Wuliangye, New Hope plan grain joint venture

Top baijiu producer Wuliangye Yibin Co Ltd and leading agribusiness operator New Hope Group Co Ltd have set up a joint venture to turn distillery waste into feed, and raise cows with the feed.

Baijiu is a popular Chinese liquor distilled from fermented sorghum and rice.

Feed for farming cattle that is produced from distillery byproduct costs less than feed from other sources and is competitive in terms of quality, according to industry experts.

Yibin Wuliangye Environmental Protection Industry Co, a subsidiary of Wuliangye, will hold 35 percent of the joint venture, which is known as Sichuan Jinwu New Feed Technology Co Ltd.

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New Hope Liuhe will hold 35 percent, and Yibin Feiyan Investment Co Ltd will hold 30 percent.

With an investment of 772 million yuan ($124.5 million), Wuliangye will provide the material for feed while New Hope Liuhe will be in charge of product research.

Industry experts said it is a challenge for distillers in China to use all of their distillery waste efficiently. Many sell any surplus to farming or breeding companies or even throw it away.

In March, China Energy Conservation and Environment Protection Group signed a collaboration framework with the Guizhou provincial government to invest 6 billion yuan in distillers' grain processing and management programs to produce natural gas and organic fertilizer.

"Dealing with distillery waste from baijiu manufacturing matters for environmental protection and companies' economic standing," said Liang Mingxuan, an analyst at CIConsulting.

The collaboration with New Hope will produce distribution channels for Wuliangye's massive volume of distillery waste and increase sales revenue.

New Hope will also get material for producing feed, Liang said.

The project will involve more than 10,000 cows.

Dairy cows have become the darlings of many investors seeking improved returns amid the nation's economic slowdown.

Yunfeng Capital, a private equity firm co-founded by Alibaba Group Chairman Jack Ma, Target Media founder Yu Feng and Citic Private Equity, spent 2 billion yuan for a 60 percent stake in a unit of dairy giant Inner Mongolia Yili Industrial Group Co Ltd.

According to Yili, the investment will help sustain milk supply sources, enhance farm building capacity, and expand and upgrade the dairy source network to boost profitability.