THE BUSINESS OF FOOD AND BEVERAGE IN CHINA

The Business of Food and Beverage in China

In 2017, China was the world’s second-largest importer of agri-food and seafood (the single-market EU 28 was the largest), and the size of this market will only continue to grow. According to the Canadian Agri-Food Trade Alliance, one of the prime reasons for this growth is that growing urbanization and constraints on the country’s agricultural production capacity are limiting China’s ability to meet its food requirements through in-country production.

Another reason can be found in the country’s expanding middle class, which is turning to diets focused on animal proteins, eating out and convenience. This offers many opportunities for Canadian food and beverage companies to export products into a growing market that places a high premium on foreign products associated with greater levels of health and safety.^[1]

Key Growth Areas to Consider

Packaged food sales are growing quickly and are expected to grow at 5.7% from 2018 to 2022. Top segments in this area are baked goods, sauces, soup, baby food and breakfast cereal.^[2]

There’s also significant interest in foods connected to health and wellness, another segment that’s gaining by more than five per cent annually. Organic products are expected to expand by 13 per cent annually between 2018 and 2022.^[3]

Sales of wine and spirits are up around 15% year on year as the country’s growing middle class has more disposable income. In 2015, China was Canada’s second-largest export market for wine after the US, with a total export value of $13.5 million.^[4]

Meat imports have also been increasing along with rising incomes; China imported US$10.3 billion of meat and meat products in 2016. This level is expected to grow, given constraints on the ability for domestic producers to meet demand.^[5]

Opportunities for Canadian Companies

Canadian foods are seen as natural and safe, giving them an edge in the Chinese marketplace. Given Chinese consumers’ interest in organic and natural food, emphasizing the quality and provenance of the ingredients used in food products is a good strategy.

A report from Agriculture and Agri-Food Canada also argues that Canadian producers would also do well to focus on uniquely Canadian high-value products: “The Chinese market offers an opportunity for Canadian exporters to position products that consumers identify with Canada, such as bison meat, cranberries, blueberries, ice wine, wild rice, lobster, and maple products. Canadian businesses can take advantage of Canada’s brand and positive image to enhance their product offerings to the Chinese market.”^[6]

For companies wishing to tap into the wine and spirit market, Agriculture and Agri-Food Canada suggests focusing on tier 2 and tier 3 cities, where wine consumption has yet to take off at the same rate as has been seen in the tier 1 cities of Beijung, Guangzhou, Shanghai, and Shenzhen. The report suggests that “price and packaging will be an important concern for new wine consumers”^[7] and emphasizes the value of selling into international supermarket chains, which earn higher trust from Chinese consumers.

March, 2019

^[1] Canadian Agri-Food Trade Alliance, A Policy Paper on Expanding Canada’s Agriculture and Agri-Food Exports to China, February, 2017 .

^[2] Agriculture and Agri-Food Canada, Market Overview – China, July 2018.

^[3] Agriculture and Agri-Food Canada, Market Overview – China, July 2018.

^[4] Agriculture and Agri-Food Canada, Sector Trend Analysis – The Wine Market In China, October, 2016.

^[5] Agriculture and Agri-Food Canada, Sector Trend Analysis – Meat Trends in China, February, 2018.

^[6] Agriculture and Agri-Food Canada, Outline of Opportunities in China.

^[7] Agriculture and Agri-Food Canada, Sector Trend Analysis – The Wine Market In ChinaOctober, 2016.