Fufeng Group Ltd (HKG:0546) The Issue of Two Stabilities of MSG Industry

China's urbanization and economic development have procured the flourishing development of the food industry and the catering industry. As one of the invisible champions in the background, the glutamic acid and MSG industry has also grown stably. China is the new centre of the worldwide glutamic acid and MSG industry. Its vast market provides a good platform for the industry. On this foundation, this report aims to probe into the important issues of the existing layout and "two stabilities" in the industry.

Stability 1: Stability of the industry layout. After the drastic 2006-2008 industry integration, the current glutamic acid and MSG industry has formed the leadership enterprise group in the initial stage. The basic reason of the integration refers to the leading strategic judgment of the enterprise and it is embodied in the low-cost barrier and the price war. Glutamic acid and MSG are different parts of the production chain. Because of different investment levels and technical characteristics, glutamic acid incorporates "integration steadiness" while MSG incorporates "integration repetition".

Stability 2: Stability of making profit. The making profit-making cycle of the glutamic acid and MSG industry can be divided into the industry cycle (or cost cycle) and the integration cycle. Because of the demand steadiness, the enterprises of the industry in general are capable of pricing in line with the cost so as to transfer the cost downstream. It has been embodied in the stable gross profit margin in the industry. The widening profit variation is in fact due to the integration cycle, that is, the process in which the leading enterprises take the initiative to eliminate production capacities in the industry.
After the industry integration cycle in the, the glutamic acid and MSG industry will enjoy the golden period at this stage, due to decreased supply terminals and increased concentration. Starting from the 4th quarter in 2008, China's glutamic acid and MSG industry has entered this stage.

For the full report, please download from this link:
http://www.abnnewswire.net/media/en/docs/62119-ABNEN62119.pdf' target=_blank>http://www.abnnewswire.net/media/en/docs/62119-ABNEN62119.pdf' target=_blank>http://www.abnnewswire.net/media/en/docs/62119-ABNEN62119.pdf


About Fufeng Group Limited

Fufeng Group (HKG:0546) is the world's largest producer of MSG, xanthan gum and a major supplier for a series of bio-fermentation products. The main products of the Group are food additives, animal nutrition, colloid and high-end amino acids. In fiscal 2016, Fufeng generated sales of approximately RMB11.2 billion and profit attributable to shareholders of about RMB1.09 billion. For more information, please visit our website www.fufeng-group.com


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