Anhui BBCA Biochemical, the large-scale bio-energy, biomaterial and biological pharmacy manufacturer, estimated its net profit was more than 50 million yuan ($7.4 million) in 2008, almost double what it was in 2007.

A COFCO spokesman declined to give the parent company's total revenue or net profit for 2008.

No longer a monopoly

COFCO used to be a monopolistic, state-owned foodstuff import and export company. Its monopoly ended in 2004 when the country had to lift government controls on foodstuff import and export operations to fulfill its commitments to the World Trade Organization.

But this forced the company to start transforming itself the following year to increase its competitiveness through product diversification, expansion, and mergers and acquisitions. By the end of 2008, the value of COFCO's total assets under management had increased to 120.9 billion yuan ($17.8 billion) from 46.6 billion yuan ($6.9 billion) in 2004, according to the company.

Ning said the only way forward for the company was to focus on the industry in terms of production rather than trade. Thanks to the big profits that the company made in the past as a monopoly, COFCO has been able to complete a series of large mergers and acquisitions and expand its business in agriculture and food-processing, biomass energy production, real estate development and financial services. For example, in June 2005, it restructured Xinjiang Tunhe so that it became a ketchup producer and fruit processor. In the same year, the parent company restructured Xinjiang Sifang Sugar Co. Ltd.

COFCO has undertaken mergers and acquisitions not only to broaden its scale, but also to increase its strength and forge competitiveness. In 2007, it merged Sifang Sugar and Suozhou Sugar into Tunhe, making that company China's biggest beet sugar producer. In March 2006, COFCO acquired China Grains and Oils Group Corp. and turned it into the country's largest food and oil distribution group with a total assets of more than 60 billion yuan ($8.8 billion).

Completing the industry chain

"In 2009, we need to answer some questions that in the past we did not have time to consider," Ning wrote in a memo to company staff earlier this year about his reflections on the economic crisis and how it could affect COFCO.

"The first question is, how long can our industry chain be and what are its advantages and disadvantages? In the past, these questions seemed to be not so important, but today, they are important, because we are being confronted with new challenges."

Building a complete industry chain has always been COFCO's first and foremost task and will continue to be so in the near future, Ning said. The purpose of COFCO's industry chain is to "turn the corn harvested in Jilin Province in northeast China into ham on the table of Shanghai residents," Ning said at the forum. "This industry chain comprises foodstuff manufacturing, cultivation, processing, marketing, packing and logistics."

COFCO's expansion and diversification has not occurred randomly, but has always centered on building a complete chain of foodstuff production and distribution. Last October, COFCO obtained the leasehold of more than 260,000 mu (17,300 hectares) in Ningxia Hui and Xinjiang Uygur autonomous regions to plant tomatoes. Prior to that, Tunhe had contracts with local farmers who grew tomatoes. But it was difficult for the company to control the use of fertilizer and pesticides on individual farms. And if the price of tomatoes rose, farmers did not always adhere to the terms of their contracts with Tunhe and sold their tomatoes to other companies instead.

By gaining the leaseholds, COFCO has been able to ensure a stable supply of tomatoes, said Zheng Qi, an agricultural industry analyst at China Securities Co., Ltd.

COFCO's latest acquisition attests to its efforts to enhance its downstream industry chain. This February, it purchased "The Cereal Way," the first instant noodle brand in China. COFCO is committed to being a whole-chain foodstuff company, and instant noodles are an important product in the food industry chain, said Qu Ze, the assistant to the company's president.