ChinaNews
Transcription
ChinaNews
GIRACT ChinaNews FOOD & FOOD INGREDIENTS REVIEW July/August 2013 G IRACT 24 Pré Colomb CH-1290 Versoix-Geneva Switzerland Tel: +41 22 779 0500 [email protected] www.giract.com Table of contents ChinaNews FOOD & FOOD INGREDIENTS REVIEW Editorial Food Industry News (Contd) Pg1 Pg32 Worried parents drive imported milk sales Pg33 Baby formula gets new import rules Pg35 Multinationals face increased scrutiny Pg37 China implements new import and export requirements for dairy products Pg38 Infant formulae: market shares of international brands Seafood businesses flounder amid spending cut Pg39 Shrimp exports Pg40 The U.S. admin ruling on Chinese canned mushroom Milk powder prices lowered after government probe Pg41 Food watchdog probes tainted egg allegations Pg42 Food safety official in pesticides warning Pg43 Watchdog: Trans-fat levels meet standards Pg44 Three provinces establish seasoning league Watchdog: Trans-fat levels meet standards Pg45 Better times ahead for catering industry Pg47 Top cooking oil suppliers Domestic rapeseed oil production faces challenges Pg48 Major advance to halt flow of 'gutter oil' Pg50 Detection of illegal cooking oils in China Pg51 China’s devastated wheat crop could spur more food deals Pg52 Looking to find, feed new food consumers Pg54 China eyes food security options in Venezuela Pg55 Apple juice exports Pg56 Cooperatives can ensure safe food Pg57 China's Bad Earth Editorial Food Industry News Pg3 Pg5 Pg7 Pg8 Pg9 Pg10 Pg11 Pg12 Pg14 Pg17 Pg18 Pg19 Pg21 Pg23 Pg24 Pg26 Pg 27 Pg 29 Pg30 Chinese soy stakeholders desire cooperation on sustainable soy GM food influx a dilemma for consumers, farmers China gives approval to GM soybeans Call for cheaper wine as economy slows Chilean investment in Chinese wine Wine makers join forces Beer imports Most valuable alcohol brands Probe into imports of EU wines Chinese quench their thirst for French vineyards Bright future for white spirits China’s grocery market to reach USD 1 trillion Bread producers cheating customers, says dietician Sugar imports declining Fast food really fast New tech can help to keep food safe Dairy statistics January– April 2013 Too much reconstituted milk Baby formula industry to consolidate NZ starts infant formula brand register for China Complaints spike over subpar baby formula imports Honey laundering: two honey processing companies charged in anti-dumping case Bigger concentration of infant formulae required Dairy measures start at source Dairy companies become bigger China steps up checks on milk formula producers China investigates Danone, Nestle on milk-powder pricing July/August 2013 (Table of contents continued on next page) www.giract.com Table of contents ChinaNews FOOD & FOOD INGREDIENTS REVIEW Food Industry News (Contd) Regional News (Contd) Pg63 Ice on the rocks as 80% from 'illegal' factories Pg64 A Chinese trip for foodies and scientists Gansu Functional and Organic Foods Shanxi Pg64 Malaysian bird nests allowed to enter China again Dupont opens probiotic facility in China Pg73 Friends in spirits Pg66 DuPont Sees Niche in Curing China's Indigestion Pg73 Huailai plans to be major wine region Pg73 Fields of sunflowers star in Gansu Hebei Zhejiang Ingredient News Pg68 US to levy anti-dumping duty on xanthan gum from China Solvay to boost vanillin production with new Chinese facility Pg69 MSG disappearing Pg70 Pepsi to reduce use of toxic chemical Stevia developer GLG to team up with COFCO Pg71 Tate & Lyle forms food systems joint venture in China Regional News Fujian Pg72 Fujian still China’s canned food province Fujian tea output Xinjiang Pg73 Aksu attracting beverage investment Beijing Pg73 Fangshan wine cluster Pg77 Water grows scarce for thousands as drought, heat blast landscape Company News Pg78 Desserts recalled in Taiwan, sold on mainland Pg80 Mengniu offers to buy Yashili Pg81 French milk brand sets up in China to woo worried parents Pg82 Baby-Milk Demand Helps to Lift Danone Pg83 Milkworld venturing into China Pg84 Mead Johnson sees China infant nutrition rebound Bright Dairy keeps control of Synlait Milk despite dilution Pg85 How Nestlé finds clean milk in China Pg87 Chinese dairy float for NZX Pg89 Yili starts up new plant in Henan FrieslandCampina cuts baby formula prices in China as probe begins Pg90 Fonterra reacts to China price probe Pg91 McDonald's hopes to wow mainland diners with rice Pg92 Zhongyi to develop new whole grain snacks (Table of contents continued on next page) July/August 2013 www.giract.com Table of contents ChinaNews FOOD & FOOD INGREDIENTS REVIEW Company News (Contd) Glossary Pg92 Canned fish to Russia Campbell to Acquire Kelsen Group Pg93 New sugar plant in Shandong Nekta enters the Chinese market Uni-Present can start in Hainan Pg94 Moet toasts opening of first sparkling winery Pg95 Hawthorn wine Yanjing: first quarter of 2013 High-end liquor sellers take a hit Pg97 Kraft's new plant to double output volume Trade agreement opens doors for Lindt Pg99 COFCO selling plant in Xinjiang Pg99 Wahaha enters Russian market Mondelez International Breaks Ground to Expand Biscuit Plant in China Pg100 Kvass war Smithfield shareholder still presses for break up Pg102 Jollibee targets 500 stores in China by 2014 Nestle’s China investment shows need to think local Cargill expands commitment to responsible supply chains Special Features Pg106 Growing your own food: Chinese consumers’ response to food safety issues Pg107 Balcony farmers are taking root Pg108 Following nature's lead on food Pg110 People power Pg112 Harvesting the homegrown Upcoming events Pg114 Upcoming events July/August 2013 www.giract.com mio bio k t kt kl lpd klpd tpa ktpa tpd tph tpm cpd JV M&A pa Sensex '000 000 '000 000 000 '000 tons '000 tons '000 litres litres per day kilo litres per day tons per annum kilo tons per annum tons per day tons per hour tons per month cases per day Joint Venture Merger & Acquisition per annum Stock exchange index Editorial ChinaNews FOOD & FOOD INGREDIENTS REVIEW We would love to be original in writing this Editorial, but there is no way we can escape starting with the obvious. After several months of keeping up the suspense, the Chinese authorities have published the results of the investigation into illegal price fixing by infant formulae suppliers in China. No one seems to be surprised about the findings. Almost all of the big names were found guilty. A number of these companies have been handed out fines amounting to 3% of their 2012 turnover. The level of those fines are the strongest indication so far of the exorbitant earnings these companies have reaped in China lately. However, even more interesting is that a few of the companies that have committed the same illegal activities have not been fined, as they have ‘fully cooperated with the inquiry’. That decision reveals a fascinating aspect of Chinese culture: once you have committed a crime and you have been found out (when Chinese authorities start such an investigation, it means that you have been found out), you can gain significantly from fully cooperating with the authorities, instead of making the inspectors’ lives as difficult as possible, shredding papers, deleting emails, etc. The big question is: did they have it coming? And our reply here is: ‘actually, they did’. The prices of infant formulae in China have seen several hikes per year over the past few years. Chinese parents have to pay several times more for the same formula than their counterparts in Europe, and in any case, much more than could be justified by higher costs like transportation, import duties, or commissions to local agents. The multinationals in this business have not just been cashing in on the shortage of infant formula in China and the lack of trust of Chinese consumers in domestic products but they have also greatly abused the problematic situation in China. In addition, they have forced local agents to agree to fixed consumer prices that have made it impossible for the agents to compete. For some ‘business people’, this may sound like normal practice, but it makes us question the validity of all that boasting about sustainability and corporate social responsibility that is published in the promotional materials of these companies. And then came Fonterra. Disputable business practices are one thing, but that would at least not harm the high quality image of imported infant formulae. It did so when Fonterra came with a warning that several batches of its ingredients for infant formulae had been contaminated with botulism. This shocked China and the rest of the world more than the 1976 earthquake. The world’s largest dairy manufacturer proved unable to sustain a proper quality management system. July/August 2013 www.giract.com Editorial ChinaNews FOOD & FOOD INGREDIENTS REVIEW But, wait a moment; wasn’t Fonterra also involved in the melamine incident of 2008? With a 43% stake in the main producer of melamine-stained baby formula, Fonterra then still tried to make the world believe that it was not at all responsible for the misery caused by this formula. Milk is a highly perishable product. The tightest quality control may not be sufficient to guarantee the quality of 100% of the output of dairy products. However, in this case, all the signs seem to indicate that the big names in baby formulae have been so busy cashing in on the problems of Chinese parents, that quality control was low on their list of priorities. This is not the proper space to come up with answers, but perhaps the fact that Fonterra is so large is part of the(ir) problem. We can imagine that total quality control can be much more effective in smaller scale dairy operations. If this is correct, then the same Chinese authorities who finally put an end to the price fixing are about to commit a fatal error of their own. The Ministry of Information & Industry has announced that it will soon publish a plan to facilitate a series of mergers in the Chinese dairy industry that should decrease the number of dairy companies in China to 50. They believe that this will benefit quality control, and will create opportunities for the resulting companies to become multinationals themselves. The acquisition of Yashili by Mengniu reported in this issue could already be an early example. Interestingly, criticism to that plan has already appeared in the Chinese media, questioning whether it is up to the government to decide on mergers & acquisitions, instead of leaving that to the market parties. The illustration shows a cartoon about this subject in the Chinese press. We will wait and seen, and keep you abreast of the developments in our future issues. ChinaNews is published every 2 months by: GIRACT 24 Pré Colomb 1290 Versoix-Geneva Switzerland Tel +41 22 779 0500 Fax +41 22 779 0505 [email protected] www.giract.com July/August 2013 www.giract.com Page 1 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Chinese soy stakeholders desire cooperation on sustainable soy Chinese soy stakeholders desire cooperation on sustainable soy (Contd) The Round Table on Responsible Soy Association (IRTRS) successfully concluded RT8: The International Forum on Responsible Development of the Soybean industry in Beijing, China under the theme “Building Global Bridges for Responsible Soy.” China was the first country to cultivate soy and produced approximately 12 mio t in 2012/13 (USDA). It is also the world’s largest importer, having imported 59 mio t in 2012/13 (USDA). While the purpose of the RTRS conference is to share knowledge and dialogue about responsible soy between all countries and regions where soy is produced and consumed, the program has a special focus on China as the world’s biggest market for imported soy as well as a major producer Over 200 global delegates attended the multi-stakeholder RT8, including soy industry leaders and respected thinkers from the soy value chain—from China and around the world-gathered to dialogue about the responsible development of the soybean industry and the benefits of responsible soy. “China plays an essential role in the international soy industry and China is the most important country of soy production and consumption,” said Liu Denggao, Deputy Director, Chinese Soybean Industry Association during Session I, Developments in Chinese Soy Production, Imports and Overseas Investments. Co-hosted by the Chinese Soybean Industry Association (CSIA), the conference is the RTRS’ 8th annual conference, and the first held by the association in the Asia-Pacific. RTRS Executive Director Agustin Mascotena opened the conference by expressing his thanks to his co-host and his sincere hope for increased cooperation and dialogue on responsible soy. “As the global leader on responsible soy, the RTRS welcomes the opportunity to convene a dialogue on the solutions offered by responsible soy with companies that produce, trade and buy soy in Asia. RTRS soy benefits the environment workers, and communities and helps companies guarantee a long-term sustainable supply of responsible soy into the future,” Mr Mascotena said. Soy production, especially in South America, has been blamed for a number of issues including environmental degradation, social breakdown and worker exploitation. The RTRS was created to tackle these issues and transform the soy industry by creating demand for responsible soy in all stages of the supply chain. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 2 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Chinese soy stakeholders desire cooperation on sustainable soy (Contd) Chinese soy stakeholders desire cooperation on sustainable soy (Contd) Being a multi-stakeholder-based initiative, the RTRS allows stakeholders with a wide range of roles in global soy supply chains to have a global dialogue and reach agreement on how best to ensure economically viable, socially equitable and environmentally sound soy production. RSG’s members include Ahold, Asda, Coop (Switzerland), Delhaize, Migros, Marks & Spencer, Sainsbury’s, The Co-operative Food (UK) and Waitrose. Gai Junyi, Academician of the Chinese Academy of Engineering gave a rousing official closing address at RT8 where he said to the packed room that “China should take good care of its soybean farmers and import responsible RTRS soy, while providing more soy products as high quality protein food for consumers worldwide.” Other eminent speakers included Dr Cheng Guoqiang, Secretary General and Senior Research Fellow, Development Research Center, of the State Council of China, Soy Market and Policy in China. Dr Cheng told the delegates that “Vegetable oil consumption will grow during this period of higher income and that the policy will remain open and supportive for the plant oil market.” Breakout Sessions at the Forum included such topics as “Responsible Sourcing,” “Responsible Soy and Food Safety Responsible Production” and “Responsible Soy and Small Holders.” In other RT8 highlights, a representative of the European Retailers Soy Group (RSG) was elected to be member of the newly formed RTRS Executive Board at the 7th General Assembly for members - immediately after the successful conclusion of RTB. (Continued in next column) July/August 2013 In addition, a representative of European animal feed industry associations FEFAC was elected as an RTRS Executive Board member. At the General Assembly meeting which followed the conference, RTRS members took the decision to ban the use of Paraquat and Carbofuran pesticides by 2017. The RTRS membership includes large soy producers as well as small farmers from South America, India and China. Major global traders like Wilmar, Cargill, Bunge and ADM are also members, as well as consumer brands like Unilever and Nestlé, global retailers including Carrefour and Marks & Spencer, NGOs including WWF, The Nature Conservancy and Solidaridad, and financial institutions including Rabobank and the International Finance Corporation (IFC). In addition to the organizations listed above, other participants in Beijing included representatives from FEFAC (European Feed Association), MPRESID (Argentinean No Till Producer Association), André Maggi, RSPO, GMP International and the European Retailers Group. (Continued on next page) www.giract.com Page 3 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Chinese soy stakeholders desire cooperation on sustainable soy (Contd) GM food influx a dilemma for consumers, farmers (Contd) Speaking at the conference included such respected people as His Excellency AarI Jacobi Ambassador of the Netherlands to China, Benjamin Ware, Sustainability Manager for Nestlé, Daniel Nepstad from IPAM and Henk Flipsen, Dutch Feed Industry Association. He grows corn instead, which yields much more than soybean and brings more income. "The price of soybeans has kept almost unchanged while the prices of corn and rice have been rising in recent years," says Liu. In Keshan County, the plantation area of soybeans nearly halved from 2007 to 2012, showing farmers having less interest in planting the crop, a trend that is playing out in many other rural areas. On the Chinese side some of the key speakers were Mr. Yang Shaopin, Chief Economist, Chinese Ministry of Agriculture, and President of the China Soybean Industry Association, Liu Denggao, Vice President of the China Soybean Industry Association, and Hu Junlie, President of the ChongQing Grain Group. (fif 3/6/2013) GM food influx a dilemma for consumers, farmers Liu You, a farmer in Keshan (Heilongjiang) [1], stopped planting soybeans last year, due to the crop's low yield and economic return. (Continued in next column) July/August 2013 The root for the decisions taken by Liu and his peers can be found in China's rising imports of genetically modified (GM) soybeans. By virtue of the modifications, GM soybeans are more economical to produce than their conventionally-farmed equivalents. With large-scale production of GM crops not yet approved in China, domestic farmers of soybean are being priced out of the market as the country proves happy to look to imports for this most quintessential of Chinese foodstuffs. (Continued on next page) www.giract.com Page 4 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW GM food influx a dilemma for consumers, farmers (Contd) GM food influx a dilemma for consumers, farmers (Contd) However, this is far from the only troubling aspect of imported GM food. GM remains controversial over doubts as to its safety. As it flows into China, the country has to face up to such questions. Although edible soybean oil made from GM produce is common in Chinese supermarkets, most citizens worry about its safety despite relatively lower prices than equivalents such as peanut oil. Last week, China's Ministry of Agriculture announced the approval of three varieties of GM soybeans to be imported as processing materials. "When I buy edible oil, I will make sure whether they have GM marks. After all, there is no final conclusion as to the safety of GM products," says a lady surnamed Zheng in Guangzhou, capital of south China's Guangdong Province. The news triggered fresh domestic concerns about safety, although there has been large-scale commercial plantation of GM crops for years in the United States and many other countries. China began to import GM soybeans in 1997 to meet surging domestic demand, according to Peng Yufa, a senior member of the country's GM crop bio-safety committee and a researcher at the Chinese Academy of Agricultural Sciences. Last year, China imported 58.38 mio t of soybeans while the country's own soybean production was about 13 mio t, official statistics showed. For Chinese farmers, the plantation of corn per mu, a Chinese measurement which equals about 667 sq.m., can earn them about RMB 300 to RMB 400 more in revenue than that of soybeans on average. This has prompted more farmers to stop planting soybeans. In Heilongjiang, a major soybean producer in China, the area used for plantations of this legume reduced to about 40 mio mu last year from about 70 mio mu in 2009. Results of an online survey conducted by Chinese news portal sina.com showed on Wednesday that about 85% of the 30 000 voting netizens said they would not buy GM products and 78% believed GM is harmful to people's health. To woo consumers, some companies in Heilongjiang have tried to highlight their non-GM soybeans. For example, the Heilongjiang Jiusan Non-GM Soybean Trade Centre was set up last September. "The key is to allow and encourage Chinese scientists to catch up with others and come up with quality products, including safe GM products. Only in this way can we change the status quo of China's soybean products," says Rao Yi, Dean of the School of Life Sciences at Peking University. (cd 20/6/2013) (Continued in next column) July/August 2013 www.giract.com Page 5 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China gives approval to GM soybeans China's agricultural authorities issued biosafety certificates to three new overseas varieties of genetically modified soybeans on Thursday, allowing them to be imported as raw materials for domestic processing. According to a statement from the country's biosafety committee in charge of agricultural genetically modified organisms, the newly approved genetically modified soybeans included CV127 from German chemical producer BASF and MON87701 and MON87701 x MON89788 from Monsanto Far East Ltd. The three new varieties of genetically modified soybeans, which fare better against insect attacks and herbicide, have been approved for commercial planting or consumption in many countries, it said. The news follows Monday's statement from Brazil's agriculture ministry, which said on its website that China had approved imports of three varieties of Brazilian genetically modified soybeans. Antonio Adrade, Brazil's minister of agriculture, livestock and food supply, participated in the China-Latin America and Caribbean Agricultural Ministers' Forum in Beijing on Sunday and confirmed the information the next day. Imports of Brazil's genetically modified soybeans to China had previously been discussed by Agricultural Minister Han Changfu and Andrade. (Continued in next column) July/August 2013 China gives approval to GM soybeans (Contd) The approved soybeans include RR2 PRO, which is resistant to caterpillars, a main threat to bean crops in Brazil. The other two are CV127 and Liberty Link, which have a better resistance against herbicide. As of April, Brazil had exported 7154 mio t of soybeans valued at around USD 3797 bio — 5604 mio t were exported to China. "This decision is very timely for Brazilian soybean farmers," Andrade said, "because the companies will have a few weeks to expand their plantations." Huang Dafang, a researcher from the Biotechnology Research Institute at the Chinese Academy of Agricultural Sciences, said on Thursday that China began to import some varieties of genetically modified agricultural products as early as 2003 or 2004 to satisfy domestic demand. "At present, besides the United States, a substantial proportion of genetically modified agricultural products such as soybeans and corn have been imported from Brazil and Argentina," he said, without providing specific data. Local demand is mainly driven by increasing domestic need for fodder and food processing, Huang said. "Besides meeting domestic needs in terms of quantity, imported genetically modified agricultural products are always better than domestic traditional varieties in terms of quality," he said. (Continued on next page) www.giract.com Page 6 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China gives approval to GM soybeans (Contd) Call for cheaper wine as economy slows (Contd) For instance, compared with domestic soybeans, imported genetically modified crops have higher oil and protein content, he said. (cd 14/6/2013) There is no industry definition for entry-level wine or affordable wine. However, industry industry experts said wine priced below RMB 200 could be defined as entry-level wine. Call for cheaper wine as economy slows There is no industry definition for entry-level wine or affordable wine. However, industry industry experts said wine priced below RMB 200 could be defined as entry-level wine (Provided to China Daily). The wine industry in China is paying more attention to less expensive brands as an increasing number of Chinese people seek more affordable imported bottles to enjoy socially rather than for business purposes. The figures from Wine Intelligence, a London-based consulting firm specializing in the wine business, show that in the first quarter of 2013, 69% of 1024 people surveyed aged between 18 and 50 in China said they usually spent less than RMB 200 on imported wine for a casual occasion. Wine Intelligence did not provide figures for previous years because there was a change to its survey methodology. However, Wine Intelligence said there is growing demand for less expensive wine in China. "There is a growing trend of drinking wine for pleasure rather than buying it primarily as a gift or serving it at banquets as a status symbol and, along with this growth in more casual drinking, there's also a higher demand for wine at more affordable price points," said Maria Troein, China country manager of Wine Intelligence. (Continued in next column) July/August 2013 "The Chinese, as in other mature markets, are showing more interest in wine and getting to know more about it. This has created new market segments of young drinkers who like to drink wine and that fits their lifestyles - whether it is in restaurants, bars or even at home," said Joao Gago, managing director of Boutique Wine Asia. BwA is an imported-wine trading company in China with annual trading volume of 20 containers of wine from more than 10 countries. Gago said 50% of BwA sales are made up of wine priced around RMB 90, an increase from 25% in 2012. "Before it was not common to see a Chinese person order a bottle of wine in a restaurant or buy wine to share with friends at home. Now it is becoming better appreciated. It has become part of daily life, especially in bigger and more sophisticated cities such as Shanghai," said Gago. "Wine is said to be good for the health and a bottle of wine might provoke more topics to talk about in one's leisure time," said Wang Yue, a white-collar worker in Shanghai. The gradually maturing wine market in China has made wine businesses in Bordeaux, France, keen to introduce more affordable varieties to the Chinese market to capture demand from ordinary people. (Continued on next page) www.giract.com Page 7 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Call for cheaper wine as economy slows (Contd) Call for cheaper wine as economy slows (Contd) In previous years, Bordeaux wine was considered to be a symbol of social status and only suitable for high-end business banquets. Bordeaux wine traders are trying to change that image. The Hong Kong-listed consumer food arm of the country's largest State-owned food conglomerate China National Cereals, Oils and Foodstuffs Corp Industry experts believe more affordable wine will help cultivate a wine culture in China and boost market demand in the long run. Every year, the Bordeaux Wine Council (Conseil Interprofessionnel du Vin de Bordeaux, or CIVB in French), a French group that represents more than 10 000 Bordeaux wine producers and vine growers, recommends to Chinese wine lovers a selection of 100 Bordeaux wines that are best adapted to the Chinese market and are priced at the entry and medium levels (RMB 100 to 350 a bottle). "We want the customers to know that not all Bordeaux wines are expensive. Some of them are but there are also some that are affordable and of good quality," said Thomas Jullien, Asia Manager of the CIVB. "China's market is growing very fast but people are still less familiar with the wine culture than they are in Western countries. The most important thing right now is to bring wine into households as well as people's daily lives," said Ma Wenfeng, a Senior Analyst at Beijing Orient Agribusiness Consultant. (cd 3/6/2013) This figure was only 4.4 litres in 1994. So, although the average consumption is still relatively low, the increase has been considerable during the past decade. Chilean investment in Chinese wine China has become the first export destination for Bordeaux wine. In 2012, China imported a total of 64 mio liters of Bordeaux wines, twice the volume sent to Germany, its closest rival, according to CIVB data. Changing market conditions are also pushing Chinese wine makers to develop less expensive brands to better fit market demand. A spokesperson of the Chilean Embassy in Beijing has announced that the Chilean government is considering to invest in a winery in China. A company may be established in Shanghai to determine the proper location and other issues to prepare for such an investment. (tjkx 23/7/2013) "Our new products will be priced between RMB 50 to 100 a bottle, affordable for ordinary folk. This is in line with the relatively slower economic growth this year," said Luan Xiuju, Managing Director of China Foods Ltd. China is already one of the largest destinations for Chilean wines, so it makes sense that Chilean investors are looking at the domestic industry as well. However, it is unorthodox that the Chilean government, rather than a commercial enterprise is taking the lead in this matter. (Continued in next column) July/August 2013 www.giract.com Page 8 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Wine makers join forces Most valuable alcohol brands (Contd) Against the background of possible anti-dumping measures against wine imported from the EU, a number of Chinese wineries in North and Northeast China (including ones from Ningxia, Shanxi, Henan and Hebei) have formed a league to jointly develop the domestic market. Rank One of their joint endeavours is staring a web shop for selling their products. (tjkx 24/7/2013) Brand Type Value (RMB bio) 1 Maotai distilled 58.0 2 Wuliangye distilled 29.0 3 Yanghe distilled 16.0 4 Qingdao beer 14.0 5 Luzhou Laojiao distilled 10.0 6 Fenjiu distilled 5.9 7 Zhangyu wine 4.4 8 Jiannanchun distilled 3.6 9 Snowflake beer 3.6 10 Langjiu distilled 3.2 11 Yanjing beer 2.7 12 Harbin beer 2.5 13 Gujinggong distilled 2.2 14 Jiuguijiu distilled 2.1 It is interesting to see that these companies have not taken this step earlier to join ranks in dealing with the threat from abroad. 15 Chongqing beer 2.0 16 Guyue Longshan rice wine 1.7 17 Shuijingfang distilled 1.7 Beer imports 18 Zhujiang beer 1.4 19 Tuopai distilled 1.2 China imported 490 620 hls of beer in the first 5 months of 2013, an increase of 37.8% compared to the same period of 2012. (tjkx 24/6/2013) Most valuable alcohol brands Hurun, the Chinese section of Fortune has published the following list of the Chinese alcohol brands with a value exceeded RMB 1 bio. (hurun 24/7/2013) The distilleries are still the leading players in the Chinese alcoholic beverage market. This list only includes 5 breweries, 1 winery, Zhangyu and 1 rice wine producer, Guyue Longshan, as opposed to 11 distilleries. This indicates that there is ample space for growth for the newer types of alcoholic beverages: beer and wine. (Continued in next column) July/August 2013 www.giract.com Page 9 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Probe into imports of EU wines Probe into imports of EU wines (Contd) On Tuesday, the EU announced provisional anti-dumping duties on imports of solar panels, cells and wafers from China following a nine-month investigation. China is firmly opposed to the European Union's 11.8% tariffs on the country's solar panel products, officials said. Colin Yang, vice-president of public affairs of Trina Solar, said: "Our sales in Europe have already been affected, because many local partners are worrying about our price after the investigation. Before the decision, the business of our European partners and ourselves has already been hurt." China's wine imports rose by 8.9% to 430 mio litres in 2012, according to the General Administration of Customs. The imports were valued at about USD 2.57 bio. Ministry of Commerce spokesman Shen Danyang said the reduced tariffs show the flexibility of the EU, and the temporary tariff of 11.8% instead of 47.6% shows the dispute between China and the EU can be solved through negotiation. The EU accounted for more than two-thirds of the imports, with France being the biggest export country. According to the 27-country bloc, the duties on China's solar panel companies will be imposed in two stages, starting at 11.8% for the first two months, followed by 47.6% for another four months. "Overall, the duties will range from 37.2% to 67.9% at that stage. Those Chinese companies which have cooperated will face lower tariffs. Those which have not cooperated will face higher tariffs," said EU Trade Commissioner Karel De Gucht. Most Chinese solar panel companies have encountered difficulties continuing doing business in the European market since the investigation. "If the EU adopts the anti-dumping taxes on Chinese companies, most of our export companies will not be able to sell a single product there," said Wang Donghong, publicity officer at Jingwei Electronic Material. (Continued in next column) July/August 2013 The ministry said that the trade relationship between the two sides is an important foundation for China-EU ties, and China doesn't want to see the solar dispute affect the broader relationship. Shen also said that Chinese solar products are less expensive because of cheaper raw materials and the Chinese solar panel industry's technological improvements, not because of the so-called dumping subsidy. The ministry said trade protectionism will bring damage to both sides. (Continued on next page) www.giract.com Page 10 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Probe into imports of EU wines (Contd) However, De Gucht said at the European Commission that the United States also applies duties to Chinese exports. "This is not protectionism," he said. Some experts worry that other economies may follow the EU's action and start similar investigations. Cui Hongjian, director of European Studies at the China Institute of International Studies, said that the China-EU relationship may face a "cooling-down" period. Eighteen EU members have voted against the solar panel case. Even though this vote does not prevent the EU Commission from imposing provisional anti-dumping duties, member states will vote again by the end of this year to decide if the EU's final conclusion can be enacted or not. (cd 6/6/2013) Chinese quench their thirst for French vineyards The attack on Chinese students in Hostens, a small town in the South-west of France, allegedly by a group of French youngsters, followed by the largest international wine fair, Vinexpo, in Bordeaux, where Chinese investors were very much present -- and active -- have triggered much talk in France about Chinese investment in the country's vineyards and a backlash against it. Over the past couple of years, there has been a significant rise of Chinese investment in French wines, notably Bordeaux wines. In line with this, China has recently become the first export market for Bordeaux wines. (Continued in next column) July/August 2013 Chinese quench their thirst for French vineyards (Contd) But Chinese investors seem to want more than being simple buyers. Many want wines to match their tastes and those of their fellow citizens. That's why they have started to invest in the well-known Chateaux brands, wine domains or wine trading companies. Whether they are buying the entire vineyard or only part of it, Chinese investors want to hold greater control over the final product. "There are two groups of Chinese buyers," says Michael Baynes, an estate agent in Bordeaux. One is typically from Hong Kong where the people look "for something smaller, something that is more for the passion of wine. And, although they are commercially minded, they are more interested in the wine product itself." Baynes, co-founder of Maxwell-Storrie-Baynes (affiliate of Christie's International Real Estate), talks a bit differently about the mainland Chinese who "will be thinking about all aspects of using the resource to make some maximized returns." Peter Kwok fits almost perfectly in Bayne's first description. This businessman from Hong Kong bought the Chateau Haut-Brisson in 1997, in the Bordeaux village of Saint-Emilion. He has since then "invested more and more to increase the quality and the size of the vineyard," says Charles Lemoine, in charge of wine marketing for Kwok. (Continued on next page) www.giract.com Page 11 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Chinese quench their thirst for French vineyards (Contd) Chinese quench their thirst for French vineyards (Contd) "He comes three to five times a year," adds Lemoine, who describes Kwok as having a real passion for French wine. Indeed Kwok is not just a distant vineyard owner: his love for wine has become a family matter and his children are now very much involved in the business. There are even investors who seem to specifically target the Chateaux brands which sound very French such as the "Lafite" or the "Latour" names that are recognizable symbols of French culture. So does this trend really come as a big surprise? French wine has always appealed to foreigners. The Belgians, Dutch, English, Americans, Swedes, etc. have been buying French vineyards for decades, if not centuries. Surely the fact that the Chinese are also starting to invest in these same lands should be a reflection of the global era, nothing more than that. For Jean-Pierre Rousseau, whose wine trading company Diva Bordeaux was the subject of a 70% investment purchase by Shanghai Sugar Cigarette and Wine, a subsidiary of Bright Food, a state-owned food group, the Chinese are looking for a sense of "recognition", one which he describes as "social." "They are attracted to a European lifestyle, they are of course looking for expensive stuff and wine is part of that lifestyle", he adds. Undoubtedly, the Chinese seek to invest in French vineyards for the reputation of the wines and their quality. In a way, owning French vineyards gives them credibility. (Continued in next column) What would the Chinese say if Europeans started buying 10 or 20 meters of the Great Wall of China? And the French appear receptive to Chinese investment in their wine, particularly in the Bordeaux region. Rousseau is himself enthusiastic about the Chinese coming to Bordeaux, "they come here to learn, they come here to understand and when they bought some chateaux; they were rather positive in improving the quality." The businessman also likes to wittingly remind people that "in Bordeaux, we welcome them much better than (if) they are in Burgundy." In fact, he has a point. When Chateau Gevrey-Chambertin was sold to a Chinese investor, the winegrowers of Burgundy were not impressed by the transaction and the manner in which it was handled. The head of the wine syndicate of Gevrey-Chambertin, Jean-Michel Guillon, expressed his disappointment saying that he and his winegrower colleagues were "really sad to see that the only chateau of the 12th century -with the Clos de Vougeot- will be acquired by a person foreign to the job." (Continued on next page) July/August 2013 www.giract.com Page 12 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Chinese quench their thirst for French vineyards (Contd) Jean-Michel Guillon, who's been in the wine business for more than 30 years, explains that the purchase of this chateau may cause future and significant financial difficulties for the remaining winegrowers of the region. As the Chinese investor outbid local vintners to pay EUR 8 mio -- more than double the estimated value of the property -- this will change the market prices for vineyards and, as Guillon indicates, taxes on succession rights to these properties will also rise significantly. Bright future for white spirits The Chinese liquor industry is expected to have impressive growth potential in the future despite the present downturns caused by the government's crackdown on luxury banquets, said Frost & Sullivan, a US-based market consultancy. According to a recent report by the consultancy, the white spirit production will reach 17.05 bio litres in 2016 from 4.94 bio litres in 2007 with a compound annual growth rate of 14.8%. Sales revenue from white spirits is expected to grow from RMB 110.9 bio in 2007 to RMB 926.5 bio in 2016, with a compound annual growth rate of 26.6%. But the selling of Gevrey-Chamberton has also caused discontent among local growers because of the nature of the region itself. Burgundy is a lot smaller in comparison to the Bordeaux wine region. So any purchase of a significant vineyard in Burgundy has a much greater impact on the region. Domains are very often a family affair; "each winegrower is also a winemaker," says Guillon with a wholehearted voice. "What would the Chinese say if Europeans started buying 10 or 20 meters of the Great Wall of China?" asks the Burgundian, semi-smiling, semi-serious. But ultimately French wine inspires admiration among the Chinese, and the French have something to gain out of this. Plus, the Chinese are not "buying everything"; in Bordeaux, where they invest the most, they have only acquired 1% of the whole wine lands. It is not exactly a huge loss. (cnn 27/6/2013) July/August 2013 The report attributed the robust growth potential to the following factors. First, the white spirit industry is closely associated with the macroeconomy and currently China is still at a stage of rapid economic development as well as rising disposable incomes. (Continued on next page) www.giract.com Page 13 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Bright future for white spirits (Contd) Bright future for white spirits (Contd) Second, multi-sales-channels marketing strategies have been vigorously used by domestic alcohol makers, such as group purchases and online sales, which have been greatly welcomed by younger customers. But, there are also some restraints on the industry, said Frost & Sullivan, such as local governments' protection of local brands, which jeopardizes fair competition in the market, as well as a lack of product research and innovation capabilities, as the new generation of young customers seek personalized and diversified products. Other major obstacles also exist, said the consultancy. According to the report, Chinese white spirit is one of the seven renowned distilled spirits in the world. Sichuan, Guizhou, Shaanxi, Anhui and Shanxi provinces are the most recognized origins of it in China. Each province has its own special drinking habits and brands. There is Wuliangye in Sichuan, Moutai in Guizhou, Xifeng in Shaanxi, Gujing in Anhui and Fenjiu in Shanxi. Sichuan is the most high-yielding province in China. In 2011, white spirit output in Sichuan made up around 30% of total output in China and has maintained a compound annual growth rate of 38% for nearly five years. There are numerous famous white spirit brands in Sichuan, including Wuliangye, Luzhoulaojiao and Swellfun (Shuijingfang). Shandong is anther traditional high-yielding province, said Frost & Sullivan. In 2011, the output of baijiu in Shandong made up around 10% of the total output in China, with stunning revenue of around RMB 30 bio. Taking Confucian Family Liquor (Kongfujiajiu) as an example, since 2007, its sales volume has maintained an annual growth rate of 100%. (Continued in next column) July/August 2013 At the end of last year, the central government unveiled a series of anti-graft rules called "The Limitation of the Three kinds of Government Consumption". They include the regulation that receptions for high-ranking military officials should no longer include liquor or luxurious banquets, which has led to a sharp decrease in the purchase of white spirit by government and business organizations. Some high-end white spirit brands have faced a sharp decrease in demand and sales volume. It did not take long for the stock market to feel the effects. Just two days after the announcement, shares in Chinese distillers such as Wuliangye Yibin Co and Kweichow Moutai Co fell. Shares in Moutai fell 5.55% on the Shanghai Stock Exchange, while shares in Wuliangye slid 3.02% on the Shenzhen stock market. Moutai's market value shrank by RMB 12.5 bio on the same day. "Moutai and another two high-level alcohol brands, which are popular with government officials and military officers, account for 20% of the total liquor market," said Jian Aihua, a researcher with CIConsulting, a leading industry research institution. (Continued on next page) www.giract.com Page 14 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Bright future for white spirits (Contd) Bright future for white spirits (Contd) Yuan Renguo, Kweichow Moutai's Chairman, said recently that the company will slow its growth rate to reach an 18% year-on-year rise by the end of this year. Jiugui products were taken from shelves and shares in the Shenzhen-listed company were suspended when the scandal broke. "There has been a slump in Chinese liquor sales and in the catering industry since late last year, mainly caused by the government's anticorruption calls," said Su Qiucheng, head of the China Cuisine Association. "Restaurant sales in some big cities even posted negative growth, such as Beijing and cities in Jiangsu and Zhejiang provinces." Duan Kaiyun, Assistant Secretary-General of Beijing Cuisine Association, said: "The difficult time will last for a long time because it is a key part of the new government's vow to curb corruption." But Bian Jiang, Assistant Director of the China Cuisine Association, said the habit of pleasing business clients with extravagant banquets has been deeply rooted in Chinese culture and will not be reversed overnight. In addition to government's anti-graft calls, food safety scandals have also damaged development of the industry. Last year, the Hunan Provincial Administration of Quality and Technological Supervision said liquor samples from Jiugui Liquor Co contained 1.04 mg of plasticizer per kg, higher than the 0.3 mg per kg standard set by the Ministry of Health. (Continued in next column) July/August 2013 According to a statement released in March by the Hunan-based liquor maker, its first quarter profits plummeted 90% year-on-year and it expects its first quarter profits to be RMB 8 mio to RMB 12 mio compared with RMB 119 mio during the same quarter last year. The China Alcoholic Drinks Association said earlier this month large-scale tests on China's liquor products show that almost all alcohol products contain plasticizers, with an average level of 0.537 mg/kg. They are used to thicken liquids. "Although some alcohol brands are facing difficulties in the short term, the Chinese liquor industry is expected to have impressive growth potential in the future because the post-80 generation will gradually become major consumers," Frost & Sullivan forecast. "The drinking habits of the post-80 population will determine the future of the Chinese white spirit market. The industry players who strengthen their marketing efforts toward the post-80 generation, such as their drinking habits and culture, will eventually win more market share," said Bian, of the China Cuisine Association. According to the association, in 2015, the number of primary white spirit customers who are between the ages of 30 and 49 will be 441 mio. (Continued on next page) www.giract.com Page 15 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Bright future for white spirits (Contd) The post-80 generation will make up 22% of them. In 2010, primary white spirit drinkers will number 444 mio and the post-80 will make up 48.5% of them. "The growth rate of high-end white spirits such as Moutai and Wuliangye might slide in the short term but, in the long run, the two brands, especially Wuliangye, will rebound quickly. The sales growth of middle or moderate high-level brands such as Yanghe and Langjiu will rapidly speed up. And the distiller that is successful in the middle to high-end white spirit market will be the ultimate winner," research and investing firm Rising Securities Co said in a report. (cd 17/6/2013) China’s grocery market to reach USD 1 trillion China, the world’s biggest food and grocery market, is now valued at more than USD 1 trillion and is forecast to be worth USD 1.5 trillion in 2016, according to latest figures published by lGD. IGD research also found: The US grocery market will remain the second largest globally and is predicted to be worth USD 1.5 trillion in 2016. IGD expects growth to accelerate from a compound annual growth rate (CAGR) of 3.6% between 2010 and 2012, to 4.7% between 2013 and 2016; China’s grocery market to reach USD 1 trillion (Contd) By 2016, the Indian grocery market will have overtaken Japan to become the world’s third largest grocery market valued at USD 566 bio; The gap between Russia and Brazil is fast narrowing. By 2016, the Brazilian and Russian grocery markets are projected to be worth USD 468 bio and USD 467 bio respectively, with Brazil set to climb to fourth position with a CAGR of 9.1% between 2013 and 2016 All of the BRIC (Brazil, Russia, India, China) nations will be in the top five grocery markets by 2016, worth just over USD 3 trillion in total. Joanne Denney-Finch, chief executive, IGD, said: “For food and consumer goods companies, the Asia-Pacific and Latin American grocery markets offer long-term growth opportunities, with many businesses already profiting from entering them. “The Chinese grocery market in particular, has been growing at a rapid pace for several years. Representing one fifth (20%) of the world’s population, China has had a surge in the number of higher-income earners, benefiting from a significant rise in wages. This has resulted in a soaring demand for new products, brands and concepts — all of which have helped fuel its growth. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 16 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China’s grocery market to reach USD 1 trillion (Contd) Bread producers cheating customers, says dietician (Contd) “International and domestic grocery retailers are expanding quickly in China with diverse formats and entering new regions. This not only creates new supply chain opportunities for manufacturers, but also presents a wealth of choice for Chinese shoppers. "Some whole wheat bread sold in the city is made with common grains, not whole wheat, and producers dye them with caramel pigment to make them look brown to cheat consumers," said Wang Xingguo, a clinical dietician. "The common grains also provide a smoother texture, which is preferred by most Chinese customers." In Latin America, Brazil is also an attractive growth market for global grocery players. Over the next few years, Brazil will be hosting big sporting events such as the World Cup and Summer Olympic Games, presenting a further boost for its economy and for the performance of retailers and manufacturers operating in the region. “By 2016, the top 15 global grocery markets will have a total value of USD 6.5 trillion. The top five - US and BRIC - will increase their share to 65% - compared to 60% in 2012 - with a combined value of USD 4.2 trillion. “This offers plenty of scope for food and consumer goods companies seeking international growth and paints a positive picture for the industry globally.” Bread producers cheating customers, says dietician Most whole wheat bread sold in the city doesn't contain whole wheat flour due to a lack of national standards, a clinical dietician told Shanghai Daily. He added some consumers don't like the coarse texture of genuine whole wheat bread, thus some businesses have cut costs by eliminating the use of whole grains. At a Hualian chain store on Dagu Road, a Shanghai Daily reporter found a package of socalled whole wheat bread priced at RMB 10 made by Shanghai Taoli Food Co Ltd. It didn't contain whole wheat flour. The listed ingredients were wheat meal flour, milk powder, cream, sugar, salt, water, yeast and additives. Whole wheat foods are becoming more popular among residents as they contain a variety of vitamins, minerals, along with fiber and phytochemicals. Nutritionists say whole wheat bread is healthier because it can help prevent cardiovascular and cerebrovascular diseases and diabetes. Wang said the amount of whole wheat used to make bread is determined by producers because there is no national standard. Some businesses add bran or wheat germ instead of whole wheat, he said. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 17 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Bread producers cheating customers, says dietician (Contd) Whole-wheat bread is made using flour that is partly or entirely milled from whole or almostwhole wheat grains. Recipes for whole wheat breads vary considerably. (sd 6/6/2013) Sugar imports declining According to the China Customs, China has imported 1.268 mio t of sugar during the first half of 2013, down 12.22% compared to the same period of 2012. (tjkx 23/7/2013) New tech can help to keep food safe Vice-Premier Wang Yang urged public and civil groups to help supervise food safety, particularly through modern technology. "Given major challenges facing the nation's food safety, like the colossal number of small businesses and a decentralized food production and processing model, a supervisory net highlighting the general public is essential to help ensure food safety," he said at the fifth China food safety forum as national food safety week kicked off on Monday. Non-government industry associations of food producers should also play a role in enhancing food safety and quality, he said. Wang cited practices in Guangdong province as an example. "I regularly get text messages sent by the Guangdong food safety authority asking mobile subscribers, including me, to report any related irregularities or even crimes," he said. Fast food really fast Industry experts estimate that the value of the Chinese fast food and food delivery market will be RMB 1.8 trillion in 2017. Although this includes major chains like KFC and Pizza Hut, more than 99% of this value is generated by Chinese style fast food. (tjkx 6/6/2013) July/August 2013 New-technology tools like text messaging should be widely used to facilitate public involvement in food safety supervision, he said. The forum was held by government agencies including the food safety committee under the State Council, the Ministry of Public Security, China Food and Drug Administration and the National Health and Family Planning Commission. Xu Jinghe, director of the legal affairs department under the China Food and Drug Administration, said that more public supervision is being considered in the ongoing revision to the country's Food Safety Law. (Continued on next page) www.giract.com Page 18 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW New tech can help to keep food safe (Contd) New tech can help to keep food safe (Contd) "The revised law will better encourage and facilitate that," he said. Previous reports said the revision was expected to be finished by the end of the year. Zhang Yong, chief of the China Food and Drug Administration, said that regulation of food safety is part of social management, so it requires participation of all stakeholders including government agencies, the public and the food industry. Specific items like rewarding tips and reports from the public, corporate insurance or self-insurance programs, online food trading, and a food safety tracing mechanism are being considered, Xu said. Special funds have been established in some regions to reward useful public reports of food safety scandals. But "few worked well to encourage public involvement", he said. If it was included in the food safety law, however, "the situation would be largely different", said Li Shichun, a law expert specializing in food safety with the China Law Society. "The feasibility of the new legal articles should be carefully studied to help with enforcement," he said. For example, the public should at least have easy and wide access to report food safety problems, he said, adding that measures like introducing a third party channel to receive public reports should be considered. "Many people are now reluctant to report for fear of leakage of private information and potential revenge by those breaking the law," he said. "Government supervision and law enforcement alone can hardly ensure food safety given its great variety and complexity," he said. However, "industry practitioners should be first in line to ensure and be accountable for food safety and quality," he said. Zong Qinghou, chairman of beverage giant Wahaha, said: "To ensure food safety, all those involved in the food chain, including farmers, producers and sellers, must maintain credibility and be honest to consumers, and provide safe and healthy food." A fair distribution of profits among producers and sellers is also important for food safety, he said. "A prominent problem for the food industry is that most profits have been taken away by retailers, such as big shopping malls, forcing food producers to keep agricultural products that they buy from farmers at a very low price," he said. "This results in little profit for farmers, forcing them to ignore the quality of agricultural products or even adulterate them." Fair prices should be ensured for farmers to sell agricultural products to improve food safety, he said. (cd 18/6/2013) (Continued in next column) July/August 2013 www.giract.com Page 19 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Dairy statistics January– April 2013 Too much reconstituted milk The Dairy Association of China (DAC) has published a number of figures related to the first 4 months of 2013. 649 producers were active in that period (7 more than in the same period of 2012). The following table lists their main products, volumes and growth compared to the same period of 2011. The CEOs of two dairy companies have recently stated that they believe that up to 60% of drinking milk sold in China could be reconstituted from milk powder. They derive this conclusion from the rapidly increasing imports of milk powder in China, suggesting that many producers of ‘fresh milk’ are actually literally manufacturing it from imported milk powder, because this is lower in cost than using domestic raw milk. (tjkx 22/7/2013) Product Drinking milk Volume (t) Growth (%) 7 215 000 13.45 Milk powder 459 000 -3.54 Other 652 000 - Imports continued to grow, as is shown in the following table. Product Imports (t) Growth (%) Milk powder Whey Lactose Whey protein Infant formulae 298 700 122 000 24 600 4 600 38 900 28.61 24.63 6.39 -1.27 37.24 Drinking milk 63 700 164.69 This statement has aroused opposition from many parties in the market. However, a considerable number of industry experts, including officials of the Dairy Association of China (DAC) are calling for more transparency in this matter. They are also proposing to gradually reduce the ratio of reconstituted milk. This discussion resembles that of a few years ago, when the top Chinese dairy makers called for stricter criteria for what can be sold as ‘pure milk’. That proposition also met with violent opposition. It will not be feasible to ban all reconstituted milk in China any time soon. (hcfood 18/6/2013) Baby formula industry to consolidate The illustration shows the development of Chinese imports of drinking milk during the past 3 years. Move meant to revive sector, raise consumer confidence About a third of the country's baby formula businesses will be axed, in what experts are calling a major consolidation of the industry. The government has been trying to revive the industry since the 2008 melamine scandal, but consumer confidence is still lacking. (Continued on next page) July/August 2013 www.giract.com Page 20 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Baby formula industry to consolidate (Contd) Baby formula industry to consolidate (Contd) The move is part of a campaign to scrutinize dairy businesses in the next three months to improve the quality of milk powder products and boost confidence in the industry, the Ministry of Industry and Information Technology announced in Beijing on Tuesday. "Of the 127 licensed dairy businesses that produce baby formula products, 25% to 35% will be cut. They are not necessarily unqualified, but the country needs more powerful alliances," Zhuang Pei, Deputy Director of the metropolitan industry division of the Shanghai Municipal Commission of Economy and Information, said on Tuesday. Sales in the domestic dairy industry slumped in 2008 when a scandal broke out over baby formula that was tainted with melamine, an industrial compound that can cause kidney ailments but was added to milk to make it appear to have a higher protein content. Six children died from drinking the milk, and at least 300 000 others became ill. Only 30 of the licensed producers are active in the market and have a stable sales volume, he added. Industry industry experts said small-scale enterprises, especially private ones, are likely to be eliminated by the regulation, and more mergers and acquisitions led by domestic giants are expected. "The quality and safety of dairy products has notably improved in recent years, but they still require further improvements to make local brands more competitive," said Zhu Hongren, Chief Engineer of the Ministry of Industry and Information Technology. In addition to the requirement that every batch of raw milk be tested for melamine after the scandal, the government also demanded quality supervisors stationed at factories to oversee the whole process from raw materials to end product. Song Kungang, Secretary-General of the China Dairy Industry Association, said more than 60kt of liquid milk for babies were imported in the first four months of the year, a year-on-year rise of more than 164%, and a total of nearly 600kt of dairy products were imported, an increase of nearly 25% from last year. (Continued in next column) July/August 2013 In the next two years, China's quality watchdogs carried out a tough battle to clean up the sector, which saw the closure of nearly 70 baby formula producers. The baby formula businesses also made huge investments to ensure and improve product quality, according to industry experts. Chenguan, one of the four dairy businesses that specialize in baby formula production in Shanghai, said in addition to the 64 items that are required to be tested, it tests more than 20 other items, such as the level of lutein. (Continued on next page) www.giract.com Page 21 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Baby formula industry to consolidate (Contd) NZ starts infant formula brand register for China "The national standard says the tested amount of melamine in baby formula should not exceed 1 mg per kg, while our ceiling is 0.01 mg per kg," said Sun Jing, brand manager of Shanghai Chenguan Dairy Co Ltd. New Zealand's Ministry for Primary Industries (MPI) is expected to publish this month a list of registered brand names of New Zealand infant formula products exported to China, Radio New Zealand reported Monday. Each of the businesses have established credit and traceability systems, said Gu Zhenhua, Deputy Director of Shanghai Municipal Food Safety Commission Office. The list would be made available to consumers as well as Chinese authorities so they could check that formulas carrying New Zealand labels were valid. MPI introduced the new infant formula brand register, which requires companies exporting to China to have the specific brand name included on the export certificate, last month. "According to official test reports, dairy products in Shanghai, especially baby formula, are 100% reliable, but consumers don't think this way. One of the popular goods residents buy from overseas is baby formula," he said. Due to excessive consumption, on March 1 Hong Kong put a regulation in place, limiting the amount of baby formula people from the Chinese mainland can carry when they depart to two cans. One way to narrow the gap between the government's guarantee and the reaction from society is to further improve information disclosure, Gu said. "If consumers buy a product and they can check its test reports online, they'll feel more reassured," he said. "We're urging businesses to display the test results of every batch of product on their websites." (cd 19/6/2013) July/August 2013 China had asked for brand information to be added to export certificates as part of its efforts to crack down on false labelling. MPI said 30 exporters had registered their brands last month, and they were required to provide more detailed information by July 6, including copies of actual labels approved by Chinese regulators with translations and associated formulation information, said the report. The main opposition Labour Party claimed Monday that the new labelling requirements would mean Chinese parents would receive more information about what they were feeding their babies than New Zealand parents. It was time for the government to protect domestic consumers in the same way by making Country of Origin Labeling mandatory, Labour primary industries and food safety spokesperson Damien O' Connor said in a statement. (Continued on next page) www.giract.com Page 22 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW NZ starts infant formula brand register for China (Contd) Complaints spike over subpar baby formula imports "That would provide the same level of information and protection for Kiwi parents as these latest changes will mean for Chinese ones," said O'Connor. Having low confidence in domestic baby formula brands, Chinese consumers have turned to imported formula but are finding a growing number of problems with those products, too. New Zealand authorities are tightening regulations on infant formula exporters after concerns raised in China about the reliability of some brands and products appearing in the Chinese market, and as Chinese authorities conduct their own investigations into infant formula companies. Consumers' low confidence in domestic baby formula has led to a surge in complaints against imported baby formulas as some businesses turn to inferior foreign brands, experts said. In June, New Zealand Food Safety Minister Nikki Kaye said she had asked the MPI to undertake an audit to identify any areas for improvement, including verification, compliance and testing regimes. She had also ordered a check that New Zealand's Overseas Market Access Requirements were in line with changes being introduced in China's regulations for infant formula. New Zealand's infant formula exports are estimated at about NZD 600 mio a year, with approximately NZD 170 mio of that going to China. Cans of imported formula reportedly fetch up to NZD 70 each in China and more than 200 brands are estimated to be produced in New Zealand, but most of them are produced at contract manufacturing plants. (cd 23/7/2013) July/August 2013 Nearly two-thirds of the complaints that the China Consumers' Association received about baby formula in the first half of the year were about foreign brands. The association received 744 complaints about infant formula in the last six months, double the number in the same period last year. The association declined China Daily's request on Sunday to say which brands got the most complaints. Nearly 90% of the complaints were over quality issues, such as finding foreign objects - including worms and iron wire - in the cans. Some infants suffered adverse effects such as diarrhoea and allergic reactions, and some products were found being sold after their expiration dates. Industry experts said that one reason for the rise in complaints against imported brands is that some Chinese businesspeople have been taking advantage of consumers' blind trust in such brands. (Continued on next page) www.giract.com Page 23 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Complaints spike over subpar baby formula imports (Contd) Complaints spike over subpar baby formula imports (Contd) Heitiki, a milk powder brand which its distributor in Shenzhen claims is "a top brand" in New Zealand, was discovered in 2011 to be registered by Chinese businesspeople and unknown to New Zealanders. "Some so-called foreign brands are not really worthy of the name. They're high in price but inferior in quality," said Qiu Baochang, head of the legal team of the China Consumers' Association. "In addition to self-inspections and tests conducted by Sutton Group, which would weed out any batch that fails to meet standards, New Zealand authorities test to see whether the baby formulas meet the national standards there, which allows the products to be shipped overseas," Lin added. Xile Lier, the Suzhou partner of the Swiss baby formula manufacturer Hero Group, was accused of deliberately mislabelling milk powder in March. The company changed the expiration dates and relabelled formula for older babies as the pricier ones for younger babies. The infant formula is sold on the Chinese mainland under the label "Hero Nutradefense". "Customers turned to foreign brands, especially when it came to baby formula, after 2008 (when the melamine-contaminated baby formula scandal occurred)," said Wang Dingmian, Chairman of the Guangzhou Dairy Association. "Some Chinese people have sniffed out a business opportunity." Products manufactured and imported from overseas but targeted solely at China have taken root in recent years, Wang said. Dairy companies should be cautious about quality issues to prevent a crisis in brand trust, said Lin Jun, Director of a dairy company that registers and imports milk products from New Zealand but sells solely in China. (Continued in next column) July/August 2013 The products also need to pass all nutrition and bacterial-residual tests to attain approval from China's Entry-Exit Inspection and Quarantine Bureau to enter the country, he said. Because some complaints involved sales practices of brick-and-mortar and online stores, experts urged efforts be made to close legal loopholes that overseas purchasing agents take advantage of. Cao Mingshi, Deputy Secretary-General of Shanghai Dairy Association, said online sales are a problem as well. "Many people have joined overseas purchasing of infant formula in recent years to grab a share of the booming business, but most of them sell online and don't hold certificates of food circulation permits as regular food sellers do," Cao said. More than 133 000 baby formula products labelled "purchased overseas" were found on Taobao, China's leading e-commerce platform, on Sunday. (Continued on next page) www.giract.com Page 24 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Complaints spike over subpar baby formula imports (Contd) Zhang Qing, the father of a 3-year-old girl in Shanghai, said regulation of the industry should be tightened. "To echo Premier Li Keqiang's requirement of ensuring supervision of baby formula be as strict as it is for medicine, the country should regulate the online market of baby formula as much as it does for medicine," he said. Drug makers and drugstores can sell medicines online only with the approval of the China Food and Drug Administration. (cd 29/7/2013) Honey laundering: two honey-processing companies charged in anti-dumping case In February, the U.S. Immigration and Customs Enforcement agency (ICE) reported that five individuals and two domestic honey-processing companies, Groeb Farms and Honey Solutions, have been charged for illegal importation of honey from China. This indictment follows a similar case in 2010, in which 11 individuals and six corporations were charged with the same crime, and is indicative of a federal crack-down on honey laundering. Honey laundering: two honey-processing companies charged in anti-dumping case (Contd) The intent of an import duty is to protect domestic producers from international product being sold at less than fair market value, a practice called “dumping.” In 2001, the United States imposed a duty on honey imported from China after finding them in violation of anti-dumping policies. The criminal actions led to a predicted loss of over USD 80 mio in tax dollars, and reduced the intended protection effects on domestic honey producers. However, the evasion also has safety implications, because contaminants have been found in honey from China. Honey is traceable to its source by examining the types of pollen found in it. But filtration methods are able to eliminate pollen in honey, making it impossible to tell where it from. In a statement given to Food Safety News, President of the American Honey Producers Association Mark Jensen said, “Elimination of all pollen can only be achieved by ultra-filtering and these filtration processes do nothing but cost money, and diminish the quality of the honey.” CEO Bruce Boynton of the National Honey Board, a federal research and promotion board under U.S. Department of Agriculture (USDA) oversight, would argue otherwise; consumers prefer honey without particles, and particulate and air bubbles lead to faster crystallization. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 25 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Honey laundering: two honey-processing companies charged in anti-dumping case (Contd) He has also contested the use of the term “ultra-filtration,” which is a technical term referring to a specific type of filtration resulting in a product that all parties concede is no longer honey. Regardless of misnomers, it is true that pollen can be removed through filtration, and that the absence of pollen makes the honey untraceable. The incentive exists to do so because it caters to consumer preference, but it also makes easier to launder. The primary health concern of unregulated honey is that antibiotics and toxins not approved by the U.S. Food and Drug Administration (FDA) go undetected. In particular, chloramphenicol – an antibiotic linked to DNA damage and carcinogenicity in children - has been used to fight disease outbreaks in hives, and can be detected in trace amounts in some honeys. Additionally, toxins from lead contamination may be present, and given its accumulative nature, poses a larger threat then chloramphenicol. (foodtank 18/6/2013) Bigger concentration of infant formulae required The Ministry of Industry and Information has announced that it plans to increase the intensity of the of the Chinese infant formulae industry in the coming years. Bigger concentration of infant formulae required (Contd) Within 2 years, the country must have 10 companies with an annual turnover exceeded RMB 2 bio. (tjkx 20/6/2013) Mengniu’s recent acquisition of Yashili can be seen as part of this endeavour. However, although in theory the Chinese government can ‘further’ such a development, it will not be able to do so by a simple ukaze. It will be interesting to see to what extent it can be realised within that time span. Dairy measures start at source Increased supervision to improve food safety and consumer trust Companies that produce baby formula will be required to have their own dairy farms, according to measures released by nine ministries on Thursday. The move is designed to allow greater supervision of the production process, help ensure food safety and restore consumer confidence in the industry, officials said. Other measures include adopting stricter management standards to supervise the baby formula industry and registering all foreign producers. The measures were drafted by central government departments including the China Food and Drug Administration and the Ministry of Industry and Information Technology. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 26 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Dairy measures start at source (Contd) Dairy measures start at source (Contd) "A quality gap in the source of dairy does exist between Chinese and foreign baby formula products," said Teng Jiacai, deputy head of the China Food and Drug Administration, "though ours could match foreign counterparts in formula design and production technology". Several major dairy enterprises in China have gradually stopped buying milk from individual farms or milk sheds, and have turned to their own farms, Chen said. Chen Junshi, a member of the Chinese Academy of Engineering at the China National Centre for Food Safety Risk Assessment, said: "It would be very difficult to ensure the quality and safety of a company's source of milk if it does not have its own farms". Industry industry experts blamed milk sources as the major reason behind a major dairy scandal in 2008, when excessive melamine was added to milk to make protein content appear higher. At least 300 000 babies were sickened and six died. According to Wang Dingmian, executive council member of the Dairy Association of China, most milk sheds — which act as middlemen between dairy farmers and producers — operated under almost no supervision before 2008, resulting in quality risks. In response, agricultural authorities have intensified supervision of dairy sources, and the number of certified milk sheds has decreased 34% to 13 000, said Wang Feng, an official at the Ministry of Agriculture's animal husbandry department. Large dairy farms are also expanding, and the number of farms with more than 100 cows accounted for 35% of those, an increase of 15.5% age points over 2008. "But safety risks still exist for some small dairy producers that rely on milk sheds for milk sources," he said. Chen Fuquan, vice-president of Yili Industrial Group, one of China's largest dairy producers, said the company had invested about RMB 9 bio by the end of last year to build cow farms, which ensure stable and high-quality sources. Another major dairy producer, Yashili International Holdings, will open a new factory in Waikato, New Zealand, with an investment of RMB 1.1 bio, to produce infant formula. Lin Jinlin, spokesman for Yashili International Holdings Ltd, said quality dairy sources are important. On Tuesday, China Mengniu Dairy, the country's largest dairy producer, acquired more than 75% of Yashili. Industry analysts expect more mergers in the industry. Gao Fu, an official with the Ministry of Industry and Information Technology, said such integration would enhance industrial resources, consolidate brands and improve competitiveness. The ministry has pushed domestic dairy producers to "get married". (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 27 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Dairy measures start at source (Contd) Dairy companies become bigger Gao hopes to see about 10 companies, with annual revenues exceeding RMB 2 bio in two years, taking up 70% of the industry. The notion of "too big to fail" is becoming prevalent in the Chinese dairy industry. Pushed by increasing demands for quality and safe baby food, the government and industry members have encouraged mergers and acquisitions to create dairy giants, who are pressuring their foreign rivals in pricing power and market competitiveness. "Out of about 120 baby formula producers in China, only 15% have their own cow farms," said Wang Dingmian. "Many of these enterprises that don't have financial capabilities to run cow farms may have to quit." It takes time to restore consumer confidence in domestic milk powder as many consumers have turned to foreign producers, Wang Dingmian said. According to him, public confidence in domestic dairy products hit a low after the 2008 incident, resulting in soaring sales of foreign brand milk, which has accounted for 85% of the market in some major cities. However, a number of low quality foreign formula milk brands also entered the Chinese market, according to Xiang Jianjun, a researcher with CIConsulting, a leading industry research institution. The General Administration of Quality Supervision, Inspection and Quarantine said on Thursday it would take stricter measures, such as requiring all overseas dairy producers to register in China before they can export to the country, and banning companies from outsourcing baby formula production. Imported baby formula must arrive in packages for retail to avoid repackaging and redistribution, during which imported goods are sometimes adulterated. (cd 21/6/2013) July/August 2013 On Tuesday, China Mengniu Dairy Co Ltd agreed to acquire privately owned Yashili International, one of the country's leading makers of infant milk formula and baby food, for USD 1.6 bio, making it the largest merger in the domestic dairy industry. The merger unveils the beginning of a series of consolidations in an attempt to revive the troubled industry. An industry industry experts told China Daily the Yili Industrial Group (Huhhot, Inner Mongolia) [2] also intends to acquire Feihe Dairy (Heilongjiang) [1] and Wondersun (Wandashan) Dairy Inc. (Heilongjiang) [1] The three companies have denied the rumour, but the industry expert said the offer is to secure milk suppliers of the latter two companies who have quality dairy farms in Northeastern China. After such mergers and acquisitions, the line between Chinese and foreign brands is blurring, said Song Liang, a dairy industry analyst at the Distribution Productivity Promotion Centre of China Commerce. (Continued on next page) www.giract.com Page 28 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Dairy companies become bigger (Contd) China steps up checks on milk formula producers (Contd) "The integration with international standards and levels will greatly improve the quality and safety of domestic milk powder," he said. In a similar overhaul in 2011, the General Administration of Quality Supervision, Inspection and Quarantine shut down 475 milk enterprises. A number of small producers are expected to be axed in such moves. Cheng Qunshi, a nutrition and food safety expert, said that of about 120 milk powder manufacturers in China, some small enterprises have found loopholes in implementing industrial standards. Many without fresh milk suppliers and farms have difficulty in controlling the quality and safety of the raw milk they use. However, industry analysts said making the country's dairy industry bigger does not necessarily make it stronger. Stricter quality control and supervision are keys to improving the dairy industry, Song said. (cd 21/6/2013) China steps up checks on milk formula producers China will step up checks on infant milk formula producers and eliminate sub-standard ones, a government statement said on Thursday. The China Food and Drug Administration will consult the Good Manufacturing Practices certification system used by drug producers to improve standards in baby milk formula production, said Teng Jiacai, Deputy Head of the administration. Companies using sub-standard technology and equipment shall be shut down, the statement said. (Continued in next column) July/August 2013 China now has 127 infant formula producers and manufactured about 600kt of the product in 2012. Demand for infant formula is booming in China, but confidence in domestic products was badly hit after a milk scandal in 2008, which killed six infants and sickened 300 000 over melamine-tainting. (cd 21/6/2013) China investigates Danone, Nestle on milk-powder pricing China is probing foreign milk-powder companies including Danone and Nestle SA for possibly violating anti-monopoly laws and setting prices too high, the official People’s Daily reported, citing a government agency. The National Development and Reform Commission, the country’s top economic planning agency, started an investigation into the pricing of infant formula sold by companies also including Mead Johnson Nutrition Co., Abbott Laboratories, Dutch producer Royal FrieslandCampina NV, and local firm Biostime International Holdings Ltd., the newspaper reported today. (Continued on next page) www.giract.com Page 29 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China investigates Danone, Nestle on milk-powder pricing (Contd) China investigates Danone, Nestle on milk-powder pricing (Contd) The NDRC has evidence the companies sold products at high prices in China and their pricing increased about 30% since 2008, according to today’s report, which cited the agency. China targets creating 10 large companies in the industry within two years, each with annual revenue of more than RMB 2 bio, China National Radio reported last month, citing Gao Fu, an official at the Ministry of Industry and Information. Safety scares such as a melamine-tainted milk powder scandal in 2008 which killed at least six infants have increased Chinese consumers’ distrust of local milk and driven up their purchases of foreign brands at home and overseas. The NDRC carried out a review of documents related to product pricing at Glenview, Illinois-based Mead Johnson’s China unit recently, the company said in an e-mailed statement. The U.S. company said it is providing “full” cooperation. Jonathan Dong, a Beijing-based spokesman for Nestle, said the company is working with the government on the matter. Agnes Berthet-d’Anthonay, a Paris-based spokeswoman for Danone, said the company is “fully” cooperating with the authorities. Jan-Willem ter Avest, a spokesman from Royal FrieslandCampina, said he has no information on the probe and will look into the matter. Biostime said in a statement today that the company hasn’t raised prices since 2008. Abbott couldn’t be reached immediately for comment. The investigation follows China’s attempt to consolidate its milk-formula industry and create strong domestic brands. (Continued in next column) Danone shares slipped 1.6% to EUR 56.57 at 1:13 p.m. in Paris. Nestle fell 0.6% to 62.20 Swiss francs in Zurich. China Mengniu Dairy Co., the country’s largest dairy producer, led gains by domestic dairy companies after the report from the newspaper, which is published by the Chinese Communist Party. Mengniu shares surged 4.1% to HKD 28.90 in Hong Kong trading today, the biggest gain since June 19. Inner Mongolia Yili Industrial Group Co. rose 1.7% in Shanghai trading. Biostime’s Hong Kong-listed shares declined the most in almost two years on June 28 after the baby-care products provider said one of its units was under investigation for alleged antimonopoly law violations. The company said last week that it will “actively cooperate” with the investigation. The shares fell 1% to HKD 43.05 in Hong Kong today. Mengniu Dairy offered HKD 12.5 bio to buy local infant-formula maker Yashili International Holdings Ltd. on June 18. (Continued on next page) July/August 2013 www.giract.com Page 30 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China investigates Danone, Nestle on milk-powder pricing (Contd) Worried parents drive imported milk sales (Contd) The acquisition was part of the government-led push for consolidation, Mengniu Chief Executive Officer Sun Yiping has said. COFCO, the state-backed agricultural and food industry supplier, owns 19% of Mengniu, according to data compiled by Bloomberg. Liu said she knows the imported milk, with its five-month shelf time and long shipping distance, may not be as good as local fresh milk but "safety is my top concern". Mead Johnson had a 14% share of China’s RMB 77.9 bio milk-formula market last year, according to industry researcher Euromonitor International. Hangzhou Beingmate Group Co. was second with a 10% share, followed by Danone’s 9.2% and Yili’s 7.8%. (theglobaldairy 2/7/2013) Worried parents drive imported milk sales The first thing customers see as they enter the basement of the Wal-Mart Qinghe store in Beijing is a mountain of imported milk cartons. Half a large stack of Euro-fit whole milk from Germany, selling at RMB 9.9 per box, is almost gone. "My girl is going to stop taking formula milk, so I have to get her some good quality milk," said Liu Ying, a 30-year-old mother, carrying a shopping basket filled with a range of imported milk. "I don't know which brand to take. Maybe I will just take some from world-renowned dairy production places, such as the Netherlands, Australia or New Zealand." According to Tesco Plc, the world's third-largest retailer by revenue, imported milk is one of the fastest-growing categories in their 132 Chinese stores, with year-on-year sales gains of about 30%. The United Kingdom-based retail giant said Chinese like milk from New Zealand above all and many young parents buy several cartons at a time. Imported milk is Chinese shoppers' favorite choice on the Internet, too. On the home page of Yihaodian, a major online grocery store, imported milk is listed as the third top category. Ads flash for promotion deals such as buy one, get one free. "Room temperature imported milk has been available on Yihaodian.com since 2012," said Viki Yang, a public relations executive at Yihaodian, which is backed by United States-based Wal-Mart Stores Inc. "We sold around one container (around 30 t) per month at the beginning and now we deal with more than four containers per day." (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 31 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Worried parents drive imported milk sales (Contd) Worried parents drive imported milk sales (Contd) Yang said Yihaodian has 74 milk brands from 21 foreign countries. The best-selling products are Oldenburger, from Germany and Devondale, from Australia. The e-commerce retailer said it will greatly expand the sourcing of imported milk to a wide range of countries, such as Uruguay, to meet different taste demands. A series of milk safety scandals, involving milk and infant formula have been exposed since 2008. Toxic chemicals were added to dairy products to yield higher protein content. The practice killed at least six infants. According to the China Dairy Industry Association, in the first four months of this year, China imported dairy products amounting to 596 200 t, up 24.6% year-on-year. Imports are being driven by infant formula milk, which totalled 38 900 t in the first four months, up 37.2%, as well as liquid milk, which hit 63 700 t in the first four months, a year-on-year surge of 164.7%. "Domestic milk consumption has been increasing for years, lifted by rising personal incomes and a soaring milk-drinking population," said Wang Dingmian, a Consultant with the Guangdong Provincial Dairy Association. He added that besides liquid milk, milk-based beverages, imported cheese and yogurt may become popular. Lao Bing, general manager and industry expert of the Shanghai-based Mental Marketing Dairy Consulting, said: "Surging imported milk consumption will have a negative impact on domestic dairy industry chains" in light of foreign products' allegedly competitive prices and good reputations. But Lao said brisker sales of imports are largely due to domestic milk scares. (Continued in next column) July/August 2013 The State Council, the country's cabinet, said it will take effective measures to ensure the safety of baby milk products. "Food safety is not simply a food problem, it has become a social problem, or even a national image-related problem," said Ning Gaoning, board chairman of the China National Cereals, Oils and Foodstuffs Corp, at the Fifth China Food Safety Forum. "Large Chinese food producers should play a leading role in food safety and product quality, while their mid-sized and small counterparts strongly need self-discipline." (cd 3/7/2013) Baby formula gets new import rules China’s authorities released a policy Thursday to further strengthen the quality and safety of baby milk products, a move intended to restore consumer confidence in the domestic dairy sector. The policy, released by nine ministries and commissions including the China Food and Drug Administration (CFDA) and the Ministry of Industry and Information Technology (MIIT), prohibits repackaging imported baby formula from large bulk packages into small packages and says that baby formula must be labelled in Chinese before being imported to the mainland. (Continued on next page) www.giract.com Page 32 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Baby formula gets new import rules (Contd) Baby formula gets new import rules (Contd) Companies exporting baby formula to the mainland must register with the authorities before May 1, 2014, Lin Wei, an official with the Administration of Quality Supervision, Inspection and Quarantine, told a media briefing Thursday. The newly released policy also requires that baby formula be managed in accordance with pharmaceutical rules, and that baby formula producers own and control their own milk sources. The strict rules for imported baby formula products are the highlight of the new policy, which targets a market that is currently in chaos, Song Liang, an analyst with the Distribution Productivity Promotion Centre of China Commerce, told the Global Times Thursday. The moves, which aim to enhance the safety of domestic baby formula products and promote scaled production, came after the MIIT said Tuesday it expects that within two years, 70% of the sector will be dominated by 10 large domestic baby formula producers with revenues exceeding RMB 2 bio. Because the profit margin on baby formula is high, many domestic firms repackage imported products into smaller sizes or produce goods in their own overseas plants and claim they are imported. Song Kungang, Secretary-General of the China Dairy Industry Association, suggested Thursday that the CFDA rule out producers with quality problems and tighten verification for baby formula production licenses. Only 20 out of the 200 “New Zealand” baby formula brands sold in China are genuine, the New Zealand Infant Formula Exporters Association said in April. China Mengniu Dairy Co announced Tuesday that it will acquire milk powder firm Yashili International Holdings Ltd, and analysts said the sector would see an increasing number of takeovers in the near future due to government policies and market competition. Online purchases of imported products are also growing quickly, which can lead to quality problems as the sector has yet to see any regulatory laws, Wang Dingmian, former director of the Dairy Association of China, told the Global Times Thursday. China has 127 baby formula producers, but more than half the market is held by foreign brands, Wang said. Song said there are currently over 120 domestic baby formula brands, but two-thirds will exit the market in three to five years. However, Wang said that because milk products have a short shelf life, it is better to use local resources to make it (theglobaldairy 3/7/2013) (Continued in next column) July/August 2013 www.giract.com Page 33 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Multinationals face increased scrutiny China is expanding its investigations into the food, dairy and pharmaceutical industries, raising questions about whether the days of "supranational treatment" for multinationals have ended. Multinationals face increased scrutiny (Contd) The investigations signal that these companies face increased scrutiny of their operations in the country. The State Administration for Industry & Commerce is investigating the food processing and packaging company Tetra Pak International SA for possible abuse of market dominance. The SAIC has organized more than 20 of its regional agencies to investigate the allegations, Zhang Mao, head of the market regulator, said on Friday. It is also investigating 23 cases of possible monopoly violations. Tetra Pak China said in a statement that it has received requests from the SAIC and will provide relevant information about its operations in China to fully cooperate with the government's investigation. Earlier, the National Development and Reform Commission, the top economic planning agency, started an investigation into the pricing of infant formula sold by Switzerland-based Nestle's Wyeth and other foreign companies, including Mead Johnson Nutrition Co, Abbott Laboratories and Dutch producer Royal FrieslandCampina NV. (Continued in next column) Nestle SA and Danone's infant-nutrition units cut some prices after the government started looking into possible price-fixing by global producers of infant formula. Domestic company Biostime International Holdings Ltd, whose net profit rose 40% year-on-year in 2012, is also being investigated. The NDRC has evidence showing that the companies' prices have increased about 30% since 2008. The world's largest dairy exporter, Fonterra Cooperative Group Ltd in New Zealand, was contacted on a "broad-ranging investigation of consumer dairy products in China", and it is cooperating with the authorities, the Auckland-based company said. Wyeth said this week it would lower the prices of some baby-formula products by as much as 20%. It said the reductions will save consumers an estimated RMB 450 mio in the next 12 months. Danone said its Dumex unit is preparing a price cut, and it will disclose details later. (Continued on next page) July/August 2013 www.giract.com Page 34 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Multinationals face increased scrutiny (Contd) Multinationals face increased scrutiny (Contd) Some industry industry experts said investigations might exert temporary limits on milk powder prices, but Chinese parents' demand for foreign brands would drive prices back up again. According to an e-mail response from MSD China, a unit of international drug maker Merck & Co, said the NDRC announced cost and price surveys on July 2. Wang Dingmian, an executive council member of the Dairy Association of China, said entrenched preferences for foreign brands would not easily change. As for domestic milk powder brands, the government's actions would also have a limited impact if the problems involving product quality, milk sources and trust issues were not resolved, he said. Chinese consumers' loyalty to foreign brands is thought to be pushing up their prices over the long run. Guo Yuanyuan, the mother of a 2-year-old, buys high-end milk powder produced by Wyeth regularly. Each can costs about RMB 400. "When I encounter piles of imported milk powder at the supermarket, the price is the only factor that matters to me," Guo said. "I believe the more expensive the product, the better the quality and thus the safety for children." The government is also examining the costs and prices of international pharmaceutical companies, including GlaxoSmithKline Plc, Merck & Co, Novartis AG and Baxter International Inc, with the aim of improving the pricing system for medicines. MSD said it is a routine cost and price data collection spanning the entire healthcare industry, including local and multinational pharmaceutical manufacturers. The company said such surveys are carried out on a random basis. For example, this month, 27 drug companies, including Boehringer Ingelheim GmbH, Astellas Pharma Inc, GSK, Baxter and MSD, have been chosen for the survey, together with large domestic pharmaceutical and medical device companies. Wang Zhile, president of the Beijing New Century Academy on Transnational Corporations and a senior researcher on foreign direct investment, said that an anti-monopoly investigation is necessary to build up a healthier market. He said the move encourages all companies — local or foreign — to play by the rules. He said it is vital for the government to adopt proper and internationally recognized methods in investigations to yield a fair result. (cd 6/2013) (Continued in next column) July/August 2013 www.giract.com Page 35 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China implements new import and export requirements for dairy products On January 24, 2013, the State General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) announced the "Supervision and Administration of Inspection and Quarantine of Imported and Exported Dairy Products" (AQSIQ Decree No. 152, hereinafter referred to as the "measures"), which were implemented starting May 1, 2013. This announcement extends on the Relevant Requirements for Implementing the Measures for the Supervision and Administration of Inspection and Quarantine of Imported and Exported Dairy Products by AQSIQ Announcement No. 53, which was released on April 15, 2013. The "measures" refer to: - The People's Republic of China Food Safety Law and its implementing regulations; - The Import and Export Commodity Inspection Law of P.R.C. and its implementing regulations; - The Entry and Exit Animal and Plant Quarantine Act and its implementing regulations; - The State Council on Strengthening Food and Product Safety Supervision and Management of Special Provisions; - The Dairy Quality and Safety Supervision and Management Regulations and other laws, regulations China implements new import and export requirements for dairy products (Contd) The "measures" cover the contents of the dairy classifications and definitions, detailed regulations on the contents of dairy imports, exports products, risk warning, liability, implementing the supervision and management. Meanwhile, if the dairy importers and exporters have objections on the inspection and quarantine results, retesting can be applied for via the Provisions of the Import and Export Commodity Re-inspection Management Approach. A further clarification of the contents and the scope of application have been described in the Implementation Requirements of “measures”. Businesses exporting dairy products to China should register in the registration system. For the first import of dairy products, the importer or agent should provide a testing report following the national food safety product standard, including the requirements of GB 2761 and GB 2762. For subsequent imports of dairy product, the implementation requirements of “measures” are shown in a recent SGS SafeGuards article in Table 1. According to the Implementation Requirements of “measures” testing organizations are required to obtain the China Metrology Accreditation of Food (CMAF). The SGS China Agriculture & Food Unit has 10 laboratories, which all hold CMAF accreditation. (afj 6/6/2013) (Continued in next column) July/August 2013 www.giract.com Page 36 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Infant formulae: market shares of international brands Seafood businesses flounder amid spending cut (Contd) A survey conducted in June 2013 showed that the four leading infant formula brands in China were foreign. The following tables list the brands and their current market shares. A kg of abalone now costs around RMB 80, against RMB 140 a year ago, and a lobster can be bought for less than RMB 100, according to Li Jianchao, a restaurant owner in Beijing. Brand Abalone and lobster account for the majority of high-end seafood dishes in luxury restaurants. Share (%) Mead Johnson 12.3 Dumex 11.7 Wyeth 11.0 Abbot 7.7 Sales of imported dried seafood being sold in Jingshen Seafood Market in southern Beijing, for instance, have dropped two-thirds with almost zero demand from high-end restaurants, according to a report in China Securities Journal. (cftn 11/6/2013) Seafood businesses flounder amid spending cut Piles of high-end seafood — including lobsters, crabs and abalone — sat quietly in the small tanks of various vendors, during a visit to one of the largest aquatics markets in northern Beijing this week. Store owners at the market, a major wholesaler for restaurants in the area, said they were disappointed by the sluggish levels of business for expensive aquatic products in recent months, the result of the ongoing decline in luxury catering across the nation. "Top restaurants have cut their demands for high-end products," said one shop owner surnamed Lin. "Expensive seafood such as abalone and lobsters are difficult to sell, despite prices dropping 30% compared with last year." In such a depressed market, many high-end seafood traders have been forced to quit the businesses altogether, the journal added. High-end seafood products at lower prices have lured many individual customers, however, while some medium and lower priced seafood remains popular, with some prices even rising, said Lin. Bian Jiang, Assistant Director of the China Cuisine Association, said a decline in retail and wholesale seafood sales is inevitable, as the catering industry slows, and the effects are also hitting other related sectors of the industry, from breeding, to feeding, fishing, and seafood imports and exports. "It has been the worst time for seafood-related industries in a decade," Bian said. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 37 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Seafood businesses flounder amid spending cut (Contd) Shrimp exports (Contd) Region Homey Group of Shandong province, a listed food processing, aquaculture and ocean fishing company with more than 30 subsidiary companies, including 10 food processing plants, said it expects to see a reduction in its first quarter sales, according to China Investment Securities. In December, the government launched a nationwide crackdown on graft and extravagance, which is now being blamed for what experts suggest is the biggest slowdown in the catering industry in a decade. Revenues of high-end restaurants in Beijing, Shanghai and Chengdu were down at least 20% during this year's Spring Festival. In the first quarter of the year, many top catering companies had to close branches or change their menus. However, large chain restaurants have a different view on seafood sales. Jingya Group, for instance, reported its seafood businesses have not been affected by the government policies yet and its seafood buying from suppliers in Shandong is little changed, according to Ma Yuming, a Marketing Executive at the company. (cd 14/6/2013) Shrimp exports The following table shows the region breakdown of the exports of shrimps in the first 4 months of 2013 and the same period of 2012. 2013 1-4 2012 1-4 (t) (t) Growth (%) Beijing 13.9 5.7 146.9 Tianjin 163.1 293.7 -44.5 Hebei 248.2 272.0 -8.7 3 517.9 3 634.7 -3.2 4.5 26.3 -82.8 Shanghai 1 818.9 3 079.5 -40.9 Jiangsu 1 538.7 2 036.3 -24.4 Zhejiang 13 627.3 17 698.9 -23.0 Anhui 323.0 195.4 65.3 Fujian 19 767.4 12 766.5 54.8 0.0 12.4 -100.0 5 759.5 9 108.2 -36.8 Henan 10.1 251.7 -96.0 Hubei 1 489.8 836.6 78.1 Hunan 0.0 67.2 -100.0 32 718.3 25 787.9 26.9 Guangxi 2 530.4 1 978.5 27.9 Hainan 1 381.2 1 688.4 -18.2 Yunnan 11.6 37.6 -69.2 Liaoning Jilin Jiangxi Shandong Guangdong (Mofcon 27/7/2013) When we compare this table with that about apple juice exports in this section, we once more see a sharp increase in the exports from Beijing, an inland city located in a water deficient region. It seems that Beijing is growing as an export hub. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 38 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW The U.S. admin ruling on Chinese canned mushroom Milk powder prices lowered after government probe (Contd) On March 12, the U.S. Department of Commerce announced its preliminary ruling of anti-dumping administrative review on canned mushrooms from China, affirming that the dumping margin of China's Blue Field (Sichuan) Food Industrial Co., Ltd. was 102.11%, Chinese general dumping margin was 308.33% covering enterprises Dujiangyan Xingda Foodstuffs Co., Ltd. (Sichuan) [3], Ayecue (Liaocheng) [4] Foodstuff Co.,Ltd. (Shandong) [4], Jiufa Edible Fungus Corporation (Shandong) [4], Ltd., and Iceman Group Co., Ltd. (Zhejiang) [5]. However, the moves have also raised worries that domestic brands might be further squeezed out of the market. On February 2, 1998, the Department of Commerce started the anti-dumping investigation under HS Codes 20031027, 20031031, 20031037, 20031043, 20031047, 20031053 and 0711904000. On December 18, 1998, the Department ruled the Chinese dumping margins from 123.16% to 198.63%. On March 30, 2012, the Department made the 13th administrative review on this case. (etochina 1/4/2013) By taking the initiative to cut prices as a way of showing that they are cooperating with the government's probe, the move is also expected to soothe consumers who have suffered from increasing prices for years, and to get lighter fines if the probe finds them guilty of any irregularities, said Song Liang, a Chinese dairy expert. Milk powder prices lowered after government probe An increasing number of foreign and domestic milk powder companies have cut the prices of their products after the government launched an anti-monopoly probe earlier this month. The price cuts are considered an attempt to get lighter fines if the companies are found guilty of any wrongdoing, experts said. On Monday, Chinese infant formula maker Beingmate Group Co., Ltd. (Hangzhou, Zhejiang) [5] said it will lower its prices by 5 to 20% starting on July 10, in a bid to boost its competitiveness and grab more market share. Also on Monday, Dutch dairy producer Royal FrieslandCampina NV has notified its retailers in China that it will reduce its prices by 5%. Xiang Jianjun, a researcher with CIConsulting - a major industry research firm - said the anti-monopoly probe is targeting foreign brands, which are allegedly taking advantage of the consumers' distrust of domestic brands to raise prices frequently and are hurting consumer interests. Foreign brands, which have a market share of more than 70%, are a major threat to local brands, Xiang said. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 39 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Milk powder prices lowered after government probe (Contd) Milk powder prices lowered after government probe (Contd) On July 1, the National Development and Reform Commission started an investigation into the prices of infant formula products sold by foreign companies, including Switzerland-based Nestlé SA's Wyeth, Mead Johnson Nutrition Co, Abbott Laboratories and Royal FrieslandCampina NV. Wang Jing, 34, welcomes the reduced price of foreign milk powder brands, which she purchases two or three cans of per month for her 2-year-old child. The NDRC has evidence showing that prices have increased about 30% since 2008. Domestic company Biostime International Holdings Ltd, which saw its net profit increase 40% year-on-year in 2012, is also being investigated. Nestle SA and Groupe Danone SA infant-nutrition units cut some prices after the probe was launched. Leyou, a leading retailer of milk powder in Beijing, said that Wyeth lowered the prices of its products by 10% on average, with the highest reduction at 20%. But all of the products for which Wyeth lowered prices are domestically produced, said Gong Dingyu, Chief Operating Officer of Leyou. Gong doesn't believe that the price cuts by foreign brands will hit the market share of domestic brands because brand loyalty among milk-powder buyers is high. Mothers who purchase domestic brands will not easily shift to foreign brands as a result of the cuts, he said. (Continued in next column) Wang, who sometimes relies on supplies from her friends in Australia, added parents don't choose brands based on price, but quality and safety. "Baby food is the only thing that we don't take price into consideration," she said. Dairy industry analyst Song said that first-tier foreign brands in China have the capacity to control the pricing structure. Also, the price cuts will likely start a series of price decreases in the industry and will have a chain effect, he added. "The anti-monopoly investigation will burst the price bubble and make prices return to their real value," Song said. But he doubts that the cuts will have a major impact on domestic brands. "Most domestic milk-powder brands have their markets in third-tier cities or even in smaller regions," Song said. "They have no direct conflicts in the market with their foreign competitors." (cd 9/7/2013) Food watchdog probes tainted egg allegations China's State Food and Drug Administration, or SFDA, on Sunday began to check for food companies processing lime-preserved eggs with copper sulphate, following a scandal highlighted in a media report. (Continued on next page) July/August 2013 www.giract.com Page 40 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Food watchdog probes tainted egg allegations (Contd) Food safety official in pesticides warning (Contd) On Friday, China Central Television reported that some egg processing plants are suspected of using copper sulphate in the pickling of lime-preserved eggs, a black-colored cold dish popular around the country. Copper Sulphate can be poisonous if swallowed. China's mainland has limits on residue from 667 pesticides, while Japan has limits on some 62 000, said Xu Minghuan, of the General Administration of Quality Supervision, Inspection and Quarantine. The SFDA ordered the Jiangxi provincial food and drug administration to investigate the issue immediately, and required industrial and commercial administrative departments, quality supervision departments as well as food and drug administrative departments nationwide to supervise and examine all producers of lime-preserved eggs. Food additives and processing aid will be the focus of the supervision, said the SFDA, adding that companies found using copper sulphate to process preserved eggs will have their production licenses suspended and be punished strictly according to law. People suspected of violating the criminal law will be transferred to the police, said the SFDA. (cd 17/6/2013) Food safety official in pesticides warning State standards for pesticide residue lag far behind those of developed countries and are putting health at risk, according to a senior official with China's food safety watchdog. (Continued in next column) July/August 2013 He said the mainland's residue standards were also lower than those in Hong Kong which has limits on some 6100 pesticides, Xinhua news agency reported. Meanwhile, the amount of fertilizer and other additives allowed on farm produce were about two times higher than international standards. Tests for pesticide residue on the mainland were also failing as nearly 60% of 2200 food additives and residues that pose a risk to health could not be detected, Xu said. Low standards and poor detection technology had a huge impact on exports, he added. Japan, for example, had increased the number of banned pesticides and additives to 797 from the former 63 on vegetables from the Chinese mainland. It also set some 50 000 standards on all kinds of chemical residue. Residue must be no more than 0.01 mg per kg on produce. Xu said such strict stipulations had affected some 30% of China's agricultural exports, or about 6000 Chinese companies and the income of Chinese farmers, he said. To solve the problem, Xu said the country should first improve its detection technology. (Continued on next page) www.giract.com Page 41 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Food safety official in pesticides warning (Contd) Watchdog: Trans-fat levels meet standards (Contd) He said the country's land resources authority had begun monitoring soil quality to curb the amount of polluted farmland, but an evaluation mechanism should also be set up to monitor and record all potential sources of pollution. "Meanwhile, tests have found trans-fatty acids in all the 197 samples of imported baby formula and the value detected was 0.024 to 0.367 g per 100 g of the product," the notice said. Last year, it was reported that red wine from three domestic makers contained excessive levels of two pesticides, carbendazim and metalaxyl. But the Ministry of Health later said the amount was below the country's limits. (sd 17/6/2013) Watchdog: Trans-fat levels meet standards China's top food watchdog said the content of trans fat in homemade baby formula abides by national and international standards, contrary to a media report claiming that some milk powder contains too much of the substance. "Test results showed the value of trans-fatty acids in domestic baby formula products was 0.019 to 0.574 g per 100 g of milk powder, which conforms to national and international standards," said a notice that the China Food and Drug Administration posted on its website on Tuesday. Tests of fatty acids and trans-fatty acids were performed on 10 187 samples of baby formula products manufactured on the Chinese mainland in recent years, it said. Hong Kong's South China Morning Post said in a report on Monday that three popular mainland milk powder brands - Beingmate's Baby Club, Synutra's Super infant formula and Yili's Gold infant formula — were found in lab tests commissioned by the newspaper to contain trans fat between 0.4 and 0.6 g per 100 g of the product. Nutritionists say trans fat can cause obesity, diabetes, coronary heart disease and affect the growth and development of infants. There are two kinds of trans fat: natural and man-made, like that in artificial fat and coffee creamer, said Song Kungang, secretary-general of China Dairy Industry Association. "Trans fat is an inherent component of mammal milk. Trans fat accounts for 4% to 9% of the total fatty acids in milk and 2% to 6% in human milk," Song said. "No data have been shown to prove that natural trans-fat in food has adverse health effects." (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 42 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Watchdog: Trans-fat levels meet standards (Contd) Three provinces establish seasoning league (Contd) The Codex Alimentarius Commission, the international food standards setting authority, caps the limit of trans fat in baby formula at no more than 3% of total fatty acids. The national standard has the same limit. The SCMP also said the tests found two popular overseas formula brands that contained no trans fat. Dairy experts suspect the test results were fabricated. A spokeswoman for Beingmate said they have never added anything to milk formula products that goes against mainland regulations, the newspaper reported. "It' is illegal to add artificial chemicals. But the infant formula is safe and reliable if the substance lies in milk naturally and the amount accords with regulations," said Cao Mingshi, deputy secretary general of the Shanghai Dairy Association. (cd 10/7/2013) Three provinces establish seasoning league The seasoning associations of Heilongjiang, Jilin and Shandong have entered into a joint league to help one another in regulation, product development, food safety and other issues related to the seasoning products industry. (tjkx 14/6/2013) (Continued in next column) July/August 2013 This is an interesting development. Chinese provinces usually interact as if they were sovereign states, so this league by itself is innovative. Moreover, while Heilongjiang and Jilin are neighboring provinces, Shandong is located in another region of China. One would expect Liaoning to participate in a kind of north-eastern league. Watchdog: Trans-fat levels meet standards China's top food watchdog said the content of trans fat in homemade baby formula abides by national and international standards, contrary to a media report claiming that some milk powder contains too much of the substance. "Test results showed the value of trans-fatty acids in domestic baby formula products was 0.019 to 0.574 g per 100 g of milk powder, which conforms to national and international standards," said a notice that the China Food and Drug Administration posted on its website on Tuesday. (Continued on next page) www.giract.com Page 43 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Watchdog: Trans-fat levels meet standards (Contd) Watchdog: Trans-fat levels meet standards (Contd) Tests of fatty acids and trans-fatty acids were performed on 10,187 samples of baby formula products manufactured on the Chinese mainland in recent years, it said. The Codex Alimentarius Commission, the international food standards setting authority, caps the limit of trans fat in baby formula at no more than 3% of total fatty acids. The national standard has the same limit. "Meanwhile, tests have found trans-fatty acids in all the 197 samples of imported baby formula and the value detected was 0.024 to 0.367 g per 100 g of the product," the notice said. Hong Kong's South China Morning Post said in a report on Monday that three popular mainland milk powder brands - Beingmate's Baby Club, Synutra's Super infant formula and Yili's Gold infant formula — were found in lab tests commissioned by the newspaper to contain trans fat between 0.4 and 0.6 g per 100 g of the product. Nutritionists say trans fat can cause obesity, diabetes, coronary heart disease and affect the growth and development of infants. There are two kinds of trans fat: natural and man-made, like that in artificial fat and coffee creamer, said Song Kungang, secretary-general of China Dairy Industry Association. "Trans fat is an inherent component of mammal milk. Trans fat accounts for 4 to 9% of the total fatty acids in milk and 2 to 6% in human milk," Song said. "No data have been shown to prove that natural trans-fat in food has adverse health effects." The SCMP also said the tests found two popular overseas formula brands that contained no trans fat. Dairy experts suspect the test results were fabricated. A spokeswoman for Beingmate said they have never added anything to milk formula products that goes against mainland regulations, the newspaper reported. "It is illegal to add artificial chemicals. But the infant formula is safe and reliable if the substance lies in milk naturally and the amount accords with regulations," said Cao Mingshi, deputy secretary general of the Shanghai Dairy Association. (cd 10/7/2013) Better times ahead for catering industry The growth slowdown in the country's catering industry is over, with double-digit expansion to return in the current half-year, according to the China Cuisine Association. Growth will hit 10% from July to December, with industry revenue of RMB 2.6 trillion, the association said in a report on Monday. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 44 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Better times ahead for catering industry (Contd) Better times ahead for catering industry (Contd) Industry experts noted that many high-end restaurants in Beijing were located adjacent to government departments or institutions and had therefore been hit hardest. The impact on the catering sector was nationwide, however. Between January and May, the latest period for which provincial rates are available, the growth rate of most provinces was 10% age points lower than a year earlier. But the growth rates varied dramatically by region. Among first-tier cities, the outcomes for Beijing and Guangzhou were opposite. First-half revenue was up 8.7% to RMB 1.18 trillion. The growth rate was 4.5% points lower than a year earlier and 4% points below overall retail sales, according to the association. The recovery will be driven by industry upgrading and transformation, said Bian Jiang, Assistant Director of the CCA. In Beijing, a sample of 50 restaurants showed revenue down 6%, with 15 high-end catering establishments down 36%. The number of fast food and take-out stores rose, while sit-down restaurants were in decline. Volatile market conditions, high costs and lower profits caused these changes. Bian said two factors that caused the first-half downturn - the government's austerity campaign and a wave of bird flu cases - won't persist in the second half. Also, measures to upgrade business adopted by many restaurant companies are likely to take effect in the current half. And with many major holidays due in the coming months, the industry will get a further boost, Bian said. Guangzhou, however, was one of the few cities still recording rapid growth. Its catering industry expanded more than 10%, with March's growth rate rising to 17.8%. The government's austerity campaign proved most effective at curbing consumption with public funds in Beijing, where about 2 000 restaurants closed in the first half. Nonetheless, the industry is recovering slowly. In June, the growth rate of revenue climbed back to 9.5%. The H7N9 virus (a variant of bird flu) affected the catering industry in Shanghai, Jiangsu and Zhejiang in April. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 45 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Better times ahead for catering industry (Contd) Domestic rapeseed oil production faces challenges The government's move to crack down on luxury spending has resulted in a harsh environment for high-end restaurants. With lingering low prices of rapeseed on the market and continuing influx of cheap foreign rapeseed, domestic rapeseed has got into a fix, the Economic Daily reported. According to a CCA survey of major restaurant companies in the second quarter, per capita consumption fell 15 to 39% at high-end catering places and their revenue slid 22.6%. Every year, the nation launches the purchase and storage of various crops including rapeseed, as a measure to regulate market prices. In the first half, Beijing Xiangeqing Co Ltd closed eight stores, estimating a loss between RMB 160 mio and RMB 240 mio. Food acquired on the state system, mainly through China Grain Reserves Corp, from farmers nationwide, will be auctioned. China Quanjude Group, the country's top roast duck restaurant chain, only achieved revenue of RMB 850 mio, down 6.5% year-on-year, while its profit fell 32.1% to RMB 85 mio. This year, the situation seems even more complex. The state’s store of rapeseed oil in 2011 was auctioned earlier, the first batch of 4992 t, and the second 200 t. But all the rest fell through. Xiao Nan Guo Restaurants Holdings Ltd and Tang Palace (China) Holdings Ltd's interim reports contained warnings that their net profits probably fell. (cd 31/7/2013) Top cooking oil suppliers The China Grain Reserves Corporation (Sinograin) has published the following list of China’s top suppliers of food oils in 2012. Company Yihai Kerry Volume (mio t) 3 COFCO 1.1 Luhua 0.5 (hcfood 8/6/2013) July/August 2013 “Price inversion and the high cost of purchasing and storage are the main reasons leading to the unsold rapeseed oil,” said Wang Cheng, a sales manager at Zhonghe Food and Oil Group, a grain processor based in Hubei province, one of the major production bases for rapeseed in China. “The price of future Number 1401 rapeseed oil on the market has fallen to RMB 8064 per t, and the price of the spot rapeseed oil is only RMB 9100 to 9500. But the cost of the country’s temporarily stored rapeseed oil is as high as RMB 10 200 to RMB 10 600 per t,” said Chen Yanjun on July 16, a senior analyst from China Zhengzhou Grain Wholesale Market. (Continued on next page) www.giract.com Page 46 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Domestic rapeseed oil production faces challenges (Contd) Domestic rapeseed oil production faces challenges (Contd) Although the prop price or the state purchase price of rapeseed has been increasing, the market price remains low. Now almost all the rapeseed oil on the market is imported. Oil yield rate of imported GM rapeseed is 42%, with a water impurity rate of 11%, while domestic rapeseed oil yield rate is 35% with a water impurity rate of 14%. According to the Ministry of Agriculture, rapeseed imports from January to May reached 1.655 mio t, a year-on-year increase of 37%. The influx of cheap foreign rapeseed makes the production of domestic rapeseed oil frustrating. For farmers, growing rapeseed is a thankless task. Automation of rapeseed planting is low, and labour costs can be as high as RMB 9000 per hectare. Machine sowing technology has no problem, but mechanical transplanting and collecting are not ideal for domestic growers. Current rape growing machines are all modified machinery that was used to cultivate rice and wheat. “If I grow rape on all my 4 mu (about 0.27 hectares) of farmland in autumn, I could probably get 600 kg of rapeseed the next spring. Deducting all the costs, I could only get RMB 300 to 400,” said Gong Zhengqiu, a farmer from Hubei province. “We need to develop specific rapeseed cultivation machinery as soon as possible. In addition, we need to promote concentrated land cultivation to reduce labour costs,” said Gan Yuhua, an official from the Hubei Provincial Department of Agriculture. Gong said that unlike 20 years ago, nobody wants to grow rapeseed anymore. Most farmlands are empty during the winter. The main growing season of rapeseed in the south is winter. Pests are fewer in low temperatures, so the plants are real safe food, Gan added. (cd 24/7/2013) “Farmers used to rush to carry the rapeseed to my house, but now it is very difficult to collect. Sometimes you can hardly collect a car of rapeseed even if you look for it for several days,” food and oil broker Lu Guobing said. Major advance to halt flow of 'gutter oil' Low quality of domestically grown rapeseed and high production costs are two main reasons leading to the difficulties facing rapeseed oil market players. Chinese scientists say they have made a major breakthrough in the battle against "gutter oil" — illegal cooking oil recycled from waste oil collected from sources such as restaurant fryers and drains. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 47 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Major advance to halt flow of 'gutter oil' (Contd) Major advance to halt flow of 'gutter oil' (Contd) Experts at the University of the Chinese Academy of Sciences have unveiled a kit that can test the purity of cooking oil in one minute. "I'm a scientist, so I don't know how to market a product. But the method is already mature," he said. "I'd say if any company was interested, it would take less than a month for industrial manufacture." The breakthrough comes as authorities continue to crack down on the illegal collection and reselling of waste oil to restaurants and supermarkets. The test kit works by placing a small sample of any cooking oil in a test tube with a burgundy-colored reagent and then shaking them, co-creator He Yujian said. The term "gutter oil" usually refers to oil collected by using three illegal methods — oil skimmed from kitchen wastewater, oil reused several times by a kitchen (such as from a deep-fat fryer) and oil extracted from animal fat. "If the color doesn't change, the oil is safe," he said. However, if it becomes lighter, the mixture can be compared with a color chart that shows the severity of the contamination. "All illegal cooking oil contains molecules that do not exist in normal oil," He said. "So we created a reagent that reacts with these molecules and changes color." Most other detection methods require sophisticated laboratory instruments, He said. The change can be seen if the proportion of illegal oil in the sample is 5% or more, the professor of chemistry and chemical biology said. "But it is simply not possible for law enforcement officials to take huge instruments with them when they conduct routine checks at small restaurants and markets." For sellers of illegal oil 40 make a profit, the proportion of recycled oil in their products needs to be at least 5 to 10%, He said, adding that the test kit is suitable for most oils on the market in China. Public concern over illegal oil began to grow in 2011 when police cracked a cross-province case. But a laboratory test could identify only two out of 10 oil samples from the illegal workshops. The university team has spent nearly two years developing the reagent, with the aim of making detection easy, fast and cheap. The professor said he is looking for an enterprise to manufacture the kit. By May last year, the Ministry of Health (later merged to form the National Health and Family Planning Commission), had received 762 proposed methods from the public for detecting illegal cooking oil. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 48 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Major advance to halt flow of 'gutter oil' (Contd) Major advance to halt flow of 'gutter oil' (Contd) The commission chose seven — four laboratory methods and three immediate tests, without disclosing the methods to the public. However, at least one expert is not confident about testing illegal oil. "The quality test, although with good intentions, will have little effect if there are no channels for individual consumers to complain about the gutter oil they find, along with severe punishment for the manufacturers," he said. (cd 25/7/2013) "Illegal oil is especially complex to detect," Liu Zhihong, a chemistry professor at Wuhan University, was quoted as saying by Nanfang Daily. Liu said there is no flawless method yet to recognize all illegal oil. Some methods, like nuclear magnetic resonance and gas chromatography, are too time-consuming and too expensive. But He, from the University of the Chinese Academy of Sciences, said, "Based on laboratory results, our reagent has an accuracy rate of about 96%, which is enough for initial inspection and detection." He estimated the cost for each test using the reagent to be no more than RMB 0.5. Meng Lingren, 20, a consumer from Beijing, is not confident about the reagent being available to individual buyers. "Richer families prefer buying big brands or imported products, while people with lower incomes generally may care less about the oil quality," he said. Meng believes the reagent alone is far from sufficient to protect consumers. Detection of illegal cooking oils in China In recent years in China, illegal cooking oil incidents have led to serious food safety risks and negative social repercussions. The illegal cooking oils include the refined waste oil from restaurants, repeatedly used oil and waste animal fats. Because such cooking oils may contain toxic polymers, peroxide and so on, they can be dangerous to human health. The most common clinical symptoms of poisoning include headaches, vomiting and diarrhoea. While monitoring purchase records and granting administrative licences can be used to control the problem of illegal cooking oil, a rapid and on-site detection of illegal cooking oil is still necessary and urgent in China. Professor He Yujian and his group from College of Chemistry and Chemical Engineering, University of Chinese Academy of Sciences has established two rapid and convenient colorimetric techniques based on phase transfer technology which can be used for rapid and on-site detection of illegal cooking oils. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 49 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China’s devastated wheat crop could spur more food deals (Contd) Detection of illegal cooking oils in China (Contd) Their work, Rapid colorimetric detection of illegal cooking oils based on phase transfer technology, will be published on Science China Chemistry, 2013. In the methods, developed copper ions and cationic gold nanoparticles protected by poly (diallyldimethyl ammonium) chloride (PDDA) were used as the recognition probes. And the illegal cooking oil could be detected by the naked eye (see image). The results showed that qualified cooking oil mixed with 2.8% of the illegal cooking oil could be detected, and more than 5% of the illegal cooking oil could be accurately detected by the naked eye. These methods were applied in a blind test for a total of 235 samples; the results showed that the accurate rates of the blind tests were 95.7%. Compared with the traditional methods, this method is cost-effective and allows rapid and simple colorimetric detection of illegal cooking oils without complex pre-treatment. A national patent has been applied for. (foodprocessing 1/7/2013) China’s devastated wheat crop could spur more food deals A combination of frost and too much rain has wreaked havoc on China’s wheat crops, Reuters reported Tuesday, which could force the country to ramp up wheat imports. (Continued in next column) July/August 2013 Food supplies are already tight for China’s 1.35 bio people. The country ranks a lowly 42nd in the world in food security, just ahead of Botswana. Urbanization has made arable land scarce, persistent food safety scandals have made consumers nervous, and volatile food prices are driving inflation. So the failed wheat crop may induce Beijing to encourage even more acquisitions of foreign food companies to secure the technology and natural resources that China needs to feed its many hungry mouths. China’s food scarcity worries are already playing a major role in deal-making around the world. The USD 5.6 bio purchase of US soybean grower Gavilon by Japan’s Marubeni Corp was held up by Chinese officials for nearly a year, and then only approved with strict rules for the combined company, which will provide a huge portion of China’s soybean imports. (Continued on next page) www.giract.com Page 50 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China’s devastated wheat crop could spur more food deals (Contd) China’s devastated wheat crop could spur more food deals (Contd) Then in May, China’s Shuanghui International offered USD 4.7 bio for Smithfield, the United States’ largest pork producer, prompting US politicians to fret about whether China was bolstering its strategic pork reserves at America’s expense. Ben Becker, the press secretary for the Senate Agriculture Committee, worried aloud to the New York Times. “What if tomorrow it is the biggest dairy producer? Or the biggest corn producer?” Then America, he seemed to imply, could run out of milk or corn. As data from a report by the OECD (above) shows, China already needs to import significant quantities of grains and dairy. The OECD expects China “will improve its food security and remain self-sufficient in main food crops,” but will also “slightly outpace its production growth by some 0.3% p.a., similar to the trend of the previous decade.” Such fears are often overblown. After all, “It is not as if China can order the world’s pigs to stop reproducing,” the Times noted, adding that agricultural economists say it would only be a few years before the rest of America pork-packing plants could replace the lost capacity, even if all of Smithfield’s pigs were eaten by China. And China isn’t after Smithfield’s pigs—it is after the company’s expertise in running an efficient (if occasionally very gross) protein-based supply chain. It is implausible to think that China would be willing or able to simply scoop up a massive dairy company like Nestle or Danone, or a leading corn processor like Archers Daniel Midland. But the world’s top dairy producers, already in the throes of a consolidation wave, are only going to see more deals, analysts predicted even before China’s recent wheat crop disaster. (Continued in next column) July/August 2013 It is that trend that will impact M&A— occasionally with China buying expertise, in the case of Smithfield, but more often in deals like Gavilon-Marubeni, where global players consolidate to better meet massive Chinese demand. And there is certainly room for further business opportunities if China’s crops fail to meet their targets, as with this year’s wheat harvests. Foreign traders and analysts estimated to Reuters that China will now need to import some 10 mio t of wheat, nearly double the previous estimates and the most in a decade. With China facing changing food demands from better-off consumers and massive soil contamination from its decades of industrial production, Beijing may be pushed to do even more grocery shopping overseas. (qz 17/7/2013) Looking to find, feed new food consumers Agricultural firms step up their efforts to export higher value-added products instead of cheap produce, report Yao Jing and Ding Qingfen in Zhucheng (Shandong). (Continued on next page) www.giract.com Page 51 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Looking to find, feed new food consumers (Contd) Looking to find, feed new food consumers (Contd) In the spacious workshop of Zhucheng Waimao Co Ltd, a poultry producing and processing company in Shandong province, workers wearing white overalls and masks were cleaning, cutting and packaging chickens. The rumble of machines meant voices had to be raised when people spoke. Japan, which is known for its strict regulations over imported agriculture products, accounts for 70% of Zhucheng Waimao's total food exports. "All of our products shipped to Japan have passed quality tests since 2008," said Wang. All of the chickens being processed were transported from nearby feeding farms managed and owned by the company. The modern production line looks clean and efficient. This has changed a lot compared with several years ago when the company was more like a farm and was buying chickens from scattered peasant households who could not guarantee the quality of their chickens and other animals. "We have invested more than RMB 20 mio in establishing an experimental plant to push innovation and ensure the quality and safety of our poultry products," said Wang Jinyou, General Manager of Zhucheng Waimao. Wang's 38-year-old company is just one of the numerous Chinese agricultural producers that are struggling to move up the value chain against the background of the country's determination to upgrade and transform its foreign trade. One of the most important improvements for China's agriculture exporters is from selling cheap fresh products to processed goods tagged with higher prices. (Continued in next column) July/August 2013 Right now, Wang is planning to develop new cooked products based on different tastes and cooking methods. In the meantime, he will raise the price of existing new products. Large packages will also be adjusted to offer smaller ones, such as shrinking one bag of fried chicken from 300 g to 160 g, to meet local customers' demands. In order to cater to the elderly in Japan, Wang will launch softer products that are easier to chew. Wang is also trying to switch to the Chinese market. "The key factor for expanding in the domestic market is cultivating our brand names. Although we were not previously paying attention to the Chinese market, we are now realizing it has great potential," he said. Today, China market accounts for 70% of Wang's total sales in quantity. However, as for its business value, China is worth just 40%. Another high-yielding Chinese agricultural product, garlic, which totalled USD 1.69 bio in exports in 2012, is also taking off after production was upgraded. In Pizhou in East China's Jiangsu province, the garlic planting area is about 467 mio sq.m. There are nearly 500 000 garlic farmers. (Continued on next page) www.giract.com Page 52 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Looking to find, feed new food consumers (Contd) China eyes food security options in Venezuela (Contd) Garlic exports from their account for 10% of China's total exports of the root. In recent years, 36 companies have begun to conduct garlic-processing businesses, with five engaging in extended processing. Local government and companies have invested RMB 200 mio in garlic innovation and brand building. Venezuelan agriculture has suffered under frequent state interventions -- from outright nationalization to implementation of agricultural policies criticized as being removed from reality. New products made using better technology include garlic oil, allicin, an organosulfur compound obtained from garlic, and garlic capsules. "10 t of garlic can produce one ton of allicin with a purity of 10%. The value of the garlic used will surge nearly tenfold to said Du Feilong, RMB 200 000," Deputy Director-General at Pizhou Bureau of Commerce. Garlic cloves will become the main exporting product among extended processing products. "The export of garlic cloves is 8 to 10kt every year, which accounts for 10% of our total garlic output every year," said Du. However, the overall agricultural foreign trade has its problems, with China's trade deficit in the sector widening since 2004 as it relies more on imports. (cd 23/7/2013) China eyes food security options in Venezuela Oil-rich Venezuela is recovering slowly from a recession the government blames on weather vagaries, including frequent drought conditions. Opposition critics say state mismanagement of agriculture is partly to blame. Venezuelan Vice President Jorge Arreaza indicates his talks in Beijing gave him hope joint ventures involving China could bring great benefit to a sector seen to be performing well before capacity. Beijing has been touting its agricultural prowess and optimum exploitation of land resources. Critics cite China's environmental problems as an indication that progress has been patchy. Venezuela under former President Hugo Chavez pursued close collaboration with China in energy, defence and security, and technology. Chavez died of cancer in March, soon after handing over power to hand-picked successor Nicolas Maduro. President Maduro's inner circle includes Arreaza, husband to the late Chavez' eldest daughter Rosa Virgina. China is considering investment in Venezuela's agriculture industries as part of a global strategy to secure diverse sources of food supplies for its burgeoning population. Before he was appointed vice president under Maduro, Arreaza was minister of science and technology. Arreaza indicated that bilateral talks on agricultural collaboration advanced after Chinese Vice President Li Yuanchao visited the country in May. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 53 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China eyes food security options in Venezuela (Contd) Apple juice exports "Venezuela has 30 mio hectares of prime land and great agricultural potential." Arreaza said Venezuela's agriculture suffered from lack of inaction by its absentee landowners. He blamed "bourgeois" landowners for the problem. Both Chinese and Venezuelan officials say China has every reason to be driven by the need to build agriculture-based alliances worldwide. China's own soil has limited potential, which has been further diminished by recent urbanization in rural areas. Arreaza discounted criticism of Chinese interest in Venezuela's land, blaming it on opponents inspired by "U.S. imperialism" and past U.S. policies in the region. Both Chavez and Maduro have blown hot and cold on normalizing ties with Washington. One of the ideas being pursued in Venezuela will be modelled after a Chinese model for establishing special economic zones to stimulate the economy, he said. Maduro's government aims to continue Chavez's ideal of reversing a prolonged neglect of Venezuelan agricultural sector that began with the discovery of oil in the 1950s. Right up to the start of the oil boom, agriculture, fishing and forestry earned more than half of the national income. By 1988 that ratio dropped to 5.9% of Venezuela's gross domestic product, the rest supported by industrialization and oil exports, both of which declined in later years due to a spate of nationalizations by Chavez. (upi 26/7/2013) July/August 2013 The following table shows the region breakdown of the exports of apple juice concentrate in the first 4 months of 2013 and the same period of 2012. Region 2013 1-4 2012 1-4 (t) (t) Growth (%) Beijing 43 667.7 27 177.9 60.7 Tianjin 16.1 43.1 -62.6 Hebei 12.4 0.0 Shanxi 2 488.2 5 519.1 -54.9 Liaoning 3 339.0 3 134.3 6.5 198.0 264.0 -25.0 Shanghai 4.5 36.3 -87.5 Jiangsu 7.2 19.8 -63.6 381.1 49.5 669.9 0.9 1.2 -28.7 22 958.9 32 282.5 -28.9 7 612.0 6 187.2 23.0 193.3 231.6 -16.6 1 811.2 0.0 Sichuan 246.2 1 627.8 -84.9 Shaanxi 108 355.4 85 367.9 26.9 5 733.2 33 301.7 -82.8 Ningxia 841.5 504.9 66.7 Xinjiang 769.5 1 673.1 -54.0 Heilongjiang Zhejiang Fujian Shandong Henan Guangdong Hainan Gansu (mofcon 27/7/2013) www.giract.com Page 54 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Apple juice exports (Contd) Of the 2 traditional AJC region, Shandong and Shaanxi, the former shows a serious decrease, while the latter has decreased with almost the same percentage. The Shandong based companies are mainly state owned enterprises, while those in Shaanxi are mostly owned by farmer cooperatives. The increase of Beijing is remarkable, but could be caused by the fact that juice from other regions has been exported via Beijing. Cooperatives can ensure safe food There is no doubt that China has a problem with food safety and that it is in the interest of everyone other than the few causing it to see an end to the threat. So why has the problem persisted? The answer, unfortunately, is: Because the risk of those responsible for food safety scandals getting caught is low and the possible profits are high. As long as this situation continues, basic economic theory dictates that the problem will continue. The solution is obvious, though. Producers and consumers should be directly connected in a manner that will make the production process transparent and identify those responsible for tampering with food products to make more profits. Of course, one or two small farmers cannot do this. But imagine the following scenario: (Continued in next column) Cooperatives can ensure safe food (Contd) Residents of a village who produce a variety high quality vegetables and meat products decide to form a cooperative to ensure that their production process is safe, even environmentally friendly, and they hire an agricultural specialist to advise them how to do it most effectively. To sell their products, they set up a shop in a nearby city, and take turns to man it. The shop carries the name of the village, and consumers are invited to visit the village to inspect the production process. Since the village's reputation and everyone's livelihood are at stake, all the villagers will be obliged to make sure that the production takes place in an orderly fashion. An open invitation to consumers to come and observe the production process would only strengthen this tendency. The guarantee of getting absolutely safe food products will prompt quality-minded consumers to buy from the village's shop, which will enable the villagers to charge higher prices for their products in the long run and make more profit without resorting to illegal means. Over time, other villages decide to follow the model to get a slice of the pie, and some villages even start to cooperate with each other in order to make their production more efficient and to diversify their sales by opening secondary sales and production facilities such as restaurants using only self-produced products, or starting their own dairy. (Continued on next page) July/August 2013 www.giract.com Page 55 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Cooperatives can ensure safe food (Contd) Cooperatives can ensure safe food (Contd) In the end, even the larger producers get pressured into ensuring the quality of their products or to lose out in the competition. Each farmer had one vote on how to run the communal part of the business, while individual pay out was based on individual production output. Some supermarket chains, too, may get interested in setting up their own food production line to attract consumers looking for absolutely safe food. Could this work? The market for this kind of "guaranteed food" is most likely there, because many people in China are willing to go to great lengths - from asking relatives in the countryside to supply home-grown products to buying foreign products (especially milk powder) online - to get safe products. Is it hard to imagine that enough consumers would be willing to pay a little extra to make sure that they, or their children, get fresh and healthy food to help establish such a market? This would definitely work on a smaller scale, especially with communal ownership of the production facilities, which would drastically reduce the individual incentive to cheat. No matter who gives shape to (or starts) this model, individual farmers, large producers (such as certain dairy companies) and even supermarkets, it would be beneficial to all. And a new link between villages and cities could be fostered, with Chinese consumers being able to eat safe and healthier food. (cd 30/7/2013) China's Bad Earth In Dapu, a rain-drenched rural outpost in the heart of China's grain basket, a farmer grows crops that she wouldn't dare to eat. A state-backed chemicals factory next to her farm dumps wastewater directly into the local irrigation pond, she says, and turns it a florescent blue reminiscent of antifreeze. After walking around in the rice paddies, some farmers here have developed unexplained blisters on their feet. On a larger scale, and with a more diversified production process, however, one can look at the Scandinavian cooperative model that began in the 19th century and is still functioning today. There, the landownership and primary production was individual, while the shared production facilities were communally owned. (Continued in next column) July/August 2013 (Continued on next page) www.giract.com Page 56 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China's Bad Earth (Contd) China's Bad Earth (Contd) "Nothing comes from these plants," says the farmer, pointing past the irrigation pond to a handful of stunted rice shoots. She grows the rice, which can't be sold because of its low quality, only in order to qualify for payments made by the factory owners to compensate for polluting the area. Rural China's toxic turn is largely a consequence of two trends, say environmental researchers: the expansion of polluting industries into remote areas a safe distance from population centres, and heavy use of chemical fertilizers to meet the country's mounting food needs. Both changes have been driven by the rapid pace of urbanization in a country that in 2012, for the first time in its long history, had more people living in cities than outside of them. But the amount is only a fraction of what she used to earn when the land was healthy, she says. The plants look alive, "but they're actually dead inside." The experiences of these farmers in Dapu, in central China's Hunan province, highlight an emerging and critical front in China's intensifying battle with pollution. For years, public attention has focused on the choking air and contaminated water that plague China's ever-expanding cities. But a series of recent cases have highlighted the spread of pollution outside of urban areas, now encompassing vast swaths of countryside, including the agricultural heartland. Estimates from state-affiliated researchers say that anywhere between 8% and 20% of China's arable land, some 25 to 60 mio acres, may now be contaminated with heavy metals. Yet the effort to keep urbanites comfortable and well-fed has also led to the poisoning of parts of the food chain, and some of the pollution is travelling back to the cities in a different—and for many, more frightening—guise. "Pollution can be displaced only to an extent. You can't put walls around it," says Judith Shapiro, the U.S.-based author of the recent book "China's Environmental Challenges." She is one of a number of researchers and environmental activists—including many in China—who warn that pollution poses an existential threat to the current regime. It is, she says, "perhaps the single most significant determinant of whether the Communist Party will maintain its legitimacy in coming years." A loss of even 5% could be disastrous, taking China below the "red line" of 296 mio acres of arable land that are currently needed, according to the government, to feed the country's 1.35 bio people. China has long sought to industrialize its countryside, dating to Mao's disastrous Great Leap Forward beginning in 1958, when he sought rapid industrialization by urging peasants to set up backyard steel furnaces at the expense of agricultural output. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 57 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China's Bad Earth (Contd) China's Bad Earth (Contd) The cumulative impact of decades of building up rural industry is now taking an environmental toll, particularly as industrial growth surges forward in China's breadbasket. Criticism even came from the Communist Party's flagship paper, People's Daily, which posted a message to its micro blog that read: "Covering this up only makes people think: I'm being lied to." In the once agrarian provinces of Hunan and Hubei, industrial activity rose more than threefold from 2007 to 2011, far outpacing industrial growth in powerhouse Guangdong. In some cases, factories are moving to the countryside to take advantage of cheaper land, often made available with the help of local officials who want to boost growth, environmental researchers say. In other cases, urban leaders want factories to move out of crowded cities. The ensuing problems of rural pollution are exacerbated by the fact that many small-town governments have less capacity to properly regulate complex industrial activities than their counterparts in big cities, experts say. Rice farmer Zhu Hongqing has seen the market fall after a recent cadmium scare. The consequences of this shift catapulted to national attention in February, after China's Ministry of Environmental Protection refused to release the results of a multiyear nationwide soil-pollution survey, calling the data a "state secret." The decision—brought to a head when an activist lawyer pressed the ministry to reveal the numbers—sparked an outcry online and in the traditional media. The environment ministry hasn't responded to requests for comment. In April, Zhuang Guotai, head of the ecological department at the environment ministry, said during a news conference that the survey's findings would be released after the results had been "verified" but didn't elaborate. The uproar over the soil survey was compounded by a second controversy the next month, when authorities in Guangzhou, the capital of southern China's Guangdong province, revealed that eight out of 18 samples in a survey of local rice supplies had been found to contain excessive levels of cadmium, a heavy metal that can wreak havoc on the kidneys and cause severe bone pain. Officials didn't say where the cadmium came from, though the rice itself was grown in nearby Hunan province, they said. Cadmium is generally associated with mining and the smelting of metals like zinc and lead, as well as battery manufacturing, all of which are common in Hunan. Social media users expressed anger and dismissed two subsequent province wide investigations that showed excessive levels of cadmium in only 5.8% and 1.4% of rice supplies. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 58 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China's Bad Earth (Contd) China's Bad Earth (Contd) "First water, then the air we breathe, and now the earth. How can people still survive?" wrote one user on Sina Weibo, a popular Twitter-like micro blogging service. "I suppose we can always move abroad or to outer space." The Ministry of Environmental Protection publicly acknowledged the existence of such "cancer villages"—which have unusually high rates of cancer and, according to nongovernmental organizations and researchers, number in the hundreds—for the first time a month later. "Chinese people have a very deep connection to rice," adds Liu Jianqiang, a former investigative reporter who now serves as the Beijing-based editor of China Dialogue, a non-profit media organization that tracks environmental issues. "If you discover some vegetable or fruit is poisoned, you can say 'I won't eat it.' But rice you can't avoid." Chinese officials have repeatedly said that they are serious about reining in pollution. A week after the cadmium news broke, the new Chinese president Xi Jinping said at a meeting of top leaders in Beijing that he planned to set an ecological "red line," warning that those who crossed it would be "held accountable for a lifetime," though he didn't provide specifics. The threat to China's countryside goes far beyond cadmium. In January, China's official Xinhua news agency highlighted the dangers of hazardous chemical waste in rural areas by profiling Zekou, described by environmentalists as a "cancer village" in the central province of Hubei. Residents blame a nearby industrial park for more than 60 recent cancer-related deaths, most of them of people under the age of 50. (Continued in next column) July/August 2013 In March, state media reported that 168 villagers who live near a battery factory in the eastern province of Zhejiang were discovered to have elevated levels of lead in their blood, the latest in a stream of rural lead-poisoning cases tied to battery and smelting facilities. And then there are the pressures being placed on China's farmland by the overuse of chemical fertilizers. Mr. Zhuang, of the environment ministry, said at his recent news conference that only 35% of the fertilizer used in China was being properly absorbed by crops. The remaining 65%, he said, was being discharged as pollution that was seriously tainting China's farmland. Runoff of nitrogen fertilizer, among the most widely-used varieties in China, can contaminate water sources and lead to soil acidification, soil erosion and lower crop yields. "If things carry on this way, the soil will be unable to bear it, the environment unable to bear it. It is a real problem," said Mr. Zhuang. Between 2000 and 2011, the use of chemical fertilizer—pushed by the country's exploding demand for staples such as rice—rose 38%, to more than 57 mio t a year, according to the National Bureau of Statistics. (Continued on next page) www.giract.com Page 59 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China's Bad Earth (Contd) China's Bad Earth (Contd) Such growth far outpaced the growth of total irrigated farmland, which rose only about 15% during the same period. Any major reduction in food security would hurt the Communist Party, which has staked its reputation in part on its ability to keep the country's granaries full with minimal imports. Experts say that the government is aware of the threat posed by rural pollution, noting a pledge by the environmental minister in March to make heavy-metal pollution a major focus. The Ministry of Land and Resources followed by announcing in June that it would conduct its own nationwide soil sampling to map pollution levels around the country, though it isn't clear if the findings will be made public. Later that month, China's cabinet, the State Council, discussed a draft amendment to the country's environmental law that would, among other things, stiffen punishments for polluters and require tighter regulation of fertilizers. In Dapu, where chemicals factory was built in 2008, some of the crops are too low-quality to sell. The factory offers compensation to farmers. But experts say that fear of transparency, a lumbering bureaucracy and worries over how China would cope if large areas of land were declared tainted raise questions about the government's ability to respond. Removing heavy metals from farmland is a complicated process that can take years—time lost for farming. That is a chilling prospect for a government tasked with supporting 20% of the world's population on less than 10% of the world's arable land. (Continued in next column) July/August 2013 The government's refusal to release its soil survey, meanwhile, has only added to fears that officials know more than they are willing to say. Launched to great fanfare in the state media in 2006, the survey was originally scheduled to be completed in 2010. In June last year, an environment ministry official told the Xinhua news service that more than 20% of soil samples in a trial program for monitoring pollution, involving 364 rural villages, had failed to meet national standards and that the results of the survey would be published "at the proper time." "There's a general feeling that government officials know the problem is really bad, and if they disclose it, then the public outrage will get ahead of the ability of the state to do something about it," says Alex Wang, an expert in Chinese environmental law at the UCLA School of Law. For generations of readers in the West, the profound ties to the land of China's farmers have been vividly depicted by "The Good Earth," novelist Pearl S. Buck's 1931 portrait of one rural family's struggles in the era before the revolution. As the protagonist Wang Lung discovers, even through years of famine and hardship, Chinese must ultimately find their sustenance in the soil. (Continued on next page) www.giract.com Page 60 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China's Bad Earth (Contd) China's Bad Earth (Contd) Today, many of the country's rural dilemmas are most visible in Hunan province, the source of the cadmium-tainted rice discovered in Guangzhou. In one of a handful of small studies done on heavy-metal pollution in the area, published in 2008, Nanjing Agricultural University professor Pan Gengxing found 60% of rice bought in markets in a number of southern provinces, including Hunan, contained cadmium in excess of China's national standards. China's top rice producer, Hunan grew nearly 26 mio t of unmilled rice, almost 13% of China's total, in 2011. Hunan's central role in feeding China is encapsulated in a proverb that dates back more than 400 years to the late Ming Dynasty, when the province had a different name: "When Huguang reaps its harvest, all under Heaven want for nothing." In recent decades, however, Hunan has also become one of the country's top five producers of nonferrous metals like copper and lead, with mines and smelters that accounted for 7.5% of the country's nonferrous metals in 2012, according to Wall Street Journal calculations based on provincial and national statistics. "You have farms next to mountains where mining is happening, and not enough attention is placed on environmental protection," says Chen Nengchang, a soil remediation expert with the Guangdong Institute of Environmental and Soil Sciences. It is difficult to say how extensive Hunan's cadmium problem is, just as it is hard to pinpoint exactly where the cadmium in any batch of tainted rice comes from. (Continued in next column) That survey, however, was based on only 61 samples. Also, China's maximum allowable cadmium standard, 0.20 mg per kg of rice, is twice as strict as the widely used international standard. Studies have shown that Hunan rice is also polluted with excessive arsenic and lead, and that some of the rice has made it into markets. Zhu Hongqing, a 42-year-old rice farmer who lives down the road from Dapu in the village of Yanqiao, believes that his paddies are clean. They are located more than a mile from the chemical factory in Dapu and many miles from any mine. But consumer paranoia, amplified by a lack of information, means that the market for all Hunan rice is suffering, with prices of milled rice dipping as much as 14% since the cadmium scare began before recovering slightly, according to a manager at Jincheng Rice Mill in Hunan's Yiyang City. "I told my wife I have a very bad feeling about this," Mr. Zhu said one recent morning while surveying an early rice crop on the cusp of being harvested. "It is going to be impossible to sell it." (Continued on next page) July/August 2013 www.giract.com Page 61 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW China's Bad Earth (Contd) China's Bad Earth (Contd) The political sensitivity surrounding soil pollution is evident back in Dapu, where villagers were afraid to give their names for fear of reprisals from local officials. The farmer who is growing bad rice says that the village had long been a clean and prosperous place. Residents made a comfortable living selling rice, jujubes, oranges and melons. That changed in 2008, when construction began on an aluminium fluoride facility. He said that none of the factory emissions were harmful to human health and added that the company paid pollution compensation as required by regulations. "Conflict between farmers and enterprises happens all the time because chemical factories can only be set up in the countryside," said the official, who only gave his surname, Li. "I totally understand the local people. I'm the son of a farmer myself." The plant ran 24 hours a day, she says, sending smoke over local fields when the southern winds began to blow in late summer and polluting irrigation systems to the point that even the insects have fled. The fruit trees stopped bearing fruit, and whatever did grow, no one was willing to buy. After villagers complained, the factory owners agreed to pay compensation as long as farmers continued to raise a crop. The Dapu farmer says that she used to earn as much as RMB 10 000, or USD 1630, each year from growing rice. Now she gets about RMB 5400, or USD 880, to grow rice shoots that don't produce any rice. An official in charge of environmental protection at the factory, Hunan Nonferrous Fluoride Chemical, Co. Ltd., a subsidiary of state-run China Minmetals Group, said that the facility maintained strict environmental standards but that faulty equipment and electricity problems occasionally led to the accidental discharge of excess pollution. (Continued in next column) July/August 2013 Officials at the Hengdong Agricultural Bureau, which is responsible for monitoring Dapu, hung up the phone repeatedly. (wallstreetjournal 27/7/2013) Ice on the rocks as 80% from 'illegal' factories As much as 80% of the edible ice cubes in Beijing's shops and restaurants come from "illegal" factories, National Business Daily reported. Only six manufacturers have production license for edible ice in the capital, making the total output valued at RMB 100 mio in the summer season. But the output of the whole market is valued at RMB 500 to 800 mio, which means at least 80% of the ice comes from non-qualified factories, the report said. Edible ice companies must have a QS, or Quality Standard identification since 2005. And it costs at least RMB 30 000 to cover the certification besides building laboratories and hiring inspectors, according to an agency for quality certification. (Continued on next page) www.giract.com Page 62 Food Industry News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Ice on the rocks as 80% from 'illegal' factories (Contd) A Chinese trip for foodies and scientists (Contd) Ice cubes at several restaurants were found to be dirtier than toilet water, Chinese media reported last week. An exchange program between the University of California Davis and Jiangnan University's food science and technology department aims to explore those developments, fostering discussion between American and Chinese students and researchers. According to CCTV, ice cubes used by fast food giants including KFC, McDonald's and Guangzhou-based Kungfu at their Beijing branches were tested to contain bacteria at severe levels. The KFC ice cubes contained levels of bacteria which were 20 times higher than the national limit, and 13 times higher than water samples taken from toilet bowls. "The market is in chaos," said an employee of an ice company, "Costs are increasing and those with qualification certificates would have closed down if they didn't rely on big buyers." (cd 31/7/2013) A Chinese trip for foodies and scientists Although for many years Chinese cuisine was only prepared within the home or at local restaurants, globalization and the opening up of China have driven a demand for canned, packaged and frozen food products. In the US, the science behind packaging food for mass consumption and distribution has developed over decades; that process is behind in China, where a number of food-safety scandals have made the news in the last few years. (Continued in next column) July/August 2013 "Taste of China," led by UC Davis department of Food Science and Technology professor Charles F. Shoemaker, sends a group of American students to China for a one-month summer immersion program that includes on-campus lectures in Wuxi, cooking classes and visits to Suzhou, Hangzhou, Shaoxing and Shanghai. "In the past, people really only came to the US to study food, but these days it is important for our students to get out and visit other countries to learn about their food cultures too," Shoemaker told China Daily after his return from this year's trip. "So much of Chinese culture is built around and over food, and I wanted to use the trip as a way to look at China's history and science through the lens of food." With around 1800 undergraduate and graduate students and 100 faculty, Jiangnan University's food-science program is ranked China's best and possibly the world's largest, Shoemaker said. The curriculum is not dissimilar from UC Davis' program, which is also highly ranked. Students in food-science programs often go on to work for large food corporations like Kraft and Nestle, which employ teams of scientists. (Continued on next page) www.giract.com Page 63 Food Industry News ChinaNews Functional and Organic Foods FOOD & FOOD INGREDIENTS REVIEW A Chinese trip for foodies and scientists (Contd) Malaysian bird nests allowed to enter China again As food products are shipped around the world and can sometimes spend months on a shelf before reaching the dinner table, the chemical stability and safety of the food is absolutely essential. The scientists tasked with ensuring that the food remains fresh and also tasty have generally studied food science and technology in programs like that of UC Davis and Jiangnan University. The ban on the imports of Malaysian birds’ nests has been lifted recently. The ban was promulgated in 2011, when large concentrations of nitrites were discovered in birds nests imported from Malaysia. (tjkx 24/6/2013) Food scientists will likely have more and more opportunities to branch out into the Chinese market in the coming years, Shoemaker said. A trip like "A Taste of China" is a chance to whet their appetites, he said. Students from other programs at UC Davis have joined the trip, which also showcases Chinese culture and history. Students live in apartments on Jiangnan University's campus, and classes are also held at the university. On this year's trip the group visited Yum! Brands, the parent company of KFC in China, in an informational visit to learn about the inner workings of doing business in China. Chinese food companies are very focused on food standards in the aftermath of various tainted food scandals, and resulting deaths. The bad press and government crackdowns have made food safety a priority. "There's been a rapid change in the way their infrastructure and distribution systems work, and China is finally catching up," Shoemaker said. "Exchange and research programs are important to that process." (cd 31/7/2013) July/August 2013 Dupont opens probiotic facility in China DuPont has launched production at its state-ofthe-an probiotic blending and packaging facility in China. The new site in Beijing represents DuPont Nutrition & Health’s first step in packaging probiotics into ready-to-market formats that allow DuPont to offer its customers improved speed to market, quality and flexibility. Investment and capacity were not disclosed. In 2011, DuPont purchased a food processing plant north of Beijing and converted it into a new cutting-edge probiotic blending and packaging site to serve dietary supplement and food and beverage customers globally and more specifically China and the Asia Pacific region. (Continued on next page) www.giract.com Page 64 Functional and Organic Foods ChinaNews FOOD & FOOD INGREDIENTS REVIEW Dupont opens probiotic facility in China (Contd) Dupont opens probiotic facility in China (Contd) The investment is part of a global multi-year capacity expansion program for cultures and probiotics in the United States, Europe and now in China. The probiotic formulations offer unique improvements for digestive and immune health and other well-being benefits for the dietary supplement, dairy and beverage markets. Probiotic cultures will be sourced from the company’s North American and European sites. “Probiotics is a fast-growing segment of our business and the industry is experiencing double-digit growth rates annually around the world and in China,” said Fabienne Saadane-Oaks, vice president Health and Protection, DuPont Nutrition & Health. “As we continue to support the world’s growing population, this expansion allows us to custom blend and package high-quality probiotic products for our customers in the fast-growing dietary supplement and food and beverage industries close to our customers, where we want to be.” The new facility will allow customers to source ready4-market probiotic formulations consisting of Danisco HOWARU premium and FloraFIT custom probiotic brands. And, by DuPont managing the process throughout, customers will be assured of the highest standard of food safety and quality. The new facility in China will be able to custom blend the ingredients to meet the requirements of local customers. China is already a significant market for the YO-MIX dairy cultures from the DuPonttm Danisco range. According to industry estimates, in 2012 the market for probiotics globally totaled more than USD 32 bio. That total is expected to increase to USD 45 bio by 2018. More than 90% of the total is attributed to food, beverage and dietary supplements. DuPont has eight sites in China that provide a range of food ingredients, from emulsifiers, hydrocolloids (blended ingredients), enzymes and sweetener ingredients to food protection ingredients, soy protein, lecithin and fiber, and molecular diagnostic solutions. (fif 16/7/2013) DuPont Sees Niche in Curing China's Indigestion “This expansion is a further reinforcement of the DuPont long-standing commitment to China, our customers and consumers. We are in action to help address some major challenges facing the world, among those is the need for nutritious and quality food, resulted from population growth and urbanization,” added Tony Su, president, DuPont Greater China. Just reading recent headlines about food-safety scandals in China might be enough to give a polite person indigestion. This week CCTV reported that ice cubes found in some KFC (YUM) and McDonald’s (MCD) Beijing branches contained more bacteria than toilet water. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 65 Functional and Organic Foods ChinaNews FOOD & FOOD INGREDIENTS REVIEW DuPont Sees Niche in Curing China's Indigestion (Contd) DuPont Sees Niche in Curing China's Indigestion (Contd) According to industry estimates cited by DuPont, the global probiotics market is valued at USD 32 bio and projected to grow to USD 45 bio by 2018. Asia is seen as a prime growth region, says Fabienne Saadane-Oaks, vice president for health and protection at DuPont Nutrition & Health, adding that the Beijing facility will cater to “specific Chinese needs for flavors, formats, and textures.” (Beijing grocers often carry blueberry-taro root yogurt, for instance.) Other recent media investigations have exposed gutter oil “recycled” as cooking oil; rat meat sold as “lamb”; and growth-chemical-laced exploding watermelons. But where there’s a problem, there’s often a business opportunity: Companies selling digestive aids, dietary supplements, are nutrition products are now finding a hungry market in China. Last week DuPont (DFT) opened a new state-of-the-art probiotics blending and packaging facility in Beijing. Previously the company operated a small pilot plant to test the Chinese market. Probiotics are the “good” bacteria—such as live cultures found in yogurts—that can help maintain a healthy digestive and immune system. DuPont’s new facility will work with both dietary-supplement and dairy companies in China. (Continued in next column) July/August 2013 According to DuPont’s research, the market for health supplements in China is growing at a fast 15% a year. Supplements to enhance digestive health are especially popular. According to Saadane-Oaks, half of all diseases caused by microorganisms in China are due to contamination in the food supply. Word up: Gutter oil is tough on the tummy. China also has a nascent organic foods industry. For instance, Green Yard, a small “organic” dairy farm on the outskirts of Beijing, where cows are fed only organic fodder, is becoming popular among expats and capital foodies. (Still unconfirmed is whether the cows breathe rarefied air, apart from Beijing’s toxic smog) (Bloomberg 24/7/2013) We usually try to avoid including several items on the same topic. However, these two items are quite complementary. www.giract.com Page 66 Ingredient News ChinaNews FOOD & FOOD INGREDIENTS REVIEW ING US to levy anti-dumping duty on xanthan gum from China The United States decided on Thursday to levy anti-dumping duty on xanthan gum imported from China. US to levy anti-dumping duty on xanthan gum from China (Contd) The Chinese Ministry of Commerce has repeatedly urged the United States to abide by its commitment against trade protectionism and work together with China and other members of the international community to maintain a free, open and just international trade environment. (cd 21/6/2013) Solvay to boost vanillin production with new Chinese facility Solvay has announced its decision to build a new state-of-the-art facility to manufacture vanillin in Zhenjiang (Jiangsu) [1], boosting its production capacities by 40% and enabling the Group to better serve the fast-growing Asian market. The US International Trade Commission (ITC) claimed that the domestic industry was threatened or materially injured by imports of xanthan gum from China, setting the stage for the Commerce Department to impose punitive duty on these products. The Commerce Department alleged on May 29 that Chinese producers and exporters sold xanthan gum in the US market at dumping margins ranging from 15.09% to 154.07%. It said that imports of xanthan gum from China were valued at an estimated USD 82.4 mio in 2012. Xanthan gum is used as a thickener and stabilizer in three major sectors, namely, food and beverage, consumer and pharmaceutical products, and oilfield and industrial use. Solvay Aroma Performance is the world’s biggest producer of vanillin with facilities in Baton Rouge in the United States and Saint-Fons in France. Combined with the new plant in Zhenjiang, expected to be operational by the end of 2014, the company’s worldwide production capacities for vanillin and ethyl-vanillin will expand significantly. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 67 Ingredient News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Solvay to boost vanillin production with new Chinese facility (Contd) Solvay to boost vanillin production with new Chinese facility (Contd) Demand for vanillin in Asia is outpacing worldwide demand. The Aroma Performance global business unit includes Solvay Group’s diphenol and fluorinated intermediates operations, comprising three main product segments: flavors and fragrances for the food and perfumery markets (with its flagship vanillin and ethyl-vanillin product line sold under the Rhovanil and Rhodiarome brand names); intermediates for the crop protection, pharmaceutical and electronics markets; and finally, inhibitors solutions used for by-products of the petrochemical industry. The Zhenjiang facility will be fully compliant with both international and local stringent regulations. With this new investment, Solvay Aroma Performance establishes a unique, sustainable and global industrial fully integrated vanillin platform, spread over three continents, and controls the entire production chain, from making the raw material catechol to flagship end products like Rhovanil vanillin. A network of fully equipped food application laboratories and food technologists together with a dedicated sales force cater for specific local demands and serve clients worldwide with a complete product range to meet strict regulatory and customer safety requirements. “The addition of this manufacturing facility in China makes of Solvay a uniquely positioned highly reliable partner for our worldwide customers, especially those in the highly regulated food industry. It is an important step in our strategy to continue strengthening our market position, by offering a truly global production footprint that ensures full traceability for food safety and to consolidate Solvay as the global reference for food-safe vanillin” says Dominique Rage, President of Solvay Aroma Performance. (Continued in next column) As an international chemical group, Solvay assists industries in finding and implementing ever more responsible and value-creating solutions. The Group is firmly committed to sustainable development and focused on innovation and operational excellence. Solvay serves diversified markets, generating 90% of its turnover in activities where it is one of the top three worldwide. The group is headquartered in Brussels, employs about 29 000 people in 55 countries and generated EUR 12.4 bio in net sales in 2012. (fif 2/7/2013) MSG disappearing Industry experts report that the MSG industry is gradually disappearing. Some of the older small players have tried to survive by adding chicken essence to their product range, but most of them failed in that market as well. (tjkx 2/7/2013) (Continued on next page) July/August 2013 www.giract.com Page 68 Ingredient News ChinaNews FOOD & FOOD INGREDIENTS REVIEW MSG disappearing (Contd) Pepsi to reduce use of toxic chemical (Contd) "The work has been done in California; the rest of the US will be completed by February 2014," the statement said. "PepsiCo suppliers are also undertaking this effort globally." This may apply to the smaller companies, but the large MSG producers are still going strong. Actually, chicken essence still contains about 40% MSG, so it is more like an upgraded version of MSG than a really new taste enhancer. Pepsi to reduce use of toxic chemical PepsiCo China said Thursday the company is taking measures to cut the amount of 4-methylimidazole, or 4-Mel, in its caramel coloring, after an American environmental group reported Wednesday that Pepsi products contain high levels of the cancer-causing chemical. The Centre for Environmental Health found Pepsi products bought in 10 states outside California still contains high levels of 4-Mel. PepsiCo China said in a statement to National Business Daily that the caramel coloring Pepsi used in China is legal according to local laws and regulations. A PepsiCo statement in response said their caramel coloring suppliers are modifying the production process to reduce the amount of 4-Mel. (Continued in next column) July/August 2013 Despite Pepsi's promise, Michael Green, CEH's executive director, said, "Pepsi's delay is inexplicable. We urge the company to take swift action to provide all Americans with the same safer product they're selling in California." PepsiCo's share prices fell 1.2% on Wednesday. An unnamed Chinese food expert said that safety issues about 4-Mel have not come up in China. "But it is possible 4-Mel can cause cancer," the expert said. (cd 5/7/2013) Stevia developer GLG to team up with COFCO Canada-based stevia firm GLG Life Tech plans to team up with state-backed Chinese food giant COFCO (Beijing) to develop food and drink products containing the sweetener. The two sides have signed a letter of intent to produce stevia extracts and formulated products to sell in China. The venture is GLG's second attempt in China. In 2010, it set up another business, AN0C, to sell and distribute zero-calorie food and drink products in China. However, demand zero-calorie drinks in China was low and a spokesperson said the venture is now "dormant". (Continued on next page) www.giract.com Page 69 Ingredient News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Stevia developer GLG to team up with COFCO (Contd) Stevia developer GLG to team up with COFCO (Contd) "The AN0C (All Natural, Zero Calories) products that we developed and marketed in 2011 proved that there was a market for low and zero calorie drinks sweetened with stevia. Unfortunately, at the time we launched there was also a cool summer, some problems with our bottles, and significant competitive response, so we were not able to get any momentum. We haven't had any funds to do the marketing required to re-enter the market," he said. "COFCO certainly could, they want to be able to provide these types of products, and with us, they don't need a lot of development time." "What COFCO like about the deal is that they can get a sweetener that is grown in China, does not need imported sugar," he claimed. Reflecting on the prospects for the tie-up with COFCO, China's largest food company, the GLG spokesperson said rates of obesity and diabetes were on the up in China. Government attention on the problems, he said, could lead consumers to look for zero-calorie products. "In the past, they haven't been big buyers of low or zero calorie products, but we think this will change as the government focuses on these issues," he said. "When I first started to go to China just ten years ago, hawking on the sidewalk and smoking everywhere was the norm. Now it is much different, and this is because the government focused on the issues. Next will be obesity and diabetes - hello, stevia". Restrictions on artificial high intensity sweeteners in China could also benefit the two companies, the spokesperson added. COFCO's investments include a stake in Chinese dairy Mengniu, which could become a customer for GLG's stevia products. COFCO also owns 65% of one of the two bottlers for Coca-Cola Co. in China. In the US and Europe, yoghurt, cereal and ice cream brands have used the sweetener, although stevia has been most seen in soft drinks. The GLG spokesperson said it was "too early to tell" whether the venture would focus on drinks or food. Xiao Ming Hao, president of COFCO's Nutrition and Health Institute, said: "We plan to increase the health value of stevia from developments of technology, basic application, products and quality safety and to provide more health options for the Chinese diabetic and obese population." (justfood 14/6/2013) Tate & Lyle forms food systems joint venture in China Tate & Lyle PLC has signed an agreement with Yitong Food Industry Co., Ltd. (Xuzhou, Jiangsu) [2] to form a Sino-Foreign Joint Venture through the acquisition of a 51% equity interest in Jiangsu Howbetter Food Co., Ltd, a leading Food Systems business in the People’s Republic of China. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 70 Ingredient News ChinaNews Regional News FOOD & FOOD INGREDIENTS REVIEW Tate & Lyle forms food systems joint venture in China (Contd) Tate & Lyle forms food systems joint venture in China (Contd) Olivier Rigaud, President, Speciality Food Ingredients for Tate & Lyle said: “The combination of Tate & Lyle’s global blending capabilities and recipe know-how with Howbetter’s strong local expertise and infrastructure provides us with an excellent platform on which to accelerate the growth of our Food Systems business in China.” Under the terms of the agreement, Tate & Lyle will acquire 22% of its equity interest from Yitong and the balance of 29% from S.B International, a wholly-owned subsidiary of a Europe-based global food business (which has been a shareholder in Howbetter since 2009). Tate & Lyle also has an option to acquire Yitong’s remaining 49% equity interest in Howbetter at a later stage. The transaction is subject to governmental approval which is expected in the autumn. Howbetter provides stabilizer systems and ingredient blends for customers across China mainly in the dairy and beverage categories. It operates from a blending facility in Suqian and has application laboratories in the nearby city of Xuzhou, both in Jiangsu Province. Feng Guang, Chairman, Yitong and General Manager, Howbetter, and who will also be General Manager of Tate & Lyle Howbetter said: “Tate & Lyle and Howbetter are two highly complementary businesses with the same absolute focus on quality and customer service. Together, we will be able to offer our customers in China a significantly enhanced range of products and technical expertise”. (fif 18/7/2013) Fujian Fujian still China’s canned food province According the Fujian Food Industry Association, the region’s 106 canneries produced more than 2.36 mio t of canned food in 2012, making it the top production region in this sector in China. (hcfood 1/7/2013) How better was one of the first domestic food blending businesses in China to be awarded a license to operate under new regulations put in place in 2010. (Continued in next column) July/August 2013 www.giract.com Page 71 Regional News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Fujian tea output Beijing (Contd) The Fujian Bureau of Statistics reports that the province has produced 166kt of tea in the first half of 2013, up 7.7%. The type with the largest growth was black tea, with a growth rate of 41.7%. (cbn 9/7/2013) Xinjiang Aksu attracting beverage investment The Aksu region in Xinjiang has recently become an attractor for investment from the nation’s largest beverage companies, including Uni-President, Wahaha, ChefKong and Huiyuan and Jianlibao. This preference for Aksu is attributed to the region’s abundant supply of water. (tjkx 10/7/2013) A first foreign invested winery, Chateau Bolongbao, was established in Fangshan in 1999. Also see the item on Huailai (Hebei) in this section. Gansu Fields of sunflowers star in Gansu The sunflower industry is on a track to becoming the second-largest agricultural industry in Gansu thanks to the efforts of Gansu Joy. Beijing Fangshan wine cluster The Fanshan District, situated southeast of Beijing, is regarded by many experts as ideal for developing a wine industry. The local government is actively supporting this by establishing a Fangshan Wine Cluster. A number of domestic and foreign investors have already inspected the region. (tjkx 15/7/2013) July/August 2013 On July 22, the Incredible China Photographer's Tour will arrive in Minqin, a small little-known county in Gansu province that has sprawling fields of radiant sunflowers. (Continued on next page) www.giract.com Page 72 Regional News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Gansu (Contd) Gansu (Contd) It is projected to produce 50kt of high-end cooking sunflower oil and 77kt of sunflower protein products annually. Sunflower oil contains abundant linoleic acid that helps lower blood pressure, moderate cholesterol levels and is good for cardiovascular and cerebrovascular health. Major Asian media outlets will join the tour to record the natural extravaganza, including those from The Nation in Thailand, The Korea Herald from the Republic of Korea, The Star Publications and Sin Chew Daily from Malaysia, The Straits Times from Singapore, The Kathmandu Post from Nepal, The Statesman from India, The Philippine Daily Inquirer and Gulf News from the United Arab Emirates. The tour is co-organized by China Daily and Gansu Joy Agricultural Technology Co, which manages the sunflower fields and produces Westerner-brand sunflower oil. Located at 38 degrees north latitude - called the golden line for planting - Minqin county has a sunny climate ideal for growing sunflowers. Gansu Joy now cultivates 16 666 hectares of sunflowers in Minqin and is preparing a new plantation and processing facility in Lanzhou, capital of Gansu province and it is expected to put into service this September. With total investment of RMB 1.87 bio, the new site in Lanzhou will be ready in September. (Continued in next column) July/August 2013 Today coronary heart disease, stroke, cerebral thrombosis, arteriosclerosis and high blood pressure are on the increase, but using appropriate oil can help, said Cao Wanxin, a professor from the Xi'an Oil Science Research Institute. According to industry data, sunflower oil now ranks third among all vegetable oils in consumption worldwide. In Eastern Europe, sunflower oil is second only to soybean oil. In Japan and the ROK, sunflower oil is widely used as a high-end product. In Japan it is often presented as a gift. Use of sunflower oil is increasing in China as well. It is estimated that in 2015 its consumption will reach 650kt, accounting 2% of the nation's total cooking oil. If the proportion can be increased to 5%, it will mean a great opportunity for the industry, analysts said. They noted that today consumers choose cooking oil not only according to standards for safety and hygiene, but also its nutrition and health. (Continued on next page) www.giract.com Page 73 Regional News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Gansu (Contd) Gansu (Contd) The increasing awareness of health among domestic consumers in large part fuels the rise in use of sunflower oil, they said. Gansu Joy is expanding sales of its Westerner-brand sunflower oil beyond the province with sales channels in the nearby provinces of Shaanxi, Qinghai, Sichuan, and the Inner Mongolia and Ningxia Hui autonomous regions, as well as big cities like Beijing, Shanghai and Guangzhou and prosperous eastern provinces including Jiangsu and Zhejiang. It has also expanded into overseas markets such as Japan. According to Gansu Joy, sunflower oil is smokeless at high temperature and is a good choice for frying foods or baking. It is easily absorbed by the human body and has pleasant fragrance, the company said. In addition to its effects in improving cardiovascular and cerebrovascular health, sunflower oil may also help improve one's complexion because it is rich in vitamin E, the company said. The premium cooking oil market in China is now dominated by foreign companies, especially Spanish and Italian olive oil producers. Imported from their places of origin abroad, the oil is usually packed in small bottles and sold at high prices. Analysts said that China's high-end cooking oil market has large potential and it is possible for more domestic brands to sell their own superior products to compete with foreign counterparts. They also noted that government policy also encourages domestic companies to develop quality cooking oil. Currently Westerner brand is the only homegrown sunflower oil product to receive the certification of "green, organic food" from the Ministry of Agriculture. It has also been granted the status as a "famous trademark of Gansu." The company said it adheres to the goal of pursuing the best quality through strict quality controls of every link along the production chain, starting from the selection of seeds to planting and processing. It said that only high quality will enable the company to gain a foothold in the market as consumer are more aware of food safety. With intensive investment in research and development, the company plans to develop more sunflower-related products in the future. In the 12th Five-Year Plan (2011-15) for the food industry, the government has called for companies to produce more diverse products than traditional soybean oil. The Gansu Sunflower Association started by the company now has 31 members including Lanzhou University, Lanzhou University of Technology, Gansu Agricultural University and the Gansu Academy of Agricultural Science. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 74 Regional News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Gansu (Contd) Shanxi (Contd) In cooperation with academic partners, the company has to date developed 11 sunflower oil products and owns the intellectual property in a sunflower protein convenience food. With help from the China Association for Science and Technology, the company also established an exchange center on technology and plans to invite experts and professionals from both home and abroad to jointly work on improvements in the sunflower industry. The company said that the sunflower has many benefits. Its seed can be made into oil, while its flowers, leave, stem, pith and root can all be used in traditional medicine. Its petal and leaves can strengthen the stomach and aid digestion, its pith can be made into diuretic drug and other parts are effective in reducing blood pressure. In addition, growing sunflowers is a good choice both ecologically and economically in the western regions in China because it changes the desert into oasis and helps local residents in the quest to rise from poverty. (cd 18/7/2013) Shanxi This tie has forged a similar friendship between the famous Fenjiu spirit produced in Lüliang and Burgundy wine. (tjkx 13/6/2013) Hebei Huailai plans to be major wine region 10 new wine projects have been initiated in Huailai (Zhangjiakou, Hebei) last year, involving a total investment of RMB 540 mio. The region is currenty the home of 33 wineries. The local authorities have adopted wine making as a pillar of the local economy and intend to register the Shacheng region of Huailai as an official DOC. Friends in spirits Lüliang (Shanxi) has a signed a friendship agreement with Semur-En-Auxois in France’s Burgundy. They hope that the number of wineries will increase to 50 in the coming 2–3 years. (tjkx 26/7/2013) (Continued in next column) July/August 2013 www.giract.com Page 75 Regional News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Hebei (Contd) Zhejiang (Contd) At Baizhang Town in Yuhang, 5000-plus locals have been short on water for over a month since streams near the town dried up. They have had to depend on a small fire truck that sends water into the town everyday, shallow wells and tap water from nearby towns via pipes. Huailai is located near Beijing, so this item can be compared to the one about Fangshan in this section. It is the home base of the Great Wall brand, now part of the COFCO Group. It seems that the region around Beijing and its twin city Tianjin (the home of Dynasty, Remi-Martiin’s Chinese venture) is becoming an important wine region. Zhejiang Water grows scarce for thousands as drought, heat blast landscape About 58 000 people in Hangzhou (Zhejiang) are feeling some of the worst effects of the summer’s prolonged drought and extreme heat in the form of scarcity of water for drinking, bathing and other uses, according to Hangzhou Forestry Bureau. More than half of them are in Yuhang District, and the rest are at Chun’an and Lin’an. The fire truck can only offer each household two barrels of water a day, the water from the shallow wells is neither abundant nor very clean, and water piped from nearby towns is good only for irrigating crops and is scarce as well. “Over 5000 people are suffering from drought ever since the 44 water intakes in the town dried up a month ago,” says Ma Guojun, director of the agriculture office in Baizhang Town. In some places, the heat has been very extreme: A high of 43.5 degrees Celsius was recorded in Fenghua in east Zhejiang twice last week. High temperatures in 27 of the 36 cities and counties in the province surpassed 40 degrees Celsius for more than a week. Fifteen people in Zhejiang Province had died by yesterday from heat-related illnesses. Villagers in Yashan Village of Baizhang Town said it had not rained since the end of June and an artificial rain that officials produced by seeding clouds was too small to do much good. Before the fire truck was put into water service, they had to carry water from villages kilometers away. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 76 Regional News ChinaNews Company News FOOD & FOOD INGREDIENTS REVIEW Zhejiang (Contd) Zhejiang (Contd) The fire truck, from the nearby Huanghu Fire Brigade, has only a small, 3.5 t water capacity, but it is the largest such vehicle that can navigate the area’s hilly roads, officials said. The truck also supplies two barrels a day per household in Dusong Village in the town, where “500 villagers haven’t had a shower for a whole month,” resident Wang Daoliang said. The withering weather also caused the price of fresh vegetables to rise 5.3% last week after increasing 2.7% last month, according to Hangzhou Statistics Bureau. Residents are asking to have more water piped in, and the local Yuhang Meteorological Bureau says it is ready to seed clouds to produce rain when there are clouds in the sky. Hangzhou has spent RMB 80 mio on its drought response, including trucking in water, irrigating farms and seeding clouds. On Friday, Hangzhou began cutting back on power usage with an “orderly power utility” policy as a result of a daily 100-kw power deficit. The policy requires that all nighttime illumination of scenery must be shut off, manufacturing that does not require continuous operations is required to halt production for four days a week and high-energy-consumption enterprises must stay idle five days a week. Department stores, hotels and office buildings must reduce electricity consumption by 20% during the morning peak. Hot and dry conditions led to a forest fire that broke out on the hills in Fuyang City in Hangzhou a week ago that took firefighters two days to put out. It rekindled on Thursday and wasn’t put out again until Sunday. More than 77 000 hectares of farmland have been damaged in Hangzhou, causing 646 mio yuan in losses, Xinhua news agency reported. Specialty crops in the area such as tea, lotus and hickory nuts have been hit very hard. While high temperatures will persist most of the week, it should be a few degrees cooler, and then the temperature is forecast to drop some more toward the end of the week. (sd 13/8/2013) Hickory nuts have become a popular snack in recent years. Desserts recalled in Taiwan, sold on mainland Desserts recalled by the Taiwan company Uni-President were still being produced and sold on the Chinese mainland on Sunday, two days after they were removed from shelves in Taiwan as a precaution. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 77 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Desserts recalled in Taiwan, sold on mainland (Contd) Desserts recalled in Taiwan, sold on mainland (Contd) Uni-President's Taiwan office recalled seven products on Friday after they were found to contain an ingredient bought from supplier Roci Industrial Co. A worker at the company's Kunshan (Jiangsu) [1] plant, who gave only his surname, Lin, said it has its own suppliers of raw materials. Roci had previously been caught selling one ingredient it produced after their expiration date, namely locust bean gum, and agar powder, an industrial additive. The products recalled by Uni-President contained a different ingredient, carrageenan, which is an approved food-hardening agent. "Some of the ingredients come from Taiwan, but I'm not sure if the seven products, which were recalled in Taiwan, are involved," said a man who gave his name as Wang at the Beijing branch of Uni-President China Holdings Ltd. Wang said staff at the Beijing plant had not been informed of a recall. The plant sells its products in the capital, neighboring Tianjin and in the provinces of Shanxi and Hebei, according to the company's website. "It is impossible to import ingredients from Taiwan. All our materials are from the mainland," he said. The seven products recalled were two pudding products and five ice-cream products. The pudding, which is the most popular of the seven, is sold on the mainland, according to the Uni-President China website. When contacted, the other Uni-President branches on the mainland denied using ingredients from Roci. Zhou Feng, who works in sales for Uni-President's Wuhan branch, said the products on the mainland are not related to the food scare in Taiwan as they do not import ingredients from the province. (Continued in next column) In an outlet of FamilyMart, a chain convenience store in Shanghai's Huangpu district, clerk Zhao Weiyuan said there had been no notification that the product needed to be removed from shelves. (Continued on next page) July/August 2013 www.giract.com Page 78 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Desserts recalled in Taiwan, sold on mainland (Contd) Mengniu offers to buy Yashili (Contd) Zhang Yusong, a spokesman for the Shanghai industry watchdog, said if the company claimed they had suppliers on the mainland and the questionable products did not flow into the market, Shanghai is not involved in the food scare. "We'll release a notice of any possible recall after an inspection on Monday," Zhang said. In a Saturday notice on its website, Uni-President Taiwan said the products it recalled contain carrageenan produced by Roci, adding that preliminary tests on materials from Roci proved they met food standards. "We suspended the sales to protect the rights and interests of the consumers and cooperate with a judicial investigation. We will resume sales after we conclusively ensure the safety of the ingredients," the notice added. (cd 3/6/2013) Mengniu is buying a 75% stake in Yashili International Holdings Ltd from chairman Zhang Lidian's family and Carlyle Group. It will also offer to buy the rest of the company, giving shareholders the option to sell at HKD 3.50 a share in cash, or about 5% more than Yashili's last trading price. The move will help the Inner Mongolian producer catch up with domestic rivals in the baby milk formula market, which is estimated to be worth more than RMB 50 bio, according to Song Liang, a dairy industry analyst at the Distribution Productivity Promotion Center of China Commerce. Last year, Mengniu's milk formula sales were worth no more than RMB 300 mio, only contributing 1.6% of its revenue. Yashili (Chao’an, Guangdong) [3], ranked eighth in China's milk formula market, had a growth rate of 35.8% last year. Mengniu offers to buy Yashili Largest single domestic deal for baby formula maker valued at USD 1.6 bio. Mengniu Dairy Co. (Huhhot, Inner Mongolia) [2], the country's largest dairy producer, has offered to acquire a domestic baby formula maker in a deal valued at about USD 1.6 bio, to boost its presence in the highly profitable sector of the dairy industry. The acquisition, which would be the largest single deal in the domestic dairy industry, is expected to lead to further integration in China's milk powder business. (Continued in next column) July/August 2013 The acquisition would pave the way for integration in the milk formula sector as demand for baby food rises and the government pushes for safer products. The domestic baby milk formula market has been severely weakened since a milk powder scandal in 2008 and is losing its majority market share in high-end products to foreign rivals. The acquisition move also indicates the government's efforts to encourage integration in the dairy industry, especially in the milk formula sector, said Jian Aihua, a researcher with CIConsulting, a leading industry research institution. (Continued on next page) www.giract.com Page 79 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Mengniu offers to buy Yashili (Contd) Industry experts predict the 127 baby milk formula producers in China will be halved, making it hard for those with a smaller production capacity to survive. The Ministry of Industry and Information Technology said on Tuesday that integration of the milk powder industry is expected to involve 10 large companies with revenues exceeding RMB 2 bio in two years, accounting for 70% of the industry. The State Council said this month China will take measures to ensure the safety of baby milk products and will draft policies to support mergers and acquisitions among formula producers. The acquisition would be Mengniu's third this year. French food giant Groupe Danone SA has invested in two joint projects with Mengniu, a move that will help improve Danone's sliding market share in China and restore consumers' confidence in the country's dairy market. Danone will invest about EUR 325 mio in the projects. Through the deals, Mengniu will probably achieve breakthroughs in the high-end yogurt sector, allowing it to rival domestic competitors. Two months ago, to secure the quality and safety of its milk supply, Mengniu announced plans to pay HKD 3.18 bio, or HKD 2.45 per share, to take a controlling stake, or 26.9% stake, in the country's largest raw milk producer China Modern Dairy Holding Ltd, which owns 22 dairy farms nationwide. (cd 19/6/2013) July/August 2013 French milk brand sets up in China to woo worried parents French milk brand Candia announced Monday it was setting up shop in China in a bid to ride on the wave of booming demand for foreign baby formula following a succession of food safety scares. Chinese parents have become distrustful of domestic milk brands, particularly after a huge 2008 scandal involving formula tainted with melamine that killed six children and sickened 300 000 others. Foreign brands have benefitted as parents choose to buy non domestic products, driven by the belief they are of better quality. Surfing on this demand, Candia said Monday it had opened its first shop on July 23 in the eastern city of Wenzhou. Ten other shops will open before the end of the year, centred around the eastern coast in the cities of Hangzhou and Ningbo. “The choice (we made) of a specialised distribution system is essential in a country where consumers have a heightened need of reassurance on the origin of products, particularly for milk and baby formula,” the brand said in a statement. “The Candia brand offers Chinese customers a source of direct supply from France,” said Giampaolo Schiratti, head of the brand. Chinese demand for foreign baby formula is such that many parents and networks of traffickers have travelled far and wide to buy up stock, forcing some stores abroad to limit sales in the wake of shortages. (Continued on next page) www.giract.com Page 80 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW French milk brand sets up in China to woo worried parents (Contd) Baby-Milk Demand Helps to Lift Danone (Contd) The announcement comes as foreign formula manufacturers already in China have come under government scrutiny in an apparent price fixing investigation. Several companies have since announced they will cut prices for milk in what has become the world’s largest market for baby formula. (theglobaldairy 30/7/2013) China—which has become one of the world’s largest infant formula markets—has been a key growth driver for Danone since the rise of the middle class there and as well as concerns about the safety of Chinese-made dairy products. Switzerland’s Nestlé SA, Netherlands-based Royal FrieslandCampina NV and U.S.-based Abbott Laboratories and Mead Johnson Nutrition Co. are also under investigation. Baby-Milk Demand Helps to Lift Danone Strong demand for baby milk in China helped Danone stem falling sales in Europe in the second quarter, as the company tried to reassure investors about growth in the Chinese market after it cut prices on infant formula. Strong demand for baby milk in China helped Danone SA stem falling sales in Europe in the second quarter, as the company tried to reassure investors about future growth in the lucrative Chinese market after it cut prices on infant formula. The maker of yogurt brands including Danone, Dannon and Activia on Monday confirmed its full-year targets, despite recent price cuts in China amid a probe into foreign makers of infant formula and inflation in raw-material prices. Danone earlier this month cut prices for baby-milk products in China after local authorities started probing foreign makers of infant formula for possible price fixing and anticompetitive activity. (Continued in next column) All companies have cut prices and said they are cooperating with authorities. Danone pared prices by as much as 20%, while Nestlé sliced an average 11% from its Wyeth Nutrition line of baby products in China, where a can of baby milk powder can cost up to four times more than in Europe. Analysts have said they are concerned such cuts could weigh on Danone’s margins, adding to continuing concerns over lackluster consumer spending in Europe and an inflation of raw-material prices recently. Danone Chief Financial Officer Pierre-André Térisse said the price cuts will have some impact on the group but that this will be “manageable.” “We are fundamentally positive for the prospects of China,” he said on a conference call. Danone aims for its second-half margin to be at least in line with the 13.3% posted in the first six months, which was down 0.49%age point from the same period last year, mainly from investments in boosting volumes in Europe. “We will try to do more,” Mr. Térisse said. (Continued on next page) July/August 2013 www.giract.com Page 81 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Baby-Milk Demand Helps to Lift Danone (Contd) Baby-Milk Demand Helps to Lift Danone (Contd) “It is not entirely clear what the impact of price cuts in China will be,” said Société Générale analyst Warren Ackerman. “If input costs are going up for milk powder and prices go down, obviously your margin is squeezed but Danone may try to get back some of the losses from price cuts by investing less in promotions.” On an organic basis—stripping out acquisitions and currency swings—revenue rose 6.5%against analyst expectations for 5.7%. Sales of baby formula in China are projected to reach USD 29.5 bio in 2017, up from USD 12.4 bio in 2012, according to research firm Euromonitor International. Foreign makers of baby milk like Danone have benefited from Chinese parents rushing to their products since a 2008 scandal—when dangerous levels of an industrial chemical killed at least six infants and made many more ill—scared them away from locally produced baby milk. The rush to foreign-made baby milk has even led to some retailers in Europe rationing the purchase of baby milk as Chinese visitors would buy up cans of formula and bring or ship them back home. This trend, along with sales in China and Hong Kong, helped drive 13.5% organic revenue growth at Danone’s baby-food segment in the second quarter. Danone said sales for the three months ended June 30 rose 6.7% to EUR 5.72 bio (USD 7.6 bio). Sales growth was solid growth in the U.S. and Russia. In Europe, where sales have been falling sharply due to weak economic conditions, second-quarter sales fell 3% from a year earlier, organically, but that was a better showing than in the first quarter, when sales in Europe fell 5.1%. For the first half of the year, Danone profit rose 10% to EUR 972 mio from EUR 881 mio a year earlier, reflecting a higher valuation of its stake in Moroccan unit Centrale Laitière. Danone’s EUR 200 mio European cost-savings plan is running on schedule and should also help buoy margins in the second half of the year, said Chairman and Chief Executive Officer Franck Riboud in a statement. (theglobaldairy 30/7/2013) Milkworld venturing into China The New Zealand based dairy company Milkworld has started selling its product in China through its local agent Jianbang International Trade Co., Ltd. (hexun 1/8/2013) This news was released just before Fonterra made headlines with its botulism-contaminated whey powder. Although we have not received further news about Milkworld, the company’s launch in China will certainly have been affected by Fonterra’s problems. (Continued in next column) July/August 2013 www.giract.com Page 82 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Mead Johnson sees China infant nutrition rebound Mead Johnson sees China infant nutrition rebound (Contd) Infant nutrition company Mead Johnson has announced its financial results for the quarter ended June 30, 2013. Sales increased 4% to USD 1055 mio. Sales growth was 8% in the Asia/Latin America segment, partially offset by a 4% decline in the North America/Europe segment due to the impact of businesses exited in late 2012. EBIT for the first six months of 2013 totaled USD 480.7 mio, down from USD 497.1 mio in the same period of the prior year. “We are encouraged by our revenue growth in the quarter,” said CEO Peter Kasper Jakobsen. “It allowed us to increase demand-generation investments. Our China/Hong Kong business has returned to positive volume growth after three consecutive quarters of decline. We are fully cooperating with the Chinese regulatory authorities in the ongoing probe. We expect to meet with them again in the near future with the objective of reaching a final resolution. We remain confident in our long-term prospects in this important market. Sales growth was strong across South Asia and Latin America, with a majority of markets showing increases in market share. In the North America/Europe segment, we saw higher non-WIC market share in the U.S. offsetting lower category consumption. Importantly, we made significantly higher investments in demand generation throughout our global operations in order to drive future growth.” Sales for the six months ended June 30, 2013 totaled USD 2093.2 mio, up 5% from USD 1998.9 mio a year ago. Sales increased 4% from price and 1% from volume. (Continued in In the first half of 2013, as compared to the prior-year period, higher sales and improved gross margins were offset by higher demand-generation investments, transaction gains related to foreign exchange seen in the prior year, and higher pension settlement expense. “We expect to deliver constant-dollar sales growth of about eight% from core operations,” Jakobsen said. “We anticipate growth across our global portfolio will offset any sales impact from recent price decreases in China. We will continue to invest in demand generation where we see opportunities to accelerate growth.” Mead Johnson expects reported sales growth of 6%. This reflects a 2% impact from discontinued non-core businesses and a strengthening U.S. dollar. (ingredientsnetwork 29/7/2013) Bright Dairy keeps control of Synlait Milk despite dilution The NZX is allowing Chinese dairy player Bright Dairy (Shanghai) to keep control of Canterbury milk company Synlait’s board despite a dilution in its stake from a USD 120 mio public offering of shares. (Continued on next page) next column) July/August 2013 www.giract.com Page 83 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Bright Dairy keeps control of Synlait Milk despite dilution (Contd) Bright Dairy keeps control of Synlait Milk despite dilution (Contd) The NZX has also granted Synlait Milk a waiver allowing the Bright Dairy-appointed directors who cannot attend a meeting to appoint another Bright dairy director to exercise their voting right. The exchange said today it was granting Canterbury dairy processor and exporter Synlait Milk a waiver from a listing rule and that will permit Bright Dairy to continue to appoint four of eight directors even though its shareholding will dilute to between 38% and 41% with the USD 120 mio offer of shares to the public. Bright Dairy holds 51% now, after it pumped USD 82 mio into Synlait Milk in late 2010. It is not buying any new shares in the share offer to keep its holding at 51%. Synlait Milk told the NZX that Bright Dairy would not support the share offer unless it could continue to consolidate Synlait Milk into its accounts under China’s accounting rules and to do that it had to have control of Synlait Milk’s board. Synlait Milk announced its offer this morning. The company is raising USD 75 mio from the issue of new shares and would offer also up to USD 45 mio of shares from existing shareholders selling all of part of their shareholdings. Synlait said an indicative share price would be USD 2.05 to USD 2.65 for the shares. That would give the company a market value of between USD 305 mio and USD 372 mio. Synlait Milk was expected to list on the NZX’s main board on July 23. The USD 75 mio new capital would be used for growth initiatives. (global dairy 24/6/2013) How Nestlé finds clean milk in China NZX has agreed on the conditions the ”special” governance arrangements are contained in Synlait Milk’s Constitution and are fully disclosed in the offer documents and every annual report during which the arrangements apply, and that Bright Dairy holds no less than 37% of Synlait Milk. Exploding watermelons, toxic peanuts, and contaminated rice are just some of the food hazards that routinely bedevil Chinese consumers. The risks of contamination are particularly far-reaching in the case of milk, since more than 70% of Chinese mothers rely on baby formula rather than breast milk to feed their babies. Longstanding concerns regarding unsafe milk in China came to a head in late 2008, when the Chinese authorities accused more than 20 domestic producers of selling milk adulterated with melamine. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 84 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW How Nestlé finds clean milk in China (Contd) How Nestlé finds clean milk in China (Contd) Six infants died and more than 50 000 babies were hospitalized. In 2011, regulators closed more than 400 dairy farms for violating sanitation and certification standards. Domestic sourcing of milk can yield a significant cost advantage, build the local supplier ecosystem, and prepare the ground for the day when Chinese parents start trusting local milk as reliable enough for their babies. Growing numbers of Chinese families have responded by shunning domestic infant formula in favor of imported brands. That’s creating challenges for both local and multinational companies selling dairy products in China. The country’s largest dairy producer, China Mengniu Dairy, on June 18 announced a HKD 12.5 bio deal to buy Yashili International, a local infantformula maker. The deal makes sense because “the government is trying to consolidate the industry,” Guosen Securities analyst Todd Yang told Bloomberg News. The goal is to “better monitor both upstream and downstream food quality.” China Mengniu isn’t the only company positioning itself to benefit from China’s renewed focus on fixing its troubled food supply. To see how one multinational is handling the challenges, consider Nestlé, the world’s biggest food company. Like almost all other big foreign companies selling dairy products in China, Nestlé relies on imported milk powder for its infant formula. For other dairy products, however, Nestlé stands out for meeting its raw material needs by buying fresh milk from Chinese farmers. (Continued in next column) July/August 2013 That’s no easy task. Nestlé’s milk collection is concentrated primarily in northeast China, where, as in much of the country, the dairy sector is very fragmented: More than 18 000 farmers supply Nestlé with a daily average of 100 liters of milk. Given this structure, there are many points where milk can become contaminated, so Nestlé utilizes what it calls a “factory and farmers” model that eliminates the middleman. Farmers bring milk directly to a network of Nestlé-owned collection centers, none more than an hour’s distance from the farm, where a computerized system samples, tests, and tags each batch of milk. To reduce further the risk of contamination at the source, the company provides farmers with continuous training and assistance in cow selection, feed quality, storage, and other areas. Now Nestlé is implementing a more ambitious strategy to transform its milk supply chain by collaborating with local governments, banks, and investors to accelerate the consolidation of China’s dairy farms. Fewer, larger, and professionally managed dairy farms will have more reliable quality and use land and labor more productively. (Continued on next page) www.giract.com Page 85 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW How Nestlé finds clean milk in China (Contd) How Nestlé finds clean milk in China (Contd) Nestlé is building a new institute to upgrade the training that staff at larger and more professionally managed farms need. Around the institute, Nestlé is building three demonstration farms with thousands of cows. For farmers who want to increase their scale, Nestlé is providing credit guarantees to finance purchases of more cows. Like Nestlé, global companies can leverage their knowhow and scale to help accelerate the upgrading of their suppliers’ capabilities. The Nestlé case offers five important lessons. First, build visibility into and control over the supply chain. Know your suppliers and, as much as possible, their suppliers, too. Without end-to-end visibility and control, you run the risk of being blindsided along any of a number of dimensions—product quality and safety, environmental damage, safety and health of workers, and theft of intellectual property, to name just a few. Second, ownership is not a necessary requirement for control of the supply chain. Visibility into and control over the supply chain dramatically reduce the need to own the supply chain. Capital is always a scarce and costly commodity. Like Nestlé, most companies are generally better off investing their capital in downstream activities that offer greater opportunities for differentiation and thus higher returns. Third, be proactive in providing training and assistance to ramp up the capability of your suppliers. In strategic markets such as China, it is critical for you to ensure not just short-term but also long-term success. (Continued in next column) July/August 2013 Fourth, prefer and, if possible, try to create more consolidated (but not monopolistic) supply chains. Greater consolidation means fewer suppliers as well as fewer links in the supply chain. As a direct result, there will be fewer points which need to be monitored and where things can go wrong. Also, bigger suppliers are likely to be more professionally managed, to be more productive, and to offer greater potential for collaborative innovation. Finally, believe in and practice the concept of “shared value.” Nestlé is very clear that it wants a long-term collaborative partnership with its suppliers. More than once, the company has unilaterally increased the price it pays to dairy farmers to help them cover the rising cost of feed and to give them an incentive to boost milk supply the following year. Without a win-win mindset, long-term partnerships are impossible. (global dairy 24/6/2013) Chinese dairy float for NZX China’s Bright Dairy will retain four seats on the eight-member Synlait Milk board, despite the likelihood it will lose its majority ownership status after the company’s planned initial public offer and share market float, which is planned for next month. (Continued on next page) www.giract.com Page 86 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Chinese dairy float for NZX (Contd) Chinese dairy float for NZX (Contd) Former Finance Minister Ruth Richardson is on the board at present, along with former Fletcher Building executive Bill Roest. Penno said the composition of the board was not unusual, given Bright Dairy would still be a major shareholder with 40%. “We think that we have got the balance just right,” he told APNZ. Synlait Milk sought, and received, NZX dispensation to keep the board’s structure as it is, despite the prospect of its ownership falling to around 40%, down from the current 51%, as the result of the diluting effects of the share issue. Penno said the USD 75 mio in fresh capital would go towards projects over the next three years worth a total of USD 183 mio, which he said would also be funded by debt and operating earnings. Canterbury-based Synlait Milk said it would seek to raise USD 75 mio in new capital through the issue of shares in a USD 2.05 to USD 2.65 range. The company expects to list on the NZX on July 23. “The infant formula market is growing very quickly, and what we are seeing here is that they [Chinese participants] are really turning their attention to New Zealand to be the supplier of high-quality products.” The IPO and listing come at a time of intense interest in the milk powder and formula industry, and follow the successful launch of the Fonterra Shareholders Fund last November. At the indicative price range, Synlait Milk would have a market capitalisation of USD 305 mio to USD 372 mio, the company said. Chief executive John Penno said Bright Dairy had been consolidating Synlait Milk into its accounts, so an agreement had been reached to allow that to continue. After the issue, Bright Dairy could continue to appoint four directors, one of which must be a New Zealand resident. The board would comprise three independent directors and the board members would elect the managing director, which would then be ratified by the shareholders. The chairman, who would get the casting vote, would be independent. The offer documents point to strong earnings growth, with underlying earnings before interest and tax almost doubling from USD 13.5 mio in the July 2012 year to USD 26.9 mio in 2013 and USD 32.9 mio in 2014. Synlait Milk is an offshoot of Synlait Ltd, owned primarily by 100 or so New Zealand shareholders and 22.5% by Japan’s Mitsui. Bright Dairy is listed on the Shanghai stock exchange with a market capitalisation of about USD 3.5 bio. (globaldairy 25/6/2013) (Continued in next column) July/August 2013 www.giract.com Page 87 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Yili starts up new plant in Henan Yili Dairy has started production in its new plant in Jiyuan (Henan) [4]. The new facility can produce 390kt of drinking milk p.a. (hcfood 16/7/2013) FrieslandCampina cuts baby formula prices in China as probe begins FrieslandCampina Trading (Shanghai) Co., Ltd. has announced that it is fully cooperating with the Price Supervision and Anti-Monopoly Bureau under China’s National Development and Reform Commission (NDRC) as part of an anti-trust investigation. Beijing has launched an investigation into alleged price-fixing by foreign firms. The move from FrieslandCampina came as Swiss giant Nestle pledged to "immediately" cut prices on some formula products by up to 20%. The company promised not to raise prices on new formula products for a year. French firm Danone says it will also cut the price of its formula in China, but is yet to release any details. Sales of foreign brands have soared in China, which is the world's largest market for baby formula, after tainted milk scandals damaged their Chinese competitors. The most serious scandal killed six children and made hundreds of thousands sick in 2008 when melamine was added to baby formula. Baby formula quality remains the leading food safety issue in China since the melamine-tainted milk scandal. (Continued in next column) July/August 2013 FrieslandCampina cuts baby formula prices in China as probe begins (Contd) FrieslandCampina stated that it supports the NDRC’s objective to ensure fair pricing; the company will reinforce compliance with pricing and anti-trust regulations. FrieslandCampina commits to adjusting contractual terms to explicitly emphasize adherence to China’s AntiMonopoly Law. FrieslandCampina will also enhance its Code of Conduct and provide comprehensive anti-trust training based on Chinese laws. To support Chinese consumers and offer more value, FrieslandCampina will per July 8th, 2013 reduce its price of the full range of Friso products in China by 5%. FrieslandCampina’s value promise includes the unique grass-to-glass system, in which the company invests in managing the entire supply chain from processing, marketing and distribution to provide consumers with safe and premium products. Friso for China is 100% produced and packaged in the Netherlands and distributed exclusively by FrieslandCampina. FrieslandCampina remains highly committed to the China market. The company continues to fully cooperate with local authorities in every market in which we have a presence, and plays an important role in providing dairy products for hundreds of millions of people all over the world every day. (fif 8/7/2013) www.giract.com Page 88 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Fonterra reacts to China price probe New Zealand’s largest milk product exporter, Fonterra, is cutting prices on its Anmum milk product brand in China amid a Chinese investigation into high domestic prices of infant formula. It has been reported that high prices charged by companies including Nestle, Danone and Mead Johnson Nutrition have been the subject of a National Development and Reform Commission (NDRC) in China. The NDRC is a macroeconomic management agency with wide administrative and planning control over the Chinese economy. Fonterra president of Greater China and India Kelvin Wickham said the group would cut prices by 9% on its Anmum maternal health products sold in China in light of recent industry-wide price revisions. “We are committed to providing high quality, premium imported products to Chinese consumers and we are also committed to being an integral part of and long-term partner to the Chinese dairy industry,” Wickham said. Fonterra reacts to China price probe (Contd) It has also been reported that Danone, Netherlands-based Royal FrieslandCampina and Nestle’s Wyeth brand have been reviewing prices within the Chinese infant formula market. South Island milk product exporters into China are yet to see any impact on prices. Westland Milk Products and Synlait Milk both produce a variety of products for the Chinese market including milk powder, butter and infant-related products. But so far it appears it is the larger multinational firms that are being targeted by the authorities. Westland Milk Products chief executive Rod Quin said his company continued to export to China as it had for 10 years, and had not been directly affected by the pricing issue. He was aware, however, of the pricing issue having an impact on the multinationals. “The (New Zealand) industry is very aware of any change in the Chinese regulation,” Quin said. The price reduction for Anmum Materna would be effective from August 1. The Anmum brand included formulated milks for women during pregnancy and while breastfeeding. “In this regard though I’m not sure it is a change in regulation, rather a decision by the Chinese government to (provide) incentive to manage prices down, obviously with a view to say that they think the market for infant formula has become overheated.” Fonterra doesn’t directly sell infant formula in China, an important growth market for dairy companies and one of the world’s largest for infant formula. He also noted recent commentary from China with regard to the quality of milk products and issues around making sure Chinese consumers got what they paid for. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 89 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Fonterra reacts to China price probe (Contd) McDonald's hopes to wow mainland diners with rice (Contd) Synlait Milk chairman Graeme Milne was not aware of any impact on Synlait from changes in the Chinese regulatory environment. However, he had yet to be updated by his executive team. Chinese company Bright Dairy and Food Co has a cornerstone stake in Synlait Milk. The company's strategy includes more efforts to develop the night consumption market from 5 pm to 5 am, thought it has put more emphasis on breakfast, lunch and afternoon snacks in the past, he said in an interview with Xinhua. Synlait tended to supply the Chinese market on a business-to-business model, meaning it supplied other companies which in turn supplied branded products into shops, Milne said. “We’re not involved at the retail end,” he said. (theglobaldairy 18/7/2013) McDonald's hopes to wow mainland diners with rice With an eye on dinner tables in the Chinese mainland, McDonald's, the world's leading fast food operator, on Wednesday announced new rice products for the mainland market. Starting from June 10, the new products, including chicken and beef rice wraps, will be sold in all 1700 McDonald's restaurants on the Chinese mainland. The core menu, including the chain's staples like the Big Mac and McChicken, will not be changed, Kenneth Chan, chief executive officer of McDonald's China, said in the press release. "Our new dining options are examples of how McDonald's innovates to bring more options to our Chinese customers, because that's what they want," Chan said. (Continued in next column) July/August 2013 According to the latest data from McDonald's, dinner foods account for half of foreign food operators' sales in China and this market is growing at a double-digit pace. Meanwhile, McDonald's will set a series of standards regarding rice quality and safety, Chan told Xinhua. McDonald's sources the rice it uses on the mainland from Harbin, capital of Northeast China's Heilongjiang province, one of the country's major grain production areas. The company plans to maintain its competitiveness and boost its overall business growth by increasing the variety of the products it offers, he said. McDonald's opened its mainland first store in Shenzhen, Guangdong province, in 1990. It has currently more than 1700 outlets and over 90 000 employees on the Chinese mainland. It plans to recruit 75 000 more this year, and the number of mainland outlets is expected to reach 2000 by 2014. The US -based fast food giant has about 34 000 stores worldwide. In 2012, McDonald's same store sales rose 3.1% as revenues rose 2% to USD 27.57 bio. (Continued on next page) www.giract.com Page 90 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW McDonald's hopes to wow mainland diners with rice (Contd) Campbell to Acquire Kelsen Group In 2013, the company plans to invest about USD 3.2 bio of capital in opening 1500 to 1600 new restaurants and reinvesting in existing locations. It targets a system-wide sales increase of 3% to 5% and operating income growth of 6% to 7%. (cd 6/6/2013) Zhongyi to develop new whole grain snacks The Zhongyi Food Group (Hunan) [5] and the School of Food Engineering of the Zhongnan Forestry Science University have jointly set up an Engineering Lab for the Processing of Cereals’. Researchers have already developed maize candy, sesame and oats chocolate and raisins and oats chocolate. A common aspect of all these products that they have a low in sugar and high in fiber. Their cereal oligosaccharides and oats fiber contents is 70-80%, (tjkx 22/7/2013) Canned fish to Russia Jiabike Food Co., Ltd. (Ningbo, Zhejiang) [6] has exported its first batch of canned fish (64.2 t) to Russia. (tjkx 13/6/2013) Campbell Soup Company announced that it has entered into an agreement to acquire Kelsen Group A/S from Maj Invest, a private equity firm, and several other investors. Based in Nørre Snede, Denmark, Kelsen is a producer of quality baked snacks that are sold in 85 countries around the world. Its primary brands include Kjeldsens and Royal Dansk. Kelsen has established distribution networks in markets in Asia, South America, the Middle East and Africa as well as the United States. It is a market leader in the assortment segment of the sweet biscuits category in China and Hong Kong, where growth in sweet biscuits is outpacing the growth of the USD 60 bio global sweet biscuits market. Kelsen has been exporting premium Danish butter cookies to China for more than twenty years. Its Kjeldsens brand has strong awareness with retailers and consumers in major cities, and its sales in China have grown at a compound rate exceeding 28% in the last three years. The company generated DKK 1.043 bio in net sales for the year ended Dec. 31, 2012. Aggregate net sales have grown at a compound double-digit rate since 2009. Kelsen employs 366 people worldwide. Denise Morrison, Campbell’s President and Chief Executive Officer, said, “We are delighted to welcome the Kelsen team to Campbell and to add Kelsen’s distinctive brands to Campbell’s outstanding portfolio of baked snacks, including our Pepperidge Farm cookies and crackers in North America and Arnott’s biscuits in Australia. (Continued on next page) July/August 2013 www.giract.com Page 91 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Campbell to Acquire Kelsen Group (Contd) Campbell to Acquire Kelsen Group (Contd) Kelsen will give Campbell a solid platform for growth in baked snacks in China and for the expansion of our international footprint. The acquisition of this successful business is another important step in Campbell’s quest to delight new consumers through expansion into higher-growth spaces, including fast-growing emerging markets.” The terms of the transaction were not disclosed. Closing is subject to regulatory approvals and other customary conditions. Campbell expects the acquisition to be modestly accretive beginning in 2014. Campbell plans to operate Kelsen as a standalone business based in Denmark, reporting to Luca Mignini, President – Campbell International. Mignini said, “Kelsen’s combination with Campbell will represent a wonderful marriage of complementary skills and capabilities. Its strong position in China and Hong Kong will enhance our presence in the region. At the same time, Kelsen’s talented management team will have the opportunity to leverage Campbell’s marketing, consumer insights, R&D and supply chain expertise to grow the business in both new and existing markets.” Brian Rønsholdt, CEO of Kelsen Group, said, “Kelsen has been providing quality products to consumers for over 75 years. We look forward to joining Campbell and its family of trusted brands. Campbell’s consumer-focused capabilities and wide-ranging experience in biscuit production will provide new resources for enhancing Kelsen’s product lines and strengthening our engagement with consumers around the world.” (Continued in next column) July/August 2013 Bruun & Hjejle in Denmark and King & Wood Mallesons in Hong Kong served as Campbell’s legal counsel. Maj Invest and Kelsen investors were advised by FIH Partners and Kromann Reumert served as legal counsel. (fif 18/6/2013) We will see more and more that international M&As will affect the Chinese market as well. New sugar plant in Shandong The new plant of the Lingyunhai Sugar Group (Rizhao, Shandong) [7] has been put in operation. The new facility has a capacity of 1.2 mio t p.a. This will increase the company’s total capacity to 2.4 mio t p.a., making it the largest sugar producer in the world. (tjkx 19/6/2013) Nekta enters the Chinese market New Zealand based fruit juice maker Nekta is entering the Chinese market with its range of infant formulae. The company has started its sales campaign in Fujian. (hcfood 9/6/2013) Uni-Present can start in Hainan Uni-President’s new beverage plant in Hainan [8] is expected to start producing in September 2013. (tjkx 23/7/2013) www.giract.com Page 92 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Moet toasts opening of first sparkling winery Moet toasts opening of first sparkling winery (Contd) Moet Hennessy, the wine and spirits unit owned by French luxury group LVMH, inaugurated China's first winery dedicated to the production of premium sparkling wine on Friday, in the Ningxia [10] Hui autonomous region. "With the company's international resources, we believe this new operation will provide Chinese consumers a great sparkling wine." Domaine Chandon (Ningxia) Moet Hennessy will release its first bottle in 2014, bearing the Chandon brand. "The winery not only helps support our group's total business in China in the future," said Christophe Navarre, CEO of Moet Hennessy, "it also indicates our long-term vision in this fantastic market. "No matter if the Chinese market goes up or down, we will always be here, and we want to be part of China's future." Located close to the Helan Mountain near capital city Yinchuan, the winery - with operational area of 6300 sq m - will follow company's worldwide procedures to ensure highest quality sparkling wines. the an the the It will benefit not only from the support of Chandon's international winemaking expertise and latest production facilities, but also from Ningxia's ideal climate, said officials, where the soil and the environment are all perfectly suited to growing Chardonnay and Pinot Noir grapes. "Moet Hennessy has always been committed to providing high-standard winemaking expertise to make the finest quality wine," said Navarre. (Continued in next column) July/August 2013 Mark Bedingham, the managing director of Moet Hennessy Asia Pacific, told China Daily that the sparkling wine produced in Ningxia will initially satisfy local demand but in the future it will also look at exporting the product. "The wine market in China is booming and its growth is dramatic. This opening marks another significant milestone in Moet Hennessy's continued efforts to help develop wine in China, and is another sign of the company's commitment to China," said Bedingham. In May, the company also launched a new winery in Deqin (Yunnan) [11], in the famous area of Shangri-la. "The winery in Yunnan is dedicated to top quality, premium wine. So, to produce the best red wine in China, we are willing to wait longer," added Navarre. (Continued on next page) www.giract.com Page 93 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Moet toasts opening of first sparkling winery (Contd) Bedingham said the pricing of its premium sparkling wine produced in Ningxia will not be as high as that of the red wine made in Yunnan. The image of its perfect wine drinker in China, he added, is "young consumers who are looking for a high-quality lifestyle". Hawthorn wine Researchers of the Weifang Engineering College (Weifang, Shandong) [12] had developed a new type of hawthorn wine. The raw material is grown abundantly in the Qingzhou region of Shandong. The research has been conducted in cooperation with Shengshi Hongda Industrial Group (Shandong). (tjkx 30/9/2013) The output of sparkling wine in Ningxia will be larger than the winery in Yunnan. "In most of the world's major wine markets, sparkling wine accounts for just 0.9 to 3% of total demand," said Bedingham. "But the 1% of China's wine market, which is still increasing, is a big number. I believe as a pioneer in the sparkling wine sector in China, we will achieve a high market share after we release it next year." Six years ago, Moet Hennessy acquired Wenjun, a Chinese white spirits producer in Sichuan province, and Navarre said it has been moving quickly to sell Wenjun in luxury markets. "Now we have a rich portfolio in China's luxury spirit and wine markets," said Navarre. Statistics from International Wine and Spirit Research show that sales of wine and spirits in Asia-Pacific are forecast to overtake those in Western countries by 2016. By then, the total amount of wine consumed every year is expected to rise from 3.39 bio cases to 3.68 bio cases, with 75% of that increase coming from China. (cd 29/6/2013) July/August 2013 Yanjing: first quarter of 2013 Yanjing Brewing (Beijing) has produced 11.3 mio hls of beer in the first quarter of 2013, up 7%. The turnover in the same period was RMB 2.868 bio, up 9.8% and the net profit RMB 45.49 mio, up 20.16%. (tjkx 11/6/2013) As the prices of raw materials have been decreasing recently, the profitability of the brewing industry is on the rise again. High-end liquor sellers take a hit Kweichow Moutai Co Ltd. (Zunyi, Guizhou) [13] - China's top liquor producer - has seen nearly flat growth in revenue in the first half of the year, hit by the government's campaign to crack down on lavish spending using public funds. (Continued on next page) www.giract.com Page 94 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW High-end liquor sellers take a hit (Contd) High-end liquor sellers take a hit (Contd) The company said its revenue for the first six months of 2013 was RMB 17.9 bio, up 0.6% year-on-year, or RMB 100 mio. The government's campaign has hit high-end liquor companies the most, industry experts said. Sichuan Tuopaishede Group said because of the government's austerity campaign and the restrictions on the sale of alcoholic drinks within the military, sales of its high-end products have fallen significantly, as has its net profit, which is expected to be down about 80% for the first half of the year. In the first four months of the year, liquor production volume was 3.81 mio kiloliters, an increase of 6.9% year-on-year but down 10.36% points compared with the same period last year. To boost sales, Moutai has slashed prices to attract more customers in the mid-range market. In mid-July, the company said it planned to reduce the prices of some products by up to 50%. But industry experts are not optimistic about the company's expansion plans in the mid-range market, where its distribution channels are not established well enough to compete with local brands. For years, Moutai has relied heavily on high-end group consumption and specialized stores to develop sales. To change its distribution channels, which used to target luxury spending, to aim at ordinary customers will take considerable time and effort, said Ma Fei, an industry consultant. Meanwhile, Moutai's peers are also posting lackluster results. Jiugui Liquor Co Ltd said its first-half revenue has seen a rapid decline, resulting in a nearly 90% drop in profits. (Continued in next column) July/August 2013 Another top liquor brand, Wuliangye Group, launched mid-range products priced between RMB 200 and 500 this month. The group is seeking a flattened distribution channel for all its products to reboot its profits, said Wang Chuancai, an industry consultant. Tang Qiao, chairman of Wuliangye Group, said it is changing its product structure that used to emphasize the sales of its high-end product lines, bringing in 70% of revenues. He said the sales target for this year has been lowered to about RMB 30 bio, only slightly higher than last year's RMB 27.6 bio. Tang said the days of demand exceeding supply are over. This year the inventory situation has forced them to change their strategy for development. Xie Ji, an analyst at the New Food Industry Institute, said with the decline in spending on luxury drinks and growth in public consumption of liquor, the two sides will eventually overlap in the product range priced between RMB 100 and 300. The liquor products of this price range will make up half of the industry total sales in the future, he said. (Continued on next page) www.giract.com Page 95 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW High-end liquor sellers take a hit (Contd) Kraft's new plant to double output volume (Contd) An increasing number of distributors who used to represent mid-range liquor brands have now shown strong interests in Wuliangye's new products, Xie said. "We will continue to boost marketing and innovation efforts for our key brands and to further expand our sales channel coverage in China," Shawn Warren, president of Kraft Foods China, said in a statement yesterday. But he added the evolution is far from over. After the tumult of contraction, stability in the market is only the first step. Dealing with overcapacity will be a major challenge, he added. For example, he said, there are about 2000 liquor manufacturers nationwide. A number of small liquor producers are very likely to disappear. (cd 1/8/2013) Kraft's new plant to double output volume Kraft Foods China has started the construction of a RMB 545 mio plant in Suzhou (Jiangsu) [14] to expand production capacity. The plant, which will be more than double Kraft's production capacity in Suzhou after it is completed in August 2014, brings the total investment of Kraft Foods in Suzhou to RMB 1.14 bio. China has become the fastest growing market in Kraft's global business and the company has been stepping up efforts to add local flavors to cater to Chinese consumers. The company produces Oreo and Chips Ahoy biscuits as well as Cadbury chocolates and Halls cough drops. China's snack-food market is valued at over RMB 75 bio last year, said market research firm Euromonitor. (sd 14/3/2013) Trade agreement opens doors for Lindt The recently signed free trade agreement between Switzerland and China will help Swiss chocolatier Lindt & Sprngli to establish itself as the preferred premium chocolate brand in the country, according to the company. As one of the originators of the globally renowned Swiss chocolate culture, Lindt's heritage dates back to the year 1845. Ever since, the name Lindt has stood for premium chocolate, delighting consumers with innovative products of the highest quality, said Andreas Pfluger, vice-president responsible for Asian market. (Continued in next column) July/August 2013 (Continued on next page) www.giract.com Page 96 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Trade agreement opens doors for Lindt (Contd) Trade agreement opens doors for Lindt (Contd) "These are exactly the attributes that we want to pass on to the demanding Chinese chocolate lovers," Pfluger said. Lindt products have been available on the Chinese market for the past decade via a network of distributors. "The recently approved Free Trade Agreement between Switzerland and China will further support this expansion," Pfluger said. After years of double-digit growth in the market for premium chocolate, the company decided to establish their own base here. In August 2012, a Lindt & Sprngli subsidiary in Shanghai was opened to incorporate the Swiss premium chocolate tradition into Chinese culture. The subsidiary had a strong start, driven by the company's number one brand Lindor, which sold particularly well in metropolises like Shanghai, Beijing and Guangzhou. With its festive red and gold-colored premium packaging, Lindor is becoming increasingly popular as a gift, especially for the Chinese New Year. "We are continuously expanding our presence in China," Pfluger said. Currently, Lindt chocolates are available in more than 40 cities at nearly 3000 sales outlets. To guarantee the perfect condition of its products, the main distribution channels are gourmet food outlets and department stores, Pfluger said. "For the near future, we believe that Lindt & Sprngli China will manage to establish itself as the preferred supplier for premium chocolates and therefore contribute to our overall sales results. (Continued in next column) July/August 2013 He believes there is tremendous potential for growth in the Chinese market. Currently per capita chocolate consumption on the Chinese mainland is about 100 g a year, compared to 500 g in Taiwan, 1.6 kg in Japan and 12 kg in Switzerland. More and more chocolate is being sold in China. And the number will grow even larger. At present, per capita consumption in the mainland's first-tier cities is already equal to that in Taiwan. However, compared to figures in the West there is still a huge potential to be explored, Pfluger said. To better cater to the Chinese customers, the company has designed a special strategy, he said. "We realized that a successful sales concept is needed to introduce our brand to a new market with little to no chocolate tradition," Pfluger said. "This is why we created special Lindt Boutique corners in department stores to present to the consumers our unique chocolate expertise and allow them to taste the outstanding quality of Lindt chocolate. "So far, 100 Lindt Chocolate Corners have been established, and we have plans to open many more over the next couple of years," he said. (Continued on next page) www.giract.com Page 97 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Trade agreement opens doors for Lindt (Contd) Mondelez International Breaks Ground to Expand Biscuit Plant in China "By taking part in selected events, such as the House of Switzerland during the Beijing Olympic Games in 2008 and the World Chocolate Wonderland in Beijing in 2010, our Lindt master chocolatiers impressively presented their craftsmanship and expertise as well as our fine chocolates to a growing audience by convincing them of our outstanding product quality." (ccd 1/8/2013) Kraft Foods (Suzhou) Co. Ltd. [14], part of the Mondelez International family of companies, today hosted a groundbreaking ceremony for the expansion of its biscuit plant in Suzhou, China. COFCO selling plant in Xinjiang COFCO (Beijing) has announced that it intends to sell its fruit processing subsidiary in Khotan (Xinjiang). Due to lack of raw material, the subsidiary has been operating at a considerable loss. A key product of that plant is apricot jam. (pd 29/7/2013) Wahaha enters Russian market The Wahaha Group (Hanghzou, Zhejiang) [9] has entered the Russian market with its tea beverage. A first batch has been shipped to Wladiwostok. (hexun 24/6/2013) With a total investment of approximately USD 85 mio, the project spans 30 000 sq.m. (more than 98 000 sq.ft.) and is expected to be completed in August 2014. The project will more than double the plant's current capacity and create 340 new jobs. The Suzhou plant will feature state-of-the-art production lines to make Oreo and Chips Ahoy! biscuits to meet the growing demand from Chinese consumers. This project is consistent with the company's previously announced strategy to invest in emerging markets to drive sustainable, profitable growth. "We deeply appreciate the Suzhou government's help and support for Kraft Foods China and this project," said Shawn Warren, President of Kraft Foods China. "Since the introduction of Oreo and Chips Ahoy! to China in 1996, the country has become our second-largest market for these brands globally, after the United States, due to our consistent focus on quality, innovation and marketing. After this project is completed, the expanded plant will be a model in our global supply chain network." (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 98 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Mondelez International Breaks Ground to Expand Biscuit Plant in China (Contd) "The Kraft Foods' Suzhou plant has set examples in the Suzhou Industrial Park in terms of production efficiency, energy savings, emissions reductions and community involvement," said Madam Sun YanYan, Vice Chairman of the Suzhou Industrial Park Administrative Committee. "We're pleased to see that this project will further drive the development of the local economy." Mondelez International currently operates two manufacturing plants and a regional biscuit research and development center in Suzhou. (yahoo 17/6/2013) Kvass war A cold war has recently erupted in China about who is the manufacturer of real kvass. One of the oldest local manufacturers, Qiulin (Harbin, Heilongjiang) [15] has referred to the beverage of Wahaha as ‘fake’ on its microblog account. A large company like Wahaha is not likely to remain calm over such an allegation. The industry is waiting to see how this verbal war will develop. (hcfood 15/7/2013) As kvass is a Russian beverage, it makes sense that a company in Harbin was the first to introduce it to China. During recent years, a few companies in other parts of China, mainly the country’s northern part, have tried their luck at launching a kvass of their own, without success. Kvass war (Contd) The giant Wahaha has the financial means to finance a major marketing campaign and it is probably that campaign that has made Qiulin decide to initiate this, un-Chinese, direct verbal attack. Smithfield shareholder still presses for break up A key shareholder in Smithfield Foods Inc has hired advisers to help break up the US pork giant and sell it in pieces rather than allow it to be sold intact to China's Shuanghui International Holdings Ltd, according to a regulatory filing. Starboard Value LP, a 5.7% shareholder in Smithfield, said it hired New York-based Moelis & Co and Business Development Asia LLC to help get a better offer for Smithfield shareholders than the USD 4.7 bio deal which would be the largest Chinese takeover of a US company if completed. In the filing, Starboard, a New York-based hedge fund, reiterated its belief that Virginia-based Smithfield, the world's largest hog farmer and pork processor, would be worth more if it were broken into three parts - US pork production, hog farming and international sales of fresh and packaged meats - and then sold. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 99 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Smithfield shareholder still presses for break up (Contd) Smithfield shareholder still presses for break up (Contd) The advisory firms will assist it in "identifying and connecting any strategic or financial buyers" for Smithfield's "individual business units" and finding a "sum of the parts transaction that could qualify as a superior agreement", Starboard said in the filing. US lawmakers also have raised concerns about foreign ownership of the nation's food supply. Starboard, which laid out its criticisms of the Smithfield deal in a letter to the company's board last month, did not reply to an e-mail from China Daily requesting further comment on the hedge fund's decision to hire advisers. Smithfield agreed in May to be acquired by Shuanghui (Luohe, Henan) [16], the main shareholder in China's largest meat-processing enterprise, for USD 34 a share, or USD 4.7 bio. The agreement, which the companies said they expected to close in the second half of this year, also includes USD 2.38 bio in assumed debt. The proposed deal is under review by the Committee on Foreign Investment in the United States (CFIUS), an interagency panel that investigates foreign investments in connection with national security issues. The proposed deal is seen as helping China - the world's largest consumer of pork - meet demand for the meat, as its increasingly prosperous residents eat more protein. Since the proposed deal's announcement, US Senators have raised questions about the Chinese company's ability to comply with food safety standards if the transaction goes ahead. Ken Goldman, an analyst at JP Morgan Equity Research of America, said he believes the transaction will be approved, as CFIUS works out a "compromise solution". Although pork itself doesn't directly affect US national security, a bird flu outbreak this spring and the discovery of thousands of dead pigs in Shanghai's rivers, has added to China's "negative reputation" in the protein industry, the analyst said. Deaths tied to tainted milk and a chickenprocessing plant fire also have fueled food safety concerns. Observers, however, expect the proposed Smithfield deal to win regulatory approval, due to the companies' assertion that the merger is driven by growing pork demand in China and not a strategy to export pork to the US. The agreement is unlikely to raise traditional antitrust concerns because it doesn't give Smithfield already the world's largest hog farmer and pork producer - a larger share of the US pork market. Smithfield CEO Larry Pope recently told the US Senate Agriculture Committee that the nation's pork producers "struggle" to build market share in the US as Americans' pork consumption dwindles. As pork is only the third most consumed US meat, producers are forced to look outside the US for growth opportunities, he said. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 100 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Smithfield shareholder still presses for break up (Contd) Smithfield shareholder still presses for break up (Contd) Since announced, the proposed Smithfield deal has received support from local, state and national officials, unions, hog farmers, academics and US food industry peers, Pope said. "It is our belief that the divisions of Smithfield are easily separable and had the company explored a sale of these businesses in separate transactions, shareholders may have received far more value than the USD 34 per share consideration contemplated by the proposed merger," Starboard's letter said. The transaction apparently has cleared one US regulatory hurdle, as the waiting period for objections to be filed with the US Justice Department expired Friday. The company already has satisfied antitrust authorities in Mexico and Poland. The proposed deal still requires approval by Smithfield shareholders, who had long been critical of Smithfield's stock price with Pope in charge before the transaction was announced. In its June 17 letter to Smithfield's board, Starboard said the proposed merger "significantly understates a conservative sum-of-the-parts valuation of the company," which it put at between USD 9 bio and USD 10.8 bio, after tax, or approximately USD 44 to 55 per share. That projected price represents a premium of 29% to 62% to the USD 34 per share Shuanghui deal, according to the letter. Starboard's letter noted that Smithfield's hog-production and pork divisions are the world's largest, and its international division includes interests in hog farming, meat processing, and branded meat operations in Poland, Romania, UK and Mexico. (Continued in next column) July/August 2013 "We question whether the board gave sufficient consideration to a sale of the divisions in separate transactions, or whether it focused primarily on an all-cash transaction for the company as a whole, which we believe would entail a much more limited universe of potential." (cd 16/7/2013) Jollibee targets 500 stores in China by 2014 Homegrown food giant Jollibee Corp. is aiming to boost its footprint in China to 500 stores, according to founder and president Tony Tan Caktiong. The food and beverage conglomerate currently has 400 stores across its brands in China and is looking to add another 100 by next year. In China, Jollibee operates brands Yonghe King (which was acquired in 2005), Hong Zhuang Yuan (in 2008) and San Pin Wang (in 2012). “One of the reasons why our profit growth in the first quarter 2013 of 33% was strong was because a big part of that came from China. We have a very good trend and our estimate is by next year we will reach 500 existing brands stores,” said Caktiong. (Continued on next page) www.giract.com Page 101 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Jollibee targets 500 stores in China by 2014 (Contd) Jollibee targets 500 stores in China by 2014 (Contd) In Jollibee's first quarter 2013 results, China led the growth with 27.1% sales increase. Southeast Asia and the Middle East grew 23.8%, Philippines 10.3% and US 9.2%. “We’ve not really looked at Myanmar yet but there are a lot of interested parties who are convincing us to move there,” Caktiong shared. The food conglomerate has also recently voiced interest in expanding in Indonesia and India. In 2011, Jollibee established headquarters in China — a research and development center in Beijing and a food processing center in Anhui province. The food conglomerate whose brands include Jollibee, Greenwich, Chowking, Red Ribbon, Mang Inasal and Burger King, has been steadily expanding its brands internationally, particularly to countries with large Overseas Filipino Workers (OFW) populations. According to Caktiong, sales in their stores across the Middle East has also been doing well. Middle East is a key destination for Filipino nurses, engineers, maids, and others who seek greener pasture abroad. “More of our stores in the Middle East have very high same-store sales. [There are] double-digit growth rates across countries in the Middle East. In Saudi Arabia, Dubai and Kuwait the samestore sales are very strong,” he said. Caktiong said that while they have had a lot of offers from Myanmar, they haven’t yet looked into the opportunity. Myanmar is one of the key developing markets investors have been eyeing for expansion. The international expansions come as part of Jollibee's strategy to have a 50:50 ratio for its foreign and local businesses in the next 5 to 7 years to maintain overall growth trajectory. Jollibee currently has 80% of its operations in the Philippines and 20% based abroad. “Probably by the end of the year this ratio will change slightly to 79% Philippines, 21% abroad," he said. The stellar performance of the Philippine economy, however, is making officials rethink the target ratio. The Philippines grew 7.8% in the first quarter, one of the highest rates in the world. "While business abroad is growing well, the Philippines is also growing well. When both are doing well it is difficult to quickly change the ratio," said Caktiong. "The Philippines is growing so fast so if you want to change the ratio you have to grow faster," he explained. In 2012, the Jollibee group opened a total of 223 new stores: 135 in the Philippines and 88 abroad. At the end of the year, it was operating a total of 2 074 stores in the Philippines and 554 stores overseas. (rappler 28/6/2013) (Continued in next column) July/August 2013 www.giract.com Page 102 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Nestle’s China investment shows need to think local Nestle’s China investment shows need to think local (Contd) Success in emerging markets is dependent on the ability to think locally. However, while domestic players do have the home field advantage, multinational corporations benefit from stringent internal structures and expertise in areas such as supply chain management. Could the best way to drive growth be to combine the strengths of each, creating “multi-local” operations? Nestle would seem to think so. To get around this, in categories where domestic players have an advantage – so areas excluding nutrition and coffee – Nestle has developed joint venture arrangements with local partners such as Yinlu and confectioner Hsu Fu Chi. I’ve been to a few factory openings in my time. But never have I attended one as extravagant as the ceremony to officially open the Nestle-Yinlu dairy facility in the eastern Chinese city of Chuzhou (Anhui) [17] on 11 July. The occasion kicked off at 9.28am, a time picked because the Feng Shui master consulted by Yinlu suggested that this would help to guarantee the success of the 370 000 sq.m. factory. Drumming girls, a Chinese dragon, cannons firing gold confetti and fireworks (as well as some comparatively dry remarks from Yinlu and Nestle management along with local government officials) followed. As I sat in the already baking morning sun, an obvious truth was driven home. China, for all its potential size and scope, is an entirely different market to the western countries that so many food multinationals call home. As multinational food groups – from Hersheyto Arla – look to bulk up their operations in markets like China, to ignore this simple truth is to court failure. “An important building block for Nestle in China is the development of local partnerships,” Nestle group CEO Paul Bulcke told the audience in Chuzhou. “They allow us to stay closer to the Chinese consumer and meet demands for… healthy, safe and nutritious products.” Alongside consumer insight, another distinct advantage that Yinlu has is its distribution structure. Yinlu followed Mao Zedong’s example: starting in the countryside and then moving into the city, one industry pundit explained. This means that, where the majority of multinational corporations operating in China are struggling to get out of second or third-tier cities, Yinlu has a strong rural footprint. But multinationals do have the upper hand in some areas. Take the Nestle-Yinlu pairing. Nestle brings to the table a lot more than its deep pockets and global R&D capabilities. (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 103 Company News ChinaNews FOOD & FOOD INGREDIENTS REVIEW Nestle’s China investment shows need to think local (Contd) Nestle’s China investment shows need to think local (Contd) The company is an expert in supply management and the development of strong internal structures. In the case of Yinlu, in which Nestle took a 60% stake two years ago, the Swiss food giant has helped in the development of a stronger management structure. “The new Yinlu factory… is just one more example of our commitment… to build these partnerships into even stronger businesses,” Bulcke said. “We are on an historic and exciting journey in this country.” (theglobaldairy 16/7/2013) As Yinlu chairman Chen Qing Yuan acknowledged in a press conference following the ceremony, the company had previously been run with the entrepreneurial spirit typical of its founders. However, as a company grows and extends its reach these attitudes can only take you so far. Cargill expands commitment to responsible supply chains One Yinlu source told just-food that the company had been presented with a number of options when it was considering how to enter its next phase of growth two-to-three years ago. This included the possibility of a private listing. However, if it had pushed ahead with this option, the demands of trading on the stock exchange would likely have required Yinlu to bring in external management. The partnership with Nestle was considered a favourable option. By leveraging the local know-how and – never to be underestimated – consumer understanding of Chinese companies and combining this with the rigorous approach to issues such as food safety, supply chain and professional management present in large international corporations and it would seem that you have a winning recipe. Nestle was certainly keen to emphasise its commitment to its joint venture partnerships in the country. (Continued in next column) July/August 2013 As part of its commitment to operating responsible supply chains, Cargill announced a new assessment tool to help food and beverage customers achieve their growth, cost reduction and risk mitigation goals by identifying, prioritizing and quantifying risks and opportunities in its supply chains. The announcement was made at the 2013 Institute of Food Technologists (IFT) Food Expo. The new tool allows Cargill and its customers to rapidly identify and assess areas of risk and opportunity so they can take action on responsible sourcing issues that may negatively or positively impact business, such as labor practices, the environment and biodiversity. The tool translates these risks and opportunities into specific financial terms by assigning cost and revenue implications to those identified in the assessment as having the highest likelihood of occurrence and highest business impact. The company’s unique approach facilitates collaboration and alignment across all partners in the supply chain to move quickly to address issues and opportunities. (Continued on next page) www.giract.com Page 104 Company News ChinaNews Special Features FOOD & FOOD INGREDIENTS REVIEW Cargill expands commitment to responsible supply chains (Contd) Cargill expands commitment to responsible supply chains (Contd) “Customers, consumers and other stakeholders are increasingly demanding more information and communication around what’s happening in our extensive supply chains to mitigate corporate or brand risk, find opportunities for cost reduction, or use sustainability as a potential platform for growth,” said Scott Portnoy, corporate vice president of Cargill’s food ingredients & systems businesses. - This commitment will be extended to cover 100% of our palm oil products and all customers worldwide – including China and India – by 2020 - Soy field. A partnership with The Nature Conservancy that helps Brazilian soybean farmers comply with the Brazilian Forest Code “However, sustainability investments often struggle to gain traction as many organizations fall short of quantifying a return on investment. Our tool delivers a business case that enables responsible decision making and action.” Sustainability issues continue to be an important topic among customers. In a recent survey of Cargill’s food and beverage customers, 93% identified sustainability as one of the most critical issues of importance to their businesses. This assessment tool is the most recent example of Cargill’s continuous work in creating ways to improve its supply chains. In just the last few years, Cargill has announced: The most common cited focus areas were setting objectives and goals for sustainability and responsible sourcing. (fif 16/7/2013) - - Cocoa pods - Its Cocoa Promise aimed at promoting sustainable cocoa production. The promise focuses on three areas: training farmers, supporting farming communities and investing in the longterm sustainable production of cocoa A pledge to supply its customers in Europe, United States, Canada, Australia and New Zealand with palm oil certified by the Roundtable on Sustainable Palm Oil and/or originated from smallholder growers by 2015 (this excludes palm kernel oil products) Growing your own food: Chinese consumers’ response to food safety issues Regular readers of these pages do not need to be reminded of the various food safety problems that have stubbornly occurred and re-occurred in China during the past few years. The loss of confidence in the domestic food industry has triggered a number of peculiar responses among Chinese consumers. One of them is Community Supported Agriculture (CSA). (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 105 Special Features ChinaNews FOOD & FOOD INGREDIENTS REVIEW Growing your own food: Chinese consumers’ response to food safety issues (Contd) Balcony farmers are taking root (Contd) A number of articles about various forms of CSA have appeared recently in China. We have collated them in a special column in this issue of China News. Xue Ling, 26, has been planting vegetables on the balcony of her apartment in Jinan, capital of Shandong province, since 2010. "It is the only way to keep my food, at least the vegetables, clean and safe," she says. Balcony farmers are taking root With growing wealth, concerns about food safety and the fever for online shopping, more urbanites are taking to farming on their own terms. Zheng Jinran reports in Beijing. The perfect storm of two major trends in China online shopping and growing concerns about food safety - has given birth to a generation of urban farmers. More urban residents, many of whom are young people between the ages of 25 to 35 living in metropolises such as Beijing, are growing vegetables and herbs on their balconies or rented farmland in the suburbs, and turning to Taobao, a major online shopping service provider in China, to start their apartment gardens. Online searches for vegetable seeds at Taobao has increased by 280% over the past year, according to the company. "That means, every day, more than 6000 people went to online shops at Taobao expecting to buy seeds and tools that can convert their balconies into a small vegetable garden," says Lu Qi, a public relations officer from Taobao. (Continued in next column) July/August 2013 "Then I found out that many of my friends have realized the importance of eating vegetables. They have been busy planting this year and asked for my help to get tools for them," says Xue, who opened a shop for vegetable seeds in April because of the demand. "The sales in my shop are much higher than I expected. More than 2000 bags of seeds have been sold since then," she says. "They plant vegetables not to save money but to guarantee food safety," Lu says. A number of food scandals have rocked the nation in recent years, including the discovery that cucumbers were found with contraceptives and another incident where leeks were found filled with toxic pesticides. The latest crop to join the list of tainted foods is the Yantai apple, which was found, wrapped in paper bags containing chemicals. (Continued on next page) www.giract.com Page 106 Special Features ChinaNews FOOD & FOOD INGREDIENTS REVIEW Balcony farmers are taking root (Contd) Balcony farmers are taking root (Contd) Xu Jian, 36, an urban farmer in Hangzhou, Zhejiang province, spent about RMB 1000 in seeds and organic fertilizer on farmland he rented. He paid RMB 3560 to rent the 30-sq.m. farmland for two years. But the move did not come without its consequences: His mother moved out of their hometown to help him plant the vegetables. Taobao will soon release rules to regulate land owners and tenants. The website will also soon provide a platform where plots on a farm will be offered for rent. "But in the initial state, only residents in Hangzhou and Shanghai can enjoy this new service," Lu says, adding that it could possibly expand to cover all cities in China in the near future. "Planting vegetables by myself may cost more money than buying them from the market and they might consume extra energy. But the risk of having polluted food is everywhere. I don't want my 3-year-old daughter to suffer from any of it. It is great fun to plant in the farmland and share the spoils with my colleagues," he says, adding that every weekend his family drives to the farmland. "More cities will see the free and convenient exchange of extra vegetables or other agricultural products," he says. "But there are many problems in achieving this goal, including the packaging and we don't know when it will come to fruition." Xu's contract for the farmland he rents will end in December. "I'll still rent some land to plant vegetables, but maybe this time I'll try to do it through the website. I hope it will work to offer me and more people with appropriate land options," he says. Taobao has taken notice of the demand for vegetables. In addition to selling seeds and tools for urban farmers, the major online shopping provider has begun selling fresh vegetables and other organic food like rice on an independent website called agri.taobao.com as of early June. "About 1000 farms and companies want to join and provide their organic products on this new platform," Lu says. "But these green products such as fresh vegetables have special requirement in packaging and transporting, so the sales are not large." For those urbanites who crave a bigger plot to grow their crops, the website has a bigger plan: Offering farmland for its users to rent. The option should be available in June. (Continued in next column) July/August 2013 Following nature's lead on food No tomatoes in winter. No oolong tea after Tomb Sweeping Day. Do not treat meat as an everyday staple. The initial impression is that she keeps to the stringent regime of a sustainable lifestyle, but Shi Yan says it is all totally natural - if you live on a farm. She is probably the best-known advocate of community-supported agriculture in this country, and she is totally committed. "If you live and feed on the farm, you have more vegetables and grains. And you can only kill a pig once in a while. It cuts down the consumption of meat." (Continued on next page) www.giract.com Page 107 Special Features ChinaNews FOOD & FOOD INGREDIENTS REVIEW Following nature's lead on food (Contd) Following nature's lead on food (Contd) As for the tea, she says oolong tea before Qingming (Tomb Sweeping Day) is better because pesticides are rarely necessary then. It was a success, although the founder says with all modesty "it was because we broke the ground at the right moment, when concern for food safety was extremely high." The farm is still thriving after three years but Shi wanted to address the bigger issue - the sustainability of the rural community "where we are determined to live". "Whatever nature dictates, it is often the best," the 30-year-old post-doctorate graduates say. She calls herself a "new farmer" and has been preaching the cause for many years in her slow, calm, measured tones. Shi is on the sustainability lecture circuit, often appearing in a simple linen shift with her hair tied up in a ponytail and wearing sandals that had just trudged through the farm fields. She has been doing this since she came back from six months' of hard labor on the Earthrise Farm in Minnesota in 2008. As head of the year-old CSA model farm, Shared Harvest, she recruits land-owning farmers who are willing to work on the land themselves. Shi monitors the farming process, markets the produce to customers who are willing to pay for their vegetables in advance, and shows them around when they visit. "Once you build up an intimate relation with the land, life is different," says the city-bred agriculture scientist from Baoding, Hebei province. It was the hands-on experience from dawn to dusk that taught her the CSA concept from the ground. She wrote a book on her return and quickly became a champion of the movement. Her first project, initiated with her heavyweight graduate program supervisor Wen Tiejun from Renmin University of China, is Dondon Farm in western Beijing. It made its name as a rented plot of land that hires farmers and promises clean, natural produce for customers who order and pay in advance. (Continued in next column) "Having another stakeholder means more transparency, customers can get what they want to know not only from us, but also from different farmers," she says, "and if there are disagreements, all the better. (Continued on next page) July/August 2013 www.giract.com Page 108 Special Features ChinaNews FOOD & FOOD INGREDIENTS REVIEW Following nature's lead on food (Contd) Following nature's lead on food (Contd) "It is the farmers who benefit from the model more than anyone else. Farming should be rewarding enough to let them stay on the land." Yolanda, an expectant mother who is a member of Shared Harvest, is definitely a Shi Yan fan. For now, Shared Harvest makes RMB 0.45 for every 500 g of vegetables sold. It has already cleared the red, and even projects a sizable profit at the end of 2013, when the number of members will exceed 600. Her hope is that these members will care enough about what they eat to come down to the farms more often and take part in the whole process. To encourage them, Shi tirelessly updates progress on the plots and posts reports online on her various social network accounts, sharing everything from pop quizzes on botany to the farms' daily delights and woes to quotes from Mother Teresa. "They ask me why my photos always look so good. I tell them the photos show the love of the photographer," she says as she carefully packs bunches of kale into delivery boxes. This is all part of her routine, and she attends to it with the eye of a committed lover. She highlights the beauty of deformed tomatoes and crooked cucumbers with a dash of humor, arranging them into heart and swan shapes that are posted online with a poetic line or two. That's attracted about 30 000 fans to her weibo account. It is part of her larger plan to educate consumers: That perfect-looking vegetables may not be safe, and that buying from your neighborhood farmer reduces "food miles" and carbon emission. (Continued in next column) July/August 2013 "Shi has her feet on the ground, but she upholds an ideal at the same time. I admire her for the stamina and her vision for a better future. I trust her. I've seen the farm myself and I can let go of all my worries about food," she says. Shi current lives, works and has her research base at Mafang village where she has 40 pigs, 2000 chickens, 30 geese and three farms. Her loving husband works with her and more than 20 young colleagues who all affectionately call her "boss". "Shi Yan taught me not to lie," says Chen Li, who is in charge of sales for Shared Harvest. "That's almost against a salesman's instinct. But honesty is the core of our business." Chen joined the enterprise a year ago because he believed Shi's initiative is "small and beautiful", and that "it could only be done by someone who is adamant and innocent at the same time". "I marvel at how people are willing to help her because she's so trustworthy," he says. (cd 14/7/2013) People power Farmers supported by their communities may be the answer to China's concern over food safety, efficient land use and the unbalanced distribution of rural-urban demographics. Sun Ye goes out into the countryside to find out if this model will work for the country. (Continued on next page) www.giract.com Page 109 Special Features ChinaNews FOOD & FOOD INGREDIENTS REVIEW People power (Contd) People power (Contd) The physical manifestation of the trend is a box of vegetables that appears on the doorstep every week, filled with seasonal produce with an occasional wormhole, but is still warmly welcomed. It is also the chance to meet and get to know the farmer who supplies the box, and the opportunity to bring the children down to the farm to take part in the sowing and the harvesting. CSA encourages young farmers to go back to the land, and offers them a business model that gives them insurance against fluctuating prices brought on by inclement weather, unpredictable harvests and natural disasters. It is the building of a community, one that is prepared to pay a premium up ahead for the assurance that vegetables on the table are grown according to safe practices, are sustainable, seasonal and as far as possible, free from an overload of pesticides. It is a chance to meet and meld with other members of the community who have the same passion and beliefs. This is what community-supported agriculture (CSA) looks like in China, for now. But looking beyond the summer tomatoes and winter cabbages that are purchased even before they are sown, CSA is a new concept that goes against the traditional, or is a return to old systems depending on how you look at it. More importantly, it is a trend triggered by rampant food-safety problems thrown up in attempts to adequately feed a growing country of 1.35 bio. Huge waves of urban migration are yet another problem as the younger generations abandon the hard and thankless efforts of cultivation in their villages and head out to the bright lights. CSA involves the communities around the farms, and is a model that has worked with varying success in North America, Australia and New Zealand. In China, CSA is only at its juvenile stages, and it may grow up to be a very different child. Shared Harvest in suburban Beijing takes its name from a CSA guidebook. It has also become living proof for this farming model since its inception in mid-2012. It is a cooperative that supplies more than 400 members with weekly boxes of green vegetables - all of which have been paid for upfront. This new initiative has also helped its farmers, by educating them on agricultural methods that are sustainable, with an emphasis on the long-term rather than short-term bounties. For example, the farmers would probably not have given up the use of pesticides on their own. "It is simply scary," says Liu Xiancang, the director of the Liu village co-op that's responsible for supplying the vegetables that get sent out to Shared Harvest members. (cd 15/7/2013) (Continued in next column) July/August 2013 www.giract.com Page 110 Special Features ChinaNews FOOD & FOOD INGREDIENTS REVIEW Harvesting the homegrown Harvesting the homegrown (Contd) City folks are just as concerned about the food they put in their mouths, often more so than rural residents. That's why many are turning to their tiny balconies for sustenance. Eric Jou reports on a growing trend. "You know what's going on with your food, there are no pesticides or herbicides - nothing that will negatively affect your health," says Hodge. "A lot of farmers who do traditional farming have vegetables they grow for sale and vegetables they grow for their own consumption. They grow them differently because they know the chemicals they use are hazardous." Imagine growing organic lettuce, tomatoes and cucumbers all without pesticides and chemicals. Then imagine being able to harvest such vegetables without even leaving home or changing out of your pajamas to go to market. That is the promise of urban farming, of growing fresh produce in limited spaces. As more and more people migrate from rural China to the cities, many of them wind up living in cities such as Beijing. According to the National Bureau of Statistics of China, more than 163.36 mio people moved from their hometowns to other locations to work in 2012. Such transient psychographics can be both a blessing and a curse, particularly when it comes to food. Urbanites are eager for opportunities to reconnect to nature. And they face many challenges of time and space. Urban farming is basically about growing produce and food in an environment with limited space, and it is slowly gaining popularity in Chinese cities. Dannan Hodge, co-founder of urban farming company High Rise Homestead in Beijing, says it is a popular concept with a lot of benefits. High Rise Homestead works to help Beijing residents to "grow their own" at home. They supply products such as frames that train plants to grow upward, kits for growing produce on inclined surfaces and vertically stacked planters. Windowsills and balcony gardens are all in the picture. Hodge says the most popular plantings on balconies are vegetables because they're simple to grow, even strawberries, cherry tomatoes and gourds. "It really does inspire people to eat healthy - you can't grow a bag of chips," she says. People especially children - get excited to see their own food grow, food that they planted and will harvest themselves. "There is also a health benefit where people are inspired to become more conscious consumers," she says. High Rise Homestead is working to cut down the supply chain by sourcing materials locally. Elizabeth Jane Ashforth says the idea of growing food indoors is great. Ashforth is a doctor of marine biology who tried to build her own sustainable system within her apartment in Beijing, and she says growing food indoors can create wonders. (Continued in next column) (Continued on next page) July/August 2013 www.giract.com Page 111 Special Features ChinaNews FOOD & FOOD INGREDIENTS REVIEW Harvesting the homegrown (Contd) Harvesting the homegrown (Contd) "People in general have lost a connection to where their food comes from and how difficult it is to grow actually," says Ashforth. "I like having new projects and learning new things. It just hit me one night that I could learn something about aquaponics," adding that he's spent "many hours on Youtube researching growing my own food". "Doing something like this adds a bit of greenery to your home, it just makes you feel connected to the environment and that can only be a good thing." American Tim Quijano has recently started giving DIY lessons on setting up aquaponic ecosystems. Aquaponics is similar to a hydroponic setup where plants are grown in water, except aquaponics introduces fish into the equation. A simple aquaponics setup involves a fish tank with possibly edible fish, a water pump, a second layer above the tank where the plants are grown and a light source. The fish eat and create waste and the pump siphons the water to the upper layer to fertilize and water the plants. The water then drains back into the lower tank. According to Quijano, some aquaponics setups can support edible fish such as tilapia. A fellow with the Princeton in Asia organization, Quijano says his main passion is working on environmental issues. Quijano started working on aquaponics during a move from one apartment to another. "What got me started was that I had this fish tank in my apartment that I moved into this year and I thought how I could do something fun with this," says Quijano. (Continued in next column) July/August 2013 China has a rich history and culture of being selfreliant when it comes to food, says Quijano. Pointing out recent food safety scares and the migration of workers from the countryside to the cities, Quijano says that there is a wealth of agriculture knowledge in Chinese cities. "I live in a large apartment complex and the grannies that are there, they have set up little makeshift greenhouses with a stick of bamboo and a tarp. There's so much knowledge and there's such an appreciation for it." Aquaponics newbie Andrew Morrissey attended one of Quijano's workshops on a whim after seeing an online posting about it. "I came to see what it was about and whether I could do it at home and grow some tomatoes for the family and make me more useful," says Morrissey, "I don't know about farming but I am never going out and buying vegetables again but if I can get something going and it works. If it can get bigger over time with a bit of experimenting it can be a lot of fun. Maybe I can get some edible fish. It would make the wife very happy." (cd 15/7/2013) www.giract.com Page 112 Upcoming Events ChinaNews FOOD & FOOD INGREDIENTS REVIEW Upcoming events Upcoming events (Contd) 2013 Guangzhou Food Fair 2013 China (Guangzhou) Int’l Food Exhibition Location: Canton Fair, Pazhou Hall Dates: September 5 - 9 Telephone: 020-89231623 Fax: 89231633 Email: [email protected] China (Guangzhou) Int’l Food & Nutrition Exhibition Location: Canton Fair Pazhou Hall Dates: September 7 – 9 Telephone: 020-8989 9477 2013 China (Beijing) Int’l Healthy Potable Water Exh. (SIHWE) Fax: 89899050 Email: [email protected] 2013 China New Agricultural Equipment & Services Exh. (NRCE) 2013 China (Changsha) Int’l Tea Exhibition Location: China Agricultural Exhibition Centre Dates: September 5 - 7 Telephone: 010-57241408 Fax: n.a. Email: [email protected] 2013 Shanghai Int’l Nutrional & Health Food Exh. Location: Hunan Int’l Exhibition Centre Dates: September 12 - 15 Telephone: 0769-83835898 Fax: n.a Email: n.a China (Weifang) Int’l Food Industry Exhibition Location: Shanghai Mart Dates: September 6 – 8 Dates: Weifang Lutai Exhibition Centre September 13 - 16 Telephone: 020-66637275 Telephone: 0536-2456919 Fax: n.a. Fax: n.a. Email: [email protected] Email: n.a. (Continued in next column) July/August 2013 Location: (Continued on next page) www.giract.com Page 113 Upcoming Events ChinaNews FOOD & FOOD INGREDIENTS REVIEW Upcoming events (Contd) Upcoming events (Contd) 2013 China Int’l Imported Food (Chongqing) Exh. & Forum 2013 8th China (North) Int’l Food Additives & Ingredients Exhibition Dates: Chongqing Int’l Exhibition Centre September 13 – 15 Telephone: 4006191090 Fax: n.a. Email: n.a. Location: 2013 8th China (North) Int’l Food Processing & Packaging Equipment Exhibition 2013 China (Qingdao) Int’l Pharmaceutical Raw Materials & Intermediates Exhibition 2013 China (Qingdao) Int’l Pharmaceutical Machinery Exhibition 3rd China (Qingdao) Int’l Food Safety Testing Equipment Exhibition 2013 Shanghai Int’l Condiments & Food Ingredients Exhibition Location: Shanghai Everbright Dates: September 15 – 17 Telephone: 0 21-37821468 Fax: 37821458 Email: [email protected] 6th Wine China Expo Dates: China Agricultural Exhibition Centre September 23 – 25 Telephone: 010- 64416542 / 64414996 Fax: n.a Email: n.a. (Continued in next column) Telephone: 0532-85012515 Fax: 85012915 Email: [email protected] 2013 Vinexpo China 2013 Oil China Location: Dates: Qingdao Int’l Exhibition Centre September 26 – 28 Location: 2013 Zhejiang Int’l Hotel, Restaurant & Food and Beverage Exhibition 2013 Zhejiang Int’l Food & Beverage Catering Service Exhibition Dates: Hangzhou Peace International Exhibition Centre September 26 - 28 Telephone: 0571-89738388/89738372 Fax: 89738368 Email: [email protected] Location: (Continued on next page) July/August 2013 www.giract.com Page 114 Upcoming Events ChinaNews FOOD & FOOD INGREDIENTS REVIEW Upcoming events (Contd) Upcoming events (Contd) 2013 14th Int’l Fruit & Vegetable Exhibition 2013 8th Shanghai Int’l Fishery & Aquatic Products Exhibition Location: Yantai Int’l Exhibition Centre Dates: September 26 – 28 Location: SNIEC Telephone: 0535-6686271 Dates: October 120 -12 Fax: 6686272 6686273 Telephone: 021-34141311 Email: [email protected] Fax: n.a. Email: n.a. 2013 China (Xiamen) Int’l Tea Exhibition 11th China Int’l Meat Industry Exhibition China Xiamen Tea Packaging Design Exhibition Location: Qingdao Int’l Exhibition Centre Location: Xiamen Int’l Exhibition Centre Dates: October 13 – 15 Dates: October 10 – 13 Telephone: 010-68020935 Telephone: 0592-5959888 Fax: 51661769 Fax: 5959611 Email: [email protected] Email: [email protected] 2nd Shenzhen Int’l Hotel Equipment Exhibition 2013 China (Shenzhen) Bakery Exhibition Location: Shenzhen Int’l Exhibition Centre Dates: October 10 – 12 Telephone: 020-85627337 Fax: n.a. Email: n.a. (Continued in next column) July/August 2013 Location: Shenzhen Int’l Exhibition Centre Dates: October 14 -1 6 Telephone: 020-31746168 Fax: 22223568 Email: [email protected] (Continued on next page) www.giract.com Page 115 Upcoming Events ChinaNews FOOD & FOOD INGREDIENTS REVIEW Upcoming events (Contd) Upcoming events (Contd) 16th China (Tianjin) Ice Cream & Dairy Raw Material and Equipment Exhibition 5th China Int’l High End Beverage & Functional Beverage (Shanghai) Exh. Location: Tianjin Int’l Exhibition Centre 2013 15th China Int’l Organic Food Exhibition Dates: October 15 -1 7 Telephone: 2013 2nd China Int’l Nuts & Convenience Food Exhibition Fax: 02228362467,28362448,13752519366 15th Int’l Nutrition & Health Exhibition n.a. Email: [email protected] 2013 3rd Famous Wine & Int’l Wine (Shanghai) Exhibition 4th IND China Int’l Cereals & Oils Machinery Exhibition 2013 9th Int’l High End Healthy Food Oil & Olive Oil (Shanghai) Exhib. 4th IEOE China (Beijing) Int’l Edible Oil Exhibition Dates: China Agricultural Exhibition Centre October 16 – 18 Telephone: 010-59507558 Fax: n.a. Email: n.a. Location: Location: Shanghai Intex Dates: October 20 - 22 Telephone: 010-85753243 Fax: n.a. Email: n.a. 2013 Xinjiang Int’l Hotel Exhibition 2013 Chongqing Int’l Food Processing & Equipment Exhibition Dates: Telephone: 0991-2303954 Dates: Chongqing Int’l Exhibition Centre October 18 – 20 Xinjiang Int’l Exhibition Centre October 25 – 27 Fax: 2303979 Telephone: 023-63202811 Email: [email protected] Fax: 63202822 Email: [email protected] Location: Location: (Continued on next page) (Continued in next column) July/August 2013 www.giract.com Page 116 Upcoming Events ChinaNews FOOD & FOOD INGREDIENTS REVIEW Upcoming events (Contd) Upcoming events (Contd) 2013 China Int’l Children’s Food Safety Conference & Exhibition 2013 China (Shanghai) Vegetarian Food Fair Location: Shanghai Everbright Dates: October 31 – Nov. 8 Telephone: 021-64752979 Dates: China Int’l Exhibition Centre (Sanyuan Hall) October 26 – 28 010-53050679 Fax: 64752907 Telephone: 53050688 Email: [email protected] Fax: Email: [email protected] Location: 4th China Int’l Nutrional & Health Food Exhibition Dates: China Agricultural Exhibition Centre October 29 – 31 Telephone: 021-61107259 Fax: 61294683 Email: [email protected] Location: 2013 China Tianjin (Bohai) Int’l Food Fair 2013 3rd Tianjin Int’l Wine Industry Fair Location: Tianjin National Exhibition Centre Dates: October 31 – Nov. 04 Fax: 02288371010、88373212、28012979 88371005 Email: n.a. Telephone: (Continued in next column) July/August 2013 www.giract.com Page 117