Page 276 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
by waste, or by farmers soaking the soil in chemicals. plant-focused formulations. “This year’s trends are
The country became a byword for tainted food, from grounded in current consumer demands for healthy,
mercury-laced rice to melamine-infused milk powder. It convenient and trustworthy food and drink,” she said.
takes about 1 acre (half a hectare) to feed the average U.S. “Opportunities abound for companies around the world
consumers. China only has about 0.2 acres of arable land to capitalize on these trends.” Greater leeway for product
per citizen, including fields degraded by pollution. So prices bodes well for manufacturers riding the possible
Chinese government has increasingly shifted its focus to cyclical upturn of the Chinese economy, said Moody’s
reforming agriculture, and its approach divides into four Analyst Alaistair Chan, with consumer prices on the whole
parts: market controls, improving farm efficiency, curbing rising 2.1 percent in October 2017, up from 1.9 percent in
land loss, and imports (Niu et al.). September. But food producers remain at risk from cost
swings in key raw materials. Instant noodle maker Tingyi
In each case, technology is the key to balancing the is at the mercy of palm oil prices, which in September
food equation. The nation is spending billions on water 2016 were up 36.5 percent compared to last year, and
systems, seeds, robots and data science to roll back costs for sugar, which jumped 18.4 percent year-on-year
some of the ravages of industry and develop sustainable, in the same month (Zheng).
high-yield farms. Chinese-owned businesses are taking
notice, seeking out overseas investments that they can Zhang claims the food industry in China is naturally
turn into premium brands on supermarket shelves at evolving with the space to have a mixed investment
home. Ningbo chemical baron Lu Xianfeng’s Moon strategy across growth capital and control deals. Food
Lake Investments Ltd. bought Australia’s biggest dairy consumption in China still represents 25 percent of
operation in 2016, while Wan Long’s WH Group Ltd. household expenditure as the single biggest purchase.
became the world’s largest pork producer with the The Chinese population is three times bigger than the
purchase of Virginia-based Smithfield Foods Inc. A change U.S. and food prices are generally higher in China because
in diet is accelerating the search for overseas supplies. it doesn’t have the agricultural base of nations like the
Beef sales to China have risen 19,000 percent in the past U.S.. The cost of pork production in China, for example,
decade. Imports of soybeans, used in animal feed, have is about 50 percent higher than in the U.S. because up
grown so fast that the government quietly dropped the to 70 percent of the cost is animal feed. The U.S. is an
grain from its self-sufficiency list in 2014. The real effort efficient producer of corn and soy so it already has an
to create another green revolution is happening back advantage. This creates an environment of opportunity
home, where entrepreneurs are embracing technology for investment and growth (Burwood-Taylor).
to transform the nation’s rural landscape. New laws in
November 2016 eased the ability of companies to acquire China’s packaged-food market, valued at $226 billion
larger tracts of land, but even with a modest average farm by Euromonitor International, is helping forge domestic
size of 13 hectares, the country would need fewer than 10 companies that rival some of the world’s biggest food
million families working the land (Niu et al.). giants. Consumers, however, have become cynical about
homegrown food and are willing to pay a premium for
Food-manufacturing plants continue to operate, foreign brands they assume contain better ingredients
and with an estimated 13.22 million Chinese people and have to pass tougher safety checks. The opportunity
living in urban areas, the demand for packaged food to charge premium rates and the shortage of domestic
has skyrocketed (Jacobs). While food producers face supply for products is pushing companies like WH
headwinds with their core products as consumer become Group and Bright Dairy & Food Co. to look abroad for
more conscious of health and quality, companies are help. Chinese companies have announced more than
making up for weaker sales by finding new ways to 80 overseas deals valued at about $12 billion in the
drive revenue, a Fitch report finds. “Innovation and new food industry since 2009. That’s the year after at least six
product launches are likely to become more relevant people died from drinking melamine-laced concoctions
to drive sales growth as industry growth eases back,” sold as milk. The biggest deal was in 2013, when WH
Fitch Analysts Yee Man Chin and Cathy Chao wrote in a Group acquired Virginia-based Smithfield Foods Inc.,
report. The trend toward food that prioritizes health and the world’s largest pork producer, for $6.95 billion.
wellness has been seen globally, according to Mintel’s Recognized American brands such as Armour, Smithfield,
Global Food and Drink Analyst Jenny Zegler, who expects and Eckrich give the WH Group a way to reach upscale
healthier packaged products in 2017, particularly with consumers in China, the country that eats about half
276
by waste, or by farmers soaking the soil in chemicals. plant-focused formulations. “This year’s trends are
The country became a byword for tainted food, from grounded in current consumer demands for healthy,
mercury-laced rice to melamine-infused milk powder. It convenient and trustworthy food and drink,” she said.
takes about 1 acre (half a hectare) to feed the average U.S. “Opportunities abound for companies around the world
consumers. China only has about 0.2 acres of arable land to capitalize on these trends.” Greater leeway for product
per citizen, including fields degraded by pollution. So prices bodes well for manufacturers riding the possible
Chinese government has increasingly shifted its focus to cyclical upturn of the Chinese economy, said Moody’s
reforming agriculture, and its approach divides into four Analyst Alaistair Chan, with consumer prices on the whole
parts: market controls, improving farm efficiency, curbing rising 2.1 percent in October 2017, up from 1.9 percent in
land loss, and imports (Niu et al.). September. But food producers remain at risk from cost
swings in key raw materials. Instant noodle maker Tingyi
In each case, technology is the key to balancing the is at the mercy of palm oil prices, which in September
food equation. The nation is spending billions on water 2016 were up 36.5 percent compared to last year, and
systems, seeds, robots and data science to roll back costs for sugar, which jumped 18.4 percent year-on-year
some of the ravages of industry and develop sustainable, in the same month (Zheng).
high-yield farms. Chinese-owned businesses are taking
notice, seeking out overseas investments that they can Zhang claims the food industry in China is naturally
turn into premium brands on supermarket shelves at evolving with the space to have a mixed investment
home. Ningbo chemical baron Lu Xianfeng’s Moon strategy across growth capital and control deals. Food
Lake Investments Ltd. bought Australia’s biggest dairy consumption in China still represents 25 percent of
operation in 2016, while Wan Long’s WH Group Ltd. household expenditure as the single biggest purchase.
became the world’s largest pork producer with the The Chinese population is three times bigger than the
purchase of Virginia-based Smithfield Foods Inc. A change U.S. and food prices are generally higher in China because
in diet is accelerating the search for overseas supplies. it doesn’t have the agricultural base of nations like the
Beef sales to China have risen 19,000 percent in the past U.S.. The cost of pork production in China, for example,
decade. Imports of soybeans, used in animal feed, have is about 50 percent higher than in the U.S. because up
grown so fast that the government quietly dropped the to 70 percent of the cost is animal feed. The U.S. is an
grain from its self-sufficiency list in 2014. The real effort efficient producer of corn and soy so it already has an
to create another green revolution is happening back advantage. This creates an environment of opportunity
home, where entrepreneurs are embracing technology for investment and growth (Burwood-Taylor).
to transform the nation’s rural landscape. New laws in
November 2016 eased the ability of companies to acquire China’s packaged-food market, valued at $226 billion
larger tracts of land, but even with a modest average farm by Euromonitor International, is helping forge domestic
size of 13 hectares, the country would need fewer than 10 companies that rival some of the world’s biggest food
million families working the land (Niu et al.). giants. Consumers, however, have become cynical about
homegrown food and are willing to pay a premium for
Food-manufacturing plants continue to operate, foreign brands they assume contain better ingredients
and with an estimated 13.22 million Chinese people and have to pass tougher safety checks. The opportunity
living in urban areas, the demand for packaged food to charge premium rates and the shortage of domestic
has skyrocketed (Jacobs). While food producers face supply for products is pushing companies like WH
headwinds with their core products as consumer become Group and Bright Dairy & Food Co. to look abroad for
more conscious of health and quality, companies are help. Chinese companies have announced more than
making up for weaker sales by finding new ways to 80 overseas deals valued at about $12 billion in the
drive revenue, a Fitch report finds. “Innovation and new food industry since 2009. That’s the year after at least six
product launches are likely to become more relevant people died from drinking melamine-laced concoctions
to drive sales growth as industry growth eases back,” sold as milk. The biggest deal was in 2013, when WH
Fitch Analysts Yee Man Chin and Cathy Chao wrote in a Group acquired Virginia-based Smithfield Foods Inc.,
report. The trend toward food that prioritizes health and the world’s largest pork producer, for $6.95 billion.
wellness has been seen globally, according to Mintel’s Recognized American brands such as Armour, Smithfield,
Global Food and Drink Analyst Jenny Zegler, who expects and Eckrich give the WH Group a way to reach upscale
healthier packaged products in 2017, particularly with consumers in China, the country that eats about half
276
