It’s generally understood that refining food destroys nutrients. White flour, the common ingredient in pastries and convenience snacks, is ground from grains with germ removed to significantly extend its shelf life. With the most nutritious part of the grain removed, white flour becomes like refined sugar.
What gets lost in the refining process: half of the beneficial unsaturated fatty acids; virtually all of the vitamin E; 50% of the calcium; 70% of the phosphorus; 80% of the iron; 90% of the magnesium; 50% to 80% the B vitamins. On the other hand, China Star Food's peanut snack (above) uses roasted sweet potato coating instead of deep fried refined flour batter.
Photo: Alibaba
China Star Food resumes trading today.
Brooke Asia changed its name to China Star Food on 22 Sept 2015, after the reverse takeover was completed. Post-RTO, founder and CEO Liang Cheng Wang owns 31.3% of China Star Food Goup. Photo by Leong Chan TeikLEVERAGING ON the intrinsic sweetness of the humble sweet potato, Fujian snack manufacturer, China Star Food Group, has dramatically cut down the amount of refined sugar in its convenience snacks.
The Group's brand reputation and earnings grew as health-conscious consumers loved the way it preserved the nutritional value of the root vegetable. For example, its products has won numerous awards. Net profit from its food manufacturing business segment also multiplied more than sixfold in the 3 years from FY2012 to FY2015 to Rmb 93.4 million (year end 31 March). This represents a CAGR of a whopping 87%.
"Convenience foods that promote health are gaining market share from junk food in China because consumers there are becoming very health savvy," said CEO Liang Cheng Wang during an exclusive interview with NextInsight.
Look and taste like favorite snacks (minus sugar load)
"Product innovation is one of our key competitive strengths," said CFO Chan Siew Kit, referring to China Star Food's ability to produce healthy cousins of popular junk foods.
Photo by Sim Kih
By rolling out new products that are similar to the look and taste of traditional sugar-laden confectionery such as Rabbit milk candies, Japanese mochi and mooncakes (but with much less refined sugar), China Star Food has expanded its gross profit margin from 35.3% in FY2012 to 44.4% currently (9MFY2016).
Interestingly, the mooncakes that the Group rolled out in September 2014 enjoyed gross margin as high as 60%. The Group currently produces over 100 varieties of snacks in six product categories: baked goods; pastries; roasted sweet potato nuts; candies; preserved sweet potatoes; crisps.
The convenience food industry is fiercely competitive, and food giants are cashing in on the growing demand for healthier snacks.
In October 2015, world no.1 biscuit manufacturer, Mondelez, shut down its Shanghai factory due to declining demand for Oreo biscuits in China. Instead, Mondelez launched a brand of nutritional biscuits in China and announced plans to increase revenue contribution of healthy products from 30% currently to 50% by the year 2020.
The X factor that differentiates China Star Food from other snack makers is this: White flour and refined sugar are the key ingredients in most snacks. On the other hand, the key ingredient of the Fujian snack maker is sweet potatoes, one of the most nutritious vegetables, according to US non-profit organizations such as the Center for Science in the Public Interest and The World's Healthiest Foods.
"By working with experts in the food industry, we have adopted processing methods that preserve the nutritional value of foods," said Mr Liang, stressing on the need to educate consumers about the health benefits of sweet potatoes.
| ♦ Health benefits of the sweet potato |
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The sweet potato is rich in complex carbohydrates, dietary fibre, beta carotene, vitamins A, B6 and C, helps το protect the body's mucous membranes, inhibits the growth of cholesterol plaque that inhibits blood flow in arteries, and prevents the atrophy of tissues connected to one's liver and kidney. |
Capacity to multiply six-fold in 2 years
The Group's advertising and promotion expense was only 1.5% of sales in FY2015. Mr Liang plans to increase this ratio over the next few years. To cope with the expected increase in demand as the Group expands its points of sales, a third factory has been constructed and will commence production soon. It is also constructing a fourth factory.
The Group currently has a production capacity of 28,800 tonnes a year. Its third factory occupies land area of 13,910 sq meters and is expected to double its capacity once the third factory commences production.
Its fourth factory occupies land area of 55,733.36 sq meters (4 times the capacity of the third factory), and is expected to be completed in 2017. The new factories will add frozen sweet potato products to its product range and restaurants to its customer base.
Due to the recent RTO, its earnings growth will flow down to bottom line only from the next financial year.
The Group had a net profit of Rmb 61.4 million (excluding one-off RTO expenses and RTO related goodwill written-off) for the 9 months ended 31 December 2015.
"I believe we are able to sustain our earnings growth," said Mr Liang.
To read a Chinese translation of this article, click here.
