Chinese Beef Market Report
I am Lu Liu, 23, an exchange student in Columbia College Chicago, major in Marketing. Originally I am from Tongji University Shanghai, China. I also have a bachelor’s degree in Land Management. I love marketing. Now I am looking for a paid internship and full time job. Please contact me via: lu881110@gmail.com Overall General Market Information With 1.3 billion population and GDP of $ 5.879 trillion, and annual growth rate average 10 percent, China has been growing into the world’s fourth largest economy, right behind the U.S, Japan, and Germany. Major cities like Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin and Shenyang contributed more consumption than rural areas. Unlike the United States, China has not been traditionally a red meat consuming country. In 2008, pork accounted for 65% of total meat consumption while beef and buffalo accounted for 8%; the remaining 22% was poultry. Cows have been traditionally used as a workhorse to plough fields, not for edible purposes. Consequently, the domestic prices for beef remains almost double that of pork and chicken. Figure 1: Beef consumption comparison 8%
5%
Pig Poultry
22% 65%
Beef and Buffalo
Source: Chinese Beef Consumption Trends: Implications for future Trading Partners The demand for beef is from relatively affluent first-tier and major cities on the east coast where residents tend to have more disposable income; seek more variety in food choices; eat out more often. Beef consumption in China is varied in different seasons. Consumption is at its highest in the winter months and bottoms out in the summer. The traditional Chinese view of beef as a “hot” food; the lack of refrigeration; and price patterns are all cited as explanations for it.
Per capita beef consumption of China is far behind United States and Japan, as it is showed in figure 2. Per capita consumption in China is small while with 1.3 billion populations a small increase per capita in China will lead to large increase on consumption. Figure 2: Beef and Veal Meat Per Capita Consumption Beef and Veal Meat Per Capita Consumption by Country in Pounds(lb) ( Year of Estimate: 2011) United States 84lb China
9lb
Japan
22lb
Source: Index Mundi
Food Service Foreign restaurants, including popular French, America, Italian, Spanish, Japanese, Five-‐star hotels and an increasing number of steakhouses, all use premium and expensive beef cuts. However this premium end of the market served almost exclusively by Australian grain feed beef. Western restaurants are becoming prominent in China. Fast food dining is quickly being adopted into Chinese culture. The next generation of Chinese consumers is expected to have a higher demand for meat. For example Yum brands (KFC, Pizza hut, etc.) have close to 4,200 outlets in China, and China accounts for more than 40% of Yum's profits. The demand for beef is from relatively affluent first-‐tier and major cities on the east coast where residents tend to have more disposable income; seek more variety in food choices; eat out more often.
Retail Hypermarkets such as Wal-‐Mart and Carrefour, constitute the single best retail venue for imported products, for example international chains are familiar with the products and count large numbers of expatriates in their customer base; supermarkets rarely if ever import directly, or even buy food directly from an importer, tending instead to rely on wholesale markets and local manufacturers or distributors; there are also “Boutique” stores, which include expatriate-‐focused gourmet stores and specialty stores for organic foods, wine, cheese and similar high-‐end products.
Consumer Dynamics Chinese consumers are very price sensitive, and often unwilling to risk spending money on unfamiliar products without trying them first. Different from America, beef tenderness is less
important in China, while freshness is of more consideration; Roasted and grilled beef is less welcomed than wet cooked beef in China, such as boiling in a wok or hot pot. Beef consumption in China is varied in different seasons. Consumption is at its highest in the winter months and bottoms out in the summer. The traditional Chinese view of beef as a “hot” food; the lack of refrigeration; and price patterns are all cited as explanations for it.
Competitive Snapshot Overview Commercial beef plants in China rely on hundreds and sometimes thousands of supply contracts with small-‐scale cow-‐calf operators. As in the hog industry, some wholesale cattle buyers provide the service of consolidating purchasing and delivery of cattle to plants. There is very little captive supply beyond the supply contracts. Chinese beef imports jumped 30 per cent year-‐on-‐year during the five months of 2010, according to official statistics from the Chinese Customs Bureau. Driving the increase was the continued strong demand for beef in China, with higher imports of both New Zealand and Uruguayan beef more than offsetting falls from Australia and Brazil. Impacted by reduced production during the first quarter of 2010, Australia’s imported beef market share in China decreased to 26 per cent. Imports of Brazilian beef, influenced by reduced supplies and stronger competition from other markets fell 27 per cent year-‐on-‐year. During 2010, Uruguay has emerged as the dominant frozen beef supplier to China.
Challenges and opportunities Domestic retailers fallen behind in store management, purchasing, and food health and food safety standards. Thus Chinese domestic retailers have become increasingly less popular amongst affluent shoppers and residents of first-‐tier cities, such as Shanghai, Beijing, Guangzhou and Shenzhen. Driven by higher income levels and adoption of western culture and traditions, food-‐away-‐from-‐ home consumption continues to rise. Young white-‐collar workers residents continue to spend disposable income on eating out. Tastes vary widely from place to place in China, and are constantly evolving. It is difficult to predict what products will succeed without conducting marketing research.