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Nr. 8 · 2014
FOOD
FISHERIES
AGRICULTURE
NEWS FROM THE FOOD TEAM IN TRADE COUNCIL CHINA - AUGUST 2014
China: News from the Food Team - Export Figures - Upcoming Events - News Flash
THE FOOD TEAM IN TRADE COUNCIL CHINA
The Food Team
Trade Council China
BEIJING
SHANGHAI
Marie Louise Flach de Neergaard
Minister Counsellor
Team leader
E-mail: [email protected]
Phone: +86-10-8532 9987
Lydia Jiang
Commercial Officer
Phone: +86-21-6209 0500 + 226
Liu Qiang
Commercial Officer
Phone: +86-10-8532 9920
Lulu Li
Innovation Officer
Phone: +86-6085 2009
Shan He (Grace)
Commercial Officer
Phone: +86-10-8532 9915
CHONGQING
Daniela Zheng
Commercial Officer
Phone: +86-23-6372 5161
Mette SivebÆk Knudsen
Commercial Officer
Phone: +86-10-8532 9998
Thomas Michael Brinch-Pedersen
Commercial Intern
Phone: +86-23-6383 6008
Anne Sjørup Bertelsen
Commercial Intern
Phone: +86-10-8532 9926
GUANGZHOU
Jianru Cen (Jane)
Commercial officer
Phone +86-20-2879 7320
TAIPEI
Suping Hsu
Commercial Officer
Phone: +886-2-2718 2101 ext. 19
TABLE OF CONTENTS
TABLE OF CONTENTS
NEWS FROM THE FOOD TEAM
Meeting with Local government from Henan Province Meeting with Local government from Guangdong province
Pets in Taiwan
4
5
6
INVITATION
The 91st China Food and Drinks Fair (CFDF)
7
EXPORT FIGURES
Danish agriculture and food export to China
Chinese food inflation
8
9
NEWS FLASH
Food safety
Marketing
Trade
Reforms
GM
Farming
Dairy
Dairy (formula)
Beverages
Poultry
Bakery
Sharks
Supplements
EDITED BY
Minister CounsellorCommercial Intern
Food, Agriculture and Fisheries
KINA.UM.DK
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20
22
25
27
29
32
36
40
41
42
44
45
MEETING WITH LOCAL GOVERNMENT FROM
HENAN PROVINCE
On 14th August 2014 the Minister Counsellor met with a local government
delegation from Pu Yang city in Henan Province discussing export of
Danish technology within pig and dairy production.
A local government delegation from
Pu Yang city in Henan Province paid
a visit to the Embassy and had a
Liu Qiang
Commercial Officer
meeting with Minister Counsellor
Beijing
Marie Louise on 14th August, the
delegation was headed by the vice
Mayor of Pu Yang city and senior officials in animal husbandry bureau.
The purpose of the visit was to establish the relation between the local government and the Danish
Embassy and to explore the potential cooperation
within the livestock area. During the meeting, the
Vice Mayor introduced the overview of Pu Yang city,
status quo of animal husbandry production in Pu
Yang especially on dairy and pig industry as well as
preferential policies and incentives for investment
in Pu Yang. He stressed that Pu Yang city is located in the junction of Hebei, Shandong and Henan
province with very convenient transportation condition. Besides, the city is also very rich in agricultural
resources and covers a large market area within
4 provinces. They are very interested in advanced
Danish technology in animal production especially
within pig and dairy production. They would like to
introduce relevant Danish industry in pig and dairy
production into Pu Yang city to raise the local animal
production level. In the moment there is a big Danish model pig farm project which is handled by a
Chinese company called Hu Sheng agriculture in Pu
Yang, and they are aiming to introduce Danish dairy
4
industry into their city as well. There will be a huge
potential market for Danish industry within pig and
dairy production in Pu Yang.
Minister Counsellor Marie Louise warmly welcomed
the visit and also introduced about the Danish agriculture focusing on animal production. She expressed that the Embassy would contribute to potential cooperation between the two sides within pig
and dairy industry and spare no efforts to support
Danish relevant companies to get access to the local
market and invest in Pu Yang city together with the
local government.
KINA.UM.DK
MEETING WITH LOCAL GOVERNMENT FROM
GUANGDONG PROVINCE
On 25th July 2014 the Consul General in Guangzhou met with officials from Guangdong
province.
On 25th July, Mr. Ole Lindholm, the
Consul General of Danish consulate
general in Guangzhou met with Mr.
Jane Cen
Zheng Huidian, Deputy DirectorCommercial Officer
Beijing
general, Department of Agriculture
of Guangdong province, together
with officials from Guangdong pig
production association, centre of agriculture product
quality and safety of Guangdong province. At the
meeting, both parties exchanged views on the current cooperation on agriculture and expressed the
wishes of having more cooperation in the future on
the area of pig production, organic production and
food safety.
The conclusion for the meeting was that both parties
agrees to draft a proposal on a roundtable meeting
on pig production in Guangdong on 4th November.
The agenda for the roundtable meeting is to introduce the advanced Danish technology and equipment within pig production among Chinese potential
users.
KINA.UM.DK
5
PETS IN TAIWAN
Theme article
Societal shifts create opportunities in the market for pet care
products
Societal factors such as low birth
rates, ageing population, low marSuping Hsu
riage rates, and smaller household
Commercial Officer
Beijing
sizes are all contributing to a rise
in the amount of Taiwanese people
keeping pets. Taiwan currently has
a pet population of 9.1 million out of which 1.3 million are dogs and 321,000 are cats. Due to the urbanisation trend, resulting in smaller living space for
both humans and pets, it is especially the number
of cats and small dogs that are growing particularly
strong at the moment.
The pet is part of the family
The smaller family sizes mean that owners are investing more time, money and affection into their
pets. As pets are increasingly treated as part of
the family and owners are more concerned about
the health and well-being of the pet. The impact of
this ‘humanisation trend’ is highlighted by the rapid
growth of integrated pet specialist shops, fancy pet
products, various pet dietary supplement products
and premium pet food.
Especially the latter two categories have experienced a massive growth in recent years. 85,673
tons of dog and cat food were sold in Taiwan in 2013
at a value of DKK 2.2 billion. From 2008 to 2013 the
annual value of this market has grown an astonishing 51.8%. In the same time period the market for
pet dietary Supplements grew 55.4%.
Euromonitor predicts that this trend will continue
over the coming period of 5 years, as the value of
this market for dog and cat food is expected to grow
6
another 40.8% to DKK 3 billion in 2018. Pet dietary
supplements are expected to grow another 51.8 %
in the same period.
Consumers willing to pay for premium quality
It is especially the producers of premium and highquality pet food that have driven the value growth
and who will be able to reap the future benefits. The
pet owners are increasingly willing to purchase more
nutritious foods that contain better ingredients. This
is evident when examining Taiwan’s overall dog population which actually decreased slightly in 2013,
while the retail value dog food sales managed to increase by 8%. Recently more products with organic
ingredients, fresher protein sources, and grain-free
dry food have been introduced to the market.
The spoiling of the pets in Taiwan goes beyond meeting nutritional needs. When you see the Taiwanese
walking with a stroller, it is almost as likely to contain a pet as it is a baby. In the more extreme cases
of pampering pet owners take out expensive insurance policies on behalf of their pets. Pet cemeteries with full funeral services have also experienced
increased popularity in recent years.
The majority of the sales of dog and cat food products is split between super- and hypermarkets who
took care of 40,2 % of the sales in 2013, and pet
shops who handled 42.5 % of the sales in the same
year. In recent years pet superstores have been increasingly popular, and they now cover 7% of the
sales of dog and cat food. These stores combine
veterinary clinics with consulting centres, spas and
grooming spots, and boarding services, and thus are
able to provide multiple services for various needs.
Such stores and services will likely increase in popularity over the coming years.
KINA.UM.DK
INVITATION
THE 91ST CHINA FOOD AND DRINKS FAIR (CFDF)
Imported Food and Beverage Exhibition Zone
CFDF has been a tradition since 1955. It's a
comprehensive food show held twice a year. In the
spring it is located in Chengdu and in the autumn it
tours between different cities. This year it is held in
Chongqing.
Thanks to the “Go West” policy West China has been
growing rapidly and has become the new engine
to facilitate consumption in China. Chongqing, a
directly-controlled municipality with a population of
33 million, covers the seven South-West provinces
with 379 million people. It is the gateway to West
China and one of the newest first tier cities with a
booming economy.
With more disposable income and alternation of
consumption habits, the demand for imported
food with better quality has been growing rapidly.
Chongqing citizens spent a total of RMB 415.177
billion on consumer goods in 2013, with an average
monthly sales growth of 13%.
By 2016, a 70,000sqm Import Food Town with various
functional sectors such as Market Trading Area,
International Gourmet Street, Bonded Warehousing,
Food Inspection Center, Business Office, Direct
Shipping Port, etc. will be build. Meanwhile, the
port advantages with more international air freight,
waterways to the coast and a direct rail link between
Chongqing and Europe terminating in Germany. This
will also facilitate port logistic for the Import Food
Town. Chongqing is the pilot city for notarized meat
port and E-Commerce trade across borders, which
provide unique convenience for import food trade.
Exhibition Area: 125,000sqm
Visitor No.: 250,000
Transaction Volume: RMB 20.857billion
KINA.UM.DK
On the IFB Zone of the 90th CFDF, Thailand, Spain
and Singapore Pavilions as well as many top food
importers attended to do branding and develop
more channels. To support exhibitors more than
40 top buyers were invited to do the business
matchmaking one to one with exhibitors, which is
highly appreciated and praised by both buyers and
exhibitors.
In addition, a large number of media will cover the
show having focus on especially imported foods.
This will promote new safe products and different
food cultures.
- CFDF is the first trade show in the food industry
each year and the order-placing meeting with
biggest on-site turnover.
- It is the best platform to seize the fastest growing
2nd and 3rd tier market and explore the sub-channels.
- By infiltrating the food industry for 60 years, CFDF
have accumulated a large number dof buyer resources
and become the most popular industry gathering.
- CFDF is a trade platform to get in touch with
nationwide retail and wholesale buyers as well as a
chance to have in-depth communication to facilitate
business opportunities.
Date and time:
12th to 15th , October, 2014
Venue: Chongqing International Expo Center
For more information visit:
Or contact:
http://www.qgtjh.com/newsen.
asp?tid=4&id=677
Daniela Zheng, [email protected]
7
EXPORT FIGURES
DANISH AGRICULTURE AND
FOOD EXPORT TO CHINA
The Danish export of food and agricultural products to China reached 12.8 billion DKK in the one year period
from June 2013 to May 2014. The fur and skin export has seen a notable drop in value of 35% as compared
to previous year.
The total Danish export of goods from June 2013 to May 2014 reached 28.8 billion DKK, which is a decrease
of 6% compared to the previous year period. The agricultural and food export accounted for 44.5% of the
total export from Denmark to China. Two areas have experienced a spectacular increase: export of live animals have increased by 696% compared to the previous year and dairy and eggs by 115%.
A closer look at the numbers
By far, the largest export within food and agriculture is still fur and skin, which take up 62% of the
total export even though the area have decreased
compared to the previous year.
Diagram of the food and agriculture export
(percentage of total 12.8 billion DKK):
Meat products (16%), which have steadily increased during the last years continue to grow
and have increased with 2% compared to the
previous year. Live animals still count for a very
insignificant part of the total export, but the area
is in an impressive growth as mentioned above.
As a percentage of the total export; dairy and eggs
(3%), grains and feed (4%) and aquatic products
(7%) remain closely unchanged compared to the
previous year.
Export figures
All numbers in million DKK. Total export to China (Source: Statistics Denmark).
Goods
June 2013 - May 2014
June 2012 - May 2013
Change
Fur and skin
7,912.111
12,102.366
-35%
Meat products
2,073.341
2,023.269
2%
Aqautic products
909.922
936.393
-3%
Grains and feed
523.453
601.972
-13%
Dairy and eggs
319.980
148.829
115%
Live animals
159.422
20.034
696%
Agricultural machinery
117.957
64.356
83%
Misc.
782.586
499.864
57%
12,798.772
16,397.083
-22%
Total
8
KINA.UM.DK
EXPORT FIGURES
CHINESE FOOD INFLATION
The declining development in the consumer price index, which we have seen since October 2013, seems
to change from February 2014. After a rise in May 2014 the consumer price index fell a bit again, but have
been stable since June at 2.3%. The food price index peaked in October 2013 and have been fluctuating
trough the spring 2014, but like the consumer price index it has also been fairly stable since June and is now
3.6%, which is compared to June 2013.
Consumer Price Index (CPI) & Food Price Index development
July 2013 - July 2014 (Souce: China National Bureau of Statistics)
Last 3 months average
From previously in 2014 seeing a decrease, eggs have over the last three months seen an impressive
increase at 16.7% on a year on year basis. Almost catching up with Fruits at 20%. Grain, Beef, Mutton,
Aquatic products and Milk & Dairy have also seen an increase. However non of them as big as the previous
three month average. Grease, pork and vegetables have seen a 3 months average decrease, but not as big
a decrease as the previous three month average.
China food inflation - 3 months average
From May 2014 to July 2014 by category. Values in Y/Y (%). (Souce: China National Bureau of Statistics)
KINA.UM.DK
9
NEWS FLASH
FOOD SAFETY
DISHONOR ROLL: INDIA AND CHINA ARE THE
WORLD'S WORST FOOD SAFETY VIOLATORS
Source: Food Production Daily, 05-08-2014
A rundown of the number of food safety violators
around the globe finds India and China are the countries with the highest number of offenses.
In an annual poll conducted by food safety data
crunching outfit Food Sentry, the nations of the
world are ranked in order of the number of food
safety violations.
The recently released top 10 worst offenders list
names the leaders (or losers) as follows: India, China, Mexico, France, the US, Vietnam, Brazil, Dominican Republic, Turkey, and Spain.
Understanding food safety
According to Food Sentry’s senior intelligence analyst Zak Solomon, breaking down such data is vital
for food professionals to be aware of and comprehend.
“Clearly understanding food safety from a global
perspective is immensely important,” he said. “Food
safety violations are nothing new; they've just been
receiving a lot of attention lately, and rightly so.”
10
According to Food Sentry, the company scoured food
industry data from 12 months’ worth of reports.
Their staff dug into data from government entities
in the US, Europe, and Japan, and other sources.
Top offenders
While developing countries have their share of food
safety violations, Solomon pointed out the top 10
worst offending countries includes mostly first-world
leaders.
"We import from every single one of the countries in
the top ten, and, in fact, the U.S. is among the most
common violators,” he said.
The poll reports the most frequently listed food safety violation was “excessive or illegal pesticide contamination.” Such infractions reportedly comprised
more than a third of all the violations recorded.
Food Sentry is an organization designed to provide
food professionals and consumers with information
about food product safety.
KINA.UM.DK
NEWS FLASH
FOOD SAFETY
CHINA'S PROPOSED FOOD SAFETY OVERHAUL LACKS
CLARITY AND DETAIL, NPA SAYS
Source: Food Navigator Asia, 06-08-2014
China’s proposed changes in its food safety regulations, which also govern dietary supplements, are
long on aspiration and short on specifics. That’s the
opinion expressed by the Natural Products Association in comments the organization submitted to Chinese authorities recently.
“It’s an important market and getting more important by the day. I think it’s good news that China
is very interested in natural products. They first
looked at laws around health food in 2009 and not
much has changed since then,” Daniel Fabricant,
CEO of NPA told NutraIngredients-USA.
NPA has drafted eight pages of comments on China’s proposed 2014 amendment of its Food Safety
Law. In its comments submitted to China’s legislative body, the National People’s Congress, the organization noted that the safety of food in and from
the world’s most populous country is of critical importance in the
United States.
Increasingly, ingredients used in supplements and
finished foods in the US market are sourced in China, and more finished products are imported directly, too. Two fairly recent large scale instances
of poisoning of ingredients in China—the melamine
scandal and the case of oversulfated chondroitin—
point to the risk to US consumers of tainted Chinese
ingredients.
KINA.UM.DK
Murky lines of authority
An issue often cited when dealing with Chinese regulations is the murky question of who is actually in
charge. The interplay between national and regional
authorities is complex and often intransparent. NPA
calls for a clear lines of national authority on the issue. Unfortunately, from the association’s point of
view, the draft law would not clear this issue up.
While the law puts food safety on a national level,
the actual functioning of identifying and clearing up
food safety issues would consist of an interaction of
the firm in question with the relevant local authorities. This could make for uneven enforcement, NPA
said.
The association also observed that it is unclear how
those concerns would be communicated to the national level, complicating data collection.
To that end, NPA also noted that the draft law lacks
any requirement for an adverse event reporting system.
“We want more detail on how those responsibilities
will be parceled out between the Health Ministry,
the Chinese Food and Drug Administration, and the
authorities responsible for quarantine and sanitary
inspection. Who will have jurisdiction? Not knowing
how laws are going to be administered is a concern
regardless of the nation,” Fabricant said.
11
NEWS FLASH
continued...
FOOD SAFETY
CHINA CONTINUES TO
REJECT SUBSTANDARD
FOOD IMPORTS
Source: Xinhua, 27-08-2014
Imprecise language
Experience in dealing with US regulation, and seeing
how the functioning of those regulations can turn
on imprecise bits of verbiage buried within the law,
led the organization to criticize the vagueness of the
Chinese draft proposal.
The law contains phrases such as “reasonable equipment” and “appropriate places” making it unclear
how companies might best comply with the law (and
potentially giving local authorities wide latitude for
enforcement). For example, it is still unclear where
dietary supplements will fall. Will they continue to
be classified as “health food,” or will a new category
be created for them under a future amendment?
The comments also cite the imprecision of the draft
law’s testing requirements. There is no description
of exactly what a testing program would entail.
Will it be a risk based approach, focusing more on
categories of concern that are subject to economic
adulteration and the inclusion of undeclared active
pharmaceutical ingredients?
Chinese authorities found 424 batches of substandard food imports in July, the country's top quality
supervisor announced on Wednesday.
Poor quality, excessive additives and microbial contamination were the main problems discovered in
these imports, which came from 35 countries and
regions, according to the General Administration
of Quality Supervision, Inspection and Quarantine
(AQSIQ).
The rejected food products fell under 19 categories, with most classified as biscuits and candies,
beverages and seasonings, said AQSIQ spokeswoman Li Jing.
Besides food, the AQSIQ also found four shipments
of substandard cosmetic products imported from
three countries and regions.
All the substandard products were either sent back
or destroyed, Li said.
Will it apply to both imported raw materials and raw
materials exported to the United States? “While FSL
appears to be a comprehensive document in theory,
many questions remain as to how the law will be
implemented in practice,” NPA’s comments state.
“Knowing what we know about regulatory environments, we want to have a little more detail,” Fabricant said. “The devil is in the details. We would
rather have those concerns dealt with up front rather than on the back end as the law is implemented.”
12
KINA.UM.DK
NEWS FLASH
FOOD SAFETY
GOVERNMENT CALLS FOR ACTION OVER
DANGEROUS FOODS
Source: China Daily, 08-08-2014
Food companies should start withdrawing substandard food products that present a serious threat to
health as soon as they are discovered, according to
a draft document released by China's top food safety watchdog on Wednesday. Plans for recalls should
be submitted to the authorities within 24 hours, said
the China Food and Drug Administration.
The draft contains proposals on how food product
recalls should be supervised and managed. The authority posted it on the website of the State Council's Legislative Affairs Office and invited the public
to comment and make suggestions.
The draft makes clear that food producers and businesses bear the primary responsibility for ensuring
food safety. It says they should record detailed information about the entire manufacturing process
and retain documents and files to ensure that recalls
proceed smoothly.
Immediate recalls should be ordered when potentially harmful food products are found either through
internal checks or government inspections. Companies should halt production and inform local safety
watchdogs, business partners and the public.
Six senior executives of the company have been arrested, and Shanghai vowed it would impose a zerotolerance policy on food safety crimes.
"Food safety is an important issue and greatly affects people's health and lives," said Gu Zhenhua,
deputy director of Shanghai Food and Drug Administration. "Stricter supervision should be carried out."
Some cities are merging their various quality watchdogs to improve efficiency.
The Tianjin municipal government merged three departments - the Industrial and Commercial Administration, Quality and Technical Inspection, and Food
and Drug Administration - into one organization.
The combined body, the Tianjin Market and Quality
Supervision Administration, is the first provinciallevel department of its kind in the country, according to Xinhua News Agency.
Lin Lijun, the head of the administration, said the
creation of a unified team will optimize the supervision of food safety.
The draft divides recalls into urgent cases and
standard cases depending on the urgency and severity of the risks. While plans to withdraw products
in the first category should be submitted to local
food safety departments within 24 hours, the time
limit for less urgent cases is 72 hours.
A series of food safety scandals over the past few
years has caused widespread concern. The most recent case involved allegations that Shanghai Husi
Food Co supplied expired meat to fast-food chains.
KINA.UM.DK
13
NEWS FLASH
FOOD SAFETY
INVESTIGATION AT FOREIGN SUPERMARKET CHAIN POINTS
TO TIGHTER ENFORCEMENT OF FOOD SAFETY LAWS
Source: Control Risks, 11-08-2014
Chinese media on 9 August reported that the Shenzhen Municipal Market Supervisory Administration
was investigating reports of food safety violations at
a local Walmart branch. The company on 8 August
released a statement rejecting claims by Chinese
media alleging that a Walmart store in Shenzhen
had been selling expired meat and other sub-standard products.
•
The government is expanding enforcement of and penalties for food safety violations.
Pending reforms to the Food Safety Law will significantly increase fines and the prospect of criminal
charges. Judicial reforms have given individual consumers increased rights to sue for damages if they
are sold counterfeit or sub-standard food products.
•
Companies face significant challenges to ensure consistent application of standards
throughout supply chains and with local subsidiaries. In many of the recent government probes,
audits by companies and state regulators failed to
unearth prolonged and ongoing violations. This has
been the case with food safety issues, as well as
with violations in other areas such as labour rights.
14
•
Pressure on regulatory agencies to
enforce food safety laws has increased following
reports of major violations at meat supplier Husi.
In that case, as in others, video footage from employees and journalists helped initiate investigations. Regulators are increasingly willing to rely on
whistleblowers and reporters to raise concerns, and
in some cities have even discussed monetary rewards for employees who act as sources.
Cooker pressure
Chinese media reported that Shenzhen’s authorities
were investigating a Walmart employee’s allegations
of the use and sale of out-of-date products, including some cooking oil, meat products and rice. The
authorities are yet to issue any conclusions. Walmart
insisted that its own investigation showed these allegations to be unfounded.
Pressure on companies to guarantee the safety of
their products is increasing. Walmart was forced to
recall donkey meat products in January after tests
showed the meat to contain fox DNA. The company
has since announced numerous food safety measures, including DNA testing of meat products and
more stringent checks on suppliers’ compliance.
Walmart also announced in June that it would triple
its food safety budget to RMB 300m ($48.7m) by
2015.
KINA.UM.DK
NEWS FLASH
FOOD SAFETY
HEINZ TO TIGHTEN SUPPLIER CONTROLS IN CHINA
AFTER INFANT FOOD SCANDAL
Source: Global Times, 19-08-2014
US food maker HJ Heinz Co said on Tuesday
tighten controls over ingredients suppliers in
after it was forced to recall some infant food
ucts from Chinese store shelves due to excess
of lead.
it will
China
prodlevels
The company, known globally for its ketchup and
baked beans, made the announcement as it sought
to contain the potential damage to its reputation in
a country where consumers are highly sensitive to
food safety after a series of high-profile scares.
Heinz told Reuters on Monday that it had recalled
four batches of its AD Calcium Hi-Protein Cereal for
infants after a food watchdog in East China's Zhejiang Province found levels of the toxic heavy metal
above regulation standards.
Heinz will draft stricter systems for regulating ingredient suppliers and improve traceability and food
safety control measures along its supply chain, it
said on Weibo on Tuesday.
Supply chains issues in China have come under increased scrutiny, with Yum! Brands Inc, Wal-Mart
Stores Inc and McDonald's Corp all recently facing
food safety issues with suppliers.
Consumers in China are especially sensitive to baby
products after powdered milk tainted with the industrial chemical melamine led to the deaths of at
least six infants in 2008.
"I would think that Heinz is in a lot of trouble right
now because parents are unforgiving of any quality
control problems in baby and infant food products,"
said Shaun Rein, Shanghai-based managing director
of China Market Research Group.
An official at Zhejiang Food and Drug Administration
(FDA) said that it would release further information
about the case in the coming days.
Standard levels for infant products should be below
0.2 milligrams per kilogram, according to a 2010
government report.
The firm added that the high lead level was caused
"accidentally" by a supplier who had provided a
skimmed soybean powder ingredient used in the
products.
The incident relates to an isolated regional withdrawal in East China, company spokesman Michael
Mullen said in e-mailed comments to Reuters.
"Extensive testing confirmed that no other Heinz
baby food varieties are affected," he said.
Heinz did not respond to phone and e-mail requests
for further comment on Tuesday.
The Zhejiang FDA has said the problem affected
1,472 boxes of cereal in the province and that Heinz
had told the agency it would destroy another 153
boxes that are sealed in a warehouse in Guangzhou,
capital of South China's Guangdong Province.
Heinz said in its Weibo statement that it would compensate any consumers who had bought the affected product. The cereal is aimed at infants aged
between six months and 3 years, according to the
packaging.
It also apologized for inconvenience caused to consumers and moved to assure shoppers that the firm
was committed to food quality and safety.
Affected products had been sealed and would be destroyed under regulator guidance and the recall was
a precautionary measure,Heinz said.
KINA.UM.DK
15
NEWS FLASH
FOOD SAFETY
FOOD SAFETY IS CRUCIAL IN CHINA
DEAL FOR BABY MILK
Source:The New York Times, 27-08-2014
Six years ago, when tainted infant formula killed six
babies in China and sickened 300,000, one of the
biggest foreign investors in the sector was caught
by surprise.
The investor, the Fonterra Cooperative Group of New
Zealand, one of the world’s largest dairy companies,
had put millions of dollars into a partnership with
the Sanlu Group, a Chinese maker of infant formula
that was one of several found to have mixed an industrial chemical into milk powder to artificially raise
protein readings.
Sanlu was declared bankrupt, and four of its executives were imprisoned. Fonterra was forced to write
down the entirety of its investment of 200 million
New Zealand dollars, or about $167 million at current exchange rates, in the Chinese venture.
Yet on Wednesday, Fonterra became the latest foreign company to make a new bet that it could turn
a profit by bringing safer food to China. The company said it would spend more than $500 million in a
deal with the Beingmate Baby and Child Food Company, a Chinese manufacturer of infant formula. A
day earlier, Kohlberg Kravis Roberts, an American
private equity giant, announced an investment of
about $400 million in China’s largest chicken breeder, Fujian Sunner Development, in a deal intended
to improve food safety and quality.
“China is a completely different environment now;
Beingmate is a completely different partner,” Theo
Spierings, the chief executive of Fonterra, said on
16
Wednesday in response to questions from reporters about the Sanlu episode, according to Reuters.
“We are very focused on learning from the past and
moving on to the future.”
Food safety scandals occur with disturbing frequency in China. This week alone, according to reports
in the state-run news media: The authorities seized
more than 30,000 tons of chicken feet, a common
menu item in China, that had been contaminated by
a hydrogen peroxide cleaning agent; and in Zhejiang Province, 17 people were in court on accusations of selling 38 tons of dog meat — consumed
in parts of the country — that had been poisoned
when the animals were slaughtered with cyanide or
overdoses of anesthetics.
The challenge confronting big foreign food companies in China is how to ensure that their standards
are enforced by all workers at all stages of the food
supply chain. Ignorance can be a more common
problem than outright deception, experts say.
“Most of the time it’s not that something is being
hidden, it’s more that the people are not aware of
the standards that Western companies expect,” said
Sébastien Breteau, the chief executive of AsiaInspection. The company conducts spot checks on all
kinds of factories in China on behalf of the companies they supply, and among food factories, the
failure rate for inspections so far this year has been
more than 50 percent.
“What I’ve seen,” Mr. Breteau said, “when you sit
down in a factory and you explain what matters
KINA.UM.DK
NEWS FLASH
continued...
for a client, if you train them over more demanding standards in terms of manufacturing, then they
catch up with it very quickly.”
Although food companies with foreign backing are
often financially stronger and are perceived as
having higher quality and safety standards, some
prominent lapses in China have shown that such
companies can still run into problems. Fonterra’s investment in Sanlu was an early example. Last week,
the American food producer H. J. Heinz recalled several batches of baby cereal products after they were
discovered to contain high levels of lead.
And last month, the OSI Group, an American-owned
supplier for McDonald’s, KFC and other fast-food
chains, became the subject of an investigation by
the police and food safety officials in Shanghai. A
local television station had broadcast a program accusing OSI employees of doctoring labels to extend
expiration dates on chicken and beef products and
showed footage seemingly of workers scooping up
meat from the floor and putting it back on conveyor
belts for processing.
For OSI, which is based in Aurora, Ill., and had been
known for its industry-leading operations and quality control, the episode was jarring. In response to
food safety concerns in China, it had invested hundreds of millions of dollars building a chicken-meat
supply chain in the country that included a feed
mill, hatcheries and slaughtering operations. In the
United States, it focuses on processing meat that is
purchased from other suppliers.
In the Fonterra deal, which is subject to regulatory
approvals and calls for it to take a 20 percent stake
in Beingmate, the two companies will import infant formula ingredients from Fonterra’s dairies and
KINA.UM.DK
manufacturing sites in New Zealand, Australia and
Europe for sale in China.
“Extensive due diligence has taken place from both
sides,” said Mr. Spierings of Fonterra, “and we have
made arrangements on governance very clear.”
Experts say that China’s food industry tends to be
highly competitive and to have low profit margins,
meaning that businesses can be tempted to skip
steps to save money, in some cases turning a blind
eye to possible dangers to consumers.
“Producing food as a business is not the same as
producing T-shirts,” said Peter Karim Ben Embarek,
a food safety scientist at the World Health Organization in Geneva who was previously based in China.
“If you cut corners making T-shirts, some customers
might be upset, but if you do it with chickens, you
might end up killing people.”
He added: “You have a bit of a Wild West situation
where the public oversight is still lacking in terms of
on-the-ground implementation.”
Gao Guan, the deputy secretary of the China Meat
Association, said one problem is that China does not
have enough food inspectors.
“The level of regulation and enforcement is too low,”
Mr. Gao said. He cited recurring problems at meat
processors, which can be reckless in their pursuit
of profit. “If you rely on the individual processors,
then you will never be able to enforce safety standards, because everybody is just trying to make fast
money.”
17
NEWS FLASH
FOOD SAFETY
CHINA ACTS OVER POISONED DOG
MEAT AND CHICKEN FEET
Source: Financial Times, 27-08-2014
Dog meat and chicken feet are the latest delicacies
hit by gruesome food scandals in China, where the
government has struggled for years to purge adulterated and counterfeit products from the market.
In one of the biggest cases of its kind, 17 men are
standing trial in the eastern province of Zhejiang
this week for selling poisoned dog meat.
The accused were part of a group that bought dead
animals and used cyanide and anaesthetic darts to
snatch live pets and stray dogs that they then sold
to meat traders and restaurants, who served the
poisoned meat to patrons.
Earlier this week in the same province, police said
they had arrested 38 people on suspicion of preparing or selling chicken feet soaked in hydrogen peroxide, a potentially toxic chemical used for bleaching and sterilising.
During their raids, police seized 30,000 tonnes of
chicken feet soaked in the chemical, which can
cause vomiting, and throat and stomach problems if
ingested in unsafe amounts.
The chicken feet, which are a delicacy throughout
China, were treated with hydrogen peroxide to make
them white and fresh-looking and were sold to more
than 10 provinces across the country. Police said the
sales network was worth about Rmb300m ($49m).
China has struggled for years with constant recurring food and product safety scandals, including
some which have killed or harmed consumers on an
industrial scale.
In 2008, at least six babies were killed and 300,000
fell ill after drinking infant formula poisoned with the
industrial chemical melamine. The melamine was
added by milk producers to cheat in protein tests
so that they could water down their milk and earn
higher profits.
18
In the wake of that scandal, Beijing introduced a
new food safety law but weak enforcement, rampant official corruption and unscrupulous behaviour
in the highly competitive market mean food safety
scandals still erupt with depressing regularity.
So far this year, police have recorded more than
11,000 food and drug scandals in China, according
to Hua Jingfeng, a deputy director at China’s ministry of public security.
In the latest poisonous dog meat case, the court
heard that seven of the 17 men were responsible
for snatching and killing hundreds of dogs, often using anaesthetic darts they bought online. The other
men were dealers who resold more than 60 tonnes
of dog meat poisoned with cyanide and anaesthetics.
The accused told the court this week they knew the
meat was poisoned and admitted they would not eat
it themselves.
Dog meat is a delicacy in some parts of China and
usually fetches a higher price than pork, mutton
or chicken. The dog-snatchers in this case earned
nearly £1 a kilo for the poisoned canines.
Several recent food safety scandals in China have
involved global companies such as McDonald’s, KFC,
Starbucks, Walmart and HJ Heinz.
Last month McDonald’s removed nearly all meat
products from its menu for more than a week in China after its main supplier in the country, US-owned
Shanghai Husi Food, was found to have forged production dates and used long-expired meat. The
scandal also hit Husi customers KFC and Starbucks.
Earlier this month, US ketchup maker HJ Heinz apologised to Chinese customers after it recalled some
infant cereals containing excessive levels of lead.
KINA.UM.DK
NEWS FLASH
FOOD SAFETY
CHINESE COOK ON TRIAL OVER
PAINTED FOOD
A Chinese cook has gone on trial in east China's
Zhejiang Province accused of painting abalones and
goose paws to make the dishes more visually appealing, local authorities said on Monday.
The suspect, surnamed Chen, 27, painted inedible
pigment on 12 abalones and 100 goose paws worth
4,786 yuan (777 U.S. dollars) since March 2013, according to the Xihu District People's Court of Hangzhou City, Zhejiang Province.
The use of such pigment in food is banned. The
court indictment issued on Sunday said that Chen
was involved in the crime of manufacturing and selling poisonous and harmful food.
KINA.UM.DK
Chen worked in a hotel in Hangzhou. There were
customer complaints in early 2013 that the goose
paws Chen cooked did not look good.
The head chef then asked Chen to improve or he
would be sacked. Chen is alleged to have then
bought the pigment and begun applying it to the
abalones and goose paws.
The pigment was found by health authorities during
a check on the hotel on August 6, 2013.
19
NEWS FLASH
MARKETING
BUSINESSES DON'T KNOW HOW TO MARKET TO
CHINESE IN THE 'ASIAN CENTURY'
Source:Food Navigator Asia, 12-08-2014
Though the terms of Australia’s approach to its
“Asian Century” policy might need some finessing,
there is no doubt China still holds massive potential—as long as businesses learn how to network the
local way.
According to new Deakin research completed in
partnership with the Open University of Hong Kong,
many small to medium enterprises are struggling to
undertake the type of intense networking needed
to build relationships in an East Asian culture where
business lives or dies based on its network.
Personal touch
With China the second largest economy in the world
and Australia's number one trading partner, business is strong between the two countries, though
the researchers found that many SMEs didn’t have
the capacity to entertain the close relationships demanded by Chinese customers.
To compile the study, the team analysed the experiences of 40 different Australian SMEs over a fivemonth period from August to December last year
across a number of industries.
"Our research was motivated by the increasing significance of China to Australia's economy, and the
fact that SMEs represent a significant proportion
of the Australian economy," said Deakin’s Dr Jane
Menzies. "The Chinese market is already Australia's number one trading partner and the amount of
trade between the two countries is growing, offering
Australian businesses many opportunities."
The report identified a number of priority areas when
planning for operations in China, including innovation, network development, online strategies and investment in resources to target the Chinese market.
20
Innovation and entrepreneurship
The researchers found a focus on innovation and
entrepreneurship would help Australian companies
develop future competitiveness.
"Getting involved in Australian chambers of commerce in China, visiting trade fairs, attending conferences, and tapping into social networking and
online selling sites such as Weibo, Weishing and
Taobao are some of the neighbourly ways Australian businesses are finding favour with their Chinese
counterparts,” continued Menzies.
"But while many Australian businesses are developing new products for the Chinese market, many reported their ability to sell on the basis of innovation
was impeded by local environmental and cultural
conditions.
"Some respondents suggested there were parallels
between building and developing professional relationships in China and in Australia, such as the common practice of discussing business opportunities
over lunch, while others had benefited from employing staff with Chinese connections, including 'sea
turtles’—or students who had spent years studying
in Australia before returning to China.
"However, the most important issue that the participants faced in the Chinese market was generally
found to be due to internal resource shortfalls including funding, staffing and time. These negatively
impacted on their ability to keep up relationships
and develop business in China.
"With good connections, careful planning, an innovative approach to the local market and good products and services, Australian businesses can reap
significant rewards from operating in the Chinese
market.”
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NEWS FLASH
continued...
MARKETING
Asian Century
Some of Australia’s senior politicians continue to
champion the “Asian Century” white paper, which
was released in 2011 by Julia Gillard’s former administration, most notably Barnaby Joyce, the agriculture minister.
CALIFORNIA'S CLEAN
REPUTATION CREDITED FOR
RISING CHINA EXPORTS
However, in comments made last week in The Weekly Times last week, Joyce suggested that Australia should sharpen its focus on supplying premium
products, rather than attempting to serve as Asia’s
food bowl.
With an estimated market of 3bn Asian middle-class
consumers by 2030, Joyce said it was “ridiculous”
to believe that Australia could come close to providing the food they would require. Even if the country
doubles its output by that year, it will still only provide sufficient produce to feed around 120m Asians.
Moreover, the country’s agriculture could be seen as
a threat by neighbouring countries, like Indonesia.
“Indonesian farmers don’t want to hear that the
only cattle that will be available for market will be
Australian cattle,” said Joyce.
Instead, he said a targeted approach, much like
competing New Zealand’s 100% Pure brand, would
be a better strategy.
“If we all go off as rats and mice, here, there and
everywhere, then we won’t have a consistent approach,” he said.
A new white paper to announce Australia’s approach
to macroeconomic business in Asia will be released
towards the end of this year.
Source:Food Navigator Asia, 21-08-2014
Californian food producers are a major beneficiary
of Chinese consumer concerns in the wake of a
spate of domestic food scandals.
According to the US Department of Commerce,
the state’s food companies are on target to export
more than US$4bn worth of fresh produce, health
foods and wines to Hong Kong and China this year.
Last year, consumers in Greater China ate and
drank their way through almost US$3.9bn worth of
Californian food products, a 19.5 percent increase
on 2012.
The overall rise in consumption spending and demand for higher quality food products should lead
to a similar double-digit increase by the end of
2014, according to California State Trade and Export Promotion (Step).
“The growing number of food and wine products
imported to Hong Kong and China is a tremendous achievement of California's produce gaining
acceptance, at an ever increasing rate, with the
discerning palates of consumers in Hong Kong and
China,” said Jeff Williamson, Step’s director.
He explained that this is because shoppers are
increasingly considering their food purchases by
seeking out more information on nutrition, sustainability and safety, which is driving demand for
higher quality products.
“Quality tends to be associated with ‘country of origin’, something that consumers respond to when
making purchasing decisions. California and US
food products are positioned as high quality, which
helps to explain the growth of US food exports
across greater China.”
KINA.UM.DK
21
NEWS FLASH
TRADE
FALLOUT IN CHINA FROM NU SKIN AFFAIR
DEPRESSES USANA'S Q2 RESULTS
Usana Health Sciences reported flat net sales in the
second quarter of its 2014 fiscal year. Issues in China caused the company to miss analysts’ estimates
for sales and earnings, and the company’s share
price took a plunge as a result.
to renovating sales centers, the company also broke
ground on a $40 million production facility in Beijing
during the second quarter. Wentz said he expected
sales in China to recover their previous robust pace
as the year progresses.
Usana’s issues in China revolve around fallout from
an enforcement action taken againts NuSkin Enterprises, which, like Usana, is a multilevel marketing
company with significant operations in the country.
The regulation of network sales in China is complex,
with companies needing to have numerous regional
offices as putative places of business in order to be
in compliance. These regulations allow limited forms
of direct selling but prohibit schemes in which members make more money from recruiting additional
members than they do from actual product sales.
Regulators fined Nu Skin $540,000 and fined six
sales members a collective $241,000. The fines, at
least for the company, were paltry, but the affect on
that company’s stock price and business (and Usana’s business) was far greater.
“As far as the activity in China, we have a very strong
team over there that immediately when those kinds
of things happen, they get out to the field and help
them to focus on the business and not the garbage
that is in the media. We also proactively reach out to
regulators and to our employees to make sure everybody's getting accurate information,” Wentz said.
Company's biggest market
Usana gets 39% of its total revenue out of China,
and the company had slowed down operations there
while waiting to see how the Nu Skin situation would
pan out. Sales in China decreased year over year,
but CEO David A Wentz said the effect is expected
to be temporary.
“Last quarter, our results were impacted by the media and regulatory focus on companies in our industry in China. While that impact certainly carried over
to the beginning of the second quarter, our business
in China began to accelerate as the quarter progressed,” Wentz told analysts during a conference
call that was transcribed on the site seekingalpha.
com.
Wentz said the country is key to Usana’s future, and
the company is investing heavily there. In addition
22
Another factor that continues to affect Usana’s results in the region is an internal accounting change
in which the company mandated that products purchased in one country must be distributed in that
country. There had been a lot of cross-border activity between mainland China and Hong Kong prior to
this change because Usana’s products were cheaper
in Hong Kong. There was a $7 million bump in sales
in Hong Kong prior to the change going into effect,
and sales declined there after the deadline.
Earnings details
As far as the numbers nitty-gritty is concerned, Usana presented a mixed picture. The company reported $188 million in revenue in the quarter, compared to $189 a year previously. Analysts had been
expecting $198 million. Earnings per share came
in at $1.36, with analysts having projected $1.50.
Sales overall were flat, but declined in the company’s most important markets. Sales dropped by
4.3% in the all-imporant Chinese market and declined 4.6% in the United States as well. Still, with
the expected rebound in China, Usana management
reiterated its earnings guidance for the year. The
company is projected to post sales of between $770
million and $790 million and earnings per share of
between $5.50 and $5.65 for the full year.
KINA.UM.DK
NEWS FLASH
TRADE
PREMIER FOODS TARGETS CHINA,
US AND AUSTRALIA
Premier Foods’s formation of a new business unit
and the launch of Ambrosia rice in China are spearheading the firm’s plans to step up global sales in
three key markets.
“The fact that it is a dairy-based product, that will
be imported, is a good thing because the challenges
they have had with the domestic dairy market in
China,” he added.
The International business unit is a new group within Premier Foods, with its own dedicated resources, tasked with growing sales particularly in China,
North America and Australia.
Test launches started in Shanghai at the end of last
month and, if successful, will be repeated in other
leading Chinese cities.
In an exclusive interview Peter Ellis, head of international business at Premier Foods, told Food Manufacture that while the firm was active in a range
of overseas markets – including the Middle East
and Europe – the three target markets showed the
greatest long-term growth potential.
“The good news for Premier is the categories [in
which the firm specialises] within those markets are
big simple meals, cakes and desserts are very large
in all those markets. So, it is a good opportunity,”
said Elllis.
One of the fastest growing retail markets
China, one of the fastest growing retail markets in
the world, presents particularly strong opportunity,
especially with the growth of the urban middle class
in major cities, such as Shanghai. To exploit that potential, Premier teamed up just over a year ago with
Swire Foods, owner of several large sugar
firms in the country and part of Swire Pacific, owner
of Cathay Pacific airlines.
The latest development in that partnership is the
perhaps surprising launch of the quintessentially English product Ambrosia rice. “It [news of the
launch] gets a bit of a giggle but we did a piece of
research looking across the categories and Ambrosia rice researched incredibly well,” said Ellis.
KINA.UM.DK
North American market
In the North American market, the star of Premier
Foods’s portfolio is Sharwoods Indian range. While
the firm has sold Sharwoods products in North
America for some time, the rapid rise in the popularity of Indian food underpins strong growth prospects
for the brand. “In the same way that after Indian
restaurants opened up here and people wanted to
replicate [the experience] at home, a similar pattern
is unfolding there.”
Australia is the last market on Premier’s big three
global hit list. It recently relaunched Kipling and
Cadbury into the Coles supermarket group. The
Australian retail scene is dominated by just two big
players – Coles and Woolworths.
“While China is a very complicated distribution market, Australia is a very simple – probably more like
the UK than the UK in some ways,” said Ellis. “With
23M people in the market – a lot of them familiar
with our brands – we think there’s strong potential
in that market too.”
Ellis emphasised that the core focus of Premier’s
business plan remained the domestic market . But,
with the launch of the dedicated International business unit, the firm was well-placed to unlock the
potential of three strategic markets, based on consumer research, he concluded.
23
NEWS FLASH
TRADE
CHINA WILLING TO EXPAND AGRICULTURAL
PRODUCE TRADE WITH RUSSIA
Chinese companies exported 2.1 billion U.S. dollars
worth of agricultural produce to Russia last year,
and China is willing to work with Russia to expand
two-way agricultural produce trade, a Ministry of
Commerce spokesman said Monday.
Shen Danyang, the spokesman, made the comments at a regular press conference when asked
about Russia's decision to restrict food imports from
the United States and the European Union and increase trade with China.
Based on the China-Russia all-round partnership of
strategic cooperation, China is willing to boost economic and trade relations with Russia, and will continue to create conditions for bilateral cooperation in
the energy, agriculture, infrastructure and high-tech
sectors, he said.
24
Shen said China's agricultural exporters choose export destinations based on market information, so it
is normal commercial behavior for them to expand
exports to Russia and arrange other business.
Agricultural produce trade between the two neighboring countries has a unique edge and growth potential, he said, adding that the Chinese side will
encourage both Chinese and Russian companies to
increase agricultural produce trade.
Russia is a major trade partner of China. In the first
seven months of 2014, bilateral trade grew by 4
percent year on year to 53 billion U.S. dollars, according to the Chinese customs data.
KINA.UM.DK
NEWS FLASH
TRADE
REFORMS
CHINA REMAINS MAJOR
MARKET FOR VIETNAMESE
FARM PRODUCTS
CENTRAL BANK UPS CREDIT
SUPPORT TO AGRICULTURE
China remained one of the major markets of Vietnam's farm products in the first seven months of
2014. According to statistics from the Ministry of
Agriculture and Rural Development (MARD) on Tuesday, China remained the top market of Vietnamese
rubber, rice, fruits and vegetable as well as cassava
during the seven-month period.
In the period, Vietnam sold some 1.78 million tons
of cassava and products to China to earn a revenue
of nearly 560 million US dollars, a decrease of 4.32
percent in volume and 5.62 percent in value year
on year. China accounted for 84.95 percent of Vietnam's cassava export market, said the ministry.
At the same time, Vietnam exported some 182,395
tons of rubber to China, earning nearly 321.2 million
US dollars, a decrease of 21.01 percent in volume
and 40.25 percent in value. Exports to China took
a 39.03 percent share of Vietnamese rubber export
market, said the ministry.
Additionally, China imported some 1.47 million tons
of rice from Vietnam, worth 631.5 million US dollars, up 1.05 percent in volume and 5.17 percent in
value, remaining the largest consumer of Vietnamese rice with a 36.18 percent market share.
The People's Bank of China, the country's central
bank, has set aside another 20 billion yuan (3.24
billion U.S. dollars) for a scheme designed to funnel
credit into agriculture, it announced on Wednesday.
The money has been allocated to a relending program, under which the central bank extends loans
to commercial banks on the condition that they in
turn lend to businesses in required sectors.
The move follows a State Council meeting last month
that saw pledges to boost agriculture by increasing the scale of relending and also re-discount programs, which allow the central bank to pump funds
into commercial banks by purchasing their bills.
On Aug. 8, the central bank added 12 billion yuan to
the re-discount quota.
Authorities hope the policies will help support growth
in agriculture while stemming credit flow to undesired sectors.
Earlier this year, the central bank cut the reserve requirement ratio for banks engaged in proportionate
lending to the farming sector or small enterprises.
Meanwhile, around 30.43 percent of Vietnam's exported fruits and vegetables were sold to China with
revenue of nearly 258.9 million US dollars, up 53.72
percent year on year.
Besides, China made up 15.69 percent of Vietnam's
cashew nut exports, 14.38 percent of wood and
wood products, 9.07 percent of tea and 6.04 percent of seafood, said the MARD.
KINA.UM.DK
25
NEWS FLASH
REFORMS
CHINA TURNING STATE-OWNED FARMS INTO
AGRICORPORATIONS TO TAKE ON WORLD PLAYERS
Source: South China Morning Post, 14-08-2014
Beijing is amalgamating a number of state-owned
farms and companies into specialised agricultural
corporations to rival international food giants.
The Agricultural Cultivation (nongken) Bureau of
the Ministry of Agriculture, is integrating some of
the 1,700 farms and 3,200 companies it oversees
to build a stronger presence in sectors as diverse as
seeds, dairy and rubber.
The bureau's director, Wang Shoucong, told the
South China Morning Post that the initiative was
in response to the top leadership's call for creating
modern agricultural corporations to address growing concerns about food security in the world's most
populous nation.
"We will start with integrating domestic resources
and focusing on the domestic market," he said. "But
the ultimate goal is to have a say in the global market - to be internationally competitive."
In the dairy industry, still reeling from the 2008 melamine-tainted formula scandal, three leading dairy
companies - Shanghai-based Bright Food, Sanyuan
in Beijing and Wondersun in Heilongjiang, all under
the cultivation bureau system - are forging an alliance to manufacture and market their products,
according to Wang.
More foreign companies are trying to strengthen
their presence in China as wary customers look outside the mainland via online shops or friends and
relatives overseas to buy dairy products, especially
baby formula.
26
Abbott Laboratories of the US and New Zealand's
Fonterra Co-operative Group, the world's largest
dairy exporter, have proposed a dairy farm hub in
China with a combined investment of US$300 million.
Local seed producers Beidahuang Kenfeng in Heilongjiang, Dahua in Jiangsu and Wanken in Anhui
have also joined forces in a sector now dominated
by foreign firms.
The alliance would help cut costs such as seed trials and assessments and make transprovincial sales
easier, Wang said.
The 10 largest local seed companies share only 10
per cent of the domestic market and less than 1 per
cent globally, respected hybrid rice researcher Yuan
Longping wrote in People's Daily last year.
Since being introduced in 2005, Xianyu 335, a variety of genetically modified corn developed by Pioneer,
a subsidiary of DuPont, has occupied 75 per cent
of the market in areas suitable for its cultivation in
northeast China, and 85 per cent in Jilin province,
China Central Television quoted Pioneer China's former president as saying.
Pioneer is one of more than 70 foreign companies in
China's seed industry, including global leaders Monsanto and Syngenta.
Wang ShoucongWang said the local cultivation bureaus in Hainan, Yunnan and Guangdong provinces
would jointly operate their raw rubber businesses.
KINA.UM.DK
NEWS FLASH
continued...
GM
WUHAN STARTS
DESTROYING GM RICE FIELD
Built up in the 1950s under Mao Zedong's planned
economy, the cultivation bureau system now owns
six million hectares of farmland, employing more
than 13 million people. It produced 34 million tonnes
of grain last year, 5 per cent of total output.
In an article in Farmers' Daily last month summarising President Xi Jinping's instructions on food security since he took office in late 2012, Wang wrote
that Xi's proposals for agriculture included establishing international grain merchants.
Professor Zheng Fengtian, a specialist in agriculture
and rural issues at Renmin University, said the bureau project was part of the State Council's efforts
to push for mergers and acquisitions of mainland
companies in various industries to rival foreign giants in global markets.
"But, compared to them, our biggest agricultural
companies are small potatoes," he said.
KINA.UM.DK
Over six hectares of genetically modified (GM) rice
crops were destroyed on July 30 in Wuhan, central
China's Hubei province, according to the local government.
Each grower was compensated in the amount of
about $100 per hectare.
The BT63 rice grown in Jiangxia District is popular among farmers because of its pest resistance.
The farmers, who grew the same GM rice variety
in 2010, say the seeds came from "acquaintances"
who did not provide invoices.
This isn't the first time that GM rice had been found
in Hubei. News media uncovered the sale of experimental GM rice on the local market in May and July.
The government said it is tracking the source of
the seeds.
27
NEWS FLASH
GM
GM FOOD MEETS NEW HURDLE
The safety certificates for two kinds of genetically
modified (GM) rice and one type of Monsanto brand
GM corn - the only three types of GM food that still
had national GM certificates - expired on Sunday,
effectively meaning that they are no longer regarded as safe by the authorities.
Having this kind of certificate is a crucial step in receiving permission to sell GM products. At present
no GM grain products are permitted to be sold in
China, but GM papaya and cotton are permitted.
Analysts say that if the expiration occurs without
any renewal, it will represent another hurdle for
food companies trying to sell GM products in China,
and that it may also make the public more wary of
GM food.
The MOA accepted the safety evaluation application
in 1999 for the two kinds of GM rice, both developed
by the Huazhong Agricultural University in Wuhan,
Hubei Province, and issued the safety certificates on
August 17, 2009.
With the expiration looming, it means it is possible
the developers of the GM rice will need to re-submit
an application. "It may take at least two years to
get a certificate," Shanghai-based news portal thepaper.com quoted Xue Dayuan, a chief expert at the Ministry of Environmental Protection of China,
as saying on Sunday.
document and told the Global Times on Sunday that
the safety certificate was issued five years ago without these materials, which was not transparent for
the public. The renewal application this time is likely
to meet stricter obstacles.
The MOA later issued a statement saying it would
punish any companies or individuals growing or selling GM grains.
"The strict management on GM food and the science
popularization of people's awareness of GM food is
the right way to accelerate the commercialization
of GM food techniques," said Luo Yunbo, director of
the food science and nutritional engineering school
of China Agricultural University and a supporter of
GM food.
However, as a critic of GM food, Wang said that GM
food could pose risks to the environment and health.
Since 1997 the MOA has issued seven production
safety certificates for GM plants, but four of them
previously expired.
Although the sale of GM rice is illegal in China, China
Central Television found it was on sale in in Wuhan,
capital of Hubei Province and Hunan, Anhui and Fujian provinces.
The MOA for the first time published the safety evaluation documents on the two GM rice types on July
18, five years after issuing of the certificate.
The documents included the process of toxicity detection of GM rice and its test reports.
However, Wang Jing, a campaigner at Greenpeace
East Asia, questioned some details in the evaluation
28
KINA.UM.DK
NEWS FLASH
FARMING
RESPONSIBLE SOY SOURCING: CHINA COULD BE
ABOUT TO ENTER THE FRAY, SAYS PROTERRA
China’s involvement is critical in order to scale up
the production of sustainable, certified soy and a
leading non-profit group says an increasing number
of dissenting voices within that country could see
the Asian giant take up the gauntlet.
With 75% of the global output used in feed for animals, soy is the fastest expanding crop in the world
but its growth has come at great environmental and
social cost.
"Considering its role as the world’s major soybean
importer, China will need to increase its use of responsible soy if the global soy industry is to become
sustainable,” said Sibyl Anwander,* the new executive director of the ProTerra Foundation, a non-profit
group that supports the sourcing of sustainably produced, non-GM crops for feed and food.
China used to be a significant producer and exporter
of soy. But its rapid economic development, leading
to higher meat consumption, has seen the Asian giant become a net importer of soy since the 1990s.
Consumption of the crop in China doubled in the
last decade, from 26.7 million tons (MT) in 2000 to
55MT in 2009, of which 41MT were imported. And
the WWF projects that China’s soy imports will increase by 59% by 2022.
Dissenting voices in China
In recent years, pressure from European consumers and environmental organizations has helped to
check the spread of soy into natural ecosystems,
notably the Amazon. But, to date, Chinese consumers have not demonstrated the same concern over
deforestation.
“Some consumers there are beginning to cast a critical eye over the way the feed ingredient is being
sourced.
And we predict that the market for sustainable and
GM free soy in China will gather pace in the next
two to three years – a factor which will really help in
terms of getting more critical mass and boosting the
volume of responsibly produced soybeans and meal
in Brazil and other producing countries,” she said.
Soy conference
ProTerra is holding a conference on sustainable
sourcing of soy in the autumn. The event will focus,
in part, on ways of getting China more involved in
the discussion on how to more towards more responsible soy production.
“There will also be panel debates on how to trigger
more collaboration along the supply chain, to make
sure that it is not the feed manufacturer or the meat
producer only that ends up bearing the cost of the
premiums attached to GM free soy, for example.
The conference will look at how we could arrive at
a political commitment on sustainable soy sourcing
with legislative backing in the consuming countries
to ensure greater impetus for all partners in the feed
and food chain to back responsible soy," said Anwander.
Though, Anwander has noted a subtle change occurring in China. She told this publication that there
is increasing demand for certified soy use in food
products from the new, urban middle class.
KINA.UM.DK
29
NEWS FLASH
continued...
FARMING
CHINA WILL "SPARE NO
EXPENSE" ON DROUGHT
RESPONSE
Source: SAA news, 25-08-2014
Speakers will also explore, she said, how criteria
pertaining to sustainability and environmental orientation could inform the commercial credit risk
management process at lending institutions.
Northeast China is experiencing a record-setting
drought this summer, with precipitation rates in
some parts of Liaoning and Henan provinces falling
to 60-year lows.
GM free soy debate
There is a urgent need to dispel any misinformation around the availability and cost of GM free soy,
said Anwander, given the recent trend in some EU
markets to revert to using GM soy in feed for certain
livestock sectors.
Support for irrigation technology is emerging as
the bright spot in this year's drought crisis, and
last week Prime Minister Li Keqiang declared that
the country would "spare no expense" in responding to the drought.
In that context, she has been actively involved in
talks with meat producer groups and GM free lobbyists in Germany following the announcement by that
country’s poultry industry in March that it was withdrawing its 14 year-long pledge to only use non-GM
soymeal.
“We have made great strides on this issue just by
getting everybody along the chain talking – we have
been looking at how to ensure a level playing field
for all stakeholders. And we expect there will be a
renewed commitment to GM free soy in Germany in
the coming weeks,” said Anwander.
After a severe drought in 2009, Liaoning province
invested heavily in drip irrigation systems, which
now cover over 10m mu of cropland. This year, an
additional 2m mu is anticipated to be covered. In Liaoning alone, over a million workers and RMB
350m have been directed towards irrigation well
drilling and electrification; another project is testing 20 solar PV powered irrigation pumps, each
equipped with over 30 PV panels and capable of
irrigating hundreds of mu of farmland.
The 3rd ProTerra Conference on sustainable sourcing takes place in Hamburg on 15 October, ahead of
the European Commodity Exchange.
*Sibyl Anwander was Head of Sustainability and
Public Affairs at Coop Switzerland for over 12 years.
Coop Switzerland together with WWF initiated the
definition of the Basel Criteria for Responsible Soy
in 2004, which continues to form the basis of the
ProTerra Standard.
30
KINA.UM.DK
NEWS FLASH
FARMING
FARMING
CHINA'S MAKING HAY
WHILE THE SUN SHINES
CHINA'S FARMS ARE GOING
SOLAR THIS YEAR
The sun is shining on China's hay industry this
year: as demand for dairy and beef skyrockets, those
cattle have a growing appetite for hay. The US Department of Commerce estimates that China's demand for imported US hay increased 200-fold from
2007 to 2012 and another 43% in 2013. China's western Shaanxi province is arid and landlocked, so we were surprised to note a huge new
aquaculture project in the news last week. What's
more, that project -- with planned investments of
over RMB 11bn in the next three years -- will include
a utility-scale solar PV array of over 100MW generation capacity.
China's domestic production of forage and fodder has a lot of room to grow, however, and the Ministry of Agriculture announced an RMB 300m fund
for 2014 aimed at modernizing the hay industry.
The fund will support the import of international hay
and forage seeds to be grown domestically, as well
as domestic hay crop research and improved seeding and harvesting technology. Solar-integrated greenhouses have been increasingly popular this year, with project managers taking advantage of cheap local PV supply, government
support for agricultural modernization, and investor
interest in sustainable farming projects. However,
this is certainly China's first desert fish farm with
solar panels on top.
Local governments are also getting into the action.
Shijiazhuang in Hebei province has issued a subsidy
of RMB 300 per mu for operations growing more
than 1000 mu of alfalfa. The city is making efforts
to develop into a regional dairy hub, and wants to
ensure a large supply of high-quality alfalfa hay. KINA.UM.DK
31
NEWS FLASH
DAIRY
NEW DAIRY CULTURE SEES EXPLOSIVE
DRINKING YOGHURT GROWTH
For years a laggard in the dairy stakes, China is now
seeing massive growth in its yoghurt drinks market
largely because of significant investment and new
demand for healthier drinks on the go.
According to a report released by Canadean, yoghurt will become the third most consumed dairy
drink in China by 2016 as it overtakes grain, nut,
rice and seed alternatives to milk drinks.
According to the analytics agency, this will mainly
be due to the investment that has been made in the
yoghurt market there.
Michael Loubser, Canadean’s beverage analyst, explained: “With insufficient supply of raw milk and
rising raw milk prices in 2013, Chinese dairy producers devoted resources to maintaining steady milk
supplies by investing more in milk sources and cattle ranches.
“These investments are now bearing fruit, with the
drinking yoghurt category expected to experience
steady growth well into 2019.”
Collaboration boost
Over the last year, major dairy production companies have been building up alliances and working
with dairy farmers to boost growth in the segment.
In May last year, for example, Mengniu and Danone
signed a framework agreement to establish a jointventure for the production and supply of chilled yoghurt products. At the same time Mengniu increased
its stake in China Modern Dairy to 28%.
Yili Group also formed an alliance with the Italian
dairy firm Sterilgarda Alimenti and signed a mem-
32
orandum of understanding with Dairy Farmers of
America regarding strategic purchasing and farming
service cooperation.
‘On the go’ on the up
Significant investment, however, is not the only
reason why the Chinese drinking yoghurt market is
growing rapidly: with increasing disposable income
and exposure to the highly marketed benefits of
drinking yoghurt, more and more consumers demand healthier, nutritious dairy drinks in China.
According to Canadean, the ambient
ghurt segment is doing especially well;
than doubled in 2013, it is expected to
in 2014 to take a 70% of the overall
ghurt market.
drinking yohaving more
grow further
drinking yo-
Loubser added: “Consumption habits have shifted,
and a significant portion of the market is now ‘on the
go’ which makes yoghurt drinks, especially ambient
variants, very convenient for busy consumers.”
Bright Dairy has dominated the ambient yoghurt
drinks category for several years. With the success
of its Momchilovtsi ambient drinking yoghurt brand,
and the overall popularity of ambient drinking yoghurt in general, Bright has secured a strong lead
in the market, both in terms of volume and value
share.
According to Loubser: “Although companies such
as Mengniu and Yili have released several ambient
yoghurt brands of their own, Bright Dairy is keeping the pressure on its competitors and managed to
increase its volume share against the key players in
this category.”
KINA.UM.DK
NEWS FLASH
DAIRY
HERSHEY SUSPENDS US FLAVORED MILK
SHIPMENTS TO CHINA
Source: Dairy Reporter, 19-08-2014
Shipments of Hershey’s brand flavored milk to China
have been suspended after a consignment found to
contain unapproved ingredients was destroyed.
rector of corporate communications, Hershey, said
the decision to temporarily halt shipments from the
US to China was joint one.
In a statement, Pennsylvania-based chocolate giant
Hershey confirmed reports that a shipment of Hershey’s flavored milk, manufactured under license by
Utah-based Gossner Foods, was refused entry into
China in June 2014 by customs officials in Guangdong.
“The licensing agreement is with Gossner Foods and
they manufacture the Hershey’s licensed milk beverages,” said Beckman.
The shipment of Hershey’s Strawberry Milk and Hershey’s White Chocolate Milk was held by Chinese officials after it was discovered that the products contain stevia and a food coloring called Red 40.
In the meantime, the company said it will continue
to “work hard to abide by all food regulations.”
While “permitted in other foods and certain beverages in China” Red 40 and stevia are seemingly not
approved for use in milk.
Shanghai Daily reported that the 4.5 tonne shipment had been destroyed by customs officials in
Guangdong.
In response to the Chinese customs action, the Hershey Company has suspended all shipments from
the US to China of Hershey brand products manufactured by “authorized US licensee” Gossner Foods.
“Working with Gossner, we mutually agreed to suspend shipments to China.”
“We will continue to ensure that third parties import only Hershey-branded products into China that
meet China’s standards and regulations," said the
Hershey statement.
Pressed by DairyReporter.com, Beckman declined to
discuss whether Gossner Foods will reformulate its
licensed Hershey’s Milk products to make them China-friendly. “I can’t speculate at this point in time,”
said Beckman.
“All shipments of Hershey-branded products from
the United States to China from this licensee have
been suspended,” said the Hershey statement.
Shipments "suspended"
The destroyed shipment of shelf-stable Hershey's
flavored milk, packed in 8oz Tetra Prisma Aseptic
cartons, were manufactured by Gossner Foods under license at its Logan, Utah UHT milk plant.
Speaking with DairyReporter.com, Jeff Beckman, diKINA.UM.DK
33
NEWS FLASH
DAIRY
CONSUMER ADVOCATE SUES TOP MAINLAND
DAIRY FOR MISLABELLING
Source: South China Morning Post, 19-08-2014
Mainland dairy giant Mengniu is being sued on the
claim that one of its popular children’s products,
which it labels as pure milk, is in fact modified milk.
Chongqing Jiangbei District People’s Court accepted
the case last week after it was filed by Ye Guang, a
Chongqing-based professional fraud buster.
Ye said Mengniu uses big characters on the front of
the carton, proclaiming it is “Future Star Children’s
Growth Milk”. However, on the side of the carton,
the company says the product is “full-cream modified milk” in small characters.
The Chongqing Evening News reported that Ye’s allegation is based on China’s national standard on
food safety, which stipulates that a “milk” product
must be cow or sheep’s milk and must not contain
anything else. But “modified milk” is allowed to contain water and food additives, with pure milk accounting for at least 80 per cent of the raw material.
“National packaging standards require that food
manufacturers mark the product’s name prominently, and the name should represent the product’s true
nature,” Ye was quoted as saying.
By mislabelling, Mengniu has infringed consumers’
right to know, he said.
What’s more, Ye said the company has mislabelled
two other products that mainly target children.
“They mark modified milk as ‘milk’, misleading parents who tend to regard the products as pure milk,”
Ye said, adding that Mengniu is not the only culprit.
34
“It’s an unwritten understanding in the dairy industry that non-pure-milk products are sold as pure
milk ones. That’s how enterprises save costs. The
tactic looks after their huge economic interests.”
Mengniu said it began amending labels of some of
its products last month, the Beijing Times reports.
“Our modified milk products have been marked
in an explicit way on their packages,” it said in a
statement. “With an attitude of being responsible to
consumers, we started to improve modified milk’s
packaging in July to represent themselves better as
modified milk. For a short time, both new and old
packaging will appear on the market.”
Ye said he plans to sue Yili, another mainland top
dairy producer, on Tuesday.
Outspoken industry insider Wang Dingmian said
dairy enterprises typically don’t obey labelling regulations on their products.
“Some enterprises are suspected of misleading consumers on a huge number of affected products,”
Wang said.
The mainland’s dairy industry has been besieged by
scandals in the past few years. The most serious
one happened in 2008, when some enterprises added the chemical melamine to their baby formulas in
an effort to artificially increase the protein level. Six
children died from drinking the modified milk and
300,000 others fell ill, mostly with kidney conditions.
KINA.UM.DK
NEWS FLASH
DAIRY
80,000 COWS AND 1,000 TONS OF MILK PER DAY:
CHINA'S LARGEST CATTLE FARM
Huge new projects in China's dairy sector have
been in the headlines this past week, raising the
industry back to the top of our priority list.
While China's rising demand for dairy comes as no
surprise to our readers, the scale of new developments is jaw-dropping: Beijing Capital Agribusiness Group's dairy subsidiary, Sunlon, announced
China's largest cattle farm -- a massive 80,000head dairy and beef cattle project underway in
Hubei province.
Also on our radar is Shanghai Pengxin Group's
controversial new NZD 74m investment in a nearly
14,000 hectare dairy project announced over the
weekend and currently under review by New Zealand's Overseas Investment Office.
At the time of writing, China's press has yet to report independently on the topic, only citing 'foreign
media' in their coverage of the deal.
Sunlon, a joint venture formed last year with international Affinity Equity Partners, will be more than
doubling its herd with this project.
KINA.UM.DK
35
NEWS FLASH
DAIRY (FORMULA)
CHINA INFANT FORMULA REGULATION:
NEW ZEALAND OEM BRANDS HIT HARD
Source: Food News, 05-08-2014
•
Affected by China’s increased regulatory requirements on imported infant formula (e.g.
overseas dairy manufacturers’ registration with China CNCA), much less infant formula brands are now
exported to the Chinese market since May 1st 2014.
The number of brands from New Zealand has reduced from over 100 to around 40, a 60% reduction
compared to before.
CHINA CNCA APPROVED IF
MANUFACTURER IN NEW
ZEALAND
•
Several of the NZ infant formula
manufacturers that successfully underwent China
CNCA’s audit and approval process have already
reached saturation point in respect to the number of
brands registered under their name.
SUTTON GROUP LIMITED
888
DAIRY GOAT COOPERATIVE (N.Z.)
LIMITED
999
•
As of July 31st 2014, a total of 190
infant formula brands produced by 53 registered
overseas infant formula manufacturers can be exported and sold in China. According to statistics, a
single manufacturer usually produces 3-4 brands on
average.
May 1st 2014 was the deadline for foreign infant
formula manufacturers to register themselves with
China CNCA in order to continue or newly export
infant formula to China. The regulatory change has
exerted a significant impact on NZ diary exports,
the world’s largest dairy exporter of dairy supplying
around 90% of dairy products traded on the international market. So far, the following 8 infant formula
manufacturers in NZ have been approved:
APPROVAL
NO.
NUTRICIA LIMITED
48
NEW IMAGE INTERNATIONAL
LIMITED T/A FOOD CONTRACTORS
LIMITED
28
CANPAC INTERNATIONAL LIMITED
29
GMP DAIRY LIMITED
7777
NEW ZEALAND NEW MILK LIMITED
1380
HEALTH PAK LIMITED
9680
CNCA registered manufacturers are the sole channel
for New Zealand dairy export to China and thus attract interest from hundreds of brand owners looking to set up OEM cooperation.
While no regulation expressly states the maximum
number of OEMs that can be registered by a manufacturer there is a concern about this among the
industry. Industry think that the number of brands
registered under a manufacturer should be dictated
by production capacity and market forces but rumors have that although the MPI doesn’t directly
restrict OEM activity, the MPI is far less willing to
recommend infant formula manufacturers with too
many registered brands to China CNCA for approval.
This is a massive barrier since according to Chinese
regulations, for infant formula registration application, the manufacturer must be recommended by
the diary competent authority in the country of origin.
36
KINA.UM.DK
NEWS FLASH
continued...
However an official from New Zealand's MPI told
ChemLinked reporter that "MPI's recommendations
for registration to Chinese authorities are based
on manufacturer's compliance with New Zealand
regulations including notified Overseas Market Access Requirements. There are no requirements in
relation to the number of infant formula brands and
manufacturer produces.
MPI’s role is to facilitate market access for New Zealand companies, and provide information about market access requirements where these are known, including emerging requirements. MPI doesn’t direct
companies to take specific commercial actions, such
as the number of brands they produce. Decisions
about the products or brands a company makes are
entirely commercial.
We encourage export focused business to utilize
their contacts in-country to understand regulatory
developments in their export markets. Any registration decisions are ultimately made by Chinese
authorities. MPI cannot accept responsibility for the
registration or market access decisions of overseas
regulatory authorities".
As of July 31st 2014, a total of 190 infant formula
brands produced by 53 registered overseas infant
formula manufacturers can be exported and sold in
China. According to statistics, a single manufacturer
usually produces 3-4 brands on average.
According to our sources the OEM brand quota for
some producers such as Sutton Group Limited is
already full and many New Zealand infant formula
manufacturers have suspended or stopped accepting new OEM offers.
As one of three largest OEM manufacturers in NZ,
before being acquired by Danone, Sutton Group
made a group of “imported IF brands” owned by
Chinese investors. An industry insider revealed that
many companies are chasing New Milk, an infant
formula manufacturer that still has 4 open slots
under which OEM brands can register. Another approved manufacturer New Image is also attracting
considerable attention.
The possible reason for less brands export is that
manufacturers with numerous OEM brands might
be subject to heightened scrutiny from China CNCA
during the application and audit process. China’s
CNCA places considerable emphasis on the relationship between manufacturers and their registered
OEM brands and as such selection of brand is a serious matter.
Most manufacturers are unwilling to OEM for new
brands but instead select existing brands with a
good reputation. A QA manager from one of the major manufacturers told ChemLinked that they only
have a few brands and will most likely stick with
these brands.
KINA.UM.DK
37
NEWS FLASH
DAIRY (FORMULA)
CHINESE RETAILER INTRODUCES INFANT
FORMULA RECALL INSURANCE
Source: Dairy Reporter, 25-08-2015
Chinese retailer Suning Redbaby has reportedly begun offering an infant formula insurance policy that
compensates customers in the event of a recall.
Under the policy, backed by Chinese insurance provider Ping An, consumers stand to receive up to
2,000 Yuan (US$325, €246) per tin if the infant formula product they buy becomes the subject of a
recall, Reuters reported.
Payouts would be capped at 100,000 Yuan
(US$16,250, €12,300), Reuters added. Suning Redbaby will, according to the reports, offer insurance
free with the first 40,000 tins of infant formula sold.
After that, customers will be able to buy the insurance online, where the policy is available with
a choice of infant formula from countries including
China, New Zealand, the Netherlands, Denmark,
France, and Switzerland.
The Chinese infant formula sector is unfortunately
no stranger to quality and safety related recalls.
Current Chinese consumer concerns about the
safety of infant formula can be traced back to 2008
when six infants died and around 300,000 people
fell ill after consumer melamine tainted milk powder.
38
A steady stream of domestic infant formula recalls
in China, impacting companies such as Yili, has
followed, and Western brands have not gone unscathed.
Most recently, in August 2013, Danone businesses Nutricia and Dumex pulled infant formula from
shelves in countries including China as a precaution
after a false food safety alert by Fonterra.
With sales of infant formula in China forecast to
reach US$25bn (€33bn) by 2017, regaining the
trust of Chinese consumers is vital.
“In recent years, the milk powder market in China
has been in a mess,” Suning Commerce told Reuters.
“We realized that parent pay a great deal of attention to their children health and safety, and in particular, the safety of their infants’ foods,” Suning
added.
Attempts by DairyReporter.com to contact Nanjingbased retail giant Suning Commerce, the parent
company of Redbaby, were unsuccessful.
KINA.UM.DK
NEWS FLASH
DAIRY (FORMULA)
FONTERRA TIES UP WITH BEINGMATE IN NATION,
MOVING ON FROM 2008 FORMULA SCANDAL
New Zealand's Fonterra said Wednesday it will take
a stake in Chinese baby food and formula maker
Beingmate Baby and Child Food Co Ltd in the dairy
giant's first tie-up with a Chinese processor since its
involvement in a tainted infant formula scandal in
2008.
Six children died and thousands fell ill due to the
contamination.
Fonterra Cooperative Group Ltd, the world's largest
dairy exporter, said it would take a stake of up to 20
percent in Beingmate, and the two sides will set up
a joint venture to purchase Fonterra's Darnum plant
in Australia, according to a joint statement released
on Wednesday.
Burned by the Sanlu disaster, the New Zealand dairy
giant has been accused by some analysts of being
slow to enter China's branded infant formula market, which research firm Euromonitor says could
double to $31 billion by 2017.
"China is a completely different environment now,
Beingmate is a completely different partner," he
said.
The partnership will prioritize creating a fully integrated global supply chain from the farm gate direct
to China's consumers, using Fonterra's milk pools
and manufacturing sites in New Zealand, Australia
and Europe, the statement said.
Fonterra supplies wholesale infant milk formula to
Chinese companies, which sell it under their own
brands, but until recently it hadn't marketed its own
Anmum infant formula to consumers in China. Under
the deal, Fonterra will gain access to Beingmate's
vast distribution channel for Anmum.
Its total investment in the partnership came to about
$514 million, including proceeds from selling Beingmate a stake in an Australian plant, Fonterra said.
Spierings said Beingmate's role as China's biggest
domestic supplier of milk formula and its clean track
record made it an attractive partner.
The cooperative also said it would invest about $463
million to boost dairy processing capacity in New
Zealand.
Beingmate's brands, which include Love+ and
Champion, own about 10 percent of the market.
Beingmate chairman Wang Zhentai said that the
proposed partnership is a step forward in the company's vision to become a globally-recognized brand.
Theo Spierings, CEO of Fonterra, said Fonterra was
moving on from a 2008 scandal when Sanlu, its
then-partner in China, was found to have added a
toxic industrial chemical called melamine to bulk up
infant formulas.
KINA.UM.DK
ANZ rural economist Con Williams said Fonterra was
cautious about China, after the company was criticized for failing to blow the whistle on Sanlu sooner.
China has been dogged by food safety issues with
foreign firms coming under strong scrutiny.
A year ago Fonterra said it had found a potentially
fatal bacteria in one of its products, triggering recalls of infant milk formula in markets including China. Tests later found the initial finding was incorrect.
39
NEWS FLASH
BEVERAGES
'GREAT TO HAVE THE BRAND BACK!' ABI SEIZES BACK
CORONA CONTROL FROM CARLSBERG IN CHINA
Anheuser-Busch InBev (ABI) today took back distribution control of Corona Extra from Carlsberg in
China as CEO Carlos Brita insists the brand will extend its ‘super premium’ position in the country.
Andrea Pistacchi from Citigroup wondered whether
ABI didn’t risk cannibalizing some of Budweiser’s
“incredible success” in China. How did ABI plan to
position the brand?
ABI reported its Q2 2014 results yesterday with total revenue up 5% to $12.2bn and EBIT up 10.5%
to $4.054bn*, while normalized net profit grew 74%
in the quarter to $2.614bn.
Brito said ABI was already the premium leader in
China but wanted to extend its lead using Budweiser, Corona and the ‘Belgium Trio’ of Stella Artois,
Hoegaarden and Leffe.
The Corona family (Corona Extra and Corona Light)
grew 5.3%, and ABI CEO Carlos Brito said the world’s
largest brewer is progressively regaining control of
the brand globally following its full takeover of Mexico’s Grupo Modelo in June 2013 – and taking it into
new territories.
“Corona is going to be positioned and priced above
Budweiser to continue to extend the definition of
super-premium in China,” he said. Bud is super premium, Corona will be “super-super premium”.
In Canada ABI regained the right to import, promote
and sell the brand in March, recently took back control of Corona from Chilean brewer and soft drinks
player CCU in Argentina and is poised to regain control in the UK from Molson Coors, where Brito is eyeing a “big market”, in January 2015.
‘In Brazil, it’s white territory for Corona’
“And in Brazil, it’s white territory for the brand. We’re
going to launch it before the end of this year,” Brito
said, adding that ABI was aiming to take Corona up
to Budweiser’s level on the world stage.
But Brito enthused most about the potential for Corona in China, and said an economic slowdown in
recent months had hit local value brands – not ABI’s
‘national core’ and premium brands such as Harbin
and Budweiser.
“I’m pleased to say that we have reached an agreement with Carlsberg to take back the Corona brand
in China as of tomorrow, and are looking forward to
including it in our premium brand portfolio. So this
is very exciting for our business in China,” he said.
40
KINA.UM.DK
NEWS FLASH
continued...
POULTRY
CHINA TO EXPORT 450,000
TONS OF CHICKEN
Better access than Budweiser to Western-style
bars
Corona would give access to sales channels where
Budweiser struggles, Brito said, as a better fit in the
Western-style bars popping-up in Chinese cities.
“We’re very excited about it, but we’re going to do
it in a gradual way, like you have to with any superpremium brand,” he added. “It’s not going to be any
big bang.”
“But it’s great to have the brand back in the biggest
market in the world and in a market where we lead
in the premium segment, which is really where the
profits are and the growth is,” he added.
Addressing ABI’s Chinese strategy – EBITDA rose
almost 66% in Q2 as revenue grew (due to better
logistics, for instance, via more localized breweries)
and better product mix – Brito said the brewer had
been trading up since 2009 with Budweiser and Harbin both increasingly vital to sales mix.
China's chicken exports are expected to rise to
450,000 tons this year, according to the China Animal Agriculture Association on Sunday.
Gong Guifen, deputy secretary-general of the association's poultry branch, said exports reached 52
countries and regions thanks to high quality and low
cost, with Japan buying about half of them last year.
China shipped abroad 430,600 tons of chicken in
2013, up about 2 percent year on year.
Among the exports, cooked and prepared chicken
products stood at 266,900 tons, accounting for 62
percent. Frozen chicken totaled 99,900 tons, taking
up 23 percent.
*Revenue and EBIT figures reflect ABI’s reporting of
Q2 2013 results in yesterday’s earnings announcement, as if Grupo Modelo’s had been incorporated
from June 4 2012, rather than June 4 2013 when
the merger happened – to help us understand the
brewer’s underlying performance.
KINA.UM.DK
41
NEWS FLASH
BAKERY
MOONCAKE FESTIVAL 2014: THE BIGGEST
EVENT IN ASIAíS CAKE CALENDAR
The annual Mooncake Festival celebrated in China
and Vietnam is by far the biggest event for cake
manufacturers in the region, says an analyst.
“Flavors such as blueberry and ice cream paste are
also becoming more popular among young consumers,” Fang said.
The upcoming Mid-Autumn Festival (more commonly known as the Moon or Mooncake Festival) is
scheduled for September 8 this year. The festival is
held each year on a full moon – either in September or early October – to celebrate the harvest and
is recognized as a public holiday in China, Vietnam
and Taiwan.
In addition, consumers had started to purchase lowsugar and low-fat mooncakes amid nutrition and
health concerns, he added.
John Fang, business analyst for China Market Research (CMR) Group, said it was an important traditional festival for family reunion in China.
Traditionally, mooncakes were consumed among
family or gifted, but the gifting side was now exercised with caution, he said, particularly among businessmen and officials.
The tradition of eating and gifting mooncakes made
it an equally important event for manufacturers, he
told BakeryandSnacks.com.
“It is definitely the biggest calendar even for cake
manufacturers in the year,” he said.
Starbucks gaining ground with novel flavors
While the festival was dominated by large domestic
players like XingHuaLou, Ganso, Mei-xin and Daoxiangcun, international companies had gained some
ground, he said.
High-value cakes lose importance
What had declined, Fang said, was the importance
around high-value, expensive mooncakes.
“As mooncakes have long been used as business
gifts and even associated with bribes, the demand
for high-end mooncakes has been shrunk, mostly
since the Anti-Corruption Campaign started at the
end of 2012.”
Mooncakes for over 1,000 RMB ($162.49) were now
very difficult to sell, for example. “Consumers are
shifting to buying moon cakes with high value for
money for family use,” he said.
“International players such as Starbucks and Haagen-Dazs are also getting into the mooncake market
recently. For example, Starbucks is rolling out its
mooncake gift packages using novel paste such as
cranberry and mocha to cater to the diversified tasting needs of Chinese consumers.”
International chains Starbucks and Haagen-Dazs
were present in the market. Photo Credit: EverythingHapa
While traditional flavors like red bean paste, lotus
paste and five kernel [five types of nuts and seeds]
remained best-selling varieties, the market had seen
a raft of novel flavor development, he said.
42
KINA.UM.DK
NEWS FLASH
BAKERY
CHINA'S BAKERY BOOM: HOW TO HAVE
YOUR CAKE AND EAT IT
China will become the world’s second most valuable
bakery and cereals market by 2018, and understanding lifestyles will be key to capitalizing on this
growth, says Canadean.
In the next four years China’s bakery and cereals
market will soar to an estimated $47bn – catapulting into second place in value terms globally, just
behind the US, Canadean data indicates.
Ronan Stafford, senior analyst at the firm, said
manufacturers looking to capitalize on this needed
to truly understand Chinese lifestyles. “What makes
China different is bakery is it is a lot less functional.
It’s more about wanting something nice, therefore
eating a cake,” Stafford told BakeryandSnacks.com.
Hunger-filling categories like bread and rolls that
were huge in Europe were relatively underdeveloped in China, compared to sweet treat segments
like cakes, pastries, sweet pies and cookies, he said.
Cakes, pastries and sweet pies currently accounted
for 43.9% of China’s bakery and cereals market.
“When you’re looking for a route to market in China,
you almost need to shift your priorities. It’s a lot less
about having that basic hunger-fill and more about
something special. That’s what really makes cakes
such an interesting category,” he said.
Getting boots on the ground
Targeting these ‘treat’ categories was a clever strategy for international manufacturers entering the
country for the first time, Stafford said.
“With these more mature categories, you’ve got a
way in where you can establish your brand, get into
the market and start shifting large volumes. With
lots of brands tackling China, it’s a mountain to
conquer just understanding consumer motivations,
but if you’re in a category where you can shift large
volumes, it gives you a chance to do more on-theground research,” he said.
KINA.UM.DK
“…For every big brand that goes into China, the most
important thing now is getting boots on the ground.”
Getting into the country and understanding consumer motivations was “absolutely critical”, he said.
Asked if international companies had a competitive
edge over domestic players, Stafford said: “If they
[international manufacturers] do their work, get
boots on the ground, and do truly understand local
consumers – that’s easier than it is for local players
to get the capital they need to expand to large scale
production while still maintaining and communicating the quality of their product.”
Urban dwellers: Think on-the-go, public transport, budgets
Rapid urbanization in China presented huge opportunities for bakery and cereals growth, Stafford
said. But it came back to a true understanding of
how these consumers lived: Knowing their lifestyle,
because consumers wanted products that matched
their lifestyle, he said.
“With Chinese consumers in urban areas, there is an
emerging middle-class but they don’t have lots of
disposable income and transport is still limited. Yes,
car ownership is increasing, but if you look at Chinese shopping habits - they’re taking public transport or walking,” he said.
Knowing this would be critical in new product development projects, he said, because keeping products affordable and small enough to carry home, for
example, would be important practical factors for
consumers.
“If you’re used to targeting mum driving her estate
car to a large retailer, that’s not going to work in
China. You’re looking at single households and limited transport and availability – it’s a very different
market,” Stafford said.
43
NEWS FLASH
SHARKS
TIDE TURNS SUDDENLY FOR
SHARK FIN TRADE
A sprawling market floor in Guangzhou was once a
prime location for shark fin, one of China's most expensive delicacies. But now it lies deserted, thanks
to a ban from official banqueting tables and a celebrity-driven advertising campaign.
In 2012, the central government announced a ban
on serving shark fin, bird's nest soup and other wild
animal products at official functions, saying that it
would set a precedent that would help to protect
endangered species.
One stallholder at the Shanhaicheng center ate his
lunch quietly at a desk, flanked by four glum-looking
colleagues and giant white sacks overflowing with
thousands of dollars' worth of unsold gray stock.
WildAid also began a high-profile, celebrity-backed
advertising campaign on the issue, targeting consumers with the slogan, "When the buying stops,
the killing can too."
A woman at the next stall fiddled with her mobile
phone, plastic bags of dried yellow fins untouched
on the shelves behind her.
Demand has since fallen dramatically, the group
says, with the biggest impact being felt in Guangzhou, the heart of the country's shark fin industry.
Outside, the bustling, narrow streets of the Guangdong provincial capital were packed.
A WildAid survey released this month found that
shark fin sales had slumped in the city, with retail
prices falling on average by 57 percent and wholesale costs dropping by 47 percent.
"I don't eat shark fin," said a 23-year-old shopper
surnamed Ling, pausing between an array of multicolored dried starfish and an assortment of wood
ear mushrooms. "It's dirty, it's cruel and I think it's
quite expensive.
Costing as much as 1,600 yuan ($260) a bowl,
shark fin soup has long been among the country's
most-prized dishes, renowned as much for its supposed medicinal qualities as for its associations with
wealth and power.
A kilo of shark fin, which used to change hands for
more than 2,800 yuan, is now being priced at 1,200
yuan, or even less, in Guangzhou's Yidelu special
dried seafood bazaar, local media reported.
In Hong Kong, a major transit point for the trade,
import-export volumes have plunged.
But the appetites of many diners appear to have
been spoiled by authorities banning the dish from
official banquets and by a national anti-shark-fin advertising drive backed by former basketball star Yao
Ming and other celebrities.
China is one of the top consumers of shark fin, according to the campaign group Wild-Aid.
44
KINA.UM.DK
NEWS FLASH
SUPPLEMENTS
PROBIOTIC DROPS, SHOTS AND COMBOS
FROM CHR. HANSEN
Source: Food Navigator-Asia, 22-08-2014
Dietary supplements industry professionals will have
the opportunity to discuss current probiotic trends
and business opportunities with Chr. Hansen’s probiotic experts.
and immune function; and another with Bifidobacterium (BB-12) and vitamin D for gastrointestinal
and immune function, as well as normal growth and
bone development.
“Our Asian sales team will be in place in Hong Kong,
excited to be showcasing Chr. Hansen's many recent innovative product concepts—the results of our
leading technological expertise in probiotics,” said
Gernot Stadlmann, Chr. Hansen’s newly appointed
regional sales director.
Also on display will be its push, shake and drink probiotic shots with Bifidobacterium (BB-12) + fibre for
gastrointestinal function and regularity.
Chr. Hansen’s flagship concepts at Vitafoods Asia
2014 include new probiotic oil drops for infants and
young children, which consist of two versions: one
with Bifidobacterium (BB-12) for gastrointestinal
KINA.UM.DK
Based on patented Drycap technology.
“We invite customers and prospects to come to our
booth at Vitafoods Asia to see and try the products
for themselves as inspiration to potential business
ventures in Asia and elsewhere,” added Stadlmann.
45
For more information please contact:
Minister Counsellor
Phone: +86 10 8532 9987
Commercial Intern
Phone: +86 10 8532 9926
Denmark in China
kina.um.dk
Embassy of Denmark, China
San Li Tun, 1 Dong Wu Jie
100600, Beijing

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Transcription

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