This EMP-funded study provides a survey-based profile of North China’s food manufacturers, including their ingredient needs and interest in imports.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
GAIN Report Number:
China - Peoples Republic of
Post: Beijing ATO
Profile of North China Food Manufacturing
Agricultural Trade Office Activities
Food Processing Ingredients
Market Development Reports
This EMP-funded study provides a survey-based profile of North China’s food manufacturers, including their
ingredient needs and interest in imports. Detailed data on manufacturers will be published in a separate report.
North China is a major center for food manufacturing, and an excellent potential market for U.S. food
ingredients. However, having grown from humble origins, most of China’s food manufacturers are not well
known outside of China, nor are they particularly aware of the wide range of ingredients available from the U.S.
Even those currently using imported ingredients source these mainly through importer/distributors. This report
provides a survey-based profile of North China’s food manufacturers. Detailed importer survey data will be
available in a separate report. Although ATO has reviewed and edited this report, it remains true to the
contractor’s original submission. Therefore, opinions expressed are those of the contractor, and should not be
interpreted as official ATO positions.
China’s Food Industry: General Background
Food industry is China’s largest manufacturing sector, with double-digit growth rates over nearly three decades.
In 2010, the industry generated gross revenue of nearly USD 1 trillion, accounting for approximately 15.85% of
the nation’s GDP. China has now about 41,900 sizable food manufacturers (state-owned enterprises and others
with annual revenue exceeding RMB 5 million or 780 thousand dollars), employing a total work force of 6.54
Growing with this industry is the issue food safety. The food scandals of recent years have aroused enormous
public concern. According to a recent online survey conducted by Reuters, China fared the worst when it came to
shopper’s views about food safety oversight. To tackle this problem, the Chinese government approved new
legislation aimed at improving and monitoring national standards in food production. New laws will standardize
food production and clamp down on illegal activities in the industry.
I. Food Industry in North China
Due to budget limits, this study only covered key parts of North China, including the provinces/districts of
Beijing, Tianjin, Shandong, Henan, Hebei, Shanxi, Ningxia and Inner Mongolia, as highlighted in the map of
China below. These were chosen to target the major clusters of activity in the food manufacturing industry as
Shandong Province is one of the richer provinces of China, with nominal GDP ranking the third in the
country, and is China’s top agricultural exporter. Shandong plays a leading role in food processing
industry in North China: among the 75 food production enterprises identified in this survey, 32% are in
Shandong, and its food industry focuses on large enterprises with well-known brand names.
Henan is the 5th largest provincial economy in China and the largest among the inland provinces. It is
China’s top producer of wheat, rice and sesame and includes China’s largest meat packers. However, its
per capita GDP is low compared to other eastern and central provinces. Food production and processing
makes up more than 14% of the province’s secondary industry. Among the 75 food manufacturers
identified in the survey, 22.67% are in Henan.
Beijing and Tianjin: Beijing is the capital of China and one of the most populous cities in the world. It is
the country’s political, cultural and educational center and home to the headquarters for most of the
largest state-owned enterprises. Tianjin is a major metropolis only 100 kilometers from Beijing, with the
largest port in North China. The Beijing-Tianjin corridor is an important food manufacturing center in
part because of the location near two major consumer markets.
Other provinces: Hebei, Shanxi, Ningxia and Inner Mongolia share some common features of being less
economically developed than the coastal provinces and have agriculture as a traditionally important
industry. Food industry is growing fast in these provinces due to the importance of agriculture in the
region, but is more geographically scattered.
Leading Food Manufacturers
75 food manufacturers were selected for this survey, which was evenly divided among five sub-sectors: quick
frozen food, non-frozen ready-to-eat food, confectionery and snack food, processed cooked meat and seafood,
and bean products. The methods used were 30 field visits that involved interviewing some of the clients across
the specified 5 sub-sectors and telephone interviews to all these manufacturers. All the data was collected using a
standardized survey template.
Note on bean products: Most of the categories used in this report are self-explanatory, but bean food products
may require some explanation. Beans in this case refers to all dry beans and peas. Peas tend to dominate the
discussion due to the existence of an organized industry that processes pea flour into noodles, but the potential
may actually be higher for other dry beans. Usage of these products falls into four categories: 1) bean paste, used
primarily in either moon cakes or in distinctly Chinese ice cream flavors; 2) eight treasure and similar types of
congee – a canned, lightly sweetened rice porridge with beans, Chinese dates and other ingredients; 3) beans for
use in flavoring drinks, particularly soy milk; and 4) beans for use in traditional snack foods (fried whole for
snacking or processed into lightly sweetened cakes). Potential applications for dry beans also exist in the fast-
noodle sector, where ATO is actively working with the Chinese industry.
Geographically, the 75 selected food manufacturers are heavily concentrated in Shandong and Henan, with over
half of the manufacturers located in the two provinces. Beijing and Tianjin also formed a significant cluster.
Beijing , 16.00%
Table: Geographical spread of the 75 food manufacturers
Sub-sector Beijing Tianjin Shandong Henan Other
Quick frozen food 1 2 2 6 4
Non-frozen ready-to-eat food 4 2 5 4
Confectionery and snack food 3 9 2 1
Processed cooked meat and seafood 3 8 4
Bean food 1 10 1 3
Total 12 11 24 17 11
Corporate ownership is a complicated issue in China. 60% of the 75 manufacturers are joint stock/shareholding
corporations, and 32% are privately owned. State ownership in the food sector is surprisingly low, accounting for
less than 3% of the total.
Table: Ownership of the 75 food manufacturers by sub-sector
Sub-sector Private Joint Stock State-owned Other
Quick frozen food 5 9 0 1
Non-frozen ready-to-eat food 3 10 0 2
Confectionery and snack food 13 0 1 1
Processed cooked meat and seafood 3 11 1 0
Bean food 0 15 0 0
Total 24 45 2 4
Chinese official statistics are collected from “sizable enterprises” including all state-owned enterprises and others
with annual output value exceeding RMB 5 million. Among the 75 manufacturers, 60% of them are major
corporations with an annual output value of over RMB 100 million ($15.7 million).
Table: Production scale of the 75 food manufacturers by sub-sector
Sub-sector Over 100M 50-100M 20-50M 5-20M
Quick frozen food 8 2 1 4
Non-frozen ready-to-eat food 11 1 1 2
Confectionery and snack food 6 9 0 0
Processed cooked meat and seafood 14 1 0 0
Bean food 9 0 4 2
Total 48 13 6 8
II. Imported Ingredients
1. Imported Ingredients Used by Chinese Food Manufacturers
Based on the survey, the U.S. is currently supplying food ingredients to 4 food sub-sectors: non-frozen ready-to-
eat food, confectionery and snack food, processed cooked meat and seafood, and bean foods. The 15
manufacturers from the quick frozen food sub-sector did not use any food ingredients imported from USA,
however further research indicates that at least one of these is already using U.S. frozen fruit. The primary
ingredient in this sub-sector is flour, which is sourced primarily from Canada and Australia at present, and
imports of which are subject to quotas. Note also that some companies may be unaware of (or uninterested in)
the origin of ingredients sourced from local import distribution agents.
Table: Imported ingredients used by food sub-sector and source countries
Food Sub-sector Main Ingredients Imported Source Countries and Areas
Quick frozen food Flour Canada, Australia
Non-frozen ready- Palm oil, Spices, Flavoring essence,
to-eat food Ame Malaysia, Japan, Hong Kong, US rican durum wheat, Flour
Cocoa, Cocoa butter, Cocoa butter
C US, Poland, Argentina, New onfectionery and substitute, Whole milk powder, Whey Zealand, Malaysia, South
snack food powder, Lecithin, Flavoring essence,
Nut lets America, East Asia, Indonesia
C Southeast Asia, Paraguay, Europe, ellulose sausage casing, Pig meat,
Processed cooked US, Vietnam, Southeast Asia,
mea Chicken meat and offal, Fish, Pig head t and seafood mea South America, Japan, Brazil, t, Beef shin, Beef, Pork, Seasoning, Thailand
Bean food Peas Canada, US
The interview data reveal that 42.7% of the 75 food manufacturers are using imported ingredients, and 16% of
them are using U.S. ingredients. The U.S. has traditionally been a key exporter of milk powder, peas and whey
powder to China.
Table: Use of imported ingredients by sub-sector
Using Ingredients from Using Ingredients from Other
Sub-sector US Countries
Quick frozen food 0 1
Non-frozen ready-to-eat food 1 6
Confectionery and snack food 7 2
Processed cooked meat and
Bean food 2 6
Total 12 20
2. Interest in U.S. Ingredients
While 16% of the 75 manufacturers are currently using U.S. ingredients, a total of 41 manufacturers (55%
of the total) have shown interest in importing U.S. ingredients.
The quick frozen food and confectionery and snack food manufacturer groups showed the most interest,
each having 17.3% (13 companies) level of interest out of the 41 manufacturers that were interested.
Out of the 12 manufacturers already using U.S. ingredients, 7 (58%) were from the confectionary and
snack manufacturing group.
The processed bean food group was the next largest interest pool with 7 out of the 15 (46%)
manufacturers surveyed in using U.S. ingredients followed closely by the non-frozen ready-to-eat food
group with 6 out of the 15 (40%) manufacturers surveyed.
The processed cooked meat and seafood manufacturers showed the least interested in U.S imported
ingredients with 13 out of the 15 (87%) manufacturers surveyed.
Table: Interest in U.S. ingredients by sub-sector
Sub-sector Interested Not Interested
Quick frozen food 13 2
Non-frozen ready-to-eat food 6 9
Confectionery and snack food 13 2
Processed cooked meat and seafood 2 13
Bean food 7 8
Total 41 34
3. Disinterest in U.S. Ingredients
- 34 manufacturers taking up 45% of the total were not interested in importing U.S. ingredients. The main
reasons cited for their lack of interest was that enterprises had no or too little knowledge about the U.S.
ingredients, with 26 respondents stating this to be the case.
- Many manufacturers have set up long-term contracts with ingredient suppliers, most of them local. The table
shows a total of 14 responses, making this the second most import limit to interest in U.S. ingredients. Many are
reluctant to import ingredients because they feel it makes things more complicated, i.e., not only dealing with
import duties but also dealing with quotas (esp. flour) and licenses, not to mention flexible and timely supply. In
some cases, when manufacturers buy ingredients from local suppliers, the origin of these ingredients are from
overseas; in these instances, enterprises rely on import agencies to deal with supply and logistics issues.
- The survey indicates the lowest level of interest comes from the processed cooked meat and seafood
manufacturers: interestingly 7 out of the 15 enterprises in this group are already importing from overseas, 2 of
them from the U.S. Analysis of the survey indicates that pricing and lack of product knowledge, along with
existing long-term arrangements with local suppliers are the key barriers in this sub-sector.
Table: Reasons for disinterest in U.S. ingredients by sub-sector
Low Complicated Other
-term Focus on
igh knowledge import procedure
Sub -sector local low-end
price of U.S.
Quick frozen food 1 2 2 1 1
5 3 7 3
1 1 1
m 6 6 6 3 eat and seafood
Bean food 2 2 10 2
Total 14 14 1 26 4 6
4. Buying Criteria
- Among the 75 enterprises surveyed, 55 manufacturers (73%) listed price as their primary buying criteria. As
ingredients prices climb, food manufacturers are under increasing pressure to control costs. In addition to price,
quality is also a concern, with 48 enterprises (64%) expressing concern about sourcing the proper quality of
- Timeliness and consistency of supply was a another major factor cited by survey respondents, though it was not
comparable to price and quality. Responses on this criteria were stronger in the field interviews than in the
surveys. Manufacturers with limited experience in importing remain uncertain about the reliability of import
supplies, and the flexibility of payment arrangements.
- Food safety is an emerging concern due to the recent legislation on food standard enforced by the Chinese
government as well as increasing public concern over food safety. A substantial number of manufacturers
highlighted the need to prove the safety of imported ingredients, with documentation including commodity
quarantine inspection reports and technical specifications of the ingredients, and other relevant credentials
including FDA reports or ISO certificates.
Table: Buying criteria for imported food ingredients by sub-sector
Sub-sector Price Quality Timely Supply Food Safety
Quick frozen food 7 7 2 2
Non-frozen ready-to-eat food 12 12 2 2
Confectionery and snack food 14 9 4 3
Processed cooked meat and seafood 14 12 4 3
Bean food 8 8 2 2
Total 55 48 14 11
5. Main Requirements of Potential Chinese Buyers
- The overwhelming majority of responses cited the need for more information on U.S. ingredients and their
technical specifications. Interviews during field visits reinforced this. Simply stated, Chinese manufacturers do
not have enough, if any, knowledge of American ingredients or ingredients suppliers.
- Even though survey data show a limited response for other requirements, field visits and interviews revealed
some interesting insights. Survey sheets showed that Chinese manufacturers thought U.S. ingredients were fairly
good in quality; however a lot of them were unsure of the other necessary requirements that are needed to be in
place for future co-operation.
- A lot of the manufacturers cited the need for flexibility in payment, supply quantity and delivery times, because
demand for their products varies. Most manufacturers currently source primarily from local suppliers, and lean
on imports when the local suppliers are not able to meet demand or specifications. One manufacturer specifically
cited his concern that switching to imports will lead to changes in the taste/quality of the final product because of
Table: Reasons for lack of interest in imported ingredients by sub-sector
Product Ingredient Flexible Timely Flexible order
catalogue specifications payment supply quantity
Quick frozen food 9 7 1
9 9 1 1 2
8 8 3 8 4
Processed cooked meat
7 8 1 2 1
Bean food 9 10 1 1
Total 42 42 6 13 7
III: Key Findings of the 5 Food Sub-sectors
1. Confectionery and Snack Food Sub-sector
China's current per capita consumption of confectionery is about 0.9 kilograms/year, amounting to about one
third of the world average. This may indicate strong potential for future growth, and this industry has grown
In North China, the confectionery industry is highly concentrated in Beijing and Tianjin, while snack food
production is also common in Shandong and Henan. Tianjin has China’s largest production of chocolate
products with over 10 large companies, each with a total revenue exceeding RMB 50 million. However,
these are low-cost producers marketing primarily to rural consumers.
Current and Future Ingredients Needs
The large volume of imported ingredients used in this sub-sector goes primarily in chocolate manufacture, as
basic ingredients such as cocoa powders and butters must be imported. Chocolate manufacturers also import
large quantities of whey powder and palm oil. Among these, cocoa powder, cocoa butter and coco butter
substitutes are imported from Southeast Asian countries (some from South America), milk powder imported
from New Zealand, Holland and Australia and whey powder mainly from the U.S. and Holland.
Tough competition in the confectionery and snack food industry has led to consolidation, leaving the industry
in North China increasingly centered around Beijing and Tianjin.
In Beijing, Beijing Kangbeier Food Co., Ltd. has become the largest confectionery manufacturer in China and
is considered the best in North China. One of Kangbeier’s top competitors, Yili Food Co., Ltd., recently
closed down confectionery production in order to concentrate on other sectors, including bakery.
In Tianjin, the major local manufacturers have merged together and are the founders of the Tianjin Chocolate
Association, currently chaired by Mr. Dou Zhengli, General Manager of Tianjin Jiuzhou Food Co., Ltd. (a
leading manufacturer of chocolate products). According to the Tianjin Chocolate Association, the total
volume of imported ingredients used by the industry in Tianjin is estimated at over 10,000 tons per year.
Whey powder is the U.S.’ primary export to this sub-sector. The U.S. also exports other ingredients such as
cocoa powder and lactose, which originate elsewhere but are processed in the U.S., demonstrating the
strength of U.S. companies such as Cargill in global sourcing and re-export. Chinese companies are not
averse to purchasing products handled in this manner.
Following food safety scandals related to domestic production, demand for imported milk powder is
extremely high in China. Although China traditionally imports milk powder from New Zealand, Holland and
Australia, there is a significant market opportunity here for U.S. suppliers.
U.S. exporters have done well trading through local Chinese import agents, but would do well to consider
other models, given manufacturers’ price sensitivity. For instance, the Tianjin Chocolate Association is
composed of all major manufacturers of chocolate products in the Tianjin area. Potentially it could serve as a
group purchaser of ingredients for its member manufacturers. With revenues ranging from RMB 50-100
million for each company, it is unlikely for each of them to place large orders separately or to maintain large
inventories. However, by working with the association, U.S. companies could supply larger volumes of
ingredients at a lower price.
2. Non-frozen Ready-to-Eat Food Sub-sector
The instant food industry is one of the fastest growing segments of the food sector in China. The past five
years has witnessed average annual growth of 27.7%, with total revenue hitting RMB 92 billion in 2010.
Instant noodles (fried and non-fried) are the largest product item in this sub-sector. In 2010, China produced
6.88 million tons of instant noodles growing 16% annually since 2006.
China’s non-frozen ready-to-eat food industry is mainly concentrated in North China, especially in Henan,
Shandong and Inner Mongolia, where wheat output is high. Beijing is also an important manufacturer
because it is a large consumer market. Excluding the large manufacturers that specialize solely in the
production of instant noodles, the majority of non-frozen ready-to-eat food manufacturers also produce quick
frozen food products.
Some of the specialized instant noodle manufacturers have expressed an interest in imported ingredients as a
means of upgrading their product lines to avoid competing on price alone. Interest has included bean
products to improve flavor and nutrition profile, as well as flavorings. However, manufacturers have little
knowledge of the products available from the U.S., or how they are used.
Current and Future Ingredients Needs
Wheat flour, palm oil and seasonings are the main volume ingredients in this food sub-sector.
Flour: The need of flour in this sub-sector is substantial, although some companies import wheat instead, as
they own their own flour mills. However, import of flour and wheat is controlled through import quotas and
licenses. Only a few giant state-owned groups such as COFCO have the import licenses without quota limits,
while some large food manufacturers have licenses, but are limited by quota allocations.
Seasonings: China’s import of seasonings is also significant in this sub-sector. Southeast Asia and South Asia
have been the largest traditional exporters of raw materials for China, although Japan exports a considerable
volume of processed seasonings to China. To be competitive in this area, U.S. seasonings manufacturers will
likely need to follow Japan’s example in developing products specifically for the Chinese industry. However,
manufacturers have noted an interest in using imported seasonings to develop new and innovative products,
offering a potential opportunity.
The primary challenge in this sector are quotas on imports of wheat flour. Although a breakthrough seems
difficult, the survey indicates that interest in U.S. ingredients, particularly wheat flour, is quite high. Chinese
importers have proven resourceful in getting the materials they require, so closer contact with individual
manufacturers is likely to be the key to success. A clear sign of supporting evidence is that some Chinese
food manufacturers explicitly expressed a willingness to have “direct, face-to-face talks” with American
Business opportunities may also exist in some niche market segments. For instance, some companies are
interested in American extra-strong flour and extra-soft flour, soft red winter wheat/flour, and some beans, in
particular kidney beans.
3. Quick Frozen Food Sub-sector
China’s quick frozen food sub-sector has grown slowly relative to other sectors, reaching a total production
volume of 2.98 million tons in 2010. Limited freezer space and a difficult consolidation process for an
industry that has traditionally been dominated by extremely small-scale, generic manufacturing have been
Geographically, Henan, Shandong, Hebei, Tianjin and Beijing are the main quick frozen food manufacturers
in North China. Henan is particularly strong in producing quick frozen food, and the largest producer in
Current and Future Ingredients Needs
Quick frozen foods commonly seen in the Chinese market are frozen dumplings (baozi and jiaozi), sweet
dumplings (tangyuan), dim sum, steamed breads (mantou), spring rolls, etc. The largest companies are now
investing in new product development to differentiate themselves from traditional, small-scale generic
manufacturers. The main ingredients used are flour, different types of meats (pork, chicken, seafood, etc.),
sesame, beans, vegetables and seasonings. However, the largest manufacturers have introduced some new
items – one major manufacturer of sweet dumplings has introduced versions with blueberry and strawberry
Pork: China’s imports of pork, primarily from the U.S., Denmark and Canada, have increased enormously in
the past year, due to domestic shortages and rising prices. China’s imports of pork are expected to continue to
grow, however, this import segment market is highly impacted by domestic pork production, which is often
regulated by the Chinese government. Major items have included head meat, snouts and trotters, mainly for
use in manufacturing.
Seafood is widely used in quick frozen foods such as dumplings and dim sum. China’s domestic production
of seafood is becoming unsustainable even as demand continues to rise. Traditionally, much of China’s
seafood imports were processed and re-exported, but an increasing proportion is now going into manufacture
of food for domestic use.
Animal offal: In China, meats like chicken feet, chicken giblets and some other animal offal like pork
stomachs (maws) and kidneys are considered to be delicacies. China has been a large importer of such meats,
and some of the companies surveyed have expressed a strong interest in importing such meat products from
In China’s quick frozen food sub-sector, U.S. exporters may find some business opportunities arising from
the evolution of the market, although the overall demand of food ingredients will remain stable in volume.
Pork, seafood and animal offal are likely to continue in high demand. U.S. exporters may need to establish
direct contacts with the Chinese food manufacturers to further understand their needs for such ingredients.
Chinese food manufacturers usually have their own sales and marketing teams and have their own channels to
distribute their products. Some large manufacturers not only have well-established sales channels but also
have strong connections with their peers. These companies are usually open for new business opportunities
to diversify their product lines. The combination of the ability to create traditional foods with strong
distribution capabilities and contact with consumer markets make these companies a powerful agency for
introducing new food ingredients to the mainstream Chinese market.
4. Bean Food Sub-sector
In North China, the production of bean food is not as geographically widespread as other sub-sectors, with
the majority of bean food production located in Shandong Province. Note, however that the cluster in
Shandong is focused on pea vermicelli. Manufacture of other bean products is also growing, and is generally
dispersed throughout North China.
Chinese restrictions on genetically modified (GM) products in human food presents a significant trade barrier
for soybeans for food use, although other types of beans are not as likely to be affected.
Current trends toward healthy eating and lifestyles are driving an increased interest in bean-based foods. This
is particularly affecting interest in adapting dry beans for use in instant noodles and other convenience foods
in order to make them more nutritious.
Current and Future Ingredients Needs
In terms of volume, the largest import demand in this sub-sector comes from manufacturers of vermicelli,
eight-treasure congee (babaozhou), and soybean powder (not meal) manufacturers. The base ingredients
requirements of these manufacturers are various types of dry beans, peas, lentils, soy beans, and different
types of starch (potato, wheat and corn).
Vermicelli: Chinese bean vermicelli manufacturers are concentrated in the cities of Zhaoyuan and Longkou in
Shandong province. In general, vermicelli produced in Shandong is mainly made of peas, however vermicelli
produced in other areas (Hebei and Henan) uses sweet potatoes, corn and potato starch. The production of
vermicelli produced from mung beans is declining as peas have become the main ingredient for bean based
Eight-treasure congee: The production of eight-treasure congee is heavily concentrated in the south eastern
coastal areas of China and Taiwan. North China manufacturers are relatively small in scale, other than
Shandong Tubage Group Co., Ltd.
Ice creams and snacking: Although not yet a major component of import demand, manufacturers of ice
creams and traditional snacks are introducing more flavors and products relying on beans. Mung beans are a
traditional component in frozen summer treats.
Beverages: Similar to ice creams and snacks, demand for some dried bean ingredients for flavoring is
growing in the beverage sector. This is not yet having much impact on imports, but if it continues could
become a significant niche market.
Thanks to rising demand in the domestic vermicelli processing and starch market, China’s ingredients
imports for this market have grown steadily. Statistics show China’s dry pea imports going from 203,000
metric tons in 2008, to 553,000 metric tons in 2010.
Canada has long been the leading player in exports of dry peas to China at roughly 108 thousand metric tons
in 2009. The interviews revealed that U.S. peas are selling at a slightly lower price than Canadian peas, but
Chinese importers are reluctant to switch because of concerns about the consistency of quality and stability of
supply. Because the needs of vermicelli manufacturers are different from their traditional customer base, to
develop this market U.S. suppliers will need to work with Chinese companies to ensure that they produce the
quality needed for this purpose.
Zhaoyuan and Longkou are the leading Chinese production bases for pea vermicelli and the demand for peas
is very high. If American exporters can somehow break into this market, e.g. selling peas to one or two
leading vermicelli manufacturers, they can gradually expand their exports into this important market
5. Processed Cooked Meat and Seafood Sub-sector
Sales of meat are increasing by about 10% each year in line with China’s booming economy. This increase in
affluence, coupled with a growing appetite for time-saving processed food is driving the demand for more
processed meat-based meals. It is estimated that the processed meat sector will grow at an average of 16%
In North China, the processed meat and seafood industry are mostly concentrated Shandong, Henan and
Beijing. Located among these locations are the leading players in this industry with multi-billion RMB
revenues. Henan Shuanghui Group Ltd., for instance, is the world’s largest meat manufacturer, with annual
revenues of RMB 50 billion (over $7.7 billlion).
In contrast with meat processors, the cooked meat and seafood sub-sector tends to be dominated by medium-
sized processors with only regional distribution capabilities. Differing regional tastes and fragmented
distribution systems, particularly for cold chain, reinforce this tendency.
The bulk of demand for U.S. product is for pork. Although poultry and beef have significant potential,
market access issues continue to limit the development of these items.
Current and Future Ingredients Needs
At the moment, the majority of processed cooked meat manufacturers in North China use local pork, beef,
mutton and fish to produce sausages, meat balls and other processed meat based foods. However, rapid rises
in local ingredient prices have spurred an increased interest in imported products.
In North China, the main ingredients imported from overseas are the cassava starch, pork fat and fish paste
needed to manufacture their processed meat products. These ingredients are mainly supplied by neighboring
countries: The supply of cassava starch is mainly imported from Southeast Asia (i.e. Vietnam and Thailand),
and fish paste is mainly from Vietnam due to prices advantages.
Most manufacturers using imported meat source the product through local agencies who purchase from
multiple origins. This practice is likely to continue, as import agents provide flexibility in quantity, delivery
times and payment arrangements.
Some of China’s ingredients needs for processed meat and seafood production differ from other countries.
Several Chinese manufacturers want certain animal parts considered byproducts in the U.S., such as chicken
feet, giblets and other offal.
With an increase in demand for time saving foods, processed meat products will play a major influence in the
food industry for convenience foods.
The majority of processed meat and seafood manufacturers are extremely price sensitive, hence favoring
imports from neighboring countries in order to get the cheapest possible ingredients. Competing with these
sources on price alone would be difficult and maybe not a worthwhile venture. A better strategy would be to
target premium product manufacturers who are marketing to food safety and nutritional concerns.
China is now importing a large volume of pork from the U.S. (also Denmark and Canada), and this is likely
to continue for the near future. Given that this is likely to be a long-term market, exporters would be well
advised to invest in building relationships with Chinese importers and adapting products and packaging to
Chapter 4: SWOT Analysis and Suggestions
1. SWOT Analysis
U.S. food ingredients currently enjoy a relatively strong standing in the local Chinese market, particularly in
the high-end food segments. Chinese food manufacturers regard U.S. food ingredients to be of high quality
and fairly priced. Chinese manufacturers consider quality and price as the top criteria for their purchase
U.S. food ingredients have a high reputation for food safety. This is particularly important for Chinese food
manufactures, as they are facing greater pressure to ensure the safety and quality of their products.
While U.S. food ingredients enjoy a good reputation in the Chinese market, reservations have been voiced as
to pricing and promptness of customer service. Although some Chinese manufacturers think the U.S.
ingredients are fairly priced in general Chinese manufacturers are very price sensitive, and it is extremely
difficult for U.S. or any overseas suppliers to stay price competitive against local suppliers, given that these
overseas suppliers have to incorporate shipment and warehousing costs, export duties and other costs.
The awareness of U.S. ingredients remains low in the Chinese market. Even a high proportion of large size
food manufacturers which often use imported ingredients claim they do not have sufficient knowledge of
U.S. ingredients. Amongst 34 manufactures expressing no interest in U.S. ingredients, 26 (76%) listed “no
knowledge of U.S. ingredients” as the main reason for their disinterest.
Having maintained relative economic growth in the face of the global economic crisis, Chinese consumer
buying power and demand continues to grow. Modern-day China is moreover an extremely retail oriented,
consumer culture, largely as a product of recent, high-paced social development. Statistically China has
proven itself one the largest and fastest growing food markets in the world, growing at an average rate of 15%
annually; this momentum is expected to continue into the future. This gives a solid foundation for U.S. food
ingredient suppliers to enter and expand in a fast growing market.
The demand for high-end products is growing fast due to rising incomes and especially fast growth in the
population of white collar workers and the newly wealthy, and to the prominence of food safety and quality
of life issues for this demographic.
The Chinese food sector is gigantic and highly diversified, and the industry is experiencing critical
restructuring. The rapid changes in this industry offer great opportunities to U.S. suppliers who can adapt
their export strategy in accordance with this trend.
Competition from other developed countries and fast-growing emerging economies in south-east Asia present
a large “unknown” factor in this area. Exporters and re-exporters in Malaysia, Indonesia, Thailand, etc.,
have created a presence across a wide array of ingredients, even bridging consumer demographics from low
to high end markets. Some have substantial investments in food manufacturing in China, giving them a
The development of strong local production capabilities, increasing brand awareness and public relations
building, and the shift of local producers from exports to domestic sales, presents a heightened sense of
competition, particularly as local producers enjoy a high degree of local brand recognition, lower costs, and
well-established market communications/sales channels.
Global market forces, intense competition and shifting demand have put pressure on pricing; despite high
economic growth and retail-orientation, Chinese food manufacturers are extremely price sensitive, especially
as they have a large and growing number of choices among foreign suppliers and local ingredients on the
2. Conclusion and Suggestions
Many Chinese food manufacturers are currently using ingredients imported from overseas including the U.S.,
however they mainly purchase through local import agents. These agents deal with all the import formalities and
import duties, and providing even delivery service to the production sites. It is essential for U.S. exporters to
look into the establishment of long-term partnerships with these import agents and/or develop their own import
base within China.
Given the sheer size and geographic diversity of China’s food manufacturing industry, as well as the rapid pace of
development and consolidation, it is difficult to generalize about the opportunities for any given ingredient in any
manufacturing sub-sector. That said, certain developments are worth noting as opportunities:
- The confectionary and snack food sub-sector has the best penetration for U.S. ingredients: nearly half (7 out
of the 15) of these enterprises already import ingredients from the U.S. and a further 2 are already importing
from other countries.
- The quick frozen food sub-sector appears to have greater potential for ingredients that can be imported from
the U.S. From the data collected it would be of great interest to further investigate/inquire about the frozen
food manufacturers because of the high interest of importing ingredients from the U.S. but none (sic) have yet
done so, and only 1 out of the 15 manufacturers is currently importing ingredients of any kind. This implies
low competition and high interest – an ideal combination.
- The bean sub-sector also shows a high level of interest. The data show over half (8 out of the 15) of these
manufacturers already import peas, but only two import from the U.S. This may indicate good potential for
imports from the U.S. In addition, both of the bean and quick frozen food sub-sector ingredient groups have
the least reliance on long-term suppliers which leaves the market more open to establishing new supply
- The processed cooked meat and seafood sub-sector also has good potential for U.S. ingredients. Some low-
end ingredients including chicken feet, animal fat (for improving taste of sausage), fish paste, offal and starch
can are in high demand by Chinese manufacturers. Exporters will, however, be faced with the persistent
market access issues that affect meat products in general.
- The non-frozen ready-to-eat food sector provides unclear market potential for American ingredient suppliers,
as the main ingredient of this sub-sector is flour, whose import is highly controlled by few state-owned
giants. There may be niche-market potential, however, for flavorings and other minor ingredients.
The interviews with the 75 major food manufacturers in North China have successfully collected a number of
explicit requirements for American ingredients. These would require American ingredient exporters to closely
study the survey sheets to pinpoint the needs of each Chinese food manufacturer. Further contact with these
manufacturers is essential for better mutual understanding and discussion of detailed needs. More work is needed
to develop a comprehensive export strategy that addresses specific market barriers (particularly lack of
knowledge), as well as a host of consumer and business cultural issues.
The survey data imply that the U.S. work to increase awareness of its export credentials which are vital for
future cooperation with the Chinese food manufacturers. From the responses many enterprises require typical
materials such as samples, test reports (technical report with detailed specifications), and quarantine
inspection documents. The Chinese companies in question are typically well-established enough and with
narrow enough margins that they are most interested in direct discussion of supply and pricing issues.
Exporters can expect to be immediately asked for product and pricing details.
Most Chinese companies have established long-term supply relationships, typically featuring flexible
payment and delivery terms as stated previously. Therefore US companies must work out an effective
strategy to tackle flexible payment and delivery practices or consider accepting these features as inevitable
challenges the will face in order to do business. More direct and aggressive approaches may include either
establishing a long-term partnership with existing Chinese suppliers in the market, or establishing a steady
and timely supply base in the country.