China meat products market

Oct.20, 2008 in Market Outlook

Quick Facts

Market Highlights

China imported over 70 million metric tonnes of meat products in 2003, with the majority consisting of pork and poultry offal. Continued growth in imports is expected due to burgeoning consumer demand.
Canadian exports of meat products to China totalled $56.8 million in 2005 up from $39.5 million in 2004.
In general, consumer confidence in meat and meat products has been hampered due to numerous food safety issues.

Opportunities

Demand for frozen red meat and poultry has experienced very strong growth over the past five years, as has the demand for canned meat products.
The opportunity to increase Canadian frozen poultry parts exports exists; however the extent that this market can increase is constrained by supply management.

Key Players

The United States is the largest exporter of meat products to China, accounting for more than half of the country’s imports.
The two largest producers of low-temperature processed meats are Shineway Group, Jinluo Meats Co., Ltd. and Yurun Group, and the leading producer of canned meat food is Meilin from Shanghai.

Customers

Chinese consumers typically prefer fresh meat products over frozen meat products; however, since the early 1990s, they have become more accustomed to frozen imported meats that tend to be of higher quality than fresh products provided by domestic suppliers.

Market Entry Considerations

New import quarantine regulations require that all meat and poultry products being re-exported through Hong Kong be pre-inspected by a Hong Kong inspection company.
The Chinese market has been closed to Canadian beef and other ruminant meat products since the outbreak of BSE in May 2003.

MARKET OVERVIEW

China has one of the most flourishing meat markets in the world and is the largest consumer of meat products. According to Euromonitor consumption of fresh and unpackaged meat in China exceeded 73.9 million metric tonnes (MT) in 2004, up from 71.9 million MT in 2003. However, per capita consumption at 49 kilograms (kg) per year is still much lower than the United States (U.S.) at 127 kg per year.
China has increased domestic meat production by 51% over the period 1996 to 2003. Despite ramping up its production, China imported around 70 million MT of meat in 2003 in order to keep pace with burgeoning consumer demand. Pork (mostly frozen edible offal, frozen unboned ham and shoulders cuts, and other boneless pork cuts) and poultry (mostly frozen offal, frozen bone-in cuts, and frozen mid-joint wings) accounted for the majority of meat imports, although beef (frozen bovine tongues, and fresh or chilled bone-in and boneless cuts) and sheep (frozen bone-in cuts, fresh bone-in cuts) meat represent the fastest growing segments. It is expected that over the long-term China’s reliance on meat imports will continue to grow as a result of environmental issues related to the country’s agricultural production base. However, in the medium-term, domestic production is expected to continue to increase in an attempt to sustain the growing domestic demand for meat products.
In 2005, Canadian exports of meat products to China totalled $56.8 million up from $39.5 million in 2004. The single largest category by far, valued at $34.6 million, was “swine edible offal NES - frozen.” Appendix A provides details of Canadian meat products exports to China from 2001 to 2005.

Pork

China is the world’s largest pork producer with output of 47.3 million MT in 2004, up from 45.3 million MT in 2002. It is expected China’s pork production in 2005 will be nearly 5% higher than in 2004.
Chinese pork imports in 2004 totalled 138 000 MT, down from 149 000 MT in 2003. Pork imports are expected to further decline in 2005 to 136 000 MT. These decreases in pork imports can be attributed to higher domestic production. Between January and November 2004, Canada exported 29 700 MT of pork to China, which ranks it second only to the U.S.
During July and August of 2005, an outbreak of a mysterious pig-borne virus resulted in 36 fatalities and caused illness among another 198 in Southwest China. The World Health Organization stated that the disease was caused by the streptococcus suis bacteria, commonly found in countries with large pig industries. The outbreak can be attributed to a weak animal health program in China. The Chinese government is attempting to reassure the public that it has control of the situation and has suspended exports of pig products from the province of Sichuan.

Poultry

China’s poultry production in 2004 is estimated at 8.9 million MT, which ranks it second in the world behind the U.S. Poultry production was forecast to rise to about ten million MT in 2005 as the industry recovered from its first outbreak of avian influenza in 2004, which had the effect of reducing consumer confidence in domestically produced poultry.
Poultry consumption in China is expected to recover at a slower rate than production due to the impact of the avian influenza. Consumption in 2005 was expected to near 10 million MT and should continue to rise slowly over the long-term.
Total imports of chicken meat during 2003 reached more than 565 000 MT, an increase from 499 000 MT in 2002. The value of these imports in 2003 was approximately $578 million, up from $531 million in 2002. Canada exported 4576 MT of chicken meat (mostly frozen wings, feet, necks and hearts) to China in 2003, making it the third largest source for chicken meat behind the U.S. and Brazil.
Chinese imports of broiler meat fell to 285 000 MT in 2004 from more than 750 000 MT in 2003. It is expected that imports will rebound to about 500 000 MT in 2005. Between January and June 2004, Canada exported about 775 MT of broiler meat valued at about $945 000 to China - this accounts for just 0.5% of all Chinese broiler meat imports.

Beef

In May 2003, China banned Canadian beef imports due to reported cases of Bovine Spongiform Encephalopathy (BSE), more commonly known as ‘Mad Cow’ disease.
Between January and November 2004, China imported a total of 3371 MT of beef and veal, down significantly from 7786 metric tons in 2003. This reduction is due entirely to BSE in Canada and the U.S. Domestic beef and veal production is also improving in China.
Higher disposable incomes and a change in consumer tastes have significantly increased the demand for beef products in recent years. The beef industry is expected to continue to expand during 2005 due to strong consumer demand. It is projected that China’s beef production will reach seven million MT in 2005, up from 6.2 million MT in 2004 and six million MT in 2003.
A lack of breeding animals and limited land available for raising cattle constrain the expansion of the Chinese beef industry. Unlike foreign beef-producing countries such as the U.S., Canada and Australia, it is expensive for Chinese producers to allot a large portion of land for cattle. In addition to land issues, the Chinese beef industry lacks high-quality feed and breeding animals, and also needs education on animal husbandry for breeding and raising livestock.

Goats and Sheep

China is the world’s largest producer of goat and sheep meat with output in 2004 of 1.6 million MT and 1.9 million MT, respectively, which is consistent with production in 2003.

OPPORTUNITIES

Canadian exporters can benefit from Chinese consumers’ impression of Canada as a clean, natural environmentally friendly country. With continued strong growth projections for China’s middle class, there will be increased opportunities for imported meat products as disposable incomes rise and the tastes of consumers continue to be influenced by western diet. In 2003 it was estimated that the Chinese middle class represented about 19% of the country’s 1.3 billion people and this is expected to climb to 40% of the population by 2020.
The opportunity to grow Canadian poultry exports, specifically the parts market, exists as only 1% of China’s total poultry imports come from Canada; however the extent that this market can be grown is constrained by supply management.
According to Euromonitor, consumption of canned meat and meat products has risen by nearly 16% between 1998 and 2003 from 17.7 grams per capita to 20.4 grams per capita. Sales of canned meat products are projected to grow by more than 20% between 2004 and 2009. Sales are expected to reach $7.1 billion by 2007 and as high as $7.6 billion by 2009 up from $6.3 billion in 2004. Retail sales of canned meats is highest in East China followed by South China. The most significant volume growth of canned meat sales between 1999 and 2004 was in South China (25%), followed by Southwest China (24%). However, demand could change as fridges become more common.
Consumer demand for frozen processed red meat has increased year over year in China with a volume growth rate of about 32% between 1999 and 2004. Euromonitor states that retail sales of frozen red meat in 2004 reached about 213 million MT valued at $717 million, up from 200 million tonnes ($683 million) in 2003. Demand for frozen processed poultry has also been on the rise in China with a volume growth rate of 40% between 1999 and 2004. In 2004, retail sales of frozen poultry reached 412 million MT valued at $1.5 billion up from 383 million tonnes ($1.4 billion) in 2003.

KEY PLAYERS

The U.S. is the largest exporter of meat products to China, accounting for more than half of the country’s imports. Although the U.S. has a larger market share than Canada, exporters from both countries face similar challenges in entering the Chinese market such as tariffs, quotas (to be lifted by the end of 2005), language, and distribution costs.
The U.S. is by far the dominant exporter of poultry products to China, accounting for 96% of total imports. Other top exporters of poultry products include Argentina, Brazil and Canada.
Canadian red meat packers have been gaining increased accreditation within China allowing for more trade of meat products. In 2003, the number of Canadian companies approved to export to China grew from 18 to 41 with more working on winning approval.
According to the China Meat Association, the largest producers of low-temperature processed meats in China are Shineway Group, Jinluo Meats Co., Ltd. and Yurun Group, and the leading producer of canned meat food is Meilin from Shanghai.
In the 1990s the supermarket concept transformed retail food sales in China; however, in the past few years hypermarkets, which offer lower prices and a broader range of products and services have increased in popularity, especially in the wealthier coastal cities. Hypermarkets have been able to be cost competitive because of more efficient and modern distribution systems that are national, as opposed to the more common local distribution capabilities of other Chinese retail formats. These more efficient distribution systems means that imported food products are most likely to be offered in hypermarkets, although it still only accounts for about 5% of their stock. East China leads the way as the systems continue to be lacking in the West. The largest hypermarket chain is LianHua, that operated 2579 stores in 2003 generating almost $41 billion in sales. Other major Chinese supermarket and hypermarket chains include HuaLian (1388 stores), Nong Gong Shang (1213 stores), and SuGuo (1162 stores).
As an example of a recent success in January 2005, Polar Genetics Group of Edmonton, Alberta, signed seven letters of intent with:

Nelson Medical Co. Ltd. to create a joint venture to provide swine breeding supplies and technology to the Asian market.
Sichuan Nanjiang Yellow Goat Co. Ltd. to create a joint venture to develop and promote the “Nanjiang Yellow Goat”;
Guangzhou Animal Husbandry General Corporation to develop a swine genetic centre;
Heilongjiang SenYu Animal Husbandry Co. Ltd. to develop a network of swine artificial insemination centres in Heilongjiang province in order to provide advanced swine genetics to local swine producers;
Sichuan XinMu Animal Husbandry and Poultry Breeding Co. Ltd. to develop a swine breeding centre in Sichuan province;
Guangdong Taishan Changjiang Foodstuff Co. Ltd. to further develop and improve its purebred breeding pig nucleus operations in China; and
Guangdong Huanong Wens Animal Husbandry Co. Ltd. to further develop and improve its purebred breeding pig nucleus operations in China.

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