success story in Europe was that some Czech rivals started creating products in similarly designed packaging, even in some cases using names such as Meiling or Haiming.

Maling's products have distinctive orange and blue labels on its cans, but Heng says: "Consumers can be easily confused because the cans look so similar.

"Some of these copycat brands would also put Chinese characters onto their cans to make consumers think the products are made in China, which is seen locally as a sign of high quality."

Heng says the problem, essentially intellectual property infringement, dates back to the 1960s and 1970s when the State-owned China National Cereals, Oils and Foodstuffs Corporation, the country's largest food processor, manufacturer and trader, was also in charge of managing the international operations of many other companies, including Maling.

When China later privatized many of its State-owned firms in its reform and opening-up process, the IP of many brands was given back to them, but Maling's identity in international markets was never returned.

During the 1990s many Czech canned meat producers registered their own IP, with designs similar to Maling, but the corporation failed to intervene on its behalf as it was unfamiliar with the significance of IP registration, Heng says, meaning the Czech brands were legally branded, a situation that is now almost impossible to rectify.

So Heng's only solution has been to try to educate customers about the difference between its own products and those of others, and to highlight its quality, not only in the ingredients used, but also in its production processes.

The finished meat products are produced in airtight cans, meaning there is no need for preservatives, allowing longer freshness, Heng says.

His forensic attention to detail on the factory floor extends to insisting workers shower before they enter the food processing area.

He points out the facility still has ample room for growth.

The company originally bought 200,000 sq m of land and only uses just under a quarter of that.

It also has about 50,000 sq m nearby, previously designated for agricultural use, which the local government has agreed to help convert to light industrial use should Maling need it for further expansion.

Its growth until now has benefited from tax breaks and employment subsidies, with the local authorities willing to help with speeding up planning permission for its factory if needed.

"The Czech government is very supportive toward investors whose investment creates tangible benefits to the local economy, and Maling feels very welcomed in the Czech Republic," Heng says.