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Chinese  Beef  Market  Report  

I  am  Lu  Liu,  23,  an  exchange  student  in  Columbia  College  Chicago,  major  in   Marketing.  Originally  I  am  from  Tongji  University  Shanghai,  China.  I  also   have  a  bachelor’s  degree  in  Land  Management.  I  love  marketing.  Now  I  am   looking  for  a  paid  internship  and  full  time  job.  Please  contact  me  via:   lu881110@gmail.com     Overall General Market Information With 1.3 billion population and GDP of $ 5.879 trillion, and annual growth rate average 10 percent, China has been growing into the world’s fourth largest economy, right behind the U.S, Japan, and Germany. Major cities like Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin and Shenyang contributed more consumption than rural areas. Unlike the United States, China has not been traditionally a red meat consuming country. In 2008, pork accounted for 65% of total meat consumption while beef and buffalo accounted for 8%; the remaining 22% was poultry. Cows have been traditionally used as a workhorse to plough fields, not for edible purposes. Consequently, the domestic prices for beef remains almost double that of pork and chicken. Figure 1: Beef consumption comparison 8%  

5%  

Pig   Poultry  

22%   65%  

Beef  and   Buffalo  

Source: Chinese Beef Consumption Trends: Implications for future Trading Partners The demand for beef is from relatively affluent first-tier and major cities on the east coast where residents tend to have more disposable income; seek more variety in food choices; eat out more often. Beef consumption in China is varied in different seasons. Consumption is at its highest in the winter months and bottoms out in the summer. The traditional Chinese view of beef as a “hot” food; the lack of refrigeration; and price patterns are all cited as explanations for it.


Per capita beef consumption of China is far behind United States and Japan, as it is showed in figure 2. Per capita consumption in China is small while with 1.3 billion populations a small increase per capita in China will lead to large increase on consumption. Figure 2: Beef and Veal Meat Per Capita Consumption Beef and Veal Meat Per Capita Consumption by Country in Pounds(lb) ( Year of Estimate: 2011) United States 84lb China

9lb

Japan

22lb

Source: Index Mundi

Food  Service     Foreign  restaurants,  including  popular  French,  America,  Italian,  Spanish,  Japanese,  Five-­‐star  hotels   and  an  increasing  number  of  steakhouses,  all  use  premium  and  expensive  beef  cuts.  However  this   premium  end  of  the  market  served  almost  exclusively  by  Australian  grain  feed  beef.   Western  restaurants  are  becoming  prominent  in  China.  Fast  food  dining  is  quickly  being  adopted   into  Chinese  culture.  The  next  generation  of  Chinese  consumers  is  expected  to  have  a  higher   demand  for  meat.  For  example  Yum  brands  (KFC,  Pizza  hut,  etc.)  have  close  to  4,200  outlets  in  China,   and  China  accounts  for  more  than  40%  of  Yum's  profits.       The  demand  for  beef  is  from  relatively  affluent  first-­‐tier  and  major  cities  on  the  east  coast  where   residents  tend  to  have  more  disposable  income;  seek  more  variety  in  food  choices;  eat  out  more   often.  

Retail     Hypermarkets  such  as  Wal-­‐Mart  and  Carrefour,  constitute  the  single  best  retail  venue  for  imported   products,  for  example  international  chains  are  familiar  with  the  products  and  count  large  numbers   of  expatriates  in  their  customer  base;  supermarkets  rarely  if  ever  import  directly,  or  even  buy  food   directly  from  an  importer,  tending  instead  to  rely  on  wholesale  markets  and  local  manufacturers  or   distributors;  there  are  also  “Boutique”  stores,  which  include  expatriate-­‐focused  gourmet  stores  and   specialty  stores  for  organic  foods,  wine,  cheese  and  similar  high-­‐end  products.  

Consumer  Dynamics   Chinese  consumers  are  very  price  sensitive,  and  often  unwilling  to  risk  spending  money  on   unfamiliar  products  without  trying  them  first.  Different  from  America,  beef  tenderness  is  less  


important  in  China,  while  freshness  is  of  more  consideration;  Roasted  and  grilled  beef  is  less   welcomed  than  wet  cooked  beef  in  China,  such  as  boiling  in  a  wok  or  hot  pot.   Beef  consumption  in  China  is  varied  in  different  seasons.  Consumption  is  at  its  highest  in  the  winter   months  and  bottoms  out  in  the  summer.  The  traditional  Chinese  view  of  beef  as  a  “hot”  food;  the   lack  of  refrigeration;  and  price  patterns  are  all  cited  as  explanations  for  it.  

Competitive  Snapshot  Overview     Commercial  beef  plants  in  China  rely  on  hundreds  and  sometimes  thousands  of  supply  contracts   with  small-­‐scale  cow-­‐calf  operators.  As  in  the  hog  industry,  some  wholesale  cattle  buyers  provide   the  service  of  consolidating  purchasing  and  delivery  of  cattle  to  plants.  There  is  very  little  captive   supply  beyond  the  supply  contracts.   Chinese  beef  imports  jumped  30  per  cent  year-­‐on-­‐year  during  the  five  months  of  2010,  according  to   official  statistics  from  the  Chinese  Customs  Bureau.  Driving  the  increase  was  the  continued  strong   demand  for  beef  in  China,  with  higher  imports  of  both  New  Zealand  and  Uruguayan  beef  more  than   offsetting  falls  from  Australia  and  Brazil.  Impacted  by  reduced  production  during  the  first  quarter  of   2010,  Australia’s  imported  beef  market  share  in  China  decreased  to  26  per  cent.  Imports  of   Brazilian  beef,  influenced  by  reduced  supplies  and  stronger  competition  from  other  markets  fell  27   per  cent  year-­‐on-­‐year.  During  2010,  Uruguay  has  emerged  as  the  dominant  frozen  beef  supplier  to   China.  

Challenges  and  opportunities   Domestic  retailers  fallen  behind  in  store  management,  purchasing,  and  food  health  and  food  safety   standards.  Thus  Chinese  domestic  retailers  have  become  increasingly  less  popular  amongst  affluent   shoppers  and  residents  of  first-­‐tier  cities,  such  as  Shanghai,  Beijing,  Guangzhou  and  Shenzhen.   Driven  by  higher  income  levels  and  adoption  of  western  culture  and  traditions,  food-­‐away-­‐from-­‐ home  consumption  continues  to  rise.  Young  white-­‐collar  workers  residents  continue  to  spend   disposable  income  on  eating  out.   Tastes  vary  widely  from  place  to  place  in  China,  and  are  constantly  evolving.  It  is  difficult  to  predict   what  products  will  succeed  without  conducting  marketing  research.    


CHINESE BEEF MARKET