Food and beverage market in China

Doing business in China, New Zealand's largest export market, involves a long term commitment to building strong relationships.

Those who invest in market development, demonstrate their product's relevance to the Chinese consumer and allow their local partners to achieve their margins, will succeed. New Zealand exporters' biggest job is introducing the New Zealand brand to the broader Chinese population and convincing the people of its food safety.

Market structure

  • China is a conglomeration of distinct regional markets, with the eastern provinces more developed than the western. International retailers are expanding from the first and second tier cities to the third and fourth. Domestic retailers, which should not be underestimated, have also been quick to adopt modern retailing techniques.
  • Supermarkets dominate the retail scene in China with a market share of 44 per cent shared among retailers including Walmart China, Auchan China, Carrefour Group, Lianhua, Tesco China, Seven & I Holdings and Lianhua. Most imported products are entering the market via hypermarkets and specialty supermarkets though some convenience stores are becoming more interested in imported products. (i)
  • The best known specialty supermarket stores, often located near upmarket department stores and business centres, have a high proportion of imported food products. The major players in this market are City Shop Supermarket (Shanghai), City-Super, CRV Ole, BHG (Beijing Hualian Supermarket) Hisense Plaza in Qingdao and Jin Bou Da in Zhengzhou.
  • Domestic companies are leading China's packaged food sales, with Mengniu and Yili ranked first and second, followed by Shineway, Hangzhou Wahaha, Bright Dairy & Food and China National Cereals.

Growth drivers

  • The Chinese consumer demand is driven by rising disposable incomes, urbanisation, brand exposure and retail distribution. A new middle income group has sprung up thanks to rapid economic progress which has seen GDP growth of 10 per cent over the past 10 years. (ii)
  • The retail industry in China is developing rapidly with new supermarkets and hypermarkets providing fresh opportunities for processed food products. Shoppers are buying packaged food such as fresh milk, confectionery, sweet and savoury snacks and cooking oils.
  • Online shopping has grown at a rate of 35-50 percent in recent years and in 2011, reached NZ$140 billion in 2011. Consumers are buying imported meat, seafood and beverages from the internet directly which some New Zealand companies have benefited from.
  • Urbanisation, while a worldwide phenomenon, is happening on a major scale in China. It is expected urban areas will swell to 822 million people from 607 million by 2025, growth occurring in secondary cities such as Taiyan, Changchun and Yantai. (iii) This urbanisation will lead to demand for packaged and convenience foods such as chilled processed food and frozen processed food.
  • The Chinese interest in health will benefit product developers of health and wellness products. Dairy and baby food products - 17 million babies are born every year in China - must have a strong focus on safety and nutrition.

Import trends

  • China is New Zealand's biggest export market for food and beverage products, accounting for 11.3 per cent of our exports in 2010, predominantly milk powder, and 6.4 per cent of their imports. In December 2010, China imported a total of NZ$40.5 billion in food and beverage products, with New Zealand being its sixth largest supplier, following Malaysia, the US, Indonesia, Thailand and Brazil. (iv)
  • New Zealand is the ninth largest supplier of processed food and beverage products to China, with France, Brazil and the US leading this market.
  • Wine imports to China have been dominated by France, which had a 46 percent share in 2010, followed by Australia which has backed its Jacobs Creek brand in China with strong advertising. New Zealand's share was 1.4 percent in 2010 but is growing strongly with an interest in white wines such as Sauvignon Blanc by young Chinese. The major foreign-owned supermarkets sell largely imported wines while 70-80 per cent of wine sales occur in the Hotels, Restaurants and Institutions channel.

Market entry and development

Market entry strategies

  • As China is a very fragmented market with regional differences, thorough market research is recommended when entering the market. New Zealand exporters need to consider region, age group and eating preferences in the various areas.
  • Finding a local partner is crucial and it is recommended linking up with companies which have established wholesale and retail outlets. Ideally they should be able to drive penetration and growth as well as being able to make orders.
  • Exhibitions can be a cost effective way of gaining an understanding of the market and with very little brand recognition of New Zealand in China, collaborative marketing may create a better impact.
  • Critical issues facing the New Zealand seafood industry in China include convincing those in the market about supply stability and creating strong relationships with customs to ensure product is cleared swiftly. Shanghai is the most logical point of entry for New Zealand's fresh seafood given direct flights.

Regulatory information

New Zealand has a free trade agreement with China. To benefit from the subsequent duty reductions, a specific FTA Certificate of Origin is required in China. To find out more go to: www.chiafta.govt.nz.

Because of the numerous ever-changing laws and regulations for imported food and beverage products, anything regarding regulatory, labelling and licensing processes should go through an in-market agent. Find out more about labelling of pre-packaged foods on the AQSIQ website.

China's new Food Safety Law became effective in 2009, and all imported food products are subject to these. See the USDA website for an overview.

China loses some US$9.25 billion of food products in transportation every year, because only 15 per cent of all perishable products are transported by refrigerated vehicles compared to 90 per cent in developed countries. There are no national laws of regulations governing food safety in storage, transportation, distribution and retail.

Market resources and contacts

Government 

China State General Administration for Quality Supervision, Inspection and Quarantine, AQSIQ - Chinese version

China Customs - English version

Industry 

China Meat Industry Association - English/Chinese version

Trade events

Food Hotel China

China Fisheries & Seafood Expo 

SIAL China - The Asian food market place

Sources

(i) IDG Retail Analytics, China Country Presentation, February 2011
(ii) AC Nielsen, Chinese Takeaway, 2010
(iii) AC Nielsen, Chinese Takeaway, 2010
(iv) China Customs, via The World Atlas

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