Interview with Yihai Kerry's Chen Bo: From Zero to 100 Billion, What Has Arawana and China's Grain and Oil Industry Experienced?

Source: Tastemaster (ID: wjds2014), Interview by Zhong Ning, Edited by Zhang Yini, Guest: Chen Bo

Chen Bo, Managing Director of Yihai Kerry Food Marketing Co., Ltd. and Director of the Consumer Products Division of Yihai Kerry Group. He joined Yihai Kerry Group in 1995 and has since transformed from a "layman" in the grain and oil industry to a "senior professional" renowned in the field. His personal career has witnessed two revolutions in China's edible oil industry: from bulk oil to packaged oil, and from safety and hygiene to nutrition and health. He has also witnessed the leapfrog development of China's FMCG industry, represented by grain and oil products. Chen Bo accepted an interview with Zhong Ning, founder of Tastemaster. The interview transcript is as follows:

● Interview Transcript ●

Zhong Ning: In which year did Yihai Kerry start its business in China?

Chen Bo: To be precise, it was 1988. We invested in Shenzhen in 1988, and Arawana was truly launched in 1991. In 1988, we invested to buy land and build factories. Initially, we traded bulk oil, and later we started producing packaged and branded oil. There were plastic bottles, small iron drums, and large iron drums. The plastic bottles were 2 kg, the small iron drums were 2.5 kg, and the large iron drums were 16 kg, specifically for catering. The two smaller ones were for household use.

Zhong Ning: What was the state of the household edible oil market in China at that time?

Chen Bo: At that time, the country had not yet liberalized the market. Grain and oil were still under a supply system, with the state having a monopoly on purchasing and marketing. The entire supply was distributed to residents through the grain store and grain station system. Although oil coupons were no longer needed, prices were still completely controlled by the state. From raw materials, procurement, production, to supply, everything was done by the state. It was essentially a closed market.

Zhong Ning: What types of oil did ordinary Chinese people mainly consume at that time?

Chen Bo: Basically, it was the black-colored fourth-grade oil, including soybean oil and rapeseed oil, with perhaps a little peanut oil, but the vast majority was soybean and rapeseed oil. Fourth-grade oil was very dark, produced a lot of smoke, but was very cheap, a few mao per jin.

Zhong Ning: After Arawana products were launched in China, through which channels were they mainly sold?

Chen Bo: Initially, we mainly targeted high-end retail outlets like the Overseas Chinese Friendship Stores. At that time, there were no supermarkets or hypermarkets; only sugar, tobacco, and liquor stores and grocery stores existed. We approached them, but they generally refused to receive us, saying, "We sell liquor, cigarettes, and sugar. You've come to the wrong place. Grain and oil are sold at grain stores. Go there." So, the only places that accepted us were high-end stores like the Overseas Chinese Friendship Stores, because our products were expensive. Our oil was priced at about four to five times the price of ordinary oil. I remember ordinary oil was about 0.7 yuan per jin, while we sold ours at over 3 yuan per jin. It was very expensive.

Second, the oil's appearance was different. The old oil was sold in bottles, greasy and black, and people would bring their own containers to refill. Our oil came in a plastic jug, and you could see it was yellow and clear. People's common perception was that the oil looked strange; they thought it might be mixed with water or something. It also produced no smoke. Initially, people didn't accept it, so it was mainly sold in high-end venues.

The second sales channel, which was actually the main one, was welfare distribution by companies during festivals. Some units found it novel because the oil was fragrant, had no smoke, and was expensive. During holidays, some good units would buy some and distribute it to employees, who would take it home to eat.

I noticed that most of the first batch of people who came into contact with this packaged oil didn't buy it themselves; it was given by their employers. Only after they tried it and found it good did a few individuals start buying it from retail stores. Gradually, as retail stores saw demand, they began to sell it. As business picked up, others started selling it too. It wasn't until much later, around 1995 to 1997, that supermarkets and hypermarkets became a channel.

Zhong Ning: At that time, which region was Arawana's main sales market?

Chen Bo: First, it was Guangdong. Guangdong was influenced by Hong Kong, and Shenzhen had also started. Many people in Guangdong had relatives and friends in Hong Kong, who had long been consuming packaged oil. During festivals, they would bring oil back as gifts. So, people in Guangdong accepted it earlier. Second, people in the region watched Hong Kong TV channels like Jade, and saw advertisements. So, people in Guangdong, especially Guangzhou and Shenzhen near Hong Kong, were the earliest to accept it.

Then, Shanghai also started early because consumption there was ahead of the curve, followed by Beijing. So, our first three points were Shanghai, Beijing, and Guangzhou, with Shenzhen as the factory location. We started from these places and gradually expanded.

Zhong Ning: What problems did Arawana encounter in packaging design when facing the Chinese market early on?

Chen Bo: The packaging was designed abroad because domestically it was impossible at that time. First, there was no such product or concept. Second, domestic design capabilities were lacking. So, we hired companies from Hong Kong and Singapore.

Zhong Ning: When did packaged oil become widely accepted and mainstream among Chinese consumers?

Chen Bo: It became mainstream at least after 1996, after five or six years. We started advertising on CCTV in 1996. The ad showed a mother and child; the mother cooked a dish with our oil, and the child found it especially fragrant. Then our fish logo swam out, swam in the air, and finally returned to our packaging. That was the whole process.

At that time, 3D animated ads were rare, so the swimming fish left a strong impression. Many people didn't remember the name but remembered the fish. Since our packaging had a fish, it was highly recognizable wherever people saw it. They also remembered that our oil was fragrant and smokeless.

Zhong Ning: What type of oil was promoted in this advertisement?

Chen Bo: It was the first-generation blended oil. Initially, we only made blended oil, and later we started making rapeseed oil. Peanut oil came later, around 1996; rapeseed oil was around 1995. In the early period, we only made blended oil.

Zhong Ning: What type of catering did Arawana's early large iron drum catering oil mainly supply?

Chen Bo: All were five-star hotels. Only five-star hotels had this concept because many of their chefs came from Hong Kong, and Cantonese cuisine chefs were mostly from Hong Kong. They followed the Hong Kong system and recognized this oil. So, in Beijing, not 100%, but 90% of five-star hotels used Arawana's large drum blended oil.

Zhong Ning: How did you manage to get your products into five-star hotels?

Chen Bo: We used distributors. In Beijing, we had distributors specializing in catering and hotels. They might have also dealt in Western food ingredients, and they helped bring our oil into these establishments.

Zhong Ning: How did you solve the warehousing problem in the early days?

Chen Bo: We shipped to distributors, and they had their own warehouses. At that time, the minimum shipment was a container, and large customers could take a rail car. Some customers took a shipment that took half a year to sell, almost expiring.

Some customers gave up, finding it too hard to sell. But I remember a customer in Kunming, from the Overseas Chinese Friendship Store, who took a container for 80,000 yuan and sold it for half a year, finally distributing it to his own employees.

Later, this customer saw potential, though the business was small, and ordered a second container, another 80,000 yuan. We promised him that if he ordered another container, we would spend 80,000 yuan on advertising for him. So, we used the money from his purchase to run ads.

Zhong Ning: Where did you advertise at that time?

Chen Bo: The earliest was on CCTV, and in key cities, we advertised on local TV stations. It was all television. We rarely advertised in newspapers because our ads were quite novel for that era, with high production quality, and they were effective. Many people knew about the product but couldn't afford it. However, during festivals, business was particularly good because of welfare distribution. This continued until around 1996 when the self-use market emerged. Before that, the majority was welfare-based.

Zhong Ning: After the self-use market for packaged oil emerged in 1996, had supermarkets risen in China?

Chen Bo: Supermarkets existed but were not as powerful as now; hypermarkets had not yet appeared. Guangdong had ParknShop, a Hong Kong supermarket. Inland, I don't recall clearly, but there were some. For example, Vanguard, now China Resources Vanguard, was under Vanke at that time. But they were not the main sellers of grain and oil; the main sellers were small grain and oil shops in wet markets. Additionally, the real volume was still in welfare distribution.

Zhong Ning: When did Arawana start encountering counterfeit products?

Chen Bo: Counterfeits began to increase after the self-use market emerged in 1996. Anti-counterfeiting efforts have never stopped. Initially, counterfeits were rampant in Fujian, then Zhejiang and Guangdong, then Henan, and later spread northward. As sales volume increased, counterfeiting began.

Zhong Ning: What was the most difficult problem in anti-counterfeiting?

Chen Bo: The hardest was in Chaoshan. Anti-counterfeiting in Chaoshan was very difficult. In 1995, I was at our Shantou company. The biggest problem then was not selling but fighting counterfeits, as there were too many. There were two types: one was completely fake Arawana, also with a fish logo. The other was imitation brands like "Jin You Yu" (with a missing stroke in the dragon character) or "Jin Hua Yu" (with an extra grass radical). There were over a dozen versions, and you could see them everywhere on the streets.

Once, we went to Shanwei to survey the market. In the wet market and shops, we didn't see a single bottle of genuine Arawana. The whole market was full of Arawana, but none were real.

We walked to a supermarket in the center and found one selling genuine Arawana. I called the clerk and asked if the boss was in. He asked who I was, and I said I was from the Arawana manufacturer. He ran upstairs, and the boss was eating a boxed lunch. His surname was Chen. I asked where he got his stock, and he said he imported it from Guangzhou. I said, "The whole market is selling fakes. Why do you import from Guangzhou?" Because fakes have higher profit margins.

He replied, "I can't do that. I run a supermarket. I don't dare sell fakes. I'm in this for the long term." Later, this young man became our distributor in Shanwei and still is today, all because he sold genuine products.

Zhong Ning: How did you solve the logistics problem at that time?

Chen Bo: For logistics, within Guangdong, it was convenient because the factory was in Shekou, and we could deliver directly by truck. Outside Guangdong, it was mainly by rail, using containers or rail cars. In coastal areas, during peak seasons, we used ships, and when volumes were large, we chartered entire vessels.

Zhong Ning: What characteristics did Arawana's earliest advertisements convey to consumers?

Chen Bo: The main message was health and hygiene. We couldn't talk about higher-level benefits initially; at least we started with hygiene.

Because traditionally, people consumed fourth-grade oil, which had many impurities, harmful substances, and produced a lot of smoke. The first thing consumers noticed was the smoke. At that time, living conditions were not good; kitchens in any home were dirty and greasy due to smoke. Later, people began to realize that smoke was harmful to health, especially to the lungs, and for women cooking at home, it could damage the skin.

Second, in the past, when stir-frying, you had to heat the oil until the foam disappeared before adding ingredients. If the oil wasn't heated enough, it had a raw smell, and harmful substances hadn't evaporated. So, people knew they had to heat the oil until the smoke and foam were gone before cooking.

Our oil was different. First, there was no smoke. Second, you didn't need to heat it to that extent; just a little heating was enough, and it had a light fragrance. In today's terms, the consumer experience was direct and good. Mainly from a health and hygiene perspective, acceptance was high.

Zhong Ning: What was Arawana's market share in China's edible oil market in 1996?

Chen Bo: At that time, most edible oil was bulk oil. If we talk about packaged oil, we probably had almost the entire market. There were almost no other players; a couple of Hong Kong manufacturers in Guangdong, but outside Guangdong, no one was doing this business. It was all bulk oil. So, in terms of packaged oil, we had nearly 100% market share outside Guangdong, but that 100% might only be 2% of the entire grain and oil market; 98% was bulk oil.

At that time, bulk oil was divided into fourth-grade oil and salad oil. Salad oil wasn't consumed much either, so most was the dark fourth-grade oil.

Zhong Ning: When did packaged oil capture a large share of the Chinese market?

Chen Bo: It was close to 2000. In first- and second-tier cities, it might have become mainstream. By mainstream, I mean that in wet markets, sellers of bulk oil were far fewer than sellers of packaged oil. Or if you visited any household, most people were already consuming packaged oil. That we considered mainstream.

In the early period, bulk oil was dominant. Packaged oil was consumed by those with stronger purchasing power, health awareness, or higher income. Some people consumed bulk oil daily but bought a bottle of packaged oil for festivals. That wasn't mainstream yet; it was still seen as a bit of a luxury.

For daily household use, I think it was close to 2000. At least in first-tier cities and high-income coastal areas, packaged oil had become mainstream. If you went to a wet market to buy bulk oil, either they didn't sell it or it was hard to find, indicating that most residents had switched to packaged oil.

Zhong Ning: Under what circumstances did Arawana launch rapeseed oil and peanut oil?

Chen Bo: It was mainly based on demand. Our blended oil was originally a mix of rapeseed, peanut, and sesame oils. But especially in the southwest and northwest regions, people were accustomed to rapeseed oil, so many still consumed bulk oil.

When asked why they didn't buy packaged oil, they said, "We're not used to your oil; it has a smell," which was actually the smell of peanut and sesame. "We want rapeseed oil." I said, "If you want rapeseed oil, we can make it." So, we launched packaged rapeseed oil, which was very popular in the southwest and northwest.

This inspiration was also applied in the north. I remember clearly that we first launched soybean oil in Beijing, which was quite popular in the north. It was packaged in opaque, thick plastic bottles. People liked those bottles because they could be reused after the oil was finished. Many bought the oil half for the oil and half for the hard PE container, which they could use for other purposes. That was the initial packaging.

It wasn't until close to 2000 that we launched the current packaging, which was also an Arawana innovation. We call it PET, a transparent large container like glass. We introduced this from Hong Kong, where it was used for water packaging. We thought it was nice, so we used it for oil with a label, and it looked beautiful. At that time, no one used such bottles for oil. Later, we imported packaging equipment and produced them in Shekou. The first launch was in Beijing.

We also had a PVC packaging, which was also transparent. Our first batch of blended oil used PVC, which wasn't as clear as PET and had a lower quality feel. PET, when done well, looks like glass. PVC was also transparent but had a slightly cloudy surface, so it didn't have the same refractive clarity. Under light, PET reflected light beautifully, making the oil inside look crystal clear.

I believe we were definitely the pioneers of PET oil packaging. We looked abroad, but most used glass bottles, and some used PE. We hadn't seen PET. We didn't learn from foreign peers; we learned from beverages and water. When we saw water in PET bottles, we thought the texture was great, so we started using it for oil. Now, the entire industry, at least in China, uses PET packaging, like the 5-liter PET containers, including the square shape, which has been used for nearly 20 years.

We set up a small packaging plant in Shekou, blowing bottles and filling oil. When we first shipped to Beijing, our colleagues there were resistant. They said, "This bottle is too thin and light. After you finish the oil, you throw it away. We like to keep bottles for reuse." I said, "That's true, but let's try it." We launched it, and unexpectedly, it was a huge hit. Later, the whole industry followed.

Zhong Ning: Did your product strategy for the catering industry change at this time?

Chen Bo: The large-scale use of salad oil actually started in catering, not households. I think it was due to catering's characteristics. First, they needed to preserve the flavors of ingredients. Other fourth-grade oils, like soybean oil, had strong flavors, as did rapeseed and peanut oils. Catering places great importance on the taste of ingredients and food, so they needed oil without strong flavors to preserve the food's taste. Of course, smoke was also a significant factor; too much smoke would make the kitchen environment terrible.

So, catering was the first to use salad oil in large quantities. It was a gradual process. It started around 1996, and large-scale use probably began around 1998 or 1999.

Zhong Ning: Did high-end catering emerge at that time?

Chen Bo: Yes, there were privately-owned high-end restaurants. They formed a system where masters taught apprentices, especially in Hong Kong and Guangdong, where salad oil was used, and it gradually spread inland.

Zhong Ning: So, did Arawana products start to capture the market on a large scale from Guangdong?

Chen Bo: Guangdong was a very important birthplace. First, Cantonese cuisine developed from south to north.

Additionally, several regions in Guangdong were important to us. First, Guangzhou and the Pearl River Delta, which were our earliest markets. Another region where our products sold exceptionally well was Chaoshan. Chaoshan was the first market to exceed 100 million yuan in sales. In 1995, Chaoshan alone sold over 100 million yuan. Chaoshan people were the earliest to accept Arawana.

Because Chaoshan's economy was predominantly private, with little state-owned economy, welfare distribution wasn't the main driver; they bought for self-use. Also, Chaoshan cuisine emphasizes the original taste of ingredients and the cooking process. If you used fourth-grade oil, it would ruin the dish.

So, they found our oil paired perfectly with their cuisine. By 1992, Arawana was already widely used in Chaoshan. Then, Chaoshan people went out to do business; many in the catering and food industry across Guangdong were from Chaoshan. As Chaoshan cuisine spread north, the oil went with it. So, Chaoshan was a crucial region.

Another was Cantonese cuisine, as commonly referred to, with chefs from Guangzhou and the Pearl River Delta also spreading the product. Of course, Hong Kong chefs also played a role, as they had accepted such products earlier. Hong Kong had manufacturers of packaged oil even earlier.

Zhong Ning: What significance do you think product packaging has had for the development of China's grain and oil industry?

Chen Bo: In the past, under the supply system, oil was bulk. From storage, processing, transportation, distribution, to reaching consumers, there was no packaging. The biggest problem was that without packaging, you couldn't trace the product. If you found a problem at the terminal, you couldn't trace it back.

There was no manufacturer, no production date, no records of the processes. Everything was open, so if something was added, contaminated, or had quality issues, or contained harmful substances, there was no way to trace it.

So, it was Arawana that truly transformed the bulk edible oil industry into a packaged industry. Packaged oil became a branded food product with a production date, manufacturer, traceability, and quality assurance. This started with oil, and later drove the packaging of the entire grain and oil industry, including rice and flour. Now, packaging is the norm; bulk oil and rice still exist but are not mainstream, and will become even less so in the future.

Oil is now the most packaged among grain and oil products, because the state liberalized oil first, and later grain. It was also because after liberalization, companies like Arawana entered and pushed the industry towards branding and packaging.

Zhong Ning: When did Arawana enter the grain industry?

Chen Bo: Grain came later. Large-scale rice production started around 2005, with branded rice. Large-scale branded flour production started three or four years earlier. We built flour mills earlier.

Zhong Ning: When Arawana entered the grain industry, what was the state of China's grain market?

Chen Bo: At that time, the domestic flour market was relatively backward. First, the grade of flour was low, and processing technology and equipment were outdated. Second, it was mainly bulk. Flour is divided into two types: civilian flour and industrial flour.

Civilian flour is for households to make dumplings and noodles. Industrial flour is mostly professional flour, which needs to be subdivided: for biscuits, frozen dumplings, bread, cakes, etc. Each type requires specific wheat blends or flour blends, with different equipment and processes. At that time, there was no such subdivision; wheat was just ground into flour. Flour also has front, middle, and back runs; front run is the best, back run is not as good.

Different needs require different flour qualities. So, the upgraded equipment and subdivided demands didn't exist yet. In the early days, it was all general-purpose flour. Being able to eat white flour was already good; who cared about subdivisions? Fuqiang flour was considered good, but now it's relatively low-grade. What we sell cheaply now was considered excellent then.

Another aspect was whiteness. Early flour was expected to be white, but white isn't necessarily the best; it was achieved by adding bleaching agents. These things gradually changed.

So, the flour industry is still evolving. Now it's developing in two directions. First, civilian flour is moving towards packaging and branding, and also subdividing. We now have general-purpose flour, and specialized flours for dumplings, cakes, and bread. We also have health-oriented blends like buckwheat and wheat.

Industrial flour is also subdividing, even more so, based on usage. The baking industry is growing rapidly, with high demand for high-gluten and low-gluten flours. Whether for cakes, bread, biscuits, or frozen products, each has different requirements, which in turn dictate flour specifications. So, our flour production now extends to downstream end products, helping terminal customers by working backwards from their needs to produce the right flour. The flour industry is developing very fast.

For us, rice was the latest. Rice was even more primitive, just primary agricultural processing: husking and milling, then supplying the market. But unlike flour and oil, where processing can significantly affect the final product quality, rice quality is determined by cultivation. Whether it's good, tasty, sticky or not, soft or hard, these are not changed by processing.

It's grown in the field; the variety, climate, sunlight, and water determine whether the rice is good. Processing only removes the husk and polishes it, making it refined or brown. But the taste and quality are determined by cultivation. So, the key is the production area, origin, and procurement of raw grain. Processing is also important, but less so.

We initially chose the northeast because China grows rice from north to south, but the high-quality production areas are largely concentrated in the north, where there's a big temperature difference and typically one crop per year. So, we built factories in places like Jiamusi in the Sanjiang Plain, with its black soil, and in Panjin and Baicheng in Jilin, all high-quality rice areas. We processed locally and shipped to the south for sale.

Our rice factory was different from others from the start. Other rice mills invested a few million yuan, but ours cost 200 million yuan. Why so much? First, the scale was large. More importantly, we did comprehensive processing and utilization. Our rice factory includes a power plant, an oil plant, and a downstream white carbon black factory.

After husking, the outer husk is burned for power generation. The ash is then used to make white carbon black, which is used in rubber and tires. Between the husk and the rice is a layer of rice bran and germ, which we use to make rice bran oil.

So, we utilize every part of the rice grain. That's why a single rice factory requires an investment of several hundred million yuan, with a very long payback period. It's hard to make money early on, but the social and economic benefits are long-term. This model is unique to China, and Yihai Kerry pioneered it in the northeast. It's been quite successful.

Later, we expanded to northern Jiangsu and Jiangxi, which are rice-producing areas. Guangxi produces oil-sticky rice, northern Jiangsu produces Subei rice, and Jiangxi and Hubei produce Simiao rice. We've also used this model in southern rice areas. Now, we have factories covering the high-quality rice production areas from north to central to south.

Zhong Ning: When Yihai Kerry invested in this model rice factory in Jiamusi, what was the economic state of Heilongjiang?

Chen Bo: The Jiamusi rice factory started in 2002, and the first rice came out in 2005. At that time, Heilongjiang was relatively underdeveloped, and it still is. Our first project was in Jiamusi, which is quite far north, with harsh natural conditions. Construction was impossible for half the year because everything was frozen. We could only build from spring to autumn, so time was tight, and investment increased.

Second, the local economy was lagging, including talent and supporting infrastructure, which made things difficult. These were early challenges. Moreover, such a large rice factory included a railway loading station; we had a freight station directly in the factory because of the massive volume of goods in and out. The construction scale was enormous.

They had never seen such a large rice factory, and no one had done it before, so we all learned by doing. We built it in phases: phase one, two, three. The whole process was tough.

In the early stages, we lost money because of the large investment. Also, since no one had done it, we encountered many problems along the way. Sales were also hindered initially because high investment meant high costs. Small rice mills could operate with low costs; they'd do business when available and close if not, reopening the next year. They were like larger family workshops.

Such mills were everywhere. They were more flexible in procuring raw materials, familiar with the local area, and enjoyed more flexible policies and tax benefits, so they kept costs very low. Especially when new rice came in, they were fast, quality was comparable, prices were lower, and they were very flexible. So, it was tough for us.

But their weakness was that after the Spring Festival, around April or May, they couldn't handle high-moisture rice. High-moisture rice requires careful storage. When shipped south, with the temperature difference, the rice would mold, get insects, or reabsorb moisture. That was a big problem.

We, on the other hand, dried our rice, so we had an advantage from April or May until the new crop arrived, providing stable supply. Large manufacturers, whether for new rice or summer high-moisture rice, dry it to national standards.

Zhong Ning: What was the state of China's rice market at that time?

Chen Bo: At that time, the domestic rice market was fragmented, small, and chaotic, but the total scale was huge. China is the world's largest producer and consumer. Rice is the staple food for Chinese people, so production and sales are the largest. The state controlled grain, as it had throughout history, with strict control and unified purchasing and marketing.

Around 2000, it began to liberalize, but after liberalization, it became very fragmented. Rice mills existed at the county and even town level, with countless family-run mills across the country. Raw material procurement was diverse, and sales were chaotic, a completely open market. There were no large enterprises, just a bunch of small factories.

Except for Sinograin and COFCO, which were large but mainly focused on raw grain storage and procurement. On the sales side, local grain bureaus, private enterprises, and individuals were all involved. Product standards were not unified, and circulation was not standardized. There were no branded rice, few packaged rice, and prices were chaotic.

Zhong Ning: When were China's rice product standards unified?

Chen Bo: National standards were gradually improved. Standards existed before, but they became more standardized around 2005. After 2005, national standards became increasingly standardized, and inspections and management became more regulated.

Because with the emergence of branded and packaged rice, regulators had a way to inspect. With bulk rice, inspection was a huge workload. So, packaged and branded rice, like packaged and branded oil, helped standardize the industry, significantly reducing monitoring and management costs, and making products traceable. This improved product quality and the industry as a whole.

Zhong Ning: In our impression, when living in Guangdong, early on we ate imported packaged rice, and it was much later that domestic branded rice appeared in the market. Looking back, China's packaged rice came quite late.

Chen Bo: In the entire grain and oil industry, among oil, flour, and rice, rice was the latest to be packaged and branded, and also the latest to be liberalized by the state. In fact, this process is not yet complete. Even now, when you go to a supermarket, there's still a lot of bulk rice sold. If you visit households, a significant portion still eats bulk rice. So, this process is ongoing. In foreign countries, especially developed ones, packaged oil, rice, and flour are the norm. For rice and flour, especially rice, it might take another eight to ten years.

Zhong Ning: After packaged rice was launched in 2005, what were the main sales markets?

Chen Bo: Early on, it was sold in large supermarkets and hypermarkets. South China and East China were our largest markets. Later, we expanded to Central China, Southwest, and Northwest. Eventually, we reached as far as Xinjiang and Tibet. But the highest sales volume, the highest proportion, or the more premium products were still in coastal areas.

Zhong Ning: What was the situation of rice usage in the catering industry at that time?

Chen Bo: It was exactly the same as the market state I mentioned earlier: small, scattered, and chaotic. They purchased locally from wholesale and wet markets. I think Chinese catering placed very low importance on rice early on, which might be related to diners' habits. Most people went to a restaurant for the dishes, for a signature dish. Few went because the rice was good, as rice was just a side.

Moreover, in many early restaurants, rice was free. You paid for dishes, but rice was unlimited and free. So, they used very poor quality rice, and it didn't affect business much because the dishes were good. As long as the food was tasty, people ate it. That was the early period.

Later, some restaurants began to realize rice was important because many consumers complained if the rice was bad. If you used good rice, many people would come back because the rice was especially delicious, even without dishes. They found that although rice wasn't a large part of the cost, if done well, it attracted customers.

I've seen some restaurants where rice is cooked in a special room with a special rice cooker, and the timing is precise. When you sit down and order, they start cooking, and by the time you're ready to eat, it's just done. The whole room smells of rice, and customers have a great experience.

Of course, these are higher-end restaurants. It turns out that rice is very important in catering. In Japan and Korea, they are very particular about both dishes and rice, including the temperature when served. In China, rice is often steamed and kept in a large pot, and when needed, it's scooped out, sometimes cold, with poor quality and color. Japan does this very well, including the pairing of rice and dishes, which enhances the dining experience.

China didn't do well in this regard early on, but now I see some places starting to pay attention to rice, including the variety and pairing. In Guangdong, they like fried rice, often using Thai rice because it's less sticky and fries well, with long grains and fragrance. When stir-fried with eggs or other ingredients, it mixes well, combining the aroma of rice and ingredients.

Also, Cantonese people love claypot rice, which needs a bit of crispy rice at the bottom. What rice is used? It must be good oil-sticky rice.

We have a factory in Guigang, Guangxi, which produces the best oil-sticky rice in China. Using good Guigang oil-sticky rice for claypot rice is delicious. When eating good Chinese food elsewhere, a bowl of Wuchang Daohuaxiang rice or Jilin fragrant rice is also excellent.

Zhong Ning: What processes did Yihai Kerry's logistics system go through?

Chen Bo: We have a professional logistics company that mainly handles several businesses. First, trunk line transportation, including trains, rail cars, and dedicated trains. Second, shipping, including Yangtze River and coastal shipping; we have our own ships. Third, intercity highway freight, using 20-meter containers. Fourth, intra-city distribution, because we need to deliver from central warehouses to various sales points.

Since I don't handle this part of the business, I can't give exact numbers, like how many ships or oil tanker trains they have, but it's a large scale. Our total annual domestic transportation volume, if I remember correctly, is around 50 to 60 million tons, so the volume is huge.

Some raw materials come from abroad, some from domestic procurement, including wheat, rice, soybeans, rapeseed, peanuts, and other oilseed and grain crops, which need to be transported to factories. After processing, finished products are transported to distributors and sales points. By-products like soybean meal are transported to feed mills and other food processing plants. So, the volume in and out is enormous.

Our logistics system became relatively complete after 2000, and particularly comprehensive after 2006, with water, rail, road, air, urban distribution, trunk lines, and bulk cargo. We fully established this system.

Zhong Ning: What role do you think logistics plays in food safety?

Chen Bo: It's very important. First, because our volume is large, as I mentioned, with such a large amount of raw materials coming in and finished products going out, logistics plays a decisive role in maintaining efficient and high-speed operation. With such volume, you need to manage the rhythm and timing. You can't have everything arrive at once; the factory can't handle it. But you also can't have intermittent supply, as that would cause the factory to stop and start.

For grain and oil factories like ours, the best state is continuous full-capacity operation. This requires a steady and stable supply of raw materials, and finished products must be continuously shipped out; otherwise, the factory would be blocked. Without raw materials, the factory stops. If products aren't shipped out quickly enough, it also stops because the volume is too large for any warehouse to accommodate.

So, the logistics system must be designed to be highly efficient and rational, ensuring a steady supply of raw materials and continuous removal of finished products, maintaining continuous, efficient, and smooth production. This optimizes quality and cost.

Because our volume is large and we have many locations, with over 100 factories in China, ensuring all these points operate in this state is quite challenging.

Second, food is alive. Rice and paddy are living; even after harvest, they still respire. Time is crucial for their quality and taste.

The first requirement for food is shelf life, but shelf life is the minimum. For good quality and taste, you need to process and deliver as quickly as possible from the field to the consumer. The shorter the time, the better the taste and quality. Flour, rice, and oil are all better when fresher.

So, managing time, getting raw materials to the factory at their best time (since they are collected in stages), and then quickly moving finished products to central warehouses, then to distributors, then to retail outlets, and finally to consumers, requires a precise and efficient chain. This is valuable for taste, quality, and even health. So, logistics is a crucial part of our system.

Zhong Ning: Yihai Kerry has experienced the entire process of China's catering reform and innovation from 1988 to now. Around 2006, you basically completed the layout of the entire industry. From 2006 to now, what have been the main progress points for Yihai Kerry?

Chen Bo: I think in this period, we mainly did two things. First, we expanded from oil to the entire grain and oil sector. When we first entered China, we focused on oil. Before 2000, it was mainly oil. After 2000, we started to get involved in flour and rice.

The large-scale layout of grain, moving from oil to grain and oil, started around 2006. We began building rice mills and flour mills on a large scale, while also expanding oil factories. So, during this period, we ran three lines simultaneously: oil, rice, and flour, with rice and flour growing faster.

Now, we have initially completed the layout of factories and production areas for oil, rice, and flour. Our rice and flour factories are of two types. One is production-area factories. In the early days, we built factories where wheat or high-quality rice was produced. Later, we started building sales-area factories, like in Shenzhen, Shanghai, and Guangzhou, which don't produce wheat or rice but have large consumer markets with specific needs. We build factories there, transport raw materials from various places, and process them to meet local demand. So, we have both production-area and sales-area factories.

This process is still ongoing, but the overall framework is in place. So, in this period, first, we completed the leap from oil to the entire grain and oil industry. Second, we completed the factory layout nationwide, from production areas to sales areas. These are the two biggest achievements in the last decade or so.

Zhong Ning: What changes has Yihai Kerry made in brand strategy over the years?

Chen Bo: In the early days, our brand was Arawana, and under Arawana, we had different oil types, starting with blended oil, then rapeseed, soybean, peanut, corn, and sunflower oils. Today, I can use an analogy: we have become the P&G of the grain and oil industry.

Why do I say that? We now have a multi-brand, multi-channel, multi-category structure. Categories include oil, rice, flour, noodles, condiments, and some downstream food products.

For multi-brand, let's take oil as an example. We have a four-tier brand layout.

At the high end, we have Olivolia, the most premium and professional olive oil brand, currently the number one olive oil brand in China. Hujihua is our specialized peanut oil brand, high-end and professional. Liyu is a high-end rapeseed oil brand.

Below that is Arawana, which is now the world's largest grain and oil brand, spanning oil, rice, and flour, with 11 oil types alone.

Below that, we have a brand called Xiangmanyuan, positioned slightly lower than Arawana, more mass-market, with higher cost-performance. Xiangmanyuan also has products in oil, rice, and flour, and its scale is very large.

Below Xiangmanyuan, we have some regional brands.

So, for oil, we have a full range from high to low, from comprehensive to specialized brands, covering different segments. The same logic applies to rice and flour. For example, in rice, we have Xiangnolan, a brand specializing in Thai rice; Ruyuhuangfei, specializing in e-commerce and high-end northeast Daohuaxiang rice; Arawana; Xiangmanyuan; and Jinyuanbao, which is more catering-oriented. All are established.

Flour is the same. We also make noodles and other condiments. So, our business extends from oil to grain and oil, to kitchen foods, with multiple brands and channels.

In terms of channels, besides modern channels like hypermarkets, we also have traditional channels like mom-and-pop stores in wet markets.

E-commerce is growing rapidly, so we have specifically laid out e-commerce channels, with products and brands customized for e-commerce. We are fully multi-channel.

For the catering channel, we have specially customized products. Catering is also subdivided into traditional and e-commerce catering, like Meituan, which is e-commerce catering. We provide oil, rice, and flour for their needs. So, we cover all needs from household, catering, to food industry, with a comprehensive layout.

Zhong Ning: How many job opportunities has Yihai Kerry created?

Chen Bo: I haven't counted, but currently we have over 20,000 employees. If you include upstream and downstream industries, it's several hundred thousand people.

Zhong Ning: What is your most memorable experience in your 24 years at Yihai Kerry?

Chen Bo: Overall, I feel fortunate to have entered this industry. From the time I joined to now, I've experienced the entire period of rapid development in the industry.

The industry went from zero to its current state. When we first entered, you could say the industry didn't exist; there was no packaged oil or rice. As I mentioned, when we approached grocery stores, they said, "You've come to the wrong door; we don't sell that. Go to the grain store."

Now, in any supermarket, grain and oil is the largest category, not one of the largest, but the largest, bigger than beverages and daily chemicals. In any large supermarket, grain and oil ranks first, or at worst second. So, it's not a question of whether to sell it; they sell a lot. This entire process took just over 20 years. The grain and oil FMCG category went from zero to hundreds of billions in just over 20 years.

We joined this company in 1995, entering the industry, and have experienced this high-speed development from zero to hundreds of billions. That leaves a deep impression. Of course, personal development follows industry and company development; without industry and company growth, there can be no personal growth.

Zhong Ning: If you could say one thing to Yihai Kerry, what would it be?

Chen Bo: I feel it's been very worthwhile, and I'm very happy to have joined this company and experienced the entire industry development process. If I had the chance to do it again, I would still join this company, this industry, and go through this process. It's truly rare.