International food and supply chain firms need to take a lead on improving China’s food safety standards if they want to maximise opportunities in the booming food market, said experts today.
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China’s food safety problems have been widely covered by international media in recent months, after Chinese wheat gluten tainted with the chemical melamine was blamed for the deaths of pet cats and dogs in the US. This was followed by problems with Chinese exports of toothpaste and the US has also found unsafe additives in fish products and juice.
But as the issues become increasingly politicized, they are also gaining growing domestic attention and the international food industry could be set to benefit, said speakers at the CIES summit in Shanghai.
Revealing the results of a new study on the shopping habits of 1500 consumers in five cities around China, ATKearney said it had found three quarters preferred to shop in supermarkets or hypermarkets because they believed these stores offered safer products.
And more than 90% said they would alter their purchasing behaviour in response to a food safety incident, according to their findings.
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By GlobalDataThe consultancy says it is up to the industry to build a more efficient supply chain to raise the standards of food safety in China.
“Retail and manufacturers’ brands are highly vulnerable to backlash from a food safety incident. It will come back to haunt you,” said partner James Morehouse.
One of the major causes of food safety problems in China is a lack of national cold chain network. Morehouse said there are an estimated 4 million trucking companies in China, many with only one truck and these typically have no refrigeration capacity.
“We need 20 times the modern cold chain we have here today to reach the equivalent level in the US,” he said, adding that the investment required is in the region of US$100 billion.
The benefits will however lead to cost-savings by reducing spoilage. Currently an estimated 30% of product in China spoils before it reaches stores. There will also be savings in distribution as well as some potential for premium pricing for guaranteeing safe food.
An integrated cold chain will also allow for expansion of companies to second and third tier cities. ATKearney predicts that the Chinese middle class will spend more than US$650 billion on food by 2017 but 75 per cent of the growth will be in second and third tier cities, the areas without modern supply chain logistics.
James Rice, manager of Tyson Foods China business, agreed that the current lack of cold chain has hindered his firm’s growth in the market.
“We’re stuck on the ten biggest cities on the east coast because this is where we have a third party supply chain. Our expansion is not limited by want but by safety.”
But in a later seminar, Dr Hu Xiao Song from the China Agriculture University and presenter of a national TV programme on food safety, added that boosting food safety standards in China will take time, given the low income of the rural population and farmers’ lack of capacity for investing in quality.
“There are still 800 million people living on $1.4 per day, and a huge rural population spending 46 per cent of household income on food. That means we still have a long way to go.”
China’s agriculture ministry has nevertheless promised in a statement on its website this week that it will move to strengthen quality and safety controls over farm products and push for standardization in the farm sector.
