Blog: China grocery market "hits US$1 trillion" - but not everyone is thriving

Michelle Russell | 5 June 2013

China, the world's biggest food and grocery market, is now valued at more than US$1 trillion and is forecast to be worth $1.5 trillion by 2016, according to latest figures published by IGD.

China, which last year overtook the US as the world's biggest food and grocery retail market, has become an attractive market for food and consumer goods companies, offering long-term growth opportunities. For many food manufacturers and retailers, they are taking a chance on a market they believe will provide the returns they desire to offset weaknesses at home.

Joanne Denney-Finch, chief executive, IGD, said: "The Chinese grocery market, in particular, has been growing at a rapid pace for several years. Representing one fifth (20%) of the world's population, China has had a surge in the number of higher-income earners, benefiting from a significant rise in wages. This has resulted in a soaring demand for new products, brands and concepts - all of which have helped fuel its growth."

In the retail segment in particular, international and domestic grocery retailers are expanding quickly in China with diverse formats and entering new regions.

One such retailer that has benefited from the boom is Chinese hypermarket operator Sun Art Retail Group. The grocer booked a jump in first-quarter earnings last month as it continued its expansion into lower-tier cities.

But while China is seen as a fast growth market and has benefited most that have entered it, some retailers have been left in the slow lane.

UK retail giant Tesco, which today released its first-quarter sales figures, said its China business had been affected by consumer concern over the bird flu crisis and weaker demand for pork products following a national food safety scare.

As a results its like-for-like sales were down 4.9%. This compared to a fall of 2% in the previous quarter.

Aside from China, however, growth opportunities remain aplenty in other emerging markets such as India, according to IGD. This market is expected to have overtaken Japan to become the world's third largest grocery market, valued at $566bn. The US grocery market will remain the second largest globally.

Denney-Finch says: "This offers plenty of scope for food and consumer goods companies seeking international growth and paints a positive picture for the industry globally."


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