Case Study: Feasibility Studies

Background
Pascual Dairy Group (Spain’s leading dairy company) was planning for many years to establish a subsidiary in China.  Pascual had some experience in the market from exporting some products through distributors, and had many executives visiting China evaluating investments opportunities.  They were struggling to find an appropriate investment opportunity.


Challenge 
The challenge was the complexity of the China market, and their lack of experience and understanding of the situation on the ground. They were conscious that despite it being a tempting market, there were many challenges to launching a successful business, and that the first steps were critical. Identifying the right partner was a major hurdle as many of the potential local partners did not meet Pascual’s criteria, while most of the best companies were already large organizations and were not interested in having a foreign partner. 


Solution
Based on our study we concluded that the market was ready for Pascual’s products, and the company had right size and resources to enter the market, but lacked China experience.  Based on our study, our recommendation was to do a significant investment, by creating a JV with a local partner, with Pascual having majority control. After detailed analysis of potential partners, we identified Tian You in Chongqing, a medium sized company with a good share of the Sichuan market.  The company was a JV between the local government and a private group, with good management and a desire for foreign investment.

Result
An agreement was signed in the presence of the Spanish Minister of Industry and the Mayor of Chongqing, and Pascual has made an initial investment of 14m Euros.