Beijing Food Market
Chinese Meat product Market in the Consumption Upgrading
In 2008, Chinese meat product production amounted to over 70 million tons. In recent 20 years, the annual compound growth rate of Chinese meat product production maintains over 5%. The high-speed growth of Chinese meat production and sales volume benefits from transformation of the meat product consumption structure and the increasing demand owing to the improvement of Chinese income per capita. The consumption upgrading consists of the upgrading of the total consumption quantity, the consumption structure and the consumption pattern. As to the consumption characteristics of the meat product industry, because it belongs to the daily consumer goods, the consumer demand growth is hardly influenced by policies but greatly affected by the revenue increase. In China, the significant increase of the meat product demand will be of low speed and a long term.
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An important aspect of the meat product consumption upgrading in China is that the meat product consumption channels are transferring from traditional farmer’s markets to large supermarkets and community supermarkets. Supermarkets of USA occupy 85% shares of agricultural product markets while it is 65% and 60% for European and Latin American supermarkets separately. In 2008, the sales of raw and fresh products of Chinese Top 100 fast moving consumer goods enterprises only accounted for 12.44% of the total sales. Among them, the meat product sales took up the highest proportion of 41.25%. According to statistics, the meat product sales volume in supermarkets in central cities of Central China has taken up 29% of the total sales volume while it should be over 30% in Chinese first-tier cities such as Beijing and Shanghai. Since the implementation of the Food Safety Law of the People's Republic of China on June 1st, 2009, the meat product sales proportion in supermarkets and hypermarkets sees continuous growth.
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The increase in the meat product sales proportion in supermarkets and hypermarkets is caused by the growth in the quantity of supermarket and hypermarket stores to share with traditional farmer’s markets. In 2007, the number of stores possessed by leading enterprises in Chinese Top 100 chain enterprises exceeded 18,000. In 2008, the retail sales of Chinese Top 100 chain enterprises took up 11% of the total social retail sales. The chain industry has expanded its channels into communities to subdivide regional consumption markets. As to the product structure, the consumption upgrading of the meat product industry is concentrated on the sales proportion rise of the fresh chilled meat and low temperature meat products. These two meat products must be shelved in freezers and mainly sold in supermarkets and hypermarkets.
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Besides the chain supermarkets, the meat product industry also tends to establish the direct sales channels through fresh chilled meat franchise stores. Generally, chain franchise stores are developed through regional agents. The common mode for chain franchise stores is: there is no or little franchise charge; the equipments and store decoration are invested by franchisees; the store decoration is uniformly designed by the enterprise; products are collectively distributed by meat product enterprises. The investment in a fresh chilled meat franchise store in a second-tier city of Central China is about RMB 30,000-40,000. The low investment significantly increases the number of franchise stores and accelerates the expansion speed of the number.
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Theoretically, the profit rate of fresh chilled meat franchise stores should be higher than that of supermarkets because they directly focus on the terminal consumption market. However, the reality goes against the expectation owing to the intensified competition. The three giants – Shineway, Yurun and Jinluo have set up numerous stores in Northeast China, North China and Central China, etc, intensifying the competition to reduce the profit. As franchisees have no pricing right and there is little difference in the brands and qualities of fresh chilled meat products, their profit mainly comes from the difference of the purchase costs. In recent years, considering the high pork price and purchase cost, some franchisees begin to purchase products from local upstream suppliers with the lowest price instead of original upstream producers. Moreover, there is loose relationship between meat product producers and franchisees, many fresh chilled meat franchise stores even suffer losses, not to mention the profits. The products of franchise stores are supplied by local distributors. However, the profit of franchise stores can be cut down due to the interest contradiction between distributors and franchisees, leading to the profit reduction of meat product producers.
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Presently, Chinese meat product processing volume only accounts for 15% of the meat product production, much lower than the proportion 30%-40% in countries with developed meat product production and consumption. This is mainly because that Chinese traditional eating habit requires fresh food raw materials. However, the concept is being transformed. It is forecast that the meat product consumption growth of Chinese urban residents will focus on high-end meat product such as fresh chilled meat and low temperature meat products. The meat product consumption demand of Chinese rural markets still maintains a high-speed growth. As the cold chain system cannot completely cover Chinese rural consumption markets at present, there is great space for high temperature meat product on Chinese rural markets.
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For more information please visit:
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About the Author
Based on the database, Interviews and research methods from China Research and Intelligence, CRI analyzes the development and opportunities in this industry clearly.
Contacts:
Eileen Gu
China Research and Intelligence
www.shcri.com
Email: eileen@shcri.com
TEL: 86-21-6852-1029
86-21-5842-6733
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