To explore the secret of the rapid growth of Haid Group, the interview group of "high-quality development of Listed Companies in action" of the Securities Times came to Haid on the spot. Mr. ZhouYi, executive deputy editor in chief of the Securities Times held an in-depth dialogue with Xue Hua, chairman of Haid Group.
Technology gene drives high growth
ZhouYi: Mr. Xue, we just visited the place where you started your business. Since it was founded in 1998, Haid has become one of the leading enterprises in the feed industry. Can you tell us the story of its startup business?
executive deputy editor in chief of the Securities Times:Mr.ZhouYi(left), Xue Hua, chairman of Haid Group.
Xue: As I look back, it is quite accidental and simple. When I studied in Sun Yat-sen University. My majored was fish and shrimp nutrition. After graduation, I was assigned to Guangdong Academy of Agricultural Sciences for 3 years. In these 3 years, China is at the starting stage of aquatic feed.
In the face of such an opportunity, I think my major has a place, so I resigned from the Academy of Agricultural Sciences in 1998. At that time, there was not much capital in hand. The main position was to provide feed technology to some feed factories and to sell some aquatic premix, core materials, and other products. Therefore, the company was growing gradually.
In 1998 and 1999, we quickly won the recognition of the market, and made the first in the field of aquatic premix subdivision, and realized tens of millions of profits. But we soon realized that the aquatic premix is always a very narrow and small category, far from the breeding terminal, so we began to transform into the aquatic feed sector in 2002.
In this process, we have entered a stage of rapid development by mastering core technology and building strong serviceability. In 2007, we have nearly 3 billion in sales and become a leading aquatic feed enterprise at home and abroad. After that, the company gradually cut into poultry feed and pig feed to achieve full coverage of feed plates. The whole process of entrepreneurship is basically so simple and smooth. What is more, there are no twists and turns.
ZhouYi: It seems that the whole process of your entrepreneurship is relatively smooth, and the opportunity for each business entry is also very good. What is the key to the rapid development of the company?
Xue: The development of the company has gone through different stages. Now it looks like feed is a competitive industry, but I think it is a very good industry. It is a continuously growing industry with no limitations. The market is huge.
In this track, Haid can go smoothly. I think the core reason lies in that the company attaches importance to the gene of technology. The first founders of the company all have a technical background. The feed industry seems to be low in technology, but it is driven by technology. Whether it is feed formulation, raw materials, or core additives, the requirements for technology are very high. We attach great importance to technology, which is the basis of our ability to lead the rapid development of the industry.
We can be proud to say that we are ahead of the world in terms of feed technology. The feed industry is an industry that China has opened to the outside world very early. It has been competing with multinational enterprises from the very beginning. Now, over the past 20 years, we have known the old rivals in the world, and we will never lose them technically.
What the world sees is that Haid started to make aquatic feed in the first place, poultry feed in 2006, and pig feed in 2010. Every field it cuts into will lead the industry. However, we have been developing R&D reserves every two years before entering a link.
R&D investment can generate good returns, but many enterprises in the industry do not invest in R&D. Maybe the industry can make some profit in the initial stage, but now the competition is becoming more and more intense, the profit margins of the industry are decreasing, but our profit margins are rising. Therefore, R&D is a MUST.
ZhouYi: Speaking of R&D, the company's investment is also relatively large in the industry. How is the company's R&D team?
Xue: As Haid listed in the market in 2009, the R&D cost of the company in one year was only about RMB 20-30 million, and by 2018, it had exceeded RMB 300 million. Now, we have a team of more than 1000 people serving in R&D, covering the entire industrial chain. Moreover, the recruitment of the R&D team is intensive. Recently, 70 doctors and 500 masters will be recruited at one time. We only had more than 70 doctors in 2018.
ZhouYi: Seldom seen such large-scale recruitment of doctors and masters in agricultural enterprises.
Xue: Yes, not much on a global scale. We have visited some old foreign peer companies and found that their R&D team is only 30-40 people, such as a few people developing poultry feed, a few people developing pig feed. In the past 50 or even 100 years, this configuration has always been.
The technology of overseas enterprises is leading, and the scale of such an R&D team is enough to support their development. However, Chinese enterprises must not copy this. We are backward in technology and have a weak foundation. If we still have dozens of teams to do research and development, we will never keep up with the pace of foreign enterprises. We must catch up with each other with great strides. What we need is to go through the hundreds of years of other people's paths in 5, 10, and 20 years.
Therefore, you can see that our R&D team now has so many staff, and has completed 2,000 experiments each year, accumulating nearly 20,000 experiments so far, studying feed formula, researching nutrition demand of different animals in different growth stages, to realize our catch-up in technology.
Building comprehensive competitiveness across multiple dimensions
ZhouYi: In recent years, we have seen that Haid has begun to have some new businesses, such as seedlings, veterinary drugs, vaccines, etc. What are the development ideas of these new business sectors?
Xue: In the first few years of the company's development, we mainly rely on the leading technology of products, more of which is "one-dimensional" competitiveness. In 2006, we found that some farmers could not make money even if they bought our good feed. We found that the reason behind this might be the failure of seedlings, the failure of breeding technology, or the failure of animal health care products (veterinary drugs, vaccines) to keep up with the disease development.
Therefore, we realize that to make farmers profitable, we need a complete set of support systems, including feed, seedling, aquaculture technology, aquaculture mode, and animal health care products. As a result, the company has made a very big adjustment, from the positioning of single feed products manufacturing to service-oriented enterprises, providing overall solutions for farmers.
With this transformation, our competitiveness has changed from single-dimensional technology to multi-dimensional comprehensive service capabilities. After that, farmers who work with us can have strong profitability and surpass the market average.
At that time, we had slogans, such as let our farmers "earn RMB 1000 more for a row of pigs" and "earn RMB 1000 more for an acre of the pond". As long as our farmers earn more than the industry average, our whole service system can have a very big differential competitive advantage, supporting the company's sustained high-speed growth. Over the years, the seedling, vaccine, veterinary medicine, and breeding have become the company's new business sectors.
Now, our new business accounts for less than 20% of the company's total revenue, but the growth rate is very fast, especially in the past 2 years, with an annual growth rate of 50% - 60%. Compared with feeds, these new businesses have higher technical thresholds, and some even need to start R&D 5 or 6 years ahead of schedule.
Breeding classic of the “king of feed”
ZhouYi: Will the next effort be made to the breeding sector?
Xue: Yes, our business has formed several sectors, covering all links of the industrial chain, from seedling, animal protection to downstream breeding.
Xue: We have been laying out pig farming for several years, mainly to build teams. Originally, we planned to fully develop in 2018, but when we met with ASF, we suspended it for a while. This year, the team has accumulated a lot of methods and experience to deal with ASF, so now we are stepping up our efforts.
We believe that ASF has accelerated the reshuffle of the industry. The industry is already in the process of gradually withdrawing backward production capacity, and ASF has intensified this change. In the next three or five years, 70% - 80% of the enterprises may be eliminated, and enterprises like us with real professional ability are expected to get a larger market share.
Why do we have this confidence? First of all, at the beginning of the layout, we set a high standard. We picked it up on the site selection carefully. We got all the places that were far away from the crowd and the conditions for prevention and control were excellent. Secondly, on the internal hardware, the control of partition and isolation of fence cut off the path of cross-infection largely. Third, in terms of workforce input, we insist on high allocation from pig farm management to veterinary allocation. Now there are thousands of staff in our pig farming team, who can manage the scale of 3-5 million pigs, but our current scale is only over 1 million, and the team configuration is before the scale. Fourth, compared with small businesses and scattered households, we have a whole industry chain system to support, from breeding, nutrition system to management system. From the beginning of breeding, for example, one sow may produce 25 piglets a year, and the number of retail farmers may be only a dozen; in the nutrition system, our feed coefficient is better than that of the farmers; in the management system, our ability to prevent and control the disease is stronger. In a word, the cost of raising one pig can be RMB 200 lower than others, and this becomes our moat.
To be the No.1
ZhouYi：As you said, China's agriculture has entered a golden age of development. What is the reason for that?
Xue: First, in terms of volume, the agricultural industry chain is a market of more than RMB 10 trillion, which can be compared with the real estate business. There is no reason not to have a group of large enterprises in such a large market. However, at present, the industry is much decentralized, the majority of the main business is small-scattered farmers, and the business model is relatively primitive.
Now, we see a general trend that China's agriculture is in a stage of scale and industrialization, which will be a great change in the industry. In this trend, there must be large enterprises, which may have hundreds of billions of output value and tens of billions of profits.
First, from the perspective of economic benefits, it is very difficult for rural households to make money. It can be said that "counting on the market ". When the price of a pig is good, one pig will earn hundreds, but if the price is not good, it will lose two or three hundred. In case of an epidemic such as ASF, it may even go bankrupt. Therefore, calculating economic accounts, small business is not valuable. Its rationality lies in many old people's tools to support their families.
From the perspective of human beings, more and more young people in rural areas are now moving to the city and unwilling to return to the countryside because they are increasingly reluctant to accept such low added value of labor. Therefore, from the trend, small retail investors continue to withdraw, and the demand for agriculture is rigid. It is necessary to rely on the scale to fill the gap. However, in this industry, it is not easy to achieve scale. There are several elements behind the industry: capital, technology, and talents.
From the perspective of capital, self-employed households without capital are speeding up their departure. Of course, some external capital wants to come in, but they are also hard to play in this industry. This involves another element, technology, not only feed technology and breeding technology, but also seeding, disease prevention, and control. Each link is very professional, and the industrial chain is very long, which will take many years’ accumulation. Foreign capital often does not have the patience for so long, it is difficult to sink down and spend several years to understand the whole industry. In addition, such emergencies as ASF further increase the uncertainty of investment. Therefore, it is difficult for foreign capital to pose a real threat.
As for the talents, I think China's agriculture is the most lacking of talent at present. We are also short of talents. Therefore, you will see that we have vigorously recruited to fill the shortage of talents in recent years.
ZhouYi: Will Haid become the world's No.1 agricultural and livestock company in the future?
Xue: Yes, we are growing rapidly now. Many foreign counterparts come to Haid for visiting, and they will find it inconceivable (an increase of 30% every year). In their opinion, the growth of 5% every year has been a great achievement, but in my view, it is far from enough. This also shows that our current ability has exceeded the industry average level. First, we are not inferior to foreign enterprises in technology, and we have inherent advantages in management. We are more diligent, more committed, more targeted, and more wolf-like. Also, our comprehensive serviceability has a strong stickiness to our farmers.
Under the premise of continuous enhancement of the feed business, we have planned to develop new businesses such as seedling, animal health care, breeding, and so on. Moreover, in every business development, we will put the team's capacity building in the first place and scale in the second. In the future, we are confident that we can rush to the leading position in the world.
ZhouYi: The whole company has over 20,000 staff. How do you manage such a large team?
Xue: In terms of management structure, we mainly follow the regional system, from Group to region, and then to branch companies. The companies also include sales teams, service teams, and so on. This is the management system of the whole group.
In terms of management and operation, it has two levels: Group level and front-line level. The Group level includes the Research Institute, procurement center, information center, operation center, and human resources center, etc. our requirements for them are specialization, dynamic and strong professional ability because the task of the Group level is to serve the front line.
As for the front-line team, I delegate power. We mainly propose a development goal. The specific management operation process is planned by the front-line independently. After the planning is formulated, the group level provides the matching of procurement, technology, R&D and other resources according to the planning, but seldom directly participates in the front-line operation.
You will find that we do not rely on many strict management systems to "bind" everyone. Instead, we are giving more autonomy to the front line.
ZhouYi: Your management style is quite distinctive.
Xue: Yes, it is an effective and orderly decentralization. Now what is fashionable is called "empowerment". Why does a group exist? It is to make sure that when the first line is needed, it can replenish energy for them in time.
At ordinary times, the most I can do is to invite the heads of some business lines to come to my office and talk with them about what difficulties and needs they have and do some resource deployment with them.
ZhouYi: In what way do you motivate your team?
Xue: After the Haid went public, it implemented several equity incentives. Over the years, with the growth of the company's performance, the return is also considerable. Also, the incentive system of the company is relatively diverse, including annual salary incentives, growth sharing, options incentives, etc. growth sharing is also an attractive part. The company will share some of the new profits to the core team.