China has seen many changes over the last few decades with massive GDP growth, population growth, and urbanisation driving shifts in demographic demand, supply strains and environmental impact. In this blog, we look at China’s changing diet, how China tries to feed itself, and how China’s growth effects the way the fresh produce industry approaches exporting to China.
A dietary and economic shift
According to a 2013 McKinsey report, by 2022, 76% of China’s population will be made up of the middle class, with the upper middle class growing from 14% of the population in 2012 to 54% in 2022. China has also seen a massive decline in undernourishment, with 289 million people undernourished in the early 90s dropping to just under half this, to 133.8 million, in 2015 according to the Food and Agriculture Organisation of the United Nations.
This increase in the middle class sees a rise in disposable income, with consumers coming to expect a larger variety of quality fresh fruit and vegetables to be available year-round. Those looking to export to China can take advantage of the limited domestic production during the winter months to satisfy those who still wish to buy fresh fruit, despite the higher prices.
A larger and better nourished middle class also demands access to a different type of produce. Instead of consuming mostly processed foods and grains, they want more resource intensive products like high-quality meat, dairy products and fresh fruit, including tropical varieties that may not be able to be produced locally.
The push for self sufficiency
China is trying to feed itself, growing what it can internally instead of relying on imports. Vegetables made up US$68b of China’s imports in 2015, or only US$4,960 per capita, compared to US$50.5b, or US$15,700 per capita for the US. The Chinese government also has the highest pay-outs of agricultural subsidies, at $165 billion, compared to $30 billion in the United States.
In a whitepaper published by the Chinese government, they set the ambitious target of keeping the net import rate at a maximum of 5% for grain, citing China’s natural agricultural resources, production conditions, and technical expertise as reasons why this self-sufficiency is achievable.
Water contamination, water scarcity, soil contamination and other by-products of unsustainable agriculture only lead to worsen the Chinese publics suspicion towards agricultural regulation, with The Economist’s Global Food Security Index ranking China at 40th out of 113 countries for food quality and safety. This leaves a large opening to those looking to export to China, with those who can prove their food safety credentials and link them to their brand able to leverage this distrust of local produce to place their products as premium imports.
The brand promise
Imported fresh fruit and other produce continues to be a status symbol of wealth and prosperity for middle and upper-income Chinese consumers, including western and imported brands. While most consumers are still price-sensitive, the growing number white-collar professionals in the middle class have more disposable income to spend on brands that can promise the same taste and quality year-round. China has to look elsewhere in many cases for fresh quality produce, which is a massive opportunity for those packhouses who can guarantee and to deliver quality produce to this hungry market.
As we looked at last month in our blog “Brand boom – how to create value through fresh produce brands”, branding allows fresh produce companies to link positive attributes to a name. A great example of this has been the success of Zespri in China, with the name becoming synonymous is the English-speaking Chinese middle class for quality and a great taste. Zespri has also started to use a local name, ‘Jai Pei’ which sounds similar to the Chinese for ‘double’ and linking it to a slogan of ‘double the good life’, for those who do not speak English, to further link their brand promise to a name that is easier for the Chinese consumer to remember.
Zespri has seen massive growth in recent years, with exports to China topping NZ$400 million in 2016. While this has seen a rise in counterfeit fruit trying to shoehorn into this lucrative market, the ability of Zespri to offer quality and a brand promise at all stages of the consumer journey is some of the reason for their success in the Chinese market.