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Corporate Strategy

Orlando Li, Foodgears Industrial International Ltd. Food products imported by Foodgears. Provided to China Daily

Walking into a Hong Kong or mainland supermarket, customers are likely to be confronted by a deluge of imported food products on the shelves, be it cartons of Australian milk, chocolate bars from France or Italy-produced coffee.

People are enjoying them for a variety of reasons - guaranteed food safety or better taste. No matter what the reasons are, they have provided companies like Foodgears Industrial International Ltd with great business opportunities.

Foodgears is a Hong Kong-based, food-products importer that has been importing Western food ingredients into Hong Kong, Macao and the mainland for sale at supermarkets and restaurants since its inception in 1999.

The company is currently actively expanding its distribution network on the mainland, where consumer spending power has been rising and the potential for business expansion is limitless, Orlando Li, Foodgears' chief executive officer, told China Daily in an interview.

"The market (for imported food) in Hong Kong is very mature now while the demand for imported food on the mainland has risen significantly over the years," he said.

According to Li, in the first few years of Foodgears' operation, the bulk of its revenue was from Hong Kong and Macao. But, at present, the mainland market contributes about 60 percent to the company's income.

By the end of last year, Foodgears' revenue had gone up 20-fold.

"We have been extending our (distribution) network to third and fourth-tier mainland cities in the past five years, and this will be our main business direction in future," Li said.

Fueled by the accelerating spending power of mainland people, Foodgears expects 80 percent of its total revenue to come from the mainland in the next five to 10 years.

Li said the company is now the exclusive agent for more than 100 types of food products, with up to 70 percent of them being dairy products. The company imports them from Australia and other Western countries and sells them to dealers, food factories, restaurants, bakeries, and retail and online stores.

In Hong Kong, Foodgears is one of the key suppliers for Maxim's, Saint Honore Cake Shop, Arome Bakery, Kee Wah Bakery, hotels and supermarkets.

Clients on the mainland include dairy firms and bakeries, such as China Mengniu Dairy Company, Inner Mongolia Yili Industrial Group and BreadTalk.

Li said Foodgears came into being as the demand for imported food on the mainland soared, and the growing number of foreign companies entering the country helped spread Western culture.

But he stressed that the company's business on the mainland had been very difficult in its first few years, mainly due to China's absence from the World Trade Organization (WTO) back in 1999.

"Imported food tariffs then were as high as 60 percent, and prices for our products were so high that mainland sales were very limited in the first couple of years."

Besides high prices, Foodgears also had to entrust import agents to get its products to customers on the mainland. Sometimes, it could be very difficult to control delivery dates or even the quality of its products.

Since China's accession to the WTO at the end of 2001, major obstacles facing Foodgears in conducting business on the mainland have been removed. And as the per capita income of Chinese people has increased rapidly in the past decade, more and more people are interested in and willing to try Western food.

Back in 1999, Foodgears had only two offices on the mainland - one in Beijing and the other in Shanghai, each manned by only one employee. To meet high demand in recent years, the company has set up subsidiaries in Beijing, Shanghai and Guangdong Province.

Apart from its traditional businesses, the company now has four food "R&D" centers in Hong Kong and on the mainland. A professional team of chefs is hired to test and create recipes from the food products sold at these centers, offering customers more choices to meet demand.

According to Li, as a result of Foodgears' high profitability, bankers have been trying to convince him to allow the company to go public.

But, he said he would rather focus on expanding business on the mainland, believing it still has a lot to learn and plenty of work to prepare before contemplating a public listing.

"Of course, we'll not rule out the possibility of being listed in the future," Li added.

sophiehe@chinadailyhk.com

(HK Edition 01/11/2013 page2)