China's market for Australian pork - a window of opportunity
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China Policy China’s market for Australian pork a window of opportunity
This report was funded by Australian Pork Limited. A survey was conducted by
scope of report China Import and Quarantine Association and data analysis and reporting was
produced by China Policy, Beijing.
This report presents an analysis of Chinese market demand for Australian
pork on the basis of survey data compiled from 33 high-volume, frequent
importers of pork products. Responses are analysed and placed in context of
China’s current agri-food market and policy structure, identifying key drivers
of demand and indicators of growth potential, and evaluating the potential of
a market access strategy.
At a time of rapid development in consumer preferences and major
adjustments to trade strategies in China, the report offers a snapshot of the
current commercial and regulatory environment as it impacts Australia’s pork
industry.
The report highlights adjustment to China’s food security strategy. This has
opened up market access opportunities to industry groups who position
effectively with regard not just to safety and quality, but also cooperation with
Chinese standards and regulatory agencies. Interest from Chinese investors
and commercial partnerships is also highlighted.
The report identifies domestic consumption patterns and the international
importers currently serving them, and presents specific recommendations on
how to position Australia’s pork industry for success in the world’s largest,
fastest growing and most dynamic market for meat.
2
summary: a window of opportunity for Australian pork
Eighty-five percent of importers surveyed are interested in importing Australian pork, if a
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most major importers protocol can be secured. Those that expressed interest cite the Australian meat industry’s
strong reputation and Chinese consumers’ increasing demand for diverse and new prod-
surveyed welcome ucts, but first and foremost they cite health- and safety-related factors.
Australian pork
Australian pork is perceived as safe, healthy, and natural, by major importers surveyed.
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Some importers with concerns about price and boar taint still give high marks on these
Australian pork is factors. Benefitting from the halo effect of Australian beef and sheepmeat producers, Aus-
tralian pork already enjoys a valuable brand image among China’s importers.
seen as safe, healthy,
and natural
Nearly half importers surveyed are interested in investment opportunities in the Australian
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pork industry. Companies expressing interest in investing are in most cases large, well-cap-
nearly half are italised, and highly credible potential partners. One such respondent, Yurun Food Group, is
interested in investing among China’s largest pork processors; its subsidiary Yurun Logistics is the second larg-
est cold-chain logistics company. Another interested respondent, Foresun Group, bought
in Australia’s pork US$75 million in beef processing and feedlot assets in Argentina last year. Investing over-
value chain seas in agricultural production does not fall under current capital account restrictions.
3
summary: a window of opportunity for Australian pork
Changes in China’s food supply strategy indicate that more engagement with global mar-
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kets is necessary to satisfy its food needs. Domestic policies reflect an increasing departure
a new trade strategy from ‘self sufficiency’ and an explicit push to secure long-term, stable supply relationships
is moving China away abroad.
from ‘self sufficiency’
in food
Demand for pork has grown beyond China’s domestic production capacity. While imports
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have fluctuated on the basis of volatile domestic prices, the trend line is clearly rising.
imports will continue Domestic pig population and pork supply data is notoriously inconsistent; however, even
to grow to fill a 3+ Chinese Academy of Agricultural Sciences projects a large and growing pork supply gap
to persist through the next decade. The gap is being driven in part by China’s own move
million tonne pork to shut down small, low quality, and environmentally damaging producers and focus on
supply gap in 2026 quality as well as quantity. Domestic demand is growing fastest at the top end of the mar-
ket—it is uncertain whether China can manage to supply both quantity and quality.
China’s meat prices increasingly reflect the true cost of production (including expensive
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an increasingly domestic feed grains, high labour costs and environmental impacts) and consumers’ will-
market-based ingness to pay for quality and safety assurances. As all prices move higher, there is more
space in the market for Australian pork.
approach will
advantage exporters
(in the short term)
4
summary: a window of opportunity for Australian pork
Competitors to Australia’s pork industry are making strategic moves to secure their long-
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term trade relationships in China’s market (for example Denmark’s MOU on organic mutual
Australia should not recognition). China’s own outbound investments into livestock production in Belt and Road
wait to get a piece of countries will further expand global pork supply. If Australia wants to secure market share,
now is the time to act.
the large and growing
market for pork
ChAFTA will eliminate the current 20 percent import tariff on Australian pork in 2019, but
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without a protocol, pork producers will not benefit from this hard-won concession. China’s
Australia should willingness to relax tariffs on pork may indicate interest in expanding international supply
partnerships; with careful positioning, the 2018 round of ChAFTA negotiations may be an
take advantage of its opportunity for progress.
ChAFTA pork victory
With 16 major importers indicating interest in investing in the Australian pork industry, na-
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tional and local governments, industry associations, and pig producers have an opportunity
Australia can pursue to secure investments into farming operations, abattoirs, processors, and logistics facilities.
strategic Chinese Strategic investors on the Chinese side could help support a coordinated push on market
access.
investments along
the pork value chain
5
contents
1 summary: a window of opportunity 3
2 survey findings: high interest from top importers 7
3 a new vision for feeding China 18
4 commercial market context 25
5 appendices 32
organisation profiles
company profiles
abbreviations
6
China Policy survey findings: importers hungry for Australian pork An eight-question survey developed by Australian Pork Limited was sent to high-volume and high-frequency importers by the China Entry-Exit Inspection and Quarantine Association (CIQA) in May and June 2017. The following data was compiled from respondents at 33 companies, running the gamut from boutique importers to China’s second largest pork processor. Surveys were circulated and responses collected by email and Wechat, a popular Chinese social media tool. The quality and diversity of responses varied widely and indicated high quality, authentic work by CIQA. Surveys were processed and data analysed by China Policy.
survey findings: overwhelming interest in Australian pork
Eighty-five percent of importers surveyed Fifteen percent of respondents were not
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expressed interest in importing Australian pork. interested in importing Australian pork.
Of these— Of these—
-- eleven cite quality, safety, or health -- two cited boar taint
-- nine cite interest in more products, more diverse prod- -- one left little info, but rated safety, health, and taste at 2
ucts, or more diverse supply channels out of 5, suggesting possible experience with boar taint
-- seven name Australian meats’ high reputation -- one expressed concerns about price volatility and stabili-
ty of supply. This importer, based in Shenzhen, may have
-- five explicitly mention Australian beef
been reacting to current supply conditions (through grey
channel) rather than a scenario with market access
-- one may not actually be a meat importer (erroneously
included)
8
survey findings: top marks on safety, health, natural
‘How does Australian pork rate on the following factors in comparison to pork you currently import?’
(1 to 5 rating)
5
4
3
2
1
0
safety health natural taste price
-- in aggregate, Australian pork received high marks on safety, health, and ‘natural’ quali-
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ties, but was considered less competitive on taste and price factors
importers have a -- it is likely that many importers have little or no experience with Australian pork and extrap-
positive impression olated on the basis of their knowledge of Australian beef
of Australian pork -- boar taint has impacted some importers’ perceptions of Australian pork; those respon-
dents who referenced boar taint elsewhere in their responses accounted for the lowest
ratings on taste
9
survey findings: more attractive than many competitors
‘If Australian fresh (chilled) pork was air-shipped to China, would it be more attractive than pork from the following countries?’
100%
90%
80%
70%
60%
n/a
50% n
40% y
30%
20%
10%
0%
China Brazil Canada USA Germany Denmark Spain
-- importers overwhelmingly rated fresh chilled Australian pork as more attractive than Chi-
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nese produced pork
Australian pork -- Brazil, mired in a food safety scandal that resulted in a temporary ban on all meat imports
already compares from the country earlier this spring, provides an interesting comparison case
favorably to many -- the majority of importers are confident Australian pork will be more enticing to domestic
consumers than Brazilian pork, but the non-reponse rate still reflects some uncertainty
competitors
-- Brazilian pork is particularly competitive on price
10survey findings: spotlight on Spain
Spanish pork enjoyed the best reputation among importers, with over 43 percent confident that it is more
attractive to the Chinese market than Australian pork. Interviews with industry players suggest a number of
factors are driving Spain’s success in China.
‘If Australian fresh (chilled) pork was air-shipped to China, would it be more attractive than pork from Spain?’
-- Spain has enjoyed market access
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since a protocol was approved in
history in 2012
China’s market -- most importers are familiar with its
pork as a result
n/a
yes
-- Spain has 26 processors approved
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28%
32% to export to China
number of
approved -- this supports higher volume and
more options for importers
processors
no
-- Spanish pork exporters have hired
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40%
Chinese sales staff
adapting to -- multiple sources suggest Spain’s
local needs industry has been flexible to unique
needs and demands from China’s
market
11survey findings: preference for ribs and belly
‘Which cuts of Australian pork are you most interested in importing?’
25
20
15
10
5
0
belly shoulder tenderloin loin ribs legs offal other
-- ribs and belly cuts are the clear winners, followed by other high value cuts
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-- these responses may be driven less by importers’ knowledge of Australian pork and
importers are more due to perceptions that it is a higher priced or luxury product, in particular due to
seeking higher-end prior survey questions’ emphasis on chilled (rather than frozen) pork
cuts from Australia -- while only ten importers expressed interest in offal, those ten importers indicated poten-
tial demand for around 200,000 tonnes of Australian pork annually
12survey findings: spotlight on offal
Only ten importers indicated
interest in offal; however, this
list includes some of China’s
largest pork processors.
-- the ten importers interested in offal described combined demand for around 200,000
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highest volume tonnes annually
importers demand -- Yurun Food Group alone suggested import demand of 50,000 tonnes
offal
-- food safety risks are more likely to arise from offal than muscle cuts due to the natural
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Australian offal wins function of some organs as a filter and the role of bacteria in the digestive tract
on safety and health -- Australia’s strong reputation for safe, natural, and healthy pork could facilitate supply
relationships here
-- Australian pork producers have demonstrably lower disease prevalence than US, Brazil,
and other volume suppliers
13survey findings: for gatherings, holidays, and celebrations
The majority of importers still view Australian pork as a special occasion menu item; however, that view is
evolving in first tier cities.
‘Will Australian pork be a part of Chinese people’s daily diet? Or will it be a special occasion and group meal menu item?’
all importer responses first-tier city importer responses only
30%
36%
special occasion
daily
64%
70%
-- notably, some of the importers producing inexpensive processed meat products did not
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indicate Australian pork as a daily menu item, suggesting they would not consider using
30 percent of importers Australian pork in their cheapest products
think Australian pork -- reflects impressions of Australian pork as a pricier choice along with responses that belly,
could be a staple for ribs, and other high value cuts might be most in demand
Chinese consumers -- consumers are increasingly choosing leaner daily menu items; this may present a market-
ing opportunity for Australian pork
14survey findings: interest from volume importers and channels
‘Which sales channel(s) best suit Australian pork?’
20
18
16
14
12
10
8
6
4
2
0
-- importers highlighted wholesale as the primary channel of interest for Australian pork
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-- followed closely by retail and supermarket channels
respondents
-- answers to this question appear to reflect the core business of importers surveyed and
focused on volume rather than the final consumer-facing sales channel for Australian pork; for further detail
sales channels on ‘wholesale’ importers, see page 16
15survey findings: spotlight on wholesale and processing
Shuanghui is China’s largest pork importer by volume, totaling over 301,000 tonnes in 2016 according to the
company’s own financial reports, nearly 20 percent of all pork imports to China by volume. While Shuanghui
was not a survey respondent, the company provides an indicative case of how ‘wholesale’ imports might
actually reach the market.
Shuanghui International, renamed name WH Group in 2014, is the
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WH Group world’s largest pork producer and among China’s largest meat pro-
(Shuanghui cessors. The company’s acquisition of US Smithfield Foods in 2013
was the largest ever Chinese acquisition in the US at the time. The
International) company operates pig farms across China but is primarily known as
Shuanghui use of imported pork, 2016 a supplier of pork and processed meat products under its flagship
brand Shuanghui and a number of other labels.
processing
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pork sold to ‘industrial scale’ wholesale importers crosses
processing, retail and e-commerce channels
--of over 300,000 tonnes pork imported by Shuanghui in 2016, just over 60,000 tonnes
were directed towards the company’s own processed meat products
--the lion’s share of imports, over 248,000 tonnes, were sold through retail channels. These
include
--owned brand channels controlled by Shuanghui itself, including e-commerce channels
--supermarkets and other retail channels selling Shuanghui-branded pork
--retailers selling Shuanghui-imported pork under other in-house brands
source: China Economic News, Shuanghui Annual Report 2016, CP analysis
16survey findings: potential investors
Respondents expressed a high degree of interest in investing in Australia’s pork industry. Sixteen
respondents suggested they would consider investments. Some gave conditions of ‘only if the opportunity
is appropriate’ or ‘interested if initial sales of Australian pork in China go well’. In one case, a respondent
that rated Australian pork at the lowest possible level on taste, citing boar taint, still expressed interest in
investment opportunities. Below are profiles for three enterprises that expressed interest in investing. For
more context on why nearly half of major importers surveyed would consider investing, see ‘pushing
agriculture to Go Global’ on page 20.
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Headquartered in Nanjing and listed on the Hong Kong Stock Exchange in 2005,
Yurun Group Limited is the number two pork supplier in mainland China, and mainly
China Yurun operates in chilled-frozen meat and processed meat products. The company is well
Food Group known for its Yurun, Furun, Wangrun, and Popular Meat Packing brands, and its
nationwide production network. The company faced financial difficulties in 2015 and
2016 due in part to high pork prices on the domestic market. Still, this processor is
among the largest and most credible players in China.
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A major meat processor headquartered in Heilongjiang province in north China’s
breadbasket, the company’s core business spans beef and sheepmeat in addition
to pork. In 2016 the company acquired three beef abattoirs and a confinement op-
Foresun Group eration in Argentina in a US$75 million deal with Brazil’s Margrif Global Foods. The
company also operates two beef abattoirs in Australia: Tabro Meats and Moe Meat.
Set up in 1996 by the Jiangsu Province government with a focus on international
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trade, this SOE is among China’s 500 largest enterprises, with total revenue ex-
High Hope ceeding C¥30 billion in 2016 and trade of over US$3 bn in goods. The company
operates a meat trading subsidiary, but is primarily a cold chain logistics provider—
Group one of five strategic focuses established during a reform in 2015. Like most large
state-owned companies, High Hope is currently under pressure to ‘Go Global’ and
has expressed investment interest in the Australian pork industry.
17China Policy a new vision for feeding China Previously domestically oriented and geared towards self-sufficiency, trade has become a core focus of food security strategy. This is part of a strategic shift as China moves from a reactive position to take an active or even leading role in developing global rules and relationships. Moves towards marketisation have been made along the entire pork value chain with more in train, levelling the playing field for competitive international suppliers. The domestic livestock industry, meanwhile, is scrambling to address safety and environmental concerns.
Belt and Road Initiative
Initiated in 2013 and launched with a clear blueprint in 2015, the Belt and Road Initiative (BRI) is a major glo-
balisation program focused on greater economic integration, political cooperation, trade, financial integra-
tion, and exchange. The name refers to its two key focus areas: the Silk Road Economic Belt that connects
China with the Europe via land routes through Russia, Central Asia, South Asia and the Middle East; and
the 21st-Century Maritime Silk Road which links China’s coast to both Europe via the South China Sea and
the Indian Ocean, and the South Pacific via the South China Sea. In 2016, President Xi Jinping suggested
aligning BRI with Australia’s plan to develop its northern region, and specifically mentioned agriculture and
livestock. Australia declined to sign a BRI MoU with China during Li Keqiang’s March 2017 visit.
map courtesy Lowy Institute
19from self sufficiency to food security
Changes in China’s food supply strategy indicate that more engagement with global markets is necessary to
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China is moving satisfy its food needs. Alongside measures to secure supply from abroad, domestic policies reflect an increasing
away from ‘self departure from ‘self sufficiency’. China openly worries about being unable to produce enough to satisfy people’s
needs as it wrestles with ecological limits. China has developed a new strategy to feed its population in the future,
sufficiency’ in food necessitating robust and long-term agricultural trade relationships.
After a slew of poor-performing overseas investments, China rebranded its efforts to expand internationally as
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‘capacity cooperation’ in spring 2015 and set up an inter-ministerial group on agriculture foreign cooperation in
summer 2015. In May 2016, State Council issued an internal document outlining principles for the new strategy
on global engagement in agriculture. Many were similar to those laid out in the 5-year plan for agricultural devel-
pushing agriculture opment publicly issued in October 2016. The 5-year plan dedicates a full chapter to international agricultural co-
to ‘Go Global’ operation, explicitly stating that ‘opening up’ must be a two-way street that conforms with the ideals of ‘win-win’
cooperation and ‘mutual development.’ Under the strategy, major agri- and food-processing enterprises are given
policy and regulatory support, discounted financial services, and access to public and private funding in order to
pursue international acquisitions and investments and ensure food security. Notable examples include COFCO
Agri’s investment into Australian Quattro Ports and ChemChina’s acquisition of Syngenta. Agricultural investments
are considered strategic. They have not, so far, been subject to the same restrictions as other more vanity-driven
investments in sectors such as football, hotels and entertainment.
20from supply to safety and sustainability
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protecting public health
Food policy is shifting away from meeting calorie demands and towards improving health. National ‘Dietary guidelines for Chinese
residents’ were revised in 2016. The recommended amount of fruit, eggs, meat, and poultry decreased slightly—at 14.6-27.4kg/year,
the guidelines are not far from National Bureau of Statistics’ estimate of China’s 26.2 kg of red meat (pork, beef and mutton) and 8.4kg
of poultry consumption per capita in 2016. However, the NBS estimate differs widely from international reports, such as OECD’s meat
consumption estimate of 50 kg per capita in 2015.
In late 2016, China’s two highest policy-making bodies issued a ‘Healthy China 2030 plan’. Topics included public health services,
environmental management, the medical industry, food and pharmaceutical safety, and physical fitness. The plan targets food trade in
particular, tightening management of imported food, improving safety inspection systems for foreign food, and setting up designated
ports for food import.
21from supply to safety and sustainability
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ensuring safety, farm to table
In response to continuing consumer concerns over food safety, China revised its Food Safety Law in late 2015, mandating a food
traceability system for producers and sellers. In April 2017, China Food and Drug Administration (CFDA) published a list of food trace-
ability data requirements, mandating companies keep records on procurement, processing, storage, transportation and sale. Large
food processors, wholesalers and retail companies will bear the brunt of legal responsibility (and liability).
Internationally, AQSIQ has passed the buck to trade partners, requiring ‘traceability to origin’ with varying degrees of success. Ministry
of Commerce (MofCOM), also on the hook for traceability initiatives across a broader spectrum of products, kicked off a massive,
technically intensive pilot across 58 cities in four provinces in 2016, covering meat, vegetables and liquor.
22from supply to safety and sustainability
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acknowledging environmental constraints
MoA and Ministry of Environmental Protection moved to reduce the ecological footprint of China’s livestock industry by designating
areas prohibited for livestock and poultry farming in late 2016, including watersheds, conservation areas, and cities. Over ten percent
of the domestic swine herd will be relocated by 2018 under the policy, according to China Animal Agriculture Association.
Aimed first and foremost at addressing the environmental impacts of the livestock industry, the move has also allowed regulators a
leverage point to push consolidation and relocate farms away from urban areas, towards underdeveloped provinces, and closer to
sources of feed grains like corn. Perhaps unsurprisingly, livestock prohibited areas fall heavily within provinces and regions targeted
for reduction by MoA’s National Hog Production Plan (2016-20).
23from government- to market-led
With more market forces in play, China’s meat prices increasingly reflect the true cost of production (including
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expensive domestic feed grains, high labour costs and environmental impacts) and consumers’ willingness
an increasingly to pay for quality and safety assurances. Pork prices are highly sensitive for the Chinese government. They see
import and use of a strategic food reserve as the most important tools to control inflation under the increasingly
market approach marketised food supply system.
As the state moves away from price controls and towards marketisation of feed grains, live hogs, and pork alike,
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controlling
leaders have seized upon commodities markets as a market-based alternative for predicting and controlling prices.
commodities The Dalian Commodities Exchange (DCE) launched a price index for fresh lean pork in March 2017, a move widely
through exchange seen as a precursor to futures trading. DCE is actively developing futures for live hogs as well. These centres, trad-
ing in RMB, are likely to open up for global trade. The Chicago Mercantile Exchange with futures denominated in
centres USD, will be their biggest competitor.
Regulators, academics, and China’s largest pork processors are advocating for the launch of live hog futures
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changing the game markets, widely expected before year’s end. Officials believe clearer price signals will help address volatility and re-
quirements to deliver on futures contracts will advantage larger-scale operations. Pig farmers and pork processors
for domestic farmers also note reduced volatility, and are keen to take advantage of risk hedging.
and processors
Sales of pork fell slightly in 2015 and 2016 by volume, according to data from research firm Euromonitor. Industry
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analysts point to health concerns as a primary factor here and note high and rising demand for top quality and
driven by evolving organic pork, as well as products pitching safety and traceability claims. Consumers are also making healthier
choices, evidenced by rising vegetable consumption. Catering companies in first- and second-tier cities report
consumer demand shifting diets, with white collar workers at office cafeterias choosing around ten percent less meat and replacing it
with ten percent more vegetables.
24China Policy commercial market context China’s market for pork is evolving rapidly as incomes rise and diets diversify. Preferences vary widely across regions and between first tier and less developed markets, but consumers are converging on safety, health and convenience as key factors driving demand. Other trade partners are competing for a large and growing piece of the pie with a variety of strategies and selling points.
China’s pork consumption habits are highly varied
China covers a land area more than twice the size of the European Union, with comparable diversity in culinary
tradition. Preferences on cuts and flavour differ widely, as does preparation technique. The wide variety of cui-
sines across China, coupled with the large urban population, present unique opportunities.
Shanghai alone is home to over 24 million people—comparable to the entire Australian market. If consumers in
just one province or region prefer Australian pork, or a single major processor or supermarket chain decides to
procure it, that alone will provide a sizable and profitable export market.
26China’s food market is highly regional
Diversity impacts meat preferences, with traditionally Muslim and cattle–producing regions in the north and west demanding less
pork in general. While this geographic diversity must be heeded while developing a marketing strategy, it also ensures many diverse
markets for Australian pork.
Developed areas of southern central China have the highest levels of meat consumption per capita. Urban coastal areas, while af-
fluent, supplement their meat consumption with seafood, not included here. While there is some variance, pork still dominates the
Chinese diet due to consumer preferences and as cost factors.
China’s per capita meat consumption by province
pork
beef
lamb
source: china beef, sheep/goat industry report 2015
27China’s pork market is tiered
advanced cities developing cities emerging cities lagging cities
13 cities 80 cities 369 cities 188 cities
27% of urban GDP 35% of urban GDP 33% urban GDP 5% of urban GDP
15% of urban population 26% of urban population 45% of urban population 14% of urban population
annual
income
5 7 4 category
6 5
16
24 24
affluent
43 53
mainstream
64
75
67 value
88 81
88 71 86 low-income
56
67
44
47
22 33
25
12 15 17
11 9
4 3 6 4
2000 2010 2020 2000 2010 2020 2000 2010 2020 2000 2010 2020
affluent = >$34,000; mainstream = $16,000-34,000; value = $6,000 - $15,999; low-income =China’s pork market: imports rising, sources evolving
pork meat imports by value all pork imports (including offal) by value
US$1600 million
top 10 trade partners
US$1400 million
US$1200 million
US$1000 million
US$800 million
US$600 million
US$400 million
US$200 million
US$0 million
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
source: China customs data, UN Comtrade database retrieved 2017
-- imports have risen steeply over five years; market share has continued to evolve between major trade partners
-- who leads by volume and value varies year to year and on the basis of product mix
-- Spain and Germany have seen particularly steep rises in imports by value as opposed to slower growth paths from low-cost sup-
pliers like US, Canada, and Brazil
-- market structure is currently fluid and expanding rapidly; as growth slows, import patterns may become less flexible because im-
porters will have longer-term relationships with trade partners
29China’s pork market: imports rising, sources evolving
pork imports (including offal) by volume, 2016 top ten importers of frozen pork by volume, 2016
United Kingdom Other
2% Ireland 2%
Chile 2% USA
company name ‘000 of tonnes
2%
24% Shuanghui 110,000
Brazil
4%
France New Ocean 65,000
5%
Chuantuo Technology 31,000
Netherlands Rongliang International 29,000
7%
Zhongkaifeng Trade 27,200
Ruiyuan Cold Chain 25,500
Central Key 25,000
Canada
9%
Yidujifa Cold Logistics 23,000
Germany
18% Shanghai New Source 22,000
Zhongli Trade 19,000
Denmark source: China customs data, Modern Livestock Online
12%
Spain note: red indicates survey respondents
13%
source: China customs data, UN Comtrade database retrieved 2017
-- despite survey respondents’ preference for Spanish pork, the US and Germany are the highest volume suppliers, according to
2016 customs data
-- the UK captured two percent of market share in 2016; seven new pork producers from the region were approved to export pork
to China in August 2017
-- three survey respondents were among China’s top ten importers of frozen pork meat by volume in 2016; they are profiled on page
35will have longer-term relationships with trade partners
30China’s pork market: spotlight on e-commerce
Fresh food e-commerce grew 80 percent year on year to C¥91.3 bn in 2016, according to China
E-commerce Research Centre (CERC). Consumers, now used to buying most daily goods online, prefer
the convenience and comparison shopping available on e-commerce platforms. Fresh food e-commerce
requires quick delivery times and cold-chain logistics making it a capital-intensive and risky investment: 88
percent of platforms in the space are losing money, according to CERC. Suppliers should take note, and
expect that many of these companies will not survive.
fresh food e-commerce growth (billions of RMB)
400
350.6 TMall, a subsidiary of Alibaba group,
350 is China’s clear ecommerce market
leader boasting 466 million annual
300 active users and conducting 57.7
percent of online retail transactions in
250 229.9 2016 (followed by JD.com with just
over 25 percent). TMall Fresh has
200 been proactive in partnering with in-
145.0 ternational suppliers of pork. A 2014
150 promotion of US pork on 11/11, Chi-
91.4 na’s ‘singles day’ shopping holiday,
100 sold out within the first hour. An MOU
54.2
between TMall and Danish Crown
50 29.0
13.0 will sell pork in advance of the Lunar
4.1
New Year holiday in 2018.
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
source: CERC 2016 annual report
31China Policy appendix
associations and organisations of note
CIQA is a state-sponsored association that includes enterprises,
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institutions, individuals and other organisations involved in admin-
China Entry- istration of inspection and quarantine nationwide. It aims to play a
bridge role between government and other entities engaged in trade
Exit Import and to encourage safety, quality and effective economic development.
Quarantine The association is supervised by both the Ministry of Civil Affairs and
Association (CIQA) the General Administration of Quality Supervision, Inspection and
Quarantine (AQSIQ), China’s national quality regulator.
A non-profit consisting of members in animal husbandry, CAAA is
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overseen by MoA and plays a role in product quality authentication,
international cooperation and policy recommendation for govern-
China Animal mental agencies. China Cattle Industry Association and China Sheep
Agriculture & Goat Industry Association are 2 (of 11) of its sub-chambers. They
provide research and references for government policy, recommend
Association high-quality breeding varieties, and assist in export and import work.
Consisting of members in processed meat products, packaging ma-
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terials, cold chain logistics, animal feeds and machinery, CMA partici-
China Meat pates in shaping food safety standards and has traditionally been su-
pervised by the State-owned Assets Supervision and Administration
Association Commission . It promotes an outward-oriented meat industry.
33leading domestic pork producers and processors
Established in Sichuan by ‘Mr. Feed’ Liu Yonghao in the 1980s, New
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Hope Group, through its listed subsidiary Liuhe is China’s largest
feed and meat processing company, primarily in pork. It has aggres-
sively expanded business from feed into protein, aiming to become
New Hope Group the global leader by 2030. Its acquisitions include Kilcoy Pastoral
Company, Australia’s fourth largest beef processor. It has pledged
to invest C¥17 bn in global production bases over the next three to
five years targeting Australia, New Zealand, USA, Europe and South
East Asia.
China’s largest livestock farming company, WENS Food Group oper-
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ates 239 subsidiaries across 20 provinces and regions. In 2016, the
company earned C¥59.4 bn in revenue and managed a commercial
swine herd of over 17 million head. The company is also among the
WENS Foodstuffs world’s largest producers of livestock feed, with over 6 million tonnes
Group feed produced in 2015. Net profits at WENS fell over 74 percent
y-o-y in H1 2017 as pork prices fell from record highs in 2016 to four
year lows in 2017. The price of feed fell simultaneously, mitigating
losses at WENS and other large, vertically integrated pig farming
companies.
Among China’s largest traditional pork processors, with annual pro-
agei
cessing of over three million tonnes, the company’s products are car-
Jinluo Meat Products ried widely across convenience stores and supermarkets. While treat-
ed as a domestic player, Jinluo is technically a subsidiary of a larger
Co. conglomerate, People’s Food Holdings Ltd., registered in Bermuda
and publicly listed in Singapore. Jinluo is known domestically for its
‘no starch’ packaged hams, indicating a move up the value chain from
the most basic processed meat categories. In spring 2017, the com-
pany was sued by Yurun over alleged copying of sausage package
design.
34leading domestic pork producers and processors
Founded in 2009, Qingdao-headquartered New Ocean is primarily a
agei
meat trade logistics provider, importing meat on behalf of dozens of
domestic wholesalers and processors. It was China’s second largest
importer of frozen pork in 2016. In addition to maintaining current
New Ocean Logistics import licenses and supply relationships with hundreds of approved
meat exporters, the company controls vast cold warehousing ca-
pacity and provides financial services and imported meat futures
contracts to domestic business partners.
China’s seventh largest frozen pork importer in 2016, Central Key
agei
also holds licenses to import technical products. Another logis-
tics-focused importer, the company sources a broad range of frozen
meat and poultry products from Europe, Australia and the Americas.
Central Key
Founded in 1999, the company was China’s tenth largest importer of
agei
frozen pork in 2016, moving 19,000 tonnes into the domestic market.
In addition to pork, the company trades in coconut oil, wine, cocoa,
Zhongli Trading dairy, and waste paper for the recycling market. The company does
not maintain a web presence, however, reflecting the degree to which
major importers continue to do business based on personal relation-
ships, with partnerships developed at trade shows and by word of
mouth.
35abbreviations
Abbreviation Term
AQSIQ General Administration of Quality Supervision, Inspection and Quarantine
bn billion
ChAFTA China-Australia Free Trade Agreement
ChemChina China National Chemical Corporation
CIQA China Entry-Exit Inspection and Quarantine Association
COFCO China National Cereals, Oils and Foodstuffs Corporation
MoA Ministry of Agriculture
MOU memorandum of understanding
OECD Organisation for Economic Co-operation and Development
SASAC State-owned Assets Supervision and Administration Commission of the State Council
SOE state-owned enterprise
BRI Belt and Road Initiative
CME Chicago Mercantile Exchange
CAAA China Animal Agriculture Association
CCIA China Cattle Industry Association
CERC China E-Commerce Research Centre
CFDA China Food and Drug Administration
CMA China Meat Association
NBS China National Bureau of Statistics
CSGIA China Sheep & Goat Industry Association
CAAS Chinese Academy of Agricultural Sciences
DCE Dalian Commodities Exchange
EU European Union
HKSE Hong Kong Stock Exchange
MCA Ministry of Civil Affairs
MofCOM Ministry of Commerce
MEP Ministry of Environmental Protection
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