From the Ground Up - McCain Foods Limited

lEFt: A McDonald’s on a
busy Shanghai street.
RIGHt: Ronald Muller, project
coordinator, at the start-up of
the Harbin factory, 2006.
The typical McCain policy in any large market, such as France, Poland, China, or
India, is first to build demand by exporting and then to build a factory. In this sense,
Japan is unusual because no matter how much sales grow, McCain is most unlikely
ever to build a potato-processing factory there. Morris did look into acquiring a factory
in Japan but decided it didn’t make economic sense because land is too expensive,
as would be the price of locally grown potatoes. It’s cheaper to ship product in
from North America, Australia, or New Zealand and store it in rented warehouses.
McCain’s business in Japan has risen steadily since it began in the 1970s, and Morris
expects this growth to continue. “It’s a good market for McCain, and the Japanese are
wonderful people to work with. I worked there for thirty years and I don’t think I ever
signed a contract. It has been all verbal agreements, and everything anyone told me
they were going to do, they have done. And we have tried to do the same.”
Every new territory presents a new opportunity for McCain, but none is more glittering
than China. With 1.3 billion people, it is the world’s largest market. Its economy is growing
at a ferocious pace, and people are migrating en masse into the cities. The Chinese
welcome Western ways, including U.S.-style quick-service restaurants, which is why, as
of 2007, KFC was opening a store in China every day. McDonald’s has also targeted China
as one of its major growth markets. Taiwan, with its dynamic capitalist economy and affluent
population of twenty-three million, is also an important market for McCain.
Most North Americans associate China with rice, not potatoes. Therefore, it may
be surprising to learn that China produces more potatoes than any other country.
According to the UN Food and Agriculture Organization (FAO), China grew 73 million
metric tons of potatoes in 2005, twice as much as the 36.4 million produced by
Russia. India came third with 25 million, followed by Ukraine (19.5 million) and the
United States (19.1 million). About half the Chinese crop is used as table potatoes
and 15 percent is processed into flakes, starch, or alcohol. The rest is lost to disease,
exported, or used as animal feed and seed.
With opportunity comes challenge, and no country has been more challenging for
McCain than China. When McCain went to South Africa, it was easy for its personnel
from Canada, Australia, and Britain to help train South Africans because they
spoke the same language. No such luck in China. Perhaps most challenging of all is
that the noodles and rice Chinese people have eaten for centuries are cheaper than
french fries – important in a country where average incomes remain low. A Shanghai
office worker might try KFC occasionally, but if she can eat lunch in a Chinese restaurant
for one dollar, that’s where she’ll take most of her meals.
Still, even a small percentage of 1.3 billion people is a lot of potential customers,
which is why McCain began sending agricultural experts to China during the 1990s.
There was plenty of work to be done.
Ghislain Pelletier recalls his first visit in 1999 when McCain agronomist Wang
Rengui showed him a plot of land that was supposed to be growing Russet Burbank
potatoes. “I scratched my head and said, ‘These don’t look like Russet Burbank.’ The
foliage looked all spindly. I was wondering if we had the right variety or if it would
grow there. They were full of disease.”
The problem was that there was no good seed in China of the varieties McCain
wanted to test. “The seed harbours the diseases,” Pelletier explains. “That was why we
210 From the GrouN d up
New w orlds to CoN quer 211
lEFt: Tony Ford (left),
agriculture director for
McCain Australia, headed
the company’s project to
develop reliable raw material
supplies in China; here with
agronomist Wang Rengui
(far right), chief agronomist
of McCain China; and Liu
Wenlong (centre), also a
McCain agronomist.
RIGHt: A KFC in Shanghai.