---
title: "Shuanghui: The Hidden Worries of a Meat Empire"
description: "Over the past 30-plus years, Shuanghui has repeatedly broken through challenges in its dealings with the system and capital, thanks to strong leadership. Now, with weak external demand, urgent transformation, and succession issues on the agenda, the legendary Shuanghui faces long-term concerns despite no immediate threats."
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published: "2018-11-20"
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# Shuanghui: The Hidden Worries of a Meat Empire

> Over the past 30-plus years, Shuanghui has repeatedly broken through challenges in its dealings with the system and capital, thanks to strong leadership. Now, with weak external demand, urgent transformation, and succession issues on the agenda, the legendary Shuanghui faces long-term concerns despite no immediate threats.

Source: Shijie (ID: sparklelive)
Over the past 30-plus years, Shuanghui has repeatedly broken through challenges in its dealings with the system and capital, thanks to strong leadership. Now, with weak external demand, urgent transformation, and succession issues on the agenda, the legendary Shuanghui faces long-term concerns despite no immediate threats.
**When it comes to pig slaughtering, no one in China surpasses Wan Long.**
Wan Long, now 78, started from a loss-making meat processing plant in Luohe, Henan. Since then, he has led Shuanghui on a path of aggressive expansion, transforming a small factory with total assets of less than 5 million yuan into a "meat empire" with a market value approaching 100 billion yuan and the world's largest scale.
Shuanghui, which had been growing rapidly, has shown signs of slowing down in the past two years.
In 2014, its net profit attributable to shareholders dropped sharply from 33% the previous year to 4.71%. It remained sluggish thereafter, and by 2017, the growth rate turned negative.
Over the past 30 years, thanks to strong leadership, Shuanghui has repeatedly broken through in its dealings with the system and capital. Now, with weak external demand, urgent transformation, and succession issues on the agenda, the legendary Shuanghui faces long-term concerns despite no immediate threats.
**01**
**Slowing Performance**
Shuanghui's name is derived from the confluence of the Sha and Li rivers. Since Wan Long took over in 1984, it has been advancing rapidly.
In 1992, Shuanghui ham sausage was born and quickly sold nationwide; in 1997, during the Asian financial crisis, Wan Long used a brilliant price war to crush the once-famous Chundu ham. A year later, Shuanghui Development was listed on the A-share market.
Shuanghui ended the era when selling meat in China had no brand, changed the old model of selling meat along streets and at stalls, cleverly introduced international private equity funds to achieve restructuring, and successfully survived the "lean meat powder" crisis in 2011.
In the 20 years since its listing, Shuanghui Development has brought substantial returns to investors. As of now, based on adjusted prices, the stock has risen 27 times over 20 years, with an annualized return of 18%.
Behind the stock price rise is sustained profit growth.
When it was listed in 1998, Shuanghui Development's net profit attributable to shareholders was less than 70 million yuan. By 2013, it had reached 3.858 billion yuan, with a compound annual growth rate of 31% over 15 years.
Just as investors habitually expected the company to maintain high growth, the point of deceleration arrived. **In 2014, Shuanghui's net profit growth rate dropped sharply from 33.72% in 2013 to 4.71%, then 5.34% in 2015, 3.51% in 2016, and turned negative in 2017.**
Shijie found that the years of slowing performance coincided with years of large dividend payouts.
From 2013 to 2017, Shuanghui Development distributed a total of 21 billion yuan in dividends. Some netizens jokingly called it "eat-all dividends." This frenzy peaked in 2016 with a payout ratio of 157%, not only consuming all surplus but also "overdrawing" from the future.
High dividends amid low growth make one wonder: is it because the company cannot create more profits for investors and thus has to distribute money?
After research, Shijie found that **Shuanghui Development's "generous" dividends in recent years were merely to repay debts for its major shareholder, Shuanghui International.**
On May 29, 2013, Shuanghui International, the major shareholder of Shuanghui Development, acquired Smithfield Foods, a top U.S. pork producer, for $7.1 billion (approximately 43.7 billion yuan) in cash. Smithfield, founded in 1936, is technologically advanced and the largest in the U.S. by scale.
To raise funds, Shuanghui Development's controlling shareholder, Hong Kong-based Rothesay (100% owned by Shuanghui International), pledged its 13.02% stake in Shuanghui Development and its 100% stake in Shuanghui Group (Rothesay holds 100% of Shuanghui Group, which holds 60.24% of Shuanghui Development) to guarantee loans for Shuanghui International's overseas bank loans.
In overseas loan agreements, Shuanghui International, Rothesay, and Shuanghui Group promised overseas banks that, under the condition of complying with relevant laws and regulations, **the company would distribute no less than 70% of its audited consolidated net profit attributable to shareholders after appropriating surplus reserves for shareholder dividends each year.**
U.S. pig farming is efficient and low-cost. According to China Livestock Network, a sow in the U.S. can produce an average of 23 piglets per year, and in Europe up to 28. In China, only large pig farms can achieve an average of 17-18. According to a report in "Feed and Animal Husbandry," U.S. hog prices are lower than China's most of the time, sometimes only half of China's prices.
Whether these advantages can be leveraged by Shuanghui Development after acquiring Smithfield, combined with its domestic channels, to create synergies remains to be seen. However, the high dividends have already limited the funds available for Shuanghui Development's own development, and the results are evident.
The market has mixed opinions on Shuanghui's future. Bulls confidently believe that the low growth is temporary and that the company will regain momentum after helping the major shareholder repay debts. Bears argue that the company faces declining pork consumption, weak industry demand, the need for product upgrades for traditional ham sausages, and uncertainties such as the chairman's advanced age.
**02**
**Difficult Transformation**
"I'm not an entrepreneur; I'm just a pig slaughterer," Wan Long often says humorously on many occasions to explain his career.
Looking at Shuanghui's revenue structure, its slaughtering business indeed accounts for half of the company, winning by scale. However, due to the low gross margin of slaughtering, Shuanghui's profit growth actually relies more on its meat products business.
Unfortunately, its high-temperature meat products business is not optimistic, with its share of revenue declining from 34% in 2010 to 27% in 2016. By 2017, this situation had not fundamentally changed.
As the main product of high-temperature meat products, ham sausage was a major profit contributor for a considerable period. In 2012, Shuanghui ham sausage once held 30% of the national market, peaking at 60%, but has declined year by year since then.
According to Shijie, this decline is not a temporary downturn but a result of the consumption upgrade trend. Since 2012, many stars in the consumer sector have faced growth challenges, including Coca-Cola, Yili, Wahaha, and Uni-President.
In the "iron triangle" of pickled mustard, instant noodles, and ham sausage, the first two have all undergone painful transformations.
Master Kong's instant noodle business, once thriving, declined sharply after 2012. This situation only changed in the second half of 2017 when Master Kong adjusted packaging and let premium instant noodles "take over," achieving stabilization and recovery. Meanwhile, Fuling Zhacai, China's largest pickled mustard producer, capitalized on consumers' price insensitivity by frequently raising prices, ensuring high profit growth.
"Stabilize high-temperature, promote low-temperature" is Shuanghui's core strategy for selling meat. In the past two years, its focus has been on low-temperature chilled meat. In developed markets, low-temperature chilled meat accounts for up to 90%, while in China, the penetration rate is only 30%, indicating huge growth potential.
Previously, hot fresh meat in China was typically slaughtered in the early morning and sold the same morning, with meat temperature as high as 40 degrees Celsius after slaughter. From slaughter to sale, only a few hours pass, resulting in rough texture and the growth of microorganisms.
Low-temperature chilled meat is rapidly cooled and acid-eliminated after slaughter, with pork temperature reduced to 0-7 degrees Celsius within 24 hours. This increases tenderness and produces flavor compounds like amino acids and peptides, making it easier to cook and safer.
Data from the first half of 2018 shows that Shuanghui Development's meat product revenue was 11.422 billion yuan, of which low-temperature meat products accounted for 4.192 billion yuan, representing 36.70% of meat product sales.
However, low-temperature chilled meat is also a battlefield where Yurun and Jinluo are fully engaged, making competition fierce. Due to consumption habits, the proportion of low-temperature chilled meat in the domestic market has hovered around 30% without significant improvement. Some experts pessimistically believe that changing this habit may take generations. What troubles Wan Long is that to bring low-temperature chilled meat into kitchens, he must also break through "local protectionism."
From 2013 to 2015, Shuanghui Development's annual reports show that low-temperature meat product revenue declined: 9.524 billion yuan, 9.445 billion yuan, and 8.386 billion yuan, respectively.
**High-temperature meat has hit a ceiling, and low-temperature meat market has underperformed expectations.** In 2013, after acquiring Smithfield, Shuanghui became the world's largest slaughtering and meat product producer. Shuanghui had several considerations: first, to improve profits by importing cheap meat when facing pig cycles; second, to achieve synergies in production technology and management; and third, to enrich its American and Western-style meat products through acquisition, achieving product upgrades.
In 2015, Shuanghui built a factory for new products like American-style bacon, but some research reports suggest that these new products take a long time to cultivate and currently cannot shoulder the growth burden.
Over the past 30 years, Shuanghui's "meat empire" was built on the foundation of booming domestic consumption, benefiting from rapid economic growth and population growth. In the coming years, the situation will not be so optimistic.
Shijie reviewed data from the National Bureau of Statistics since 2000 and found that **pork remains the favorite meat of Chinese people, but growth has slowed in recent years.**
In 2000, China's pork production was about 40 million tons, surpassing 50 million tons in 2010, after which production peaked and declined. In 2016, production was 53 million tons, indicating relative overcapacity.
**Shuanghui Development's data from 2013 to 2017 confirms this trend: meat product sales fell from 1.7142 million tons to 1.5836 million tons, and revenue dropped from 25.242 billion yuan to 22.659 billion yuan.**
Whether from a macro or micro perspective, the transformation of the "meat empire" is urgent.
**03**
**Succession Challenge**
Every morning, 78-year-old Wan Long walks around the Shuanghui building. The energetic Mr. Wan seems to prove to everyone that age is not an issue.
Inside Shuanghui, discussing when the chairman will retire is a sensitive topic. Since Wan Long passed the legal retirement age of 65, the media has repeatedly asked this question. Wan Long is open-minded: "I will retire whenever shareholders need me to."
That said, the fact is that Shuanghui has been inseparable from him for 34 years. Wan's style has left a deep imprint on Shuanghui. Among the few entrepreneurs born in the 1940s in China, Wan Long's relationship with Shuanghui is like Ren Zhengfei's with Huawei or Zong Qinghou's with Wahaha. At every critical moment for Shuanghui, Wan Long has demonstrated his prestige and control.
The pig slaughterer is not a brute. Feng Lun has high praise for Wan Long: "Some people read books; Wan Long reads people." Wan Long, who often says he wants to make pig slaughtering his lifelong career, hides strategy and wisdom behind his rustic sayings.
Public reports say Wan Long has fired a number of deputy factory directors and even the niece of a deputy mayor, but in handling government relations, Wan Long is tactful and wise. Wan Long himself once said that anyone else would have been out long ago. When Zong Qinghou and Ren Zhengfei still had biases against listing, Wan Long boldly cooperated with shrewd capital like Goldman Sachs, neither falling into the trap of state asset loss nor failing to complete the MBO.
▵ Wan Long
Understanding this makes it easy to see why succession is so important. Without Wan Long, Shuanghui would lose not just the core of the midfield but the spiritual leader. Without Wan Long's "strongman governance," whether Shuanghui can continue its legend may be questionable.
Previously, there was no clear indication of Shuanghui's successor. In August this year, Wan Long's eldest son Wan Hongjian and second son Wan Hongwei appeared in the core management for the first time through cadre adjustments. On the evening of August 14, Jiao Shuge resigned as vice chairman of the board of WH Group, and Wan Hongjian took over the vacant position while continuing as executive director and vice president of the company. This was Wan Hongjian's second promotion within six months.
Wan Hongwei, born in 1973, has served as director of Shuanghui Group's Hong Kong branch, secretary to the chairman of Shuanghui Group, and manager of the public relations department at WH Group. He is currently assistant to the chairman of WH Group.
**In terms of training their children, Wan Long, like Zong Qinghou of Wahaha, has adopted the promotion model of domestic cadres, letting the next generation start from the grassroots to become familiar with every aspect of the business.** Wan Long himself is a "business control freak." Every year, hundreds of people report to the group, and Wan Long attends every meeting, asking for details, often making those reporting sweat.
Wan Hongjian, currently an executive director of WH Group, joined Shuanghui in 1990. His first job was as a worker in the cooked food workshop of Luohe Meat Processing Plant. Two years later, he was transferred to Beijing as sales director of Shuanghui Group's Beijing office. At 49, Wan Hongjian is in his prime, with his training focused on international trade. Until he became vice president of WH Group in 2016, he continued to oversee international trade.
In fact, ten years ago, Wan Long set up a "internal selection" process: first, quantitative standards; second, competitive selection. He believes that as long as the mechanism is well designed, there is no worry about not finding a successor.
**Whether the Wan brothers will take over is still unclear. Shuanghui is erasing "individual heroism" and relying more on collective wisdom in decision-making.** Shijie found that previously, eldest son Wan Hongjian and second son Wan Hongwei were extremely low-key, leaving no public statements.
In the past three years, Shuanghui's management has changed frequently. A total of nine senior executives have changed in three years. In August this year, a new board of directors and senior management team for Shuanghui Development was formed, with more than half of the senior executives appointed after 2017. Such a high turnover rate seems to indicate that in the current environment, it is not as simple as it seems for candidates to fulfill their initial promises.
According to a PwC survey, half of the more than 1,000 directors surveyed were dissatisfied with their company's succession plans. "Selecting a successor is like extracting one ounce of gold from a ton of gold." And in Chinese family businesses, the majority still prefer family members to manage.
Succession is a global challenge, and Shuanghui is no exception.
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**How long has it been since you last ate a Shuanghui ham sausage?**
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