Food & Drinks Industry Day,
Creating a Presence, Delivering on a
Promise
Chinese Market Overview
27th November 2008
China in figures
•
GDP growth rate expanded by 11.9% in 2007. During 2008 there has been signs of deceleration and
for the year GDP will fall below 10%. Forecasts for 2009 indicate GDP of 8.5% (EIU).
•
China’s consumer price index (CPI) during 2007 was 4.8%. However the first half of 2008 saw
dramatic rises with oil and food prices driving inflation. In Feb 2008 inflation hit a 11 year high at 8.8%.
•
4% official registered unemployment rate in urban areas in 2007 (8.3m)
•
A study commissioned by the Carnegie Endowment for Peace concluded that China's economy will
overtake the United States by 2035 and be more than double its size by mid-century. The study
estimated China's GDP will reach USD82 trillion dollars by 2050 compared with USD44 trillion for the
US.
• China’s main exporting partners include: • China’s main importing partners include:
- USA 21%
- Japan 14.6%
- Hong Kong 16%
- South Korea 11.3%
- Japan 9.5%
- Taiwan 11%
- South Korea 4.6%
- USA 7.5%
China in Figures (2008)
Q1 2008
Q1-2 2008
Q1-3 2008
GDP
10.6
10.4
9.9
Primary Industry
2.8
3.5
4.5
Secondary Industry 11.5
11.3
10.5
Tertiary Industry
10.5
10.3
10.9
China in figures
2000
2004
2005
2006
Primary Industry,
including agriculture
(% of GDP)
15.1%
13.4%
12.5%
11.7%
Secondary Industry
(% of GDP)
45.9%
46.2%
47.5%
48.9%
Tertiary Industry, value
added (% of GDP)
39.0%
40.4%
40.0%
39.4%
Exports of goods &
services (% of GDP)
23.3%
33.9%
36.3%
38.3%
Imports of goods &
services (% of GDP)
20.9%
31.3%
30.9%
30.7%
China in Figures
Growth Rate of Value-Added of Industry by Sector
Increase Rate over the
Same Period of Last Year %
Sector
Sept 2008
Accumulated (YTD JanSept)
Processing of Food from
Agricultural Products
13.7
15.9
Manufacture of Foods
14.1
17.6
Manufacture of Beverages
11.4
17.4
Food & Beverages outperforming other sectors
China in Figures
•
Purchasing capability of each family in urban areas reached 18,277RMB in 2006,
a 19.7% increase from 2004.
•
The figure remains relatively low in Rural areas at 8,572RMB, and a growth rate
of 9% over the same period.
– Note: Chinese Government plans to drive rural development and domestic
demand
•
Between 2004 and 2006 the share of consumer spend accounted for by food fell
in both rural and urban homes to 40.5% and 30.9% respectively
•
Food price inflation during 2008, which peaked in February at 23.3%, will
increase the share of spend on food
– Main contributors were increase in feed costs and reduce pig herd
•
5% increase in consumption of meat per year and 10% increase in milk
consumption per year for each individual in China, according to National Bureau
of Statistics.
China in Figures
The same month last year = 100 (Sept
2008)
The same period last year = 100 Jan-Sept
2008)
Item
Total
Urban
Rural
Total
Urban
Rural
Consumer
Price Index
104.6
104.4
105.3
107.0
106.7
107.7
Food
109.7
110.2
108.7
117.3
117.2
117.3
Grain
107.6
107.7
107.3
107.5
107.7
107.2
Meat, Poultry
and their
Products
108.5
109.5
106.4
129.2
130.0
127.6
Eggs
105.1
105.7
103.9
104.8
104.6
105.1
Aquatic
Products
114.7
114.6
115.2
115.1
114.6
116.3
Fresh
Vegetables
100.1
100.4
99.7
114.0
113.7
114.9
Fresh Fruit
108.9
109.1
108.5
110.7
110.6
111.3
China, the people
•
Currently at 19% of the population, the "middle class“ is
expected to make up 40% of the total population by 2020
•
China’s population of 1.3 billion is the largest on earth, about
22% of the earth’s total population
Census 2000
•
•
The highest population concentration is along the east and
south coasts, where population density averages more that
400 persons per square kilometer
0-14 years
22.89%
Males account for 51.5% of population and Females 48.5%
in 2006 (the same as 1978)
15-64 years
70.15%
65 years and over
6.96%
•
In 2006 43.9% of population was classified as urban, 56.1%
rural, compared to 17.92% and 82.08% respectively in 1978
•
The number of urban dwellers has increased by over 400m
in 30 years
•
World Bank estimates the 65’s and over will account for 22%
of population by 2030
•
China is an ageing population, with future implications for
children of the one child policy as parents enter old age
Irish Food & Beverage Exports
to China (incl HK)
120,000,000
€96m
100,000,000
€74m
80,000,000
60,000,000
€53m
40,000,000
20,000,000
0
2005
2006
2007
Category Exports to China
(incl HK)
3%
3%
25%
Meat
Consumer Foods
Dairy & Dairy Ingredients
Beverages
Seafood
Food Prep for Infants
Other
6%
62%
1%
Consumer Trends
Ø
Continuing economic growth and urbanisation is a platform for the rise of the
middle class, estimated 200m people
Ø Consumer wealth is concentrated on the eastern seaboard in 1st and 2nd tier
cities
Ø Pressure point for policy makers is the growing gap between the urban-rich and
rural-poor
Shopper Insights (IGD)
– 25% travel to hypermarkets by public transport/free shuttle bus
– Shoppers want to be entertained
– Fresh food is key
– Shoppers are price sensitive
– Shoppers want to find a bargain
Who is the Chinese consumer
•
Little Emperors/Empresses (<15years);
– Often pampered by family
– Looking for fun
– Keen to try new things
– Hard working
– Pressure to realise parents dreams
•
Achievers (25-39 years);
– Career focused
– Keen to be successful
– Cash rich/time poor
– Health conscious
– Seeks convenience
•
Trail Blazers (15-24 years);
– Grew up as first generation of ‘little
emperors’
– Educated and career focused
– Seeks out new experiences
– Enjoys technology and new media
– Familiar with western lifestyles
– Nationalistic and traditional
•
Providers (>40 years);
– Family comes first
– Works long hours
– Has traditional values
– Wants best for children
– Significant generation gap to
younger consumers
Source: TNS
Value of Chinese Grocery Retail
Market
€ per Capita
US$bn Grocery Retail Market
600
400
350
500
300
400
250
300
200
Grocery Retail Market (US$bn)
Grocery Retail Spend per Capita €
150
200
100
100
50
0
0
2004
2005
2006
2007est
2008f'cast
Source: IGD
Type of Retail outlets in China
(source: TNS)
3%
13%
6%
Traditional Market
Hypermarkets
Supermarkets
Convenience Stores
Mini Markets
10%
68%
Retailer Market Share
4.9%
2.4%
1.2%
3.4%
1.8%
2.6%
1.9%
Carrefour
Tesco
Auchan
Trust Mart
Lotus
Lian Hua
Wal-Mart
Other
81.7%
Source: Europanel Dec 2006
Developments in Retail
•
TNS Retail Forward forecasts China will sustain doubledouble-digit nominal retail sales growth in the next
five years despite shortshort-term pressures. This will push the size of the retail market in China to more
than $1.4 trillion by 2012, surpassing Japan to become the second
second-largest retail market in the world
behind the United States
•
Japanese retail giant Aeon, facing a failing domestic market owing to the country's rapidly ageing
population, will accelerate its expansion in China - By 2010, Aeon will open 100 new General Merchandise
Stores (all with basement deli floor) and Jusco Supermarket Stores
•
Korean Lotte Shopping Company is planning to open 300 hypermarkets in China within the next ten years
and will compete with Walmart and Carrefour- along with new store openings, the group also plans to
rebrand seven Makro outlets, located in Beijing and neighbouring Tianjin
•
Seven-Eleven Japan Co. has signed a letter of intent with President Chain Store that will see the Taiwan
retailer operate 7-Eleven stores in the Chinese city of Shanghai
•
French retailer Carrefour has opened its first Carrefour Express convenience store in China - Carrefour
previously opened eight Champion convenience stores in Beijing in 2004 but closed them two years later
•
In 2008 Tesco will build four “large multi-level freehold shopping centres, built around Tesco hypermarkets”.
This programme will be rolled out around Shanghai, Beijing and Shenzhen/Guangzhou regions
•
During its last financial year Walmart opened 101 stores in China in a deal with Trust-Mart
View from the Market
Developments in Foodservice
•
The Chinese appetite for onon-thethe-go burgers, fried chicken, pizza, and noodles is expected to make
make
fast food a $66 billion industry in China by 2009, up from $51.7 billion last year, according to
Euromonitor
•
China to become Marriott hotels 3rd largest market with 59 hotels by 2012
•
18 more Hilton branches in China in the next four years while simultaneously exploring the budget-hotel
category with its other chains
•
Retail Food Group Ltd (RFG) has finalized the deal to help expand its Donut King franchise into China.
Shanghai-based Mak Brands Ltd will hold the exclusive rights to the franchise in China, which has slated 10
to 15 stores to be opened by the end of fiscal 2009
•
Papa John's International Inc plans to open 500 outlets in China over the next five years as the country
becomes the driving force for its global business expansion
•
Starbucks Corp announced plans to open 80 new outlets in China this year, amid a steep downturn in its
US business. The coffee chain currently has 300 outlets in China, and also plans to introduce more new
products at existing locations
•
McDonald's has 800 branches in China, compared to KFC's 2200 and, with KFC opening 300 new
branches per year, the gap is widening
View from the Market
Why Target the Chinese
Market
•
Market scale is significant, eg Shanghai population of 18m
•
Opportunity for growth, low per capita consumption of western style food &
drink
•
Robust macro environment, although current market difficulties will impact on
Chinese exports (and therefore on local consumer demand) Government
policy clearly focused on driving internal consumer demand
•
Pace of growth, market experiencing faster growth than traditional Irish export
markets, reflected by investment of overseas retail and foodservice operators
•
It is where your customers and your competitors are looking for future growth
•
Market requires the capabilities, knowledge and product Irish food & drink
companies can deliver
Main Challenges in Supplying
China
•
Commitment and resources
– Initial cost (market visits), strain on current resources across all functions and potential impact on current
customers, managing your Chinese customer, time difference, setting up sales function in the market
•
Product offering
– Capacity, raw material availability, price volatility, fit with the market, changes to production run/specs to
meet customer requirement, supply chain (both to China and within China), ensuring product integrity
through the chain
•
Finding the right partner/Importer Distributor
– Language, Financial status, Site visit in Ireland/China, Market focus (Sector/Region), Storage and logistics
capability, sales force, customer relationships, ability to help you move up the chain, how will customer
merchandise product, how does consumer handle it in Chinese environment
•
Market Access
– Government license and approval process, Labeling, Ingredient regulations
•
Costs and Returns
– Price Point (local & international competition), Duties (Gov policy), VAT, Currency movement, Brand
Protection (First to File Jurisdiction)
In Short all the Challenges your Business Faces Every Day
Bord Bia Activities in Asia
•
Focus on assisting trade, build
– Knowledge
– Profile
– Relationships
– and Volume
…. Business2Business Focus
Information
•
Weekly Media Report
•
Customer Trading Statements/Updates
•
Manufacturer Directory
•
Retail & Foodservice Customer Directory
•
Importer/Wholesaler Directory
Profile
•
Trade Mission – China, Oct 2008
– Client Itineraries, Customer Meetings, Store Audits, Seminar
•
FHC Exhibition, Dec 2008
•
Trade Mission – Japan, Jan 2009
•
SIAL Exhibition, May 2009
•
CIMIE Exhibition, Sept 2009
•
Journalist Itineraries
•
PR Activity
Trade Development
•
Lead Generation & Follow Up
•
Buyer Presentations
•
Inward Itineraries
•
Client Market Study Visits
•
Market Access Support
Summary
•
China is a market of genuine new growth opportunity
•
There is real momentum behind new retail and foodservice trends
•
Requirement for leading edge food and drink products
•
Irish companies can exercise experience in international markets to win
business
•
A need to overcome competitive challenges and mitigate business risk
•
Bord Bia is now in the market, and looking to work with you