In 2005, SEAF Sichuan SME Investment Fund (SSIF) made two separate investments in Hua Long, a snack foods wholesaler, and Hui Ji, a snack foods manufacturer. SEAF’s financing, coupled with extensive business assistance, helped both companies grow their revenues, expand their workforces and broaden their supplier bases. Four years later, SEAF aided in the merger of the two companies into one business under the name Hui Ji.
At the time of investment, Hua Long bought branded snack foods from regional manufacturers and sold them to leading convenience chains and supermarkets in Sichuan Province. With SEAF’s help, Hua Long more than doubled its retail customers from 45 consumers the year before investment to 93 in 2009. To meet the growing demand from its retail clients, Hua Long doubled both its employment and supplier network from 2004 to 2009, and nearly quadrupled the amount it spent on valuable external training for employees.
Becoming National Competitors
To capitalize on his unique industry expertise selling other manufacturers’ products, in 2001, the founder of Hua Long launched Hui Ji as an independent snack food producer. When SEAF then invested in the producer in 2005, the capital was used to improve the company’s input sourcing by focusing on high-quality raw products. This shift was critical to Hui Ji’s success, and between 2005 and 2009 employment at the producer increased from 520 to 1,240, the employee average annual wage nearly doubled, and the number of supplier farmers the company worked with more than tripled. With the investment from SSIF, coupled with the growing demand for branded food products, Hui Ji and Hua Long successfully established themselves as national competitors.
A Completed Merger
In 2009, to maximize growth, the boards of both companies agreed to a merger and to seek additional growth capital. Two well-known investment funds that focused on China (Orchid Asia and Shenzhen Venture Capital) agreed to invest in the newly merged Hui Ji and to purchase part of SSIF’s shareholding, allowing SEAF to make a partial exit. Between the first quarter of 2009 and the same quarter of 2010, Hui Ji realized a 60% annual increase in revenue.