Everybody in the food industry is talking about China these days, so it was no surprise that the recent FHC show in Shanghai drew unprecedented crowds. Close to 700 exhibitors from 32 countries came to display their wares. Undeterred, our roving reporter Bruce Hoggard ate his way around the show floor to bring us this lip-smacking report from China..
The global retail food market, according to a Frost & Sullivan report, is expected to grow at a compounded annual rate of 5% between 2005 and 2020. During this time, China is anticipated to account for 0.4- 0.5% of the growth. Meanwhile, China’s restaurant industry is projected to reach US$91bn in sales in 2005.
According to several other people and sources at the recent show FHC 2005, these growth rates place China’s food industry, for 2005, at revenues of approximately $240bn. This represents more than a 300% increase since1997.
This phenomenal market growth is driven by several factors. In January 2005, China’s commitment to the World Trade Organisation (WTO) meant the retail market was fully opened to foreign investments. This resulted in the restrictions on various issues such as location, the number of outlets and foreign ownership being relaxed. Although foreign companies obtained the right to complete ownership, many have continued to work with Chinese partners to help them deal with the complexity of the Chinese market.
With any emerging market, there are always significant risks and challenges. However, the very nature of the Chinese market compounds this difficulty. Its immense size, its various domestic markets and the relative immaturity of key factors such as distribution channels, consumer awareness and quality all add to the market’s complexity.
While the WTO agreement has provided foreign companies with new opportunities in China, it has also increased China’s desire and efforts to export more food products to Europe and North America. To accomplish this Chinese producers must deal with several new issues regarding food safety and health regulations, and the expectations of more sophisticated consumers. Domestic buyers in all industries, including food and functional foods, where awareness of health and safety concerns as well as quality issues are becoming more common, are also exerting this pressure.
As with many other countries, organic cultivation is growing as is the reduction in the use of pesticides. These factors, along with a possible bird flu pandemic and a damaging lack of consumer confidence, are forcing the industry towards more stringent quality testing.
Other contributing factors are the increased spending power of a growing number of Chinese consumers, younger consumers with a more global vision, and the changing food habits and diets of China’s increasingly wealth individuals. These people are beyond the “feed me” stage of Maslow’s hierarchy and are looking for high quality, safe and indulgent new food choices. These trends, coupled with the streamlining of internal food distribution networks, are making imported and foreign foods an important element in China’s food supply chain.
At the cusp of this growth wave are several cities including Beijing, with close to 15 million people, and Shanghai, where the daily population exceeds 18 million people. With the addition of its high standard of living and the international influences, it was fitting that Shanghai host the 13th annual FHC 2005.
FHC 2005 remains China’s leading international food and hospitality trade event. Brendan Jennings, general manager of China International Exhibitions, the show’s organiser, commented that FHC has always been China’s preferred marketplace for international products, particularly imported food products.
The show’s popularity and continued growth forced management to relocate this year’s show to the Shanghai New International Expo Centre (SNIEC). More than 16,000 people visited the exhibition centre, located across the river in Pudong, during the two days of the show.
One of the FHC’s unique strengths has been its ability to attract China’s six largest distribution companies as exhibitors. These all-important players in the food import sector, namely Cortti Foods, Mandarin Fine Food, Goodwell China, Sinodis, Shanghai Ted and Chiro (Shanghai), were once again in attendance. This is still the only show where all six are represented.
International retail presence
In the retail sector, Germany’s Metro and one of China’s leading operators with 24 stores, was also an exhibitor. It hosted several national cooking demonstrations featuring a wide range of popular Chinese and Western food products. Alongside Metro were buyers from other major food and beverage companies doing business in China. French company Carrefour, with close to 70 locations in China, and US giant Wal-Mart were both at the show. The Chinese companies of Lianhua and Hualian independently operated by two Chinese brothers and headquartered in Shanghai, and the UK’s biggest retailer Tesco/Hymall also attended. Tesco owns 50% of the Taiwan based holdings Hymall giving it an immediate foothold in China with approximately 40 stores.
On the show floor there were close to 700 exhibiting companies from 32 countries. These companies offered food and drink products covering items from frozen food and bakery to coffee and wine as well as retail and hospitality equipment and supplies. It also boasted foodservice equipment, in-room technologies and catering aimed at the diversified demand of today’s home and takeaway markets. There were also 26 national pavilions from around the world.
Held in conjunction with FHC 2005 there were several other events including the 7th FHC International Culinary Arts Competition, the Vandergeeten Draught Beer Challenge, several wine tasting seminars, and the French Food Security systems seminar. Given the influx of industry people, several organisations also took the opportunity to hold conferences or meetings, such as the Food and Drug Administration Conference, the FMCG Winter Conference, the Shanghai Food Import Enterprises members meeting and finally, the Food Nutrition Seminar for schools, universities and contract catering.
A hot topic around the world, as demonstrated in newspapers, magazines and water cooler pow-wows, is childhood obesity and healthy food alternatives in schools. This industry and consumer concern resulted in the “China’s School Nutritional Programme” being one of the better-attended seminars during the show.
Pick of the products
With the show being in Shanghai there were a predominant number of Asian companies exhibiting, with large contingents from Taiwan, South Korea, China and Japan. One such company was Vegefood from South Korea.
Established in 1998 to supply the Korean domestic market, Vegefood specialises in vegetable and soy products that imitate the equivalent meat products. The company’s first product was a ham processed from soy protein.
Several of the products at the show reflected Korean culture, such as the soy-based boneless ribs product. Its origin comes from the Chosun Dynasty (1392-1910) where it was not acceptable for Kings to gnaw the meat off a bone. Therefore, cooks removed the meat from the ribs and shaped them into rice cakes for easier eating. The soy version, although not as good as the real meat version, is still acceptable and a dietary alternative for non-meat eaters.
The company also offered several other soy protein products including soy chicken nuggets, soy steak with a special sauce (pictured here), soy chicken meatballs, and soy versions of sausages, cutlets, and burgers. Surprisingly the soy chicken nuggets made from soy protein tasted just like chicken, but doesn’t everything? As for the soy steak, it does not even come close to replacing a real steak, especially if the person involved is from ranching countries such as Canada, United States, Australia and Argentina.
Austrian company Anderst Agrarhandel, located in the heart of potato country in Jagenbach, was at the show promoting its latest innovation in potatoes and other vegetables. The products sell internationally under the Austrian Finest brand name.
To assist with mealtime preparation for families constantly on the go the company developed a variety of organic semi-cooked and ready-cooked vegetables. The first was a semi-cooked and ready-cooked potato. This included a potato salad and cooked, peeled baby potatoes available in two sizes. The salad, as good as homemade although the recipe may differ slightly, is available in the 4250 ml tin, for those large family gatherings or a 390 ml glass jar. Made with potatoes, onions, vegetable oil, sugar, wine vinegar, salt, white pepper, and natural flavourings, it is missing eggs, which for some consumers is an important ingredient.
The company also has both an organic carrot salad and an organic red beet salad available in 390 ml glass jars. All three of these salad choices provide a healthy addition to any quick meal with little, if any, preparation. What’s more, they even taste good.
Although the nutritional and meal-replacement bar market in North America has reached saturation levels and sales have begun to slide, there is still growth potential within selected markets in Europe and Asia. However, both of these locations are still far behind North America in sales volumes. According to Euromonitor International, North America recorded 2004 sales of $4.2bn or approximately 65% of global sales. Meanwhile Western Europe had $1.2bn and Asia Pacific was only at $486m.
Energy bars and fruit bars are still niche products but they are experiencing positive growth. However, other snack bars are being replaced by substitutes such as yoghurt and smoothies. There is also a trend towards great market segmentation and an increase in the number and types of additives along specific health or nutritional claims and benefits.
Given China’s population base, especially in cities such as Shanghai where life is hectic and concern with personal health is dramatically increasing, the snack and nutritional bar market is poised to explode. However, companies will also need to develop new bars for these markets based on regional and cultural tastes and specific health concerns, practices and issues.
Organic bars for the time-poor
Taking advantage of the growth potential in Asia and China BZ Bio-Zentrale from Stubenberg, Germany, was at the show promoting its extensive range of regular organic bars marketed under the brand name “Gut & Gerne”.
A regular crowd-pleaser, although not very adventurous, are the Company’s two muesli bars, the Nut Honey bar and the Muesli Cluster bar. It is like eating cereal without the milk but with the added convenience of being mobile. For people who enjoy nuts, Bio-Zentrale offers three different ‘Croquant’ style bars, with choices of peanut, hazelnut or maple nut.
For the athletic type in training, or just people looking for an energy kick, the line of fitness and energy bars include an apple banana bar and an energy power bar. Unlike other bars, that combine banana with another fruit, resulting in an overpowering banana taste, this combination is less startling and smoother. This is an ideal snack, eaten in those first 15 minutes after exercise when the body is best able to replenish and metabolise lost nutrients.
If a regular bar is too much at one time or variety is sought, the company also offers several mini bars made with coconut, a maple nut mix, and an almond chocolate.
One of the numerous Taiwanese companies at the show was Chen Hsiang Foods Industrial, located in Chiayi Hsien County. Starting from a seafood processing plant, mainly shrimp products, the company has grown into frozen foods of various types, fresh sushi and sandwiches and boxed lunches, and most recently prepared foods for both the export and domestic markets.
The more adventurous choices included the frozen and prepared Taiwanese Milkfish Retort and Shark Fins Soup. The other soup the company offered, “Buddha Jumping Over Wall Soup”, made North
American chicken soup look like the chicken had just bathed in it, as the gift boxed chicken soup had an entire chicken in it.
Chen Hsiang also had four flavours of frozen noodles with the most challenging flavour being the noodles with pickled mustard.
Once again, the flavours and style of the company’s products were definitely created for the Asian pallet and ascetics and would require “getting used to” in many North American and European communities.
The rise of Thai cuisine
City Food, located in Thailand, started as a family-run business producing curry paste for use as an ingredient in preparing various Thai foods. Today, the company produces and distributes its own food products under two brands, Classic Thai and Classic Thai Dinner.
Thai cuisine has become more globally accepted, gaining footholds within Europe and North America, as people enjoy its unique and pleasant taste. Usually prepared with only fresh ingredients and no additional colour additives or preservatives, the majority of Thai dishes have a full flavour and defining aroma. Furthermore, some dishes are composed of herbs claiming to cure and prevent specific health ailments.
Realising this value, City Food produces a wide range of foods in response to consumer demands and the growing market niche for Thai dishes. This niche for Thai food has grown to become a globally recognised taste and food category.
Within the Classic Thai selection there is a variety of delicious instant curry pastes, sauces, instant soups and instant food. In addition, the Classic Thai Dinner alternative provides ready-to-serve dishes, consisting of various meats and vegetables in seasoned soups, as well as both cooked, and polished and unpolished, jasmine rice.
The most famous soup in Thailand is the hot and sour soup. Packaged as the Classic Thai Dinner Tom Yum Soup, it provides a ready to eat meal from an authentic Thai recipe. The Pad Thai Noodle, another
famous Thai dish in the Classic Thai line, provides another authentic taste of Thailand.
Thai food has many varieties of taste and the coconut chicken soup was another one of the Thai’s most popular soups. It is made from reduced fat coconut milk, fresh spices and a large piece of chicken breast. There is enough there to create a meal by itself for hurried business people, mums and families.
Another dish from this company to “light up” your taste buds and mouth was delivered in a tin can. The Classic Thai Dinner green curry with soybean protein was as authentic as if had been made fresh in Thailand that afternoon. This style of curry dinner is also available in either a red or a yellow curry, mixed with soybean protein.
Kimchi is king
Originally a processing company dealing with both agricultural and marine products in South Korea, Green Catering was at the show promoting a very nationalistic Korean food. Every culture has its one defining dish and for Koreans it is kimchi. This “pickled vegetable” dish is served at almost every meal and for many foreigners living in Korea quickly becomes a main part of their diet.
Kimchi is the result of processing vegetables in a salt-water solution and preparing them for consumption in the winter months. This process helps preserve the vegetables’ natural vitamins and minerals – in essence one of the first processed health foods. Today, various cooking and fermentation methods are used to prepare kimchi and the taste is dependent on the seasonings used during that process.
There are as many variations of kimchi as there are vegetables and Green Catering produces at least 15 different varieties. The company’s Cabbage kimchi had a sweet and sour taste, similar but different from sauerkraut, its western counterpart. The Gat kimchi had a unique taste and smell, being almost too pungent, and is one of the more popular varieties. It was very spicy, thanks to a generous amount of red pepper while leaf mustard added a dark violet colour to the mixture.
Many of the kimchi dishes are seasonal. However, Naback kimchi, of which the main ingredients are radish and cabbage immersed in an abundant soup mix, is not spicy and can be eaten during any season.
Layer cakes… with a twist
Finally, a company from Indonesia, Marizarasa Sarimurni, was at the show promoting its famous range of cakes. This company is unique as it is the first company to export the original Indonesian layer cakes to various countries around the world. Anyone who has been to Jakarta will recognise these towering cakes.
They are available in more than nine flavours, with the more popular choices being the Traditional Layer Cake and the Chocolate Layer Cake. With a more fruity flavour, the Strawberry Layer Cake and the Pineapple Layer Cake might have greater appeal for western taste buds. For people who are more adventurous the Screwpine Layer Cake provides a floral, nutty flavour similar to coconut and palm sugar.
For smaller servings, there are several other fruit-based snacks. For many the Morisca Layer Snack in a banana flavour will meet taste expectations. However, for non-Asians, the infamous durian fruit provides a new and challenging flavour for many while the jackfruit flavour is less startling. The only concern with the product ingredients is its shelf life of 12 months at room temperature.
As Shanghai grows and develops, and international influences continue to make an impact, the FHC Show will also grow in importance and stature. If the last five years are any indication of how Shanghai will continue to develop, then the people who are speculating that it will replace Hong Kong and Tokyo as “the” market to be in by 2020 are going to be surprised when it happens by 2012.
For food companies seeking to establish themselves in the Chinese market, Shanghai is one of the most rewarding places to start. However, it will require a commitment of time and resources over the long haul and the establishment of a brand presence in the marketplace early on.