Major urban centres lead China's growing appetite for meat
The country’s Ministry of Agriculture predicts Chinese are likely to consume 100 million tonnes (mt) of meat in 2020, while the domestic meat production capacity would be only about 90mt .
Such a shortage is encouraging meat companies to invest heavily in the country. US meat producer Hormel Foods, for example, recently started building a new production plant in Jiaxing, Zhejiang province, on the east coast, despite China’s slowing economy. The US$350 million plant, which is expected to start operation by the end of 2016, will be the first Chinese plant to produce Hormel’s processed meat Spam, supplying retailers and foodservice outlets across China.
“While there is certainly a transition going on in the Chinese economy, we still see terrific opportunities,” a Hormel spokesman told GlobalMeatNews. “The Jiaxing facility is a global state-of-the-art meat processing facility, which represents Hormel’s largest manufacturing investment anywhere in the world for the past 25 years. We see great opportunities for years to come.”
Processed meats, in particular, are in growing demand among Chinese urban residents who tend to have a busy life, said Gao Guan, deputy secretary-general at the Beijing-based China Meat Association (CMA).
“In big cities, prepared foods like processed meats are very popular because they make daily life a lot easier,” Gao explained, adding that processed meats are a major part of the evolution of China’s meat industry.
Brands such as Hormel certainly benefit from such a trend. While the revenue from its foodservice sector accounts for more than 50% of Hormel’s total revenue in China, sales from its retail sector have enjoyed double-digit growth for many years, according to the company.
“Retail is certainly how we originally built our business in China and it is a critical piece of what we do today and how we grow in the future,” said the company spokesman.
To attract more consumers in the highly fragmented yet vast Chinese market, Hormel has been honing products through the Idea and Innovation Centre it operates at its China headquarters in Shanghai. It is charged with developing China-exclusive products. Some examples of these products include a version of the Shanghai red sausage, a renowned, Russian-style sausage that has been popular among Shanghai consumers for about a century; Sichuan spicy sausage, for spicy food devotees; and a chive-flavoured classic ham.
“We take a great sense of pride in our ability to innovate locally, as it has been a core value in Hormel since it was founded,” said the spokesman, adding these locally favoured products are leading the sales.
Major meat companies such as Hormel have to take account of regional differences in not only tastes but also consumer behaviour. Research undertaken in 2011 by the development research centre of China’s state council [its cabinet] shows that, in the north, people traditionally eat more meats, notably because the regional daily food jiaozi dumpling usually contains minced pork, beef or lamb. Also, in large cities such as Shanghai and Beijing, as well as relatively wealthier southeast coastal areas including the provinces of Zhejiang, Guangdong and Fujian, meat-based Western diets are being adopted increasingly by young consumers.
With such a large appetite for meat, it is hardly surprising that meat imports are healthy. According to China Customs, China spent US$605m buying meats and offal from the global market in 2014, up 27.9% year-on-year. In August, China opened two inland ports in Zhengzhou and Luohe, both in Henan province, central China, for imported meat. Hormel’s major China-owned meat rival, WH Group (formerly Shuanghui Group), is also headquartered in Luohe.
As for retail, leading urban centres see consumers buying meat from familiar Western chains, including Tesco and Walmart, sometimes in groups of outlets including Shuanghui (its retail outlets still use the old company name) and Yurun. These two local firms specialise in frozen meat product sales, as well as processed meats, setting up frozen meat booths and franchise stores.
Speaking to GlobalMeatNews, a Shanghai-located Shuanghui franchiser surnamed Li, who would not give his first name, said: “The store brings me about [Chinese Yuan Renminbi] CNY10,000 (US$1,583.05) a month. People like to buy pork belly, pork knuckle and rib” .
He located his store next to a community food market, so “people naturally drop by after buying vegetables”, he said, adding the company is responsible for maintaining an efficient cold chain, which is critical for the frozen food business of course.
If Li’s business seems like a good one, monthly sales at the frozen meat booths of Guangdong Yihao Food Co, a Guangzhou–based meat supplier known for its acclaimed organic fresh pork, are around CNY60,000 (US$9,460) to CNY70,000 (US$11,000) on average, said a salesperson named Zhang at a Yihao pork booth in Shanghai.
“When we set up the booth last year, few consumers came to us as our price is almost twice the average price in the pork meat market. However, as consumers are getting more health-conscious, our sales are growing quickly,” Zhang said.
Even the recent report by the World Health Organization (WHO) that links red meat directly to cancer has little impact, he added: “People know we raise our livestock in an organic way, so they know our meat is healthy.”
Organic food production is growing across China, now generating approximately US$5bn in sales every year, according to the Beijing-based China Organic Food Certification Centre. Hormel is wise to this opportunity; according to the company, Applegate, the organic processed meat brand it acquired in July, will play a role in its China business in the future.
Compared with processed meats, which are sold in large and small cities, frozen meats are limited in large cities as China’s cold chain is still under development.
“It’s not that Chinese consumers don’t like frozen meats. Once cold chain matures in the country, frozen meats will be accepted nationwide,” said the CMA’s Gao.
As with processed meats sold in China, the majority of frozen meat is also pork. But companies such as Shuanghui (WH) and Yihao Food are exploring the frozen poultry meat market.
But the development of such systems has been slow in China, which is a major reason why frozen meats are only popular in big Chinese cities. “It’s not that Chinese don’t like frozen meats. Once cold chain matures in the country, frozen meats will be accepted nationwide,” said the CMA’s Gao.
As with processed meats sold in China, the majority of frozen meat is also pork. But companies such as Shuanghui (WH) and Guangdong Yihao Food Co are exploring the frozen poultry meat market. Shuanghui, for example, started selling its first batch of frozen whole chicken in its franchise stores in Luohe in May. Yihao Food entered this market back in 2013, right after China was hit by the avian influenza H7N9, which helped the company, given the government closed many fresh poultry markets as a result. According to Yihao, it sold 450,000 ‘organic’ frozen whole chickens in 2014, and the number is expected to nearly double in 2015.
But unlike frozen pork, it may take long time for Chinese consumers to fully accept frozen whole chicken, and policies play an important role.
“The Chinese government shut down live poultry markets in the country as a measure to fight against bird flu, but once the threat eased, the live markets came back again. Given that Chinese consumers traditionally prefer freshly killed poultry meat, which is deemed as fresh and tasty, it is hard for frozen poultry meat to compete with them in the short term,” said Gao.