Chapter 345: The Food Industry Chain Base Plan
"This is a classic chicken-and-egg situation," David said, clearly aware that he might be asking too much. "The U.S. side wants to see your cost breakdown and planning first. If the costs are too high, then even trying a pilot may be difficult."
Yang Wendong replied calmly, "David, think about it like this—if I could already achieve cost parity or even undercut Swire's pricing, why would I bother working with Pepsi? Why not just develop my own cola brand?
Lowering costs requires cooperation from both sides. Only with sufficient demand can I scale up and reduce costs. No contract manufacturer in the world would build a large factory before receiving substantial orders. Unless Pepsi is willing to invest more than half the cost, then maybe I'd reconsider."
David nodded. "Fair enough, Eric. You're making sense."
Yang Wendong continued, "Matching Swire's cost structure in the short term is not realistic. What I can offer is a cost lower than your Japan-based factory.
If the volume of orders increases steadily, I will invest in a sugar refinery and gradually integrate vertically into the supply chain to reduce costs. I'll also prepare a detailed feasibility plan."
"Great. I'll report all this to U.S. headquarters tonight," David said. "We'll discuss their feedback tomorrow—how does that sound?"
"Sounds good," Yang Wendong agreed.
The Next Day — Changxing Tower
David and his team returned.
"Eric," David began, "PepsiCo's board has agreed to start with a small-scale partnership. That way, your initial investment won't be too high. If things go well and your side can gradually bring costs down—below Japan's—then the Southeast Asian orders will be shifted to you. We can discuss expanding cooperation based on demand at that point. Does that work?"
"What do you mean by small-scale?" Yang Wendong asked.
David replied, "1.5 million cans per month. I understand your group already has canning capacity, probably with excess room. We can start directly with that."
"1.5 million cans per month?" Yang Wendong glanced at Zhou Haoran, then said, "That should be feasible, but we'll need to confirm the specifics afterward."
In this era, beverage production lines were far less efficient than in his previous life. A small modern factory could produce several hundred thousand cans per day, but current machinery wasn't nearly as capable.
A single can of cola sold for around 20 to 30 cents in Hong Kong. Canned beverages were even more expensive due to packaging costs, so the proposed cooperation was indeed modest in scale.
David continued, "Then we'll air freight the raw materials from the U.S. for now. If you can produce cola at a cost lower than our Japan facility, we'll consider shifting more orders."
"Alright," Yang Wendong nodded.
A deal of this scale couldn't jump straight to high-intensity cooperation. Neither party fully trusted the other yet. It was normal to build trust gradually and expand once both sides confirmed that the relationship was mutually beneficial.
Yesterday's conversation was more about strategic alignment at the executive level. Now that basic agreements had been reached, further cooperation would simply be a matter of mid-level staff negotiating terms and details.
Once the Pepsi team left, Yang Wendong turned to Zhou Haoran. "Start preparing a refined sugar processing plant. Import raw sugar and process it ourselves to guarantee a stable supply.
This initial contract might be small, but if everything goes smoothly, it will grow. And we'll need a lot of sugar for our own use as well."
Zhou Haoran nodded. "Understood. Sugar demand is extremely high. Even without our own beverage factory, a sugar refinery would be profitable. There are already several small-scale workshops in Hong Kong."
"We don't want a workshop—we need something more advanced," Yang Wendong smiled. "Use Swire as the benchmark."
"Alright. Even a formal sugar refinery can be scaled up gradually," Zhou Haoran said. "I'll first secure a large enough plot of land and build a small plant. If demand increases, we can expand."
"Good." Yang Wendong nodded. "By the way, does China Resources export raw sugar?"
"In the 1950s, the mainland used to supply sugar to Hong Kong, but not anymore. Droughts have been severe. I've heard the mainland is now importing sugar from abroad," Zhou Haoran replied.
"And?" Yang Wendong asked.
Zhou Haoran lowered his voice. "White sugar isn't just food—it has military applications too. It's used in military rations and even in making explosives. That's why global sugar markets are heavily regulated.
I've heard that when China tried to import sugar from the West in the past, they were refused unless they agreed to certain conditions. As a result, they had to settle for importing Iraqi dates, which are high in sugar and help with nutritional needs."
"I see. In that case, forget about importing from the mainland. Let's source from Southeast Asia instead," Yang Wendong nodded.
Sugar had far more uses than most people realized. In emergencies, it could even be considered a medical supply.
The collaboration with Pepsi now had a solid verbal foundation. Once Changxing successfully produced test batches of cola that met Pepsi's quality and cost requirements, they could consider further expansion. This was standard operating procedure for large-scale partnerships.
May 11 — Shatin, Hong Kong
Yang Wendong brought Su Yiyi and Bai Yushan to the coastal area of Shatin.
After giving them a brief overview of the Pepsi agreement, Bai Yushan asked, "Dong-ge, are you really planning to develop your own cola brand in the future?"
"Possibly. It's very difficult, but if the opportunity arises, I won't rule it out," Yang Wendong replied with a smile.
No one could easily challenge Coca-Cola and Pepsi's dominance in the market. Yang Wendong's only realistic shot would be to first use Pepsi to build out his own beverage production chain, and then seize early market entry when mainland China opened up its economy.
Bai Yushan nodded. "It does sound hard. I think herbal tea is already good enough."
"Mm. Let's wait a few more days to see how the Hong Kong market responds to our herbal tea launch. If it does well, we'll start exporting to Southeast Asia. There's definitely demand there," Yang Wendong said.
Tea wasn't unique to the Chinese. Many Asian nations and ethnic groups had a strong tea-drinking culture.
"Mm."
As they strolled along the shore, they were soon greeted by Liu Huayu from Carrefour and Zheng Zhijie from Changxing Real Estate, accompanied by seven or eight others.
"Yang Sheng, Madam Yang," Zheng Zhijie said as he approached. "Our poultry farm is just up ahead."
"Great, let's take a look at our farm," Yang Wendong said with a smile.
It seemed ingrained in the Chinese psyche to love land—perhaps a tradition passed down over thousands of years.
Back when he had money early on, Yang Wendong could have bought land in the U.S., but the logistics were just too inconvenient.
The group entered a large compound, immediately spotting bamboo fences surrounding various zones. Zheng Zhijie gestured to one of the men and said, "Lin Sheng, please do the introduction."
"Of course."
Farm manager Lin Yuehua stepped forward. "Yang Sheng, our farm here occupies 500,000 square feet in its first phase. We plan to raise 100,000 chickens, divided into 25 separate areas to ensure hygiene and disease control…"
"100,000 chickens isn't that many," Yang Wendong remarked thoughtfully.
Carrefour had already started offering rotisserie chickens. Sales were booming—thousands of chickens sold per day—mainly because the price was low and it was far more convenient than buying a raw chicken and cooking it at home.
For now, all supply came from China Resources. Carrefour was too important to wait for the new farm to be completed and operational.
Liu Huayu added, "Yes. If we're supplying our own chickens, then I'm even thinking we could lower the retail price in our supermarkets. By then, the main issue will just be whether we can meet demand."
At that moment, Lin Yuehua smiled and said, "Liu Sheng, Yang Sheng, no need to worry too much. A farm isn't a factory. Once it's built and we have a steady feed supply, the growth rate is very fast—especially since Carrefour doesn't need fully mature chickens. The growth cycle is much shorter than what's required for traditional wet market chickens."
"What's the turnaround time?" Yang Wendong asked.
Lin Yuehua replied, "That depends on the breed. The white-feathered chickens I've imported can be sold in about three months under wet market standards. But for Carrefour's rotisserie chicken needs, one and a half months is enough."
"One and a half months? That's acceptable." Yang Wendong nodded.
In his past life, fast-growing chickens—boosted by science and industrial practices—could be slaughtered within 20 days, even faster than the time it took to hatch the egg. Normal broiler chickens took around 40 days. It was nearly impossible for consumers to avoid this; all commercial chicken breeds were the same, unless you raised your own.
Lin Yuehua continued, "Right now, we're basically ready to go. Once our team becomes more experienced, we'll be able to multiply our output in a short period."
"Good." Yang Wendong nodded again. "I won't meddle in professional matters, but one thing must be clear—hygiene has to be your top priority. We cannot allow bird flu or any epidemic outbreak."
In industrial operations, Yang Wendong worried most about workplace accidents. But injuries don't spread. In farming, an epidemic could mean mass culling of all livestock.
The financial loss alone would be painful. Worse still, if the disease transferred to humans, the consequences could be catastrophic. While the odds were low, no one could afford to gamble on it—many major pandemics in human history had come from animals.
Lin Yuehua replied confidently, "You can rest assured, Yang Sheng. We're adopting the practices of large-scale poultry farms in Europe and the U.S. We have a team responsible for daily cleaning and hygiene. Labor in Hong Kong is relatively cheap compared to the West, so our cost control here is even better."
"Good. From now on, handle supply directly with Carrefour. Coordinate based on their needs," Yang Wendong instructed. "If you need more land for expansion, just speak with Changxing Real Estate."
Farming in Hong Kong served more than just an economic purpose—it provided a legitimate reason to purchase land from the government. Even if it was zoned as agricultural, it didn't matter. Once the land was theirs, they could always pay the difference later to convert it. The key was to own the land. If they didn't develop it themselves, reselling it would still bring a profit.
Still, if they were doing this, they had to do it properly. Without mature cold-chain logistics, local poultry would always be cheaper. It wasn't that the business wasn't profitable—it's just that most Hong Kong capital didn't see the value because of the low margins. Just like the Dairy Farm Company, which had persisted for decades despite its modest returns.
Lin Yuehua said, "Alright. If we aim to cover the entire Hong Kong market, we'll definitely need more farms. As long as we have the manpower, we can scale production quickly."
"Mm," Yang Wendong smiled. "Then I'm counting on you for this sector."
"No problem. I guarantee we'll become Hong Kong's top poultry supplier," Lin Yuehua said with confidence.
"Good. I like your ambition," Yang Wendong replied, smiling.
The group toured the chicken farm further, stopping at several egg incubators where thousands of eggs were being kept at stable temperatures, waiting to hatch.
"So basically, you're now self-sustaining?" Yang Wendong asked with a smile.
"Yes," Lin Yuehua replied. "We bought a lot of fertilized eggs and chicks for the first batch. Now we can handle breeding ourselves, though we'll still occasionally purchase high-quality breeding stock."
"Excellent." Yang Wendong nodded.
Once the livestock industry reached this level, it required very little ongoing external input besides feed—convenient and cost-effective.
At midday, after a simple meal, Yang Wendong led Liu Huayu and others to a small nearby dock.
"This is the pier we built," Lin Yuehua explained. "It's small, but it can easily handle ships up to several hundred tons. That makes it perfect for offloading feed and other supplies.
Even if we expand the farm several dozen times over, the dock's capacity will still be sufficient."
"Mm." Yang Wendong nodded. "So in Shatin, we've basically built a complete farming ecosystem—just missing food inputs."
At that moment, Liu Huayu said, "Yang Sheng, I actually have another suggestion. I already discussed it with Wei Sheng and Lin Sheng, and we all think it's doable."
"What's the suggestion?" Yang Wendong asked.
Though he was a transmigrator, Yang Wendong focused on strategic planning. In many fields, his team had far more practical knowledge. And of course, even someone with knowledge of the future had their limits.
Liu Huayu explained, "Changxing Shipping currently handles grain imports for China Resources. At the same time, Changxing Trading also purchases rice to supply the Hong Kong market and our Carrefour stores.
The problem is, we're shipping in unhusked rice. After it arrives in Hong Kong, we send it to factories in Guangdong or Taiwan for husking. Then it's sent back. That's expensive and time-consuming. And we're wasting the rice bran—the best animal feed."
"You're saying we should set up our own rice processing plant?" Yang Wendong understood immediately.
"Yes," Liu Huayu nodded. "Taiwan and the mainland both have this kind of integrated industry. Previously, Hong Kong had no large-scale farms, so no one used rice bran for feed. Even the Dairy Farm Company didn't use it much, since dairy cows don't need it. So the bran ended up being wasted.
But now that we have our own poultry farms, we can make full use of it."
"Alright." Yang Wendong agreed after a moment's thought. "Work with Wei Sheng. Set up a grain processing plant here in Shatin. The port is nearby, and transport will be easy. We can deliver the bran directly to the chicken farm."
"Understood." Liu Huayu nodded, then added, "I have another suggestion. Many of Carrefour's best-selling food items could actually be produced by us.
Now that we have a local meat supply, a dock for importing starch, our own shipping fleet, and I've heard Watsons is planning a sugar refinery—it means we already have most of what we need to process food products ourselves."
"You're right," Yang Wendong agreed.
As various business units began integrating deeper into their respective supply chains, Changxing Group's available resources expanded. That made it far easier to enter new sectors.
This was why conglomerates in Japan, South Korea, and later mainland China often had a presence in so many industries. Once a group controlled the right mix of downstream assets, it could make money from just about anything. Many times, even the group's founder hadn't anticipated the scale the company would eventually reach.
Liu Huayu continued, "That's why I'm proposing we turn Shatin into a full-scale food processing base. By leveraging the group's vast resources, we can reduce production costs to the lowest possible level.
This will give Carrefour a reliable source of affordable products. And our new food division can use the group's shipping and logistics to export these goods. Processed foods have global demand. It's a solid, scalable business."
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