Processors respond to lamb meat demand surge in China

By Mark Godfrey

- Last updated on GMT

Processors respond to lamb meat demand surge in China

Related tags Lamb Sheep meat

A Chinese mutton processor is using a major expansion in capacity to channel sheep meat products into a rising demand for convenience and snack foods in China’s cities.

Based in the Bayannur region of Inner Mongolia, Cao Yuan Hong Tai Meat Industry Co, has announced a new project to add 3,000 tons of capacity for ‘deep processed’ lamb meat products to be sold in urban centres across the country. The firm is spending RMB70 million on the capex and will be buying in sheep from neighbouring farms and marketing under the ‘Ma Lan Mountain Plains cool and fresh’ slogan.

Cao Yuan Hong Tai’s biggest problem is finding enough sheep, according to a sales executive at the company reached by phone, who explained the firm was killing below its slaughtering capacity. Companies like Cao Yuan are battling for sheep as the Bayannur region has seen a spurt of new sheep investments: among them the Haicheng Biotech Co, which aims to kill 400,000 head of sheep per year for heparin (blood thinner) and mucosal protein products, as well as casings at a new plant.

Competition for sheep has intensified across China with live sheep prices climbing to RMB70/kg in late April in Xinjiang, a key region for both consumption and production. Prices have hit RMB60 in other regions, reaching highs not seen since a sell-off of stocks since 2015 due to increased enforcement of environmental regulations in areas like Inner Mongolia. Bordering on Mongolia, the Bayannur region is the key agricultural processing hub in China’s northerly province of Inner Mongolia.

Mutton has long been a niche product in hot pot and full-service restaurants in northern Chinese cities like Beijing, but Cao Yuan Hong Tai is aiming at tourist markets in the warmer southern regions such as Hainan, as well as Shenzhen.

Meanwhile, there has been an explosion in demand for mutton from the casual dining sector. Focused on cuts in ‘Mongolian-style hotpot’ the Xiao Fei Yang chain is seeking a CNY4.5 million investment from franchisees to open new stores in provincial level cities.

The firm has also announced plans to increase its exports to the so-called Belt and Road countries (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) across Asia.

Down south in tropical Shenzhen, the new Sheep Story (Yang Gushi) chain is focused on mass-market diners, with dishes and kebab sticks starting at RMB21. In Shanghai, outlets of the Three Mongolian Uncles Barbecue Lamb chain offers diners kebabs sticks with fatty lamb at CNY30 a stick.

The restaurant, which also sells chops and full roasted legs, is one of many nascent chains appealing to young urbanites, with a casual dining approach to traditional recipes. The Long Ago Lamb Kebab chain similarly draws a young crowd.

While sheepmeat accounts for only 3% of the country’s meat protein consumption, China accounts for approximately a third of global sheepmeat consumption and has become the top market for exporters Australia and New Zealand.

In recent years, provinces such as Inner Mongolia had encouraged sheep numbers as a means of eliminating rural poverty, by providing subsidies to small-scale farmers to purchase ewes and rams with payments of RMB100 per head per year applied to flocks of at least 200 sheep.

On the demand side, China has seen an explosion of fast food franchising as incomes rise: the number of households with disposable incomes in excess of US$35,000 per year is set to double by 2020 according to management consultancy McKinsey. Even though full-service restaurants accounted for an 80% share of the market in 2017, the quick-service side of the market was growing much faster, according to Global Data.

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