Betel nut industry in Hunan now worth RMB10bn a year

Betel nut industry in Hunan now worth RMB10bn a year

Staff Reporter

2013-10-25

China’s huge industry supply chain for areca nut — more commonly known as betel nut — involves 2.3 million farmers in the southern island province of Hainan and more than 400,000 workers in Hunan’s betel nut-processing industry, which has a production value of nearly 10 billion yuan (US$1.6 billion), the Guangzhou-based Time Weekly reports. The size of the industry has come under the spotlight after reports that chewing betel nut can lead to cancer. About 1 billion people in the world consume the nut for its mild stimulant properties, chiefly in India, where it is known as paan, and throughout Southeast Asia. It is popular in Taiwan and in mainland China its use is centered on the south-central province of Hunan. India and Taiwan grow betel nut locally which is consumed fresh; Hunan, not originally a producer, imports its betel nuts and processes them with preservatives and flavorings.Hundreds of years ago, there was a plague in the city of Xiangtan and people there began eating betel nut, which was said to have a preventive effect, said Ms Wang from the city, the hometown of several former Chinese leaders including Mao Zedong, Liu Shaoqi and Peng Dehuai. Eating betel nut also helps you keep warm in Hunan’s relatively cold climate, she added.

Hunan’s betel nut processing industry has a history of just 20 years, with a real upturn in the past decade. The industry now comprises more than 50 enterprises, which process 200,000 tonnes of betel nut annually with an annual production value of nearly 10 billion yuan (US$1.6 billion). Seven major brands have emerged, each with an annual production value of more than 100 million yuan (US$16.4 million), and the processing industry has been growing at an average annual rate of 20%. Hunan’s betel nut sales reached 1.3 billion yuan (US$214 million) in 2003, and grew further to 5 billion yuan (US$821 million) in 2011. The industry grew to nearly 6 billion yuan (US$986 million) in 2012, exceeding 8 billion yuan (US$1.3 billion) so far in 2013, and will reach 15 billion yuan (US$2.5 billion) by 2016, according to estimates by Hunan’s betel nut association.

The rising demand has triggered a rise in production in Hainan over the past 20 years. In 1982, Hunan’s betel nut growing area was only 1,200 hectares but this grew to 29,000 hectares in 2001 and 79,000 hectares in 2011. Betel nut has become Hainan’s second-largest crop, after rubber. Hainan’s betel nut production accounts for 95% of the national crop.

As of 2013, the area of land dedicated to growing betel nut in Hunan covers 80,000 hectares, with total production volume exceeding 500,000 tonnes and a production value of around 20 billion yuan (US$3.3 billion).

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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