Many of you still remember one of the earliest articles of The Low Down, where we talked about painting the walls in rural areas: https://thelowdown.momentum.asia/paint-brush-best-channel-rural-ecommerce-marketing-developing-world/
Now this wall ad has been spotted in many places in China:
Yes it is an ad from Alibaba targeted at pig farmers. But why would a posh tech company like Alibaba be interested in pig farming, which seems very low level and dirty?
Well, once you understand a bit of the market, it will become so obvious to you.
Huge market ripe for disruption
According to USDA data, China contributed more than 53% of global pork consumption in 2016. Domestic economists in China estimated total pork market in China to be CNY 1.4 trillion (US$ 220 billion).
This is more than twice as big as the smartphone market in China.
The following USDA graph, albeit old, shows the pork consumption growth and pork’s dominant position in Chinese meat consumption.
In 2015, the government started tightening and enforcing environmental regulations aimed at controlling swine farm pollution. Many small and less efficient pig farms closed down. As a result, the profit for pig farming soared, reaching as high as US$100 per head in some of the more efficient farms.
Many parties are trying to fill this void left by the closure of all these small farms, including investment banks and large technology companies.
Alibaba is not the first
In fact, Alibaba is not the first large tech company to enter the market. NetEase, a Nasdaq listed Chinese internet firm whose main business is in gaming, announced its entry into pig farming back in 2009.
After a few iterations, NetEase’s pork was available at the company’s canteens for ‘internal testing’. And the market launch soon followed – the pork is priced higher than most branded pork, and is still selling fast. NetEase also opened a restaurant chain featuring its pork, and it takes a few weeks of queuing to get a table.
Data leads to trust
NetEase’s pork is premium not only because of breed and taste, but also its data operations. Every swine is tracked across the supply chain, and data analytics not only reduced operational costs, but also makes consumers more at ease of what they are getting.
This is critically important in contemporary China where food safety scandals happen one after another, and people have lost faith in what they are eating. Knowing where the pork is from, whose has handled it along the chain, and some other data almost certainly made people feel much more comfortable.
The rising middle class and the new rich are willing to pay premium for food safety.
So everyone is happy:
Alibaba won’t miss this
Currently, Alibaba is moving aggressively offline to ‘modernise’ many traditional sectors. As we previously explained (https://thelowdown.momentum.asia/real-reason-alibaba-investing-us2-9-billion-offline-retailer/), the main motive is to seek other sources of growth while online is slowing down.
Of course it could not (and would not) miss the huge gold mine pig farming. Alibaba already has huge cloud infrastructure, sophisticated data analytics, and wide-reaching distribution channel.
It is all but natural. They are certaining taking a different approach than NetEase. The forerunner controls the whole chain, while Alibaba is probably more interested in modernising the whole sector, with itself being a marketplace, and a technology (now data) solution provider.
After all, this is what they did with ecommerce (through Taobao).
More wall ads
In addition to the one in the beginning of this article, there are also more wall ads across many parts of rural China which really demonstrated the ingenuity of rural propagandists (I mean marketers):
For those who have more time during this Lunar New Year holiday season, we recommend you to read Economist’s Christmas Special in 2014 “Empire of the Pig”:
Happy Lunar New Year!
Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at [email protected] and let us know how we can help.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected]