China Steel Giant Expands into Fast-Food Delivery

State-owned Wuhan Iron and Steel (WIS) is branching into disparate non-core sectors like fast-food delivery, booking flights and even flower arrangement through a newly opened city service center, according to Guangzhou’s 21st Century Business Herald.

The service center was opened last week in Wuhan, capital of Hubei province in central China and has already begun offering home delivery services for local restaurants. Initially the WIS service center is limiting deliveries to a 5-km (3.2-mi) radius at a cost of 20 yuan ($3.15) per meal, with free delivery for 20 or more items in a single order.

Its array of offered services include flower arrangements, furniture customization, plane ticket bookings and art training. Eventually the company hopes to offer 77 types of services. It has already made tieups with 66 local businesses. Within two years WIS hopes to expand its service center offerings to all of Hubei province, then to all of China. The city service center was conceived as a relatively low-risk venture because it requires low investment and has the potential to generate relatively quick returns, said an industry analyst. WIS hopes to build the service center’s revenues to 100 million yuan ($15.7 million) within three years.

The seemingly random diversification is the firm’s effort at expanding away from its struggling core business. Only 10,000 to 20,000 of WIS’s workforce of 70,000 to 80,000 remains engaged in the core business of iron and steel, according to a company spokesperson. The rest are now engaged in non-core businesses. While in the past profits from its core areas supported expansion into non-core areas, now the non-core areas are becoming self-sustaining.

WIS’s other non-core businesses already include investments in offshore iron ore bases, engineering design, construction, machinery manufacturing, transportation, logistics, warehousing, gas and financial services. The company had expanded into services unrelated to its core business of iron and steel production to make full use of existing manpower and capacity to boost profitability, said a WIS spokesperson. It hopes to expand non-core business revenues to 110 billion yuan ($17.3 bil.) during the government’s 2011 to 2015 five-year plan. In 2011 its non-core services

In 2011 WIS non-core businesses already posted revenues of 60 billion yuan ($9.4 bil.). Its profits of 2.8 billion yuan ($440 mil.), accounted for 28% of total group profits.