China’s consumers spent $962.8 billion in grocery stores last year, pushing the country to the world’s top spot in grocery store spending. That massive expenditure — excluding restaurant spending, it surpassed the $907.3 billion spent in U.S. retail grocery stores — explains why the U.S. farm and food industries are doing everything they can to win a bigger piece of China’s market.
Last year also marked the first time China was the top market for U.S. agricultural goods, with sales of $20 billion. The potential for growth is as big as China’s 1.35 billion population. In 2011, per capita spending in grocery stores in China was $713.22, compared with U.S. per capita grocery spending of $2,908.10, according to a new report by British grocery research group IGD.
“Between 2006 and 2015, the Chinese grocery market is forecast to triple in value and to be worth nearly a trillion pounds ($1.59 trillion),” according to Joanne Denney-Finch, IGD’s chief executive.
Driving the growth in Chinese spending are rising wages and a developing middle class. “Chinese consumers continue to spend more on food as their disposable income rises,” said Mario Moreno, economist for The Journal of Commerce and its PIERS sister company.
The rising incomes are accompanied by the desire to vary diets by buying more high-value items such as meat, fresh fruit and vegetables.
China is the fastest-growing market for U.S. red meat, with sales growing at a compound annual growth rate of 36 percent over the last decade, Moreno noted. U.S. meat producers held a 1 percent market share in 2001, but boosted that to 14 percent in 2011, despite a 10-year-old Chinese ban on U.S. beef.
“Rising income in China was a critical factor to this growth,” Moreno said, citing average annual income increases of 13 percent in China, a pace he expects will slow to 9 percent annually for the next 10 years.
The U.S. Department of Agriculture in March sent its largest-ever agricultural trade mission to China. Traveling with acting Undersecretary for Farm and Foreign Agricultural Services Michael Scuse were representatives of 40 U.S. companies.
Scuse said the trade mission’s goal is to help U.S. companies strike new deals, strengthen business ties, expand their markets and support jobs for Americans.
During stops in Chengdu and Shanghai, participants met Chinese producers, importers, buyers, distributors and investors. The mission also coincided with the Food Ingredients China trade show, where the U.S. has a pavilion.
The growth in trade has caught the eye of ocean carriers. In 2011, 209,315 20-foot equivalent units of refrigerated cargo moved from the U.S. to China, and China shipped 132,099 TEUs to the U.S.
Specialized breakbulk reefer carriers also are taking notice. “We’ve always done some business there,” said Howard Posner, general manager of reefer ship operator SeatradeUSA. “We’re fairly active in the fishing trades, and we move product between Alaska, South Korea and China. Maybe we can increase that. Historically, we’ve been involved in the banana trade. We’ve had our eye on (China) for a few years, and now we’ve opened an office there. We’ll have to see what makes sense.”
Seatrade said the office would have a “particular focus on refrigerated services for fruit and frozen imports into and exports out of China.”
The growth in grocery store and restaurant sales has increased the need for cold chain infrastructure in China.
The largest operator of cold storage warehouses in China is China Merchants Americold, a joint venture between China Merchants Holding and Atlanta-based Americold Realty. CMAC operates nine refrigerated distribution centers and nine satellite refrigerated warehouses in China, but it plans to spend 3 billion to 4 billion yuan ($476 million to $635 million) over the next five years to add nine cold storage distribution centers and expand other parts of the cold chain network, including refrigerated trucking.
“Most of our investment will go into the cold storage area,” Hang Tian, deputy general manager of China Merchants Holding, told Cool Cargoes. “We want to be in the top 20 locations in China, both for local food distribution and to handle imported food.”
The growth of China’s middle class is tied to urbanization, he said. “People who move to the cities eat differently and buy more imported foods,” Tian said.
A combination of urbanization, consumers upgrading their diet, and a strengthened focus on food safety also is pushing the increase in U.S. market share in China. “Chinese consumers have a good impression of the quality of U.S. food,” Tian said.
In addition to its infrastructure, CMAC is expanding the scope of its role in the cold chain. “Last year, we got involved in trading support activity,” said Akarin Gaw, director of business development. “We’re trying to build up two-way trade. Now we are working with producers in the U.S. and acting as traders or agents in China.”
That arrangement, he said, allows smaller companies in the U.S. to enter the export market, because they don’t need office, personnel or any governmental licensing in China.
“U.S. companies are looking for a total solution,” Gaw said. “It’s important to offer one-stop integrated solutions.” As commodity traders, CMAC handles shipping and customs clearance, and handing off the products inside China.
Pork, poultry, and fresh fruit and vegetables are China’s biggest reefer imports, but Tian said the country’s growing middle class is looking at other products.
“Wine sales are increasing,” he said. “Every Chinese person knows about wine from France, but there are very nice wines in the U.S., too. We help promote those wines from California.” Most California wine makers are too small to build a national network in China, so using CMAC allows them access, he said.
CMAC this year signed a strategic alliance agreement with Yum! China, the country’s largest fast food chain, which operates KFC, Pizza Hut and Taco Bell restaurants.
The initial projects under the agreement include the relocation of the Beijing and Harbin logistics centers of Yum! China, and a long-term service contract to operate the logistics centers.
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