Report Highlights:
The food processing industry in China continues to grow rapidly. In 2003 revenue for the industry was over USD$122 billion. Strong economic growth combined and higher disposable incomes are increasing demands from Chinese consumers for high quality processed foods at home and in restaurants. China is also becoming a profitable base for export oriented food processing. The industry in China should continue to see year-on-year growth in the double-digit range for the foreseeable future and there will continue to be a market for certain high quality American ingredients.
Section I: Executive Summary
China’s population is 1.3 billion and growing by nearly 10 million people, or 0.57 percent, annually. Its per capita GDP is approximately $1,100 USD and it economy has been growing at a staggering 9 percent annually. China is currently the sixth largest economy in the world. In 2003 the value of all exports was $436.1 billion USD and the value of imports was $397.4 billion USD. Its major agricultural products include rice, wheat, potatoes, sorghum, peanuts, tea, millet, barley, cotton, oilseed, pork, and fish.
China is one of the world’s largest consumers of food. For example China consumes 51 percent of the world’s pork, 33 percent of rice, 19 percent of ice cream, 19 percent of poultry and 12 percent of beef. In raw figures China consumes 8.5 million tons of meat per year, 40 million tons of vegetables and over 12.5 million tons of fruit. The food sector accounted for approximately 28 percent of total consumer expenditure in 2003. Food categories such as milk, cheese & eggs, fish, vegetables, fruit and non-alcoholic beverages grew strongly in the range of 10 percent to 12 percent from 2002 to 2003.
Only about 30 percent of food in China is processed, compared to about 80 percent in western nations. While most consumers still prefer to purchase fresh foods, the market for processed foods is growing in China especially in urban areas where higher concentrations of wealth and busier lifestyles have led many to seek out more convenient alternatives to cooking with fresh ingredients. Demands for healthier choices, convenience, variety and quality are opening the door to high quality imported ingredients. Recent food poisoning incidents have also increased consumer concern over food safety and many are now looking towards big-name brands that they feel they can trust. In many urban areas 40 percent of food is processed which shows promising growth with room for further increases. Furthermore, China’s inexpensive labor makes it a profitable center for export-oriented production.
The food processing industry in China is based around the east coast urban regions of Shanghai, Guangzhou and Beijing. In 2003, according to official statistics, there were 19,022 food-processing ventures in China each with annual sales revenue in excess of 5 million RMB (approximately $600,000 USD). The total sales revenue for the industry was $122.86 billion USD. Here it is important to remember that numbers and statistics in China should be used as guidelines as many statistics, both official and unofficial can be misleading or inaccurate. While the Chinese government only keeps track of enterprises with sales in excess of 5 million RMB per year, there are thousands of small outfits in operation as the industry is still very fragmented. In fact, it is not uncommon to find newspaper articles reporting that China has over 900,000 food processing ventures on the mainland, from mom-and-pop storefronts to multinational corporations. The fragmented nature of the industry is bolstered by research that shows that many of the largest ventures have less than a 5 percent market share in their respective sub-sectors.