VZCZCXRO1536
PP RUEHCN RUEHGH RUEHVC
DE RUEHSH #0084 1760054
ZNR UUUUU ZZH
P 240054Z JUN 08
FM AMCONSUL SHENYANG
TO RUEHC/SECSTATE WASHDC PRIORITY 8437
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY 0814

UNCLAS SHENYANG 000084 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV EAGR CH
SUBJECT: HAO YUE ISLAMIC BEEF REVAMPS DOMESTIC STRATEGY TO 
LIMIT RETAIL PRICE JUMPS 
 
¶1.  Summary.  Hao Yue Islamic Beef Company (one of the 
largest beef companies in China) has changed its sales 
strategy in order to control retail prices and take advantage 
of beef's increasing importance in the Chinese diet.  While 
Hao Yue previously serviced the domestic market by selling to 
wholesalers, the company now employs a domestic sales staff 
which sells directly to major retailers, including Carrefour 
and Taiwan-based RT Mart.  Hao Yue is German retailer Metro's 
sole supplier of beef and mutton and sells a wide variety of 
processed beef and mutton products to other major retailers 
throughout China.  Additionally, the new sales force now 
sells directly to major hotels and restaurants.  Despite some 
initial cost increases, the company has been able expand 
margins without adversely impacting retail prices.  End 
Summary 
 
¶2.  During Econoff,s visit to Hao Yue's processing facility 
in Changchun, the President of Hao Yue Group, Mr. Cong 
Lianbiao said that Hao Yue processes all of its beef and 
mutton products to meet both Halal Islamic standards and 
China's domestic standards.  By far the largest domestic 
customer is U.S.-based McDonalds Corporation:  Hao Yue 
provides more than ninety percent of McDonalds-China's beef 
products.  Mr. Cong added that the company's primary export 
market is the Middle East but that the market is growing in 
Southeast Asia as levels of beef consumption increase, 
especially in Indonesia and Malaysia. 
 
¶3.  Rising domestic demand, coupled with food-price 
inflation, prompted Hao Yue to completely revise its domestic 
sales strategy, which now employs a domestic sales force to 
market directly to retail and service industry outlets.  The 
increase in staffing and packaging costs was more than offset 
by eliminating the wholesalers' cut, which allowed Hao Yue to 
slightly increase margins while alleviating retail price 
pressure. 
 
¶4.  Hao Yue Group, which began operating in January 2000, 
employs 3,250 people, of whom forty percent are Muslim.  Hao 
Yue Group exports to 21 countries and regions, primarily in 
the Middle East and Southeast Asia.  During 2008 the company 
will open new markets in Brunei, Macao, Israel, and Egypt. 
Exports account for 20-25 percent of total production.  The 
company's domestic large-contract customers are large-scale 
supermarkets and franchises like McDonalds. 
 
¶5.  Hao Yue processes 500,000 cattle and 300,000 sheep, in 
addition to 600,000 tons of feed and 500,000 pieces of 
leather per year.  The company also produces 100,000 tons of 
Chinese and European-style Halal cooked foods as well as 73 
varieties of processed agricultural products.  The Group has 
its own cattle ranches, feed lots and large-scale breeding 
operations in Jilin Province, all within 200 kilometers of 
Hao Yue Group's headquarters. 
 
¶6.  Jilin Provincial Livestock Bureau is the lead regulatory 
and certification agency for Hao Yue.  In May 2004, a 
13-member delegation from the U.S. Department of Agriculture 
was scheduled to visit Hao Yue's plant but was unable to 
complete the visit due to flight unavailability.  The new 
sales plan involves agreeing with large-contract customers, 
including McDonalds and Metro, to allow customer inspection 
teams full access to the plant.  The company would welcome a 
visit by U.S. inspectors. 
 
¶7. The cattle processing plant is new, clean and extremely 
high-tech.  Cattle are processed with a minimum of human 
interaction.  Robotic devices are used for hide and hoof 
removal and for vivisection reduction to beef sides.  Waste 
collection is also automated and highly efficient.  A whole 
carcass can be processed to two sides in less than two 
minutes. 
 
¶8.  While much of the finer work is done by hand, all product 
is moved on modern conveyors.  Each level of processing is 
isolated from adjacent operations by means of air locks and 
physical barriers to prevent contamination.  Automatic 
cleaning systems keep floors clean and free of debris, and 
all workers wear gowns, gloves and masks.  Each processing 
room has glass walls, so that managers can observe without 
introducing contaminants to the system. 
 
¶9.  Like the plant itself, facilities for the workers appear 
to be first rate, with on premise dormitories, recreational 
facilities, and a fully equipped hospital.  The employee 
community is centered on the company mosque, which is 
available to the local Muslim community as well as the Muslim 
members of the company's work force. 
SWICKMAN