Growth equity funds advised by China-focused, mid-market growth equity firm Welkin Capital Management have invested $17.44 million in Hunan Guitaitai Camellia Oil Technology Co. Ltd. – the largest camellia oil brand in China.
Camellia oil, also known as tea seed oil, is cold pressed from the seeds of the woody Camellia sinensis plant. Given its high smoke point of 485 degrees Fahrenheit (252 degrees Celsius), camellia oil is the main cooking oil used in China’s southern provinces. In fact, Guiyang county in China’s southern Hunan Province has been producing camellia seed oil for 800 years, according to China Daily, and has come to be known as the “hometown of camellia oil.” The oil is also low in saturated fat, high in vitamin E and antioxidants, and contains no trans fats. It is also widely used in beauty treatments for both hair and body.
Headquartered in the southern province of Hunan, Guitaitai was founded in 2008 by company CEO, Xuewen Xu. The company specializes in the production, distribution, sales, and marketing of edible camellia oil under the Guitaitai brand name. The company, which is listed on China’s National Equities Exchange and Quotation, (NEEQ) has grown its distribution network over the years to 13,000 retail locations across China.
“Welkin’s investment reflects the confidence it has in our brand, our competitive strengths and the potential of the camellia oil market,” said Xu. “We will leverage Welkin’s financial support, its operating expertise and extensive networks in China, as we continue to grow our business and strengthen our reputation as the leading brand for camellia oil in China.”
The camellia oil industry in China’s southern region is positioned to see significant growth in the coming years. In December 2014, China’s State Council published a Notice on the Development of Woody Oilseed Plants outlining plans targeting an increase in production of oil from woody plants from 450,000 tons in 2013 to 1.5 million tons by 2020. The government also intends to increase acreage from the current 8 million hectares to 13.3 million hectares, and to develop woody oilseed plants in 800 counties. This state and provincial support for the industry, along with camellia oil’s health benefits, has helped it become a key cooking oil for China’s expanding middle class.
“With Chinese consumers increasingly focused on health and quality consumer products, camellia oil is well-positioned for high growth and is quickly becoming a mainstream edible oil category,” said Jiang Pu, principal with Welkin Capital Management. “We believe that with support from Welkin, Guitaitai is well positioned to benefit from this trend, given its advanced oil processing technology, state-of-the-art manufacturing facility and solid financial position.”
Guitaitai is already coming from a position of strength, growing not only its customer base and market share, but also reinforcing its brand recognition to post revenue of RMB312 million (US$45 million) and net profits of RMB41.7 million (US$6 million) for the six months ending June 30, 2016 – reflecting year-on-year growth in revenue of 63.56 percent and year-on-year growth in net profits of 112.62 percent. As of the same date, the company’s total assets were valued at RMB493 million (US$71.4 million)
Under the terms of the investment, Guitaitai will issue 12 million shares at a per share price of RMB10 on the NEEQ. The funds raised will be allocated to support the build-out of a new camellia oil production plant in Suining, in Hunan Province, and to boost the company’s working capital.
At completion of the share issue, Welkin Capital will hold a 15 percent stake in Guitaitai, and Jiang Pu will gain a seat on Guitaitai’s board of directors.
-Lynda Kiernan
Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.