Who is making food (ingredients) in China? – the structure of the Chinese food industry

One of the first things you need to know about a (potential) Chinese partner is to what system it belongs

This is a blog about food, drinks and their ingredients. However, as Chinese society, including its economy, is organized in a very unique way, it is useful to get more insight in its basic structuring. In fact, several aspects of that structure have been mentioned indirectly in various posts, in particular those about Mengniu Dairy and Yanjing brewing.

Economic sectors

An important type of context is the industrial sector. Chinese economy is divided in a number of industries, headed by a central ministry or organization with ministerial status in Beijing. Each province and autonomous region has a Department corresponding with the central organization. Lower administrative regions have, again corresponding, Bureaus. Chinese usually refer to this as the system (xitong) to which they belong. According to the official parlance, a state-owned enterprise is the property of the entire people, but the central administrative organization of its industrial sector has been given the power to manage the enterprise in the name of the people. The central organization will then delegate that power to its corresponding lower level organization. Those organizations also establish and operate schools and colleges related to their sectors.

An example will help clarify the situation: food manufacturing is typically regarded as Light Industry in China. A state-owned flour plant in Suzhou (Jiangsu), will therefore be typically managed by the municipal Light Industry Bureau, which will report to the provincial Light Industry Department, which operates under the China National Light Industry Council in Beijing. This is the reason why so many company names in China start with the name of the city or province in which it is located: it refers to the main governing body. I have mentioned the Changyu Winery in earlier posts. Its official name is Yantai Changyu Wine Group, which indicates that its CEO is typically reporting to the government of Yantai Municipality in Shandong province.

The value of the place name in a Chinese brand name is attested by the story of Yanjing Brewing laid down in an earlier post. Located in Shunyi County, the brand name originally envisioned was Shunyi Beer, but a ministerial official proposed to change it to a name that was related to Beijing. As Beijing Beer already existed, it became Yanjing Beer.

There are also dedicated light industry colleges like the Zhengzhou University of Light Industry. As attested by several posts in this blog, Zhengzhou is located in one of China’s major food producing regions, the home of, e.g., China’s top snack producer Sinian.

This way of organizing creates a kind of matrix structure in which a Chinese company has to account for its activities and results to the local government, but simultaneously to its sector organization. To stick with Changyu, it is accountable to Yantai Municipality and the Light Industry sector. These two merge in the Yantai Municipal Light Industry Bureau, but it can happen that the provincial or national Light Industry organizations contact Changyu for information about its operations.

Personnel

In the current stage of the development of China, this structure does no exercise a huge influence on issues related to production or marketing and sales. Larger state-owned companies are still affected in the field of human resource, in particular in filling the positions of top managers. Leading functions in companies like Changyu are usually appointed by the organization on the Ministry of Personnel, which also has branches in provinces, cities, counties and other administrative levels. The Party organization is also involvement in such appointments. Nowadays, only people with proven expertise and experience in the field will be considered for appointments of top functions in state owned enterprises, but the political aspect remains. This means that the social networks of the top executives of Chinese companies exercise considerable influence on the day to day managed of the enterprises.

Social embeddedness

The combination of the various stakeholders to which a Chinese enterprise is accountable and the social network can be called: the social embeddedness of Chinese companies. Insight in the affiliation of a Chinese enterprise is vital for Western companies who are seeking or have engaged in partnerships with Chinese counterparts. Too often, Western managers believe that their Chinese partner is ‘a company just like we are’ and that the CEO of the Chinese partner has ‘the same responsibilities as I have’. They aren’t and they don’t. Such misunderstandings will certainly play a role in the problems of companies like FrieslandCampina or Fonterra in China recently reported in the media.

Eurasia Consult’s founder Peter Peverelli is an expert in determining the social embeddedness of Chinese companies and the consequences for their Western partners

Food & beverage covers several sectors

The theme of this blog, food, drinks and ingredients, involves a complex situation, as the manufacturing of these three product groups is dispersed over more than one sector. Light Industry is definitely the largest one, but a number of food companies, in particular those using primary agricultural produce as raw materials, are operating under the Ministry of Agriculture. A special type of companies under Agriculture is State Farms. This name is based on the fact that the first of such companies were large state-owned farms established in rougher regions with no existing agriculture or other economic activity. These farms later also established processing plants of their own. A small number is part of the hierarchy of the Ministry of Commerce. The latter is in charge of distributing goods rather than making them, but in the early decades of the PRC, that ministry also established production units. An industry that is very disperses over those sectors is dairy processing. Interestingly, FrieslandCampina and Fonterra mentioned above are both dairy companies.

Light Industry Top 50 2017

As Chinese ministries (try to) keep track of the industrial statics of their respective sectors, the regularly publish compilations like the top 10, 50, 100 manufacturers of a certain product or sector. The China National Light Industry Council recently published the Top 50 Light Industry companies of 2017. I will list the top 10 in this post.

Rank company sector
1 Maotai spirits
2 Wuliangye spirits
3 Yili dairy
4 Mengniu dairy
5 Wahaha beverages
6 Yanghe spirits
7 Xiwang starch sweeteners
8 Bohai soybean oil
9 Hefeng meat
10 Haitian soy sauce

From this list it is obvious that food, drinks and ingredients are the major sector of Light Industry in China. Actually, it covers a broad range of products, like: toothpaste, detergents, brooms, toys, etc. However, the Top 10 and in fact the entire Top 50 consists of food companies. Regular readers of this blog will recognise several of the companies in this list.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

Advertisements

Balancing the Five Flavours (and one more)

The ability to perfectly balance flavours is what separates a chef from a cook

If the goal of eating and drinking is to maintain and improve health, then the typical single most important element in food would be nutrition. The Chinese, however, focus on colour, fragrance, taste and form in food, looking for refinement in food vessels and elegance of the dining environment, demonstrating an artistic spirit. Hence, from the beginnings of documented history, the Chinese advocated the philosophy of ‘harmony between the five flavours’. It could be related to the core concept of Confucianism: ‘harmonious society’. The Chinese invented ways to adjust blended ingredients and spices for a wide variety of tastes. Revolving around the ‘five flavours, which are sourness, sweetness, bitterness, pungency and saltiness, dishes can evolve into more than hundreds of different flavours.

Saltiness xian

Of the ‘five flavours’, saltiness is the principal flavour. It is the simplest and simultaneously the most crucial. Salt is needed to heighten any flavour in foods. Without it, any delicacy cannot emerge in its full glory. But from a health perspective, salt should not be taken in excessive quantities. The most important salty ingredient is obviously salt. However, soy sauce is of almost equal importance as a salty seasoning in Chinese cuisine. Soy sauce is a good example of how a few other flavours can be deftly used to cut the raw edges from pure salt.

Some salty ingredients: salt, soy sauce – regular.

Sourness suan

Sourness is also an indispensable taste in foods, especially in the northern part of China, where water supply is heavy in minerals and strong in base. So, in order to induce better digestion of food, vinegar is often used in cooking. It can also arouse appetite. Sour taste can also neutralize fishy odour and greasiness. At banquets with strong grease and heavy meat dishes, sour dishes are usually added to neutralise the greasy mouthfeel (ni in Chinese). They come in many varieties. Not only are the sour tastes of plums, fruits and vinegar different from one another, just the different types of vinegar are distinguished by its production areas, different ingredients and different production techniques, thus causing quite drastic differences in taste. Usually, the northerners regard mature vinegar made in Shanxi as orthodox, whilst the people in the Jiangsu-Zhejiang area appraise the Zhenjiang-made rice vinegar as authentic. The most typical of all places eating vinegar is the province of Shanxi. Many families there are skilled at making vinegar from crops and fruits. Their everyday meals are even more dependent on vinegar. A very interesting thing is that in the Chinese language, the word “vinegar” is used to represent the feelings of jealousy between men and women. Slang, such as ‘eat vinegar(chi cu)’ for being jealous and ‘vinegar jar (cugangzi)’ for a jealous person, are universally understood in both the north and the south.

Some sour ingredients: bitter melon-fresh, vinegar, lemon, lime, dry wine, cranberry, wild cherries.

Pungency xin

Pungency is the most stimulating and complex of the ‘five flavours’. Sometimes Chinese use ‘pungent-hot (xinla)’ as one word. In actuality, pungency and hot (la) have major differences. Hot is sense of taste, stimulating the tongue, throat and nasal cavity. Instead, pungency is not just a sense of taste as it involves sense of smell as well. Pungency is mostly obtained from ginger, while hot and spicy usually denotes the use chili pepper or black pepper. Since hot peppers were a foreign product, there was no mentioning of ‘hot’ in ancient Chinese cooking, instead it was generalised as pungency. Ginger not only neutralizes rank taste and odour but can also bring out the great taste of fish and meats. So, ginger is a must-have when preparing fish and meat. There are also principles to using hot peppers. We should not merely seek for the degree of hotness but should rather use saltiness and natural essence of food as fundamentals, so that the hot and spicy taste comes out multi-staged, full of great aroma and not too dry. In addition, garlic, scallion, ginger and other spices can also kill bacteria, so are great for cold dishes with dressing.

Some pungent ingredients: ginger, black pepper, chili peppers, Sichuan pepper, cinnamon, mace, nutmeg, radish, cardamom.

Bitterness ku

Bitterness is rarely used alone in cooking but is a valuable asset. When making simmered or braised meats, adding tangerine or orange peel, clove, almond and other seasonings with a light bitter touch can rid the meat of unpleasant taste and smell, and awaken the original flavour of the food. Black foods usually also have bitter flavour notes. Traditional Chinese medicinal theories believe that bitterness is helpful for the stomach and produces saliva. Some people really enjoy bitter taste in foods, such as in the Sichuan-style ‘Strange Taste (guaiwei)’ type of foods, which have the bitter elements.

Some bitter ingredients: bitter melon-ripe, Seville orange, soy sauce-thin, garlic-raw, star anise, dry mustard, radicchio, mustard greens, endive, arugula.

Sweetness gan

Sweetness has the effect to cushion the effect of other basic flavours, whereas saltiness, sourness, pungency and bitterness are all too strong, they could be remedied by sweetness. When making dishes of other tastes, sugar can improve and embellish. However, using large amounts of sugar is not recommended, as too much sugar can be nauseous. Since many spices can produce a sweet flavour and they all taste quite different, much of the culinary world hails cane sugar as the orthodox sweetness.

Some sweet ingredients: sugar, honey, coconut, bell peppers, apples, grapes, raisons, hoisin sauce, cooking wine, garlic-cooked dates, onions-cooked, rice-cooked, bing cherries.

Freshness xian

What is not listed in the ‘five flavours’ but still holds an important status in the culinary world is the ‘freshness’, now better known as umami, factor. ‘Freshness’ is the most tempting flavour in food. Most foods all contain an ‘essence’ but it is often dormant, so making soup is often the way to awaken the taste. Chicken, pork, beef, fish and ribs can all be used as soup stock. When the unpleasant tastes and smell are eliminated during the soup-making process, the essential flavour is fully exposed by adding just a touch of salt. Stock not only can be enjoyed directly but can also be used to make other plain foods taste great. Such foods include shark’s fin, sea cucumber, bird’s nest, bean curd and gluten, which all must be cooked with essence soup to achieve its mouth-watering taste. Monosodium Glutamate (MSG) is an artificial essence. Its synthetic nature makes it impossible to compare to naturally made stock. So skilled chefs usually do not care for it.

Medicinal flavours

Five tastes in harmony, with flavour as the top priority, bringing direct pleasure to the tongue. At the same time, it is a good health-protecting and body-regulating method. Traditional Chinese medicine (TCM) theories state that pungency can regulate bodily fluids, blood and qi, and can be used to treat bone and muscle pain from coldness, kidney problems and so on. Sweetness can nourish, soothe, and improve emotional mood. Honey and red jujubes are also great tonic foods for those who have a weak and frail physique. Sour taste can cure diarrhoea and produce saliva to stop thirst. Sour vinegar can prevent colds, while eggs boiled in vinegar can stop coughing. All these are folk cures with adequate modern medical recognition. Bitterness can release heat in the body, improves vision and detoxify the body. Five tastes in harmony is an important factor to great health and long life. The picture shows that sour is linked to the liver, bitter to the heart, sweetness to the spleen, pungency to the lungs and saltiness to the kidneys.

Compound flavours

Chinese cuisine is apt in mixing and blending flavours. Spices and other seasoning ingredients can be combined in endless ways, but a small number of the them have become such favourites of Chinese chefs, that they have got used with various types of foods. An example introduced in an earlier post is yuxiang, ‘fish flavour’. In that post, I introduced the basic recipe and a number of variations developed by food technologists. This post adds another dimension to the understanding of such generic compounds: the mix of basic flavours: yuxiang is relatively hot, but the right combinations of saltiness, pungency, sourness and sweetness can bring out the delicacy of the peppers while containing excessive sharpness.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

Yanjing – the Emperor’s beer

The history of Yanjing Brewing’s founding and early growth provides a fascinating insight in the social embeddedness of Chinese enterprises.

This post is derived from a case study in one of my academic writings: Chinese Corporate Identity. Readers who are triggered to get a deeper understanding, please read that chapter, or better: the entire book.

Yanjing: more Beijing than Beijing

Yanjing, literally meaning ‘the capital of (the state of) Yan,’ is derived from Yan, the name of an ancient kingdom located just south of present day Beijing. Before the unification of China in the Qin dynasty, China was divided in a number of small states with a king, duke, or other feudal nobleman as its leader. The influence of these states on the construction of local cultures has been so strong, that many of their names are still used today as an indication of the origin of a company or government organization. In modern usage, Yan is often combined with the name of another ancient state: Yan’s southern neighbour state of Zhao. The compound Yanzhao seems to refer to Hebei province, in particular Hebei’s capital Shijiazhuang. A local newspaper, e.g., is called Yanzhao City News (Yanzhao Dushibao).

The case history (see below for the details) will show that the suggestion to change the brand name of the new brewery into Yanjing Beer was made under similar circumstances. Beijing Beer was already used as a brand name by the Beijing Brewery, which was located in Beijing and carried the word ‘Beijing’ in its name, but was tightly connect to the State, rather than Beijing Municipality. Yanjing Beer then offered an ideal alternative for ‘Beijing Beer.’

Period 1 1980 – 1988 – 100,000 hls/yr

For each period, the average increase of the beer output is indicated as the first parameter of a period. Yanjing evidently strongly anchors its self-perception in its core business: brewing.

Yanjing’s story starts by stating that it was originally established to relieve the beer shortage in Beijing. At the eve of the economic reforms, beer was still regarded a luxury good in China. Chinese drank the traditional distilled liquor, called white spirit (baijiu) in Chinese, with their meals. Wine was hardly produced and most Chinese wine was very sweet, which made it less suitable to accompany meals. Beer was served in hotels and restaurants, but production was often insufficient to serve the total populace.

Yanjing is positioned in its annals as the result of the combined effort of an impressive number of parties. The following bullets list those parties and their role in the founding of Yanjing Brewing.

  • Shunyi County Government: co-investor
  • Shunyi County CPC: co-investor
  • Shunyi County Industry Bureau: co-investor
  • Beijing Municipal Government: approval
  • State Planning Committee: approval
  • Ministry of Light Industry: vice-minister He Zhihua suggested to change the brand name from Shunyi Beer to Beijing Beer in August 1981; probably the basis for the decision to change the company name from Beijing Shunyi Brewery to Beijing Yanjing Brewery on 13.3.84
  • State Council: Praise by vice-premier Wan Li in RMRB after visit to Yanjing on 19.5.82; visit by another vice-premier Chen Muhua on 12.4.86.

Period 2 1989 – 1993 – 500,000 hls/yr

By 1988 Yanjing had already attained a share of 30% of the Beijing market. Some people in the Beijing government were sceptic about the expansion of the local brewing industry. They estimated the Beijing market at maximum 200,000 hls p.a., which was less than the combined capacity of the region’s three main breweries. Yanjing’s management calculated in a different way. They took into account that the per capita consumption of beer would increase considerably and therefore estimated the total local market at 500,000 hls, more than double the official estimate.

Moreover, Yanjing did not intend to restrict its sales activities to the Beijing region. The company had already laid out a rough expansion scheme:

Beijing > Tianjin > Hebei > China > the world

The port city of Tianjin, like Beijing, is a city with provincial status. The regions of Beijing and Tianjin municipality are almost adjacent and the two can be regarded as twin cities. Hebei is the province surrounding the regions of Beijing and Tianjin. In fact, from an economic point of view, Beijing and Tianjin are cities located in Hebei, though directly controlled by the national government. Linguistically, geographically, culturally, etc., it is one region (Yanzhao).

The following table shows Yanjing’s upward march to the number one Chinese brewery.

Year rank
1991 10
1992 5
1993 3
1994 2
1995 1

By 1995, Yanjing had a 70% share in Beijing.

Another feat of Yanjing achieved in this period was raising the percentage of its output that it was allowed to sell directly to customers. In the old command economy, state owned enterprises had to sell 90% of their output through state regulated sales channels, controlled by the Ministry of Commerce. Yanjing’s management wanted more freedom in this respect. The request was granted and Yanjing received a license to sell 50% of its output itself.

Period 3 1994 – 1998 – 1 million hls/yr

This period starts with the designation of Yanjing Beer as the official beer served at state banquets in the Great Hall of the People in February 1995. It is an honour of symbolic value, which once more suits Yanjing’s identity of state owned enterprise that is proud of that status. In that year, Yanjing replaced Qingdao as China’s number 1 brewery.

Yanjing was reorganised into a limited stock company in 1997. In the same year, the company sought listings at the stock exchanges in Hong Kong and Shenzhen.

By this time, Yanjing ranked among China’s major enterprises. The Chinese government keeps a number of lists that are updated annually. In this context, Yanjing was regarded as:

  • one of 520 Large Enterprises recognized by State Council;
  • one of 300 enterprises supported by the State Economic Committee.

Being included is lists like these is more than just honourable. It is an indication that an enterprise has access to funds that are out of reach for others. It also means that an enterprise is more likely to obtain support from the government for ambitious plans.

Period 4 1999 – 2004 – 3 million hls/yr

Yanjing received a foreign trade license, which allowed the company to directly engage in import export business without the use of a foreign trade company in March 1999. Yanjing exported its first batch of beer to the US in 2001. Export to Europe started in 2005.

The main issue of this period is the expansion of Yanjing into various regions of China. Yanjing had been using the name Yanjing Group since 1993. However, the company really only consisted of one brewery, the old mother plant. The first expansion by acquisition took place in 1995, when Yanjing took over the bankrupt Huasi Brewery. Huasi was also based in Shunyi and included capital from a Hong Kong investor. Very little is known about the background of this company, but according to Yanjing’s historians it was located right on Yanjing’s doorstep.

After Huasi was acquired, it was quickly consolidated into Yanjing. During the following years, Yanjing acquired a considerable number of breweries in various parts of China. The following table lists the acquisitions in historical order.

18/01/1999 Jiangxi Ji’an
18/06/1999 Hunan Xiangxiang
18/12/1999 Hubei Xiangtan
20/01/2000 Hunan Hengyang
18/05/2000 Jiangxi Ganzhou
08/08/2000 Shandong Laizhou
18/11/2000 Inner Mongolia Baotou
18/03/2001 Shandong Wuming
20/03/2001 Shandong Qufu Sankong
10/07/2001 Inner Mongolia Chifeng
18/07/2002 Guangxi Guilin Liquan
16/09/2002 Fujian Nan’an Huiyuan
16/07/2003 Zhejiang Xiandu
26/07/2003 Fujian Huiquan

Yanjing has never stated to have a specific strategy as to the order of regions in which it intended to become active. However, there seems to be a certain pattern in the above list. During the first 1.5 years of its acquisition spree, Yanjing developed into South Central provinces: Jiangxi, Hubei and Hunan. During the following 1.5 years, the company aimed its acquisition activities on the Northern coastal province of Shandong and Inner Mongolia, both quite close to its own home region. The period that seems to emerge then is a two-year period in which Yanjing penetrated to very South and the Southern coast.

A second pattern that can be extracted from Yanjing’s acquisition list, seems to corroborate this hypothesis: Yanjing’s acquisitions are never located in provincial capitals, but always in second echelon cities in their respective regions. Just as Yanjing did not select China’s poorest regions, the company also stayed out of the poorest provincial towns. Cities like Ji’an and Ganzhou in Jiangxi are industrial centres in their home province.

In October 2003, Yanjing established a South China Office, replacing the management office for non-Beijing subsidiaries. Following the same line of analysis, we can conclude that this decision indicates a change in the geographical perception among Yanjing’s management. I will spend the entire section 6.4 on the significance of ‘the South’ in Yanjing’s identity constructs. Here, I will concentration on the important symbolic feature of establishing such a South China Office, as it indicated that Yanjing was shifting from a Beijing identity to a China identity. It was becoming a truly national company. While the term ‘outer prefecture management company’ still had a strong Beijing flavour, the term South China Office implicated that Yanjing in the sense of the mother company was cognitively located in North China, and no longer in Beijing.

This analysis is corroborated by the fact that the non-Beijing subsidiaries were good for more than 57% of Yanjing’s turnover of 2003.

Yanjing’s largest acquisition was the 31.8% state share in the Huiquan Brewing Co., Ltd. Although Huiquan at that time was not performing well, it ranked in size among China’s top breweries. Huiquan generated a turnover of RMB 760 million. The brewery was reorganized from a state-owned production plant to a limited stock company in 1997, with the State retaining a minority share. Following this reorganization, Huiquan sought to attract more capital by a public listing. This proved to be a bad move, on the eve of the Asian financial crisis. The take-over was celebrated with a ceremony in the Great Hall of the People. Yanjing was celebrated as the saviour of the state’s assets. The was yet another event confirming the state-owned identity of Yanjing. Although it has never been confirmed, this official state level celebration seems to indicate that Yanjing was requested by the State to take over the financial burden of Heniquin. Years before, when Yanjing took over the almost bankrupt Huasi brewery, the company positioned itself as the protector of state assets against the encroaching foreign investors. When Huiquan became an ideal target for a take-over, the State seemed to prefer this to be done by a domestic rather than a foreign party.

After the acquisition of the State’s share in Huiquan, Yanjing started buying up more shares of that company. It became the majority shareholder in March 2004 and Huiquan was consolidated into the Yanjing Group in July of that year.

6.4 Yanjing’s road to the South

Yanjing’s expansion to the South is a crucial chapter in the company’s life. The original Shunyi Brewery was established with the idea to alleviate the need for beer among Beijing residents. This idea co-creates an identity of the existing breweries in the region, in particular Five Star and Beijing, of not being able to fulfil the local demand. Moreover, as the Shunyi Brewery would be operated as a state-owned enterprise, an approval from the State Planning Committee was required. This could explain that a Vice-Minister found it useful to visit the plant in 1981, even though it was a relatively small project of a county government. However, once such a visit has taken place, which involves considerable interaction between a number of parties (arranging the Vice-Minister’s security alone would be an enormous task).

The Vice-Minister did more than just honouring the plant with a visit. He suggested to change the brand name from Shunyi Beer into Yanjing Beer. In Weick’s terms of retrospective sensemaking, the creation of Shunyi Beer as the brand name took place almost automatically. A brewery established in Shunyi was called Shunyi Brewery and its beer sold under the Shunyi brand. Even though we do not exactly know what triggered it, the suggestion to switch the county related name to a name linked to the municipality indicates a strongly heightened state of sensemaking. It again stands to reason that, as the new project was to supply beer to the thirsty citizens of Beijing, the brand name should be broader in geographic scope. However, just like the idea itself, this suggestion for Yanjing as the brand name (and a few years later as the company name) reinforced the negative identity of the existing local brewers, in particular Beijing Brewery. Suggesting Yanjing as the brand name was almost like saying that the new brewery would replace Beijing Brewery. It actually did; it is currently a subsidiary of Asahi.

Visits by State Councillors in 1982 and 1986, further strengthened the ‘central authorities’ identity of Yanjing. Identity is a process, a product of social interaction. The behaviour of state leaders took place in interaction with local leaders of Shunyi county and later managers of Yanjing. The behaviour of the state leaders therefore affected the behaviour of the Yanjing related actors. The latter started acting as favourites of the central authorities, first in their interaction with the leaders, but then also in their interaction in other contexts. This explains why so many of the events of Yanjing were reported in media close to the central government, like the People’s Daily. Reporters of those media will tend to visit Yanjing to interview managers, who will therefore have more frequent interaction with the government-controlled media than other, ‘less important,’ competitors. Yanjing managers brainstorm about the importance of the South Chinese market, which makes the journalists report on Yanjing’s acquisition of a brewery in Ji’an is actually only the prelude to conquering the South. These reports will play a role in the strategic sensemaking of Yanjing managers and the mothers-in-law of Yanjing, etc. In the midst of all this interacting (= sensemaking = organizing), Yanjing was also designated as the beer to be served during state banquets in the Great Hall of the People.

By the time Yanjing made its first acquisition outside the Beijing region, it was included in a context in which it was made sense of as a strong symbol of the central government, a protector of the national industry, etc. The behaviour of Yanjing, a number of central government organizations, the centrally controlled media, etc., was tightly coupled.

When analysing Yanjing’s expansion activities, the notion ‘South’ seems to play a major role. Although Yanjing has never made explicit statements regarding the order of regions in which it acquired new subsidiaries, the company spent the first 1,5 years of its acquisition spree on buying up breweries in the South-Central provinces: Jiangxi, Hubei and Hunan. After a second 1.5-year period in which Yanjing expanding to regions closer to its home region, another move to the South started, including Guangxi, Zhejiang and Fujian.

The division of China into two major regions North and South is very old. Allusions to it can be found in ancient works of literature. The division is not only a geographic one. An imaginary border, often localized in the Yangtze River, has been perceived to divide the people in the North from those in the South. The people in the North are struggling with the harsh continental climate, constantly threatened from invading barbarians. They are, on the other hand, the speakers of Mandarin and most Chinese imperial families have been of Northern descent, while some of them actually were barbarians, including the last dynasty, the Qing. The staple of the Northerners is wheat. The Southerners live a milder climate, although Northern officials often did not appreciate a post as local magistrate in the South, complaining about the hot and humid summers. The Southerners grow and eat rice. They speak many, mutually not intelligible dialects. Although also mainly farming, many of them have switched working the soil for trading. Most Chinese that ventured emigrating to start a new life abroad were Southerners.

That most Chinese imperial families originated from the Northern half of China and that the various capitals of the Chinese empire have mostly been located in that area has probably been a product of a number or causes. First of all, Chinese civilization, based on archaeological findings, started in the North(west). Then, during the ages, most threats to that Chinese civilization had come from the North. The Northerners had to take the first blows, but by doing so also became the rules of China. In terms of organizing processes, the recurrent behaviour of the Northern Chinese as the protectors of the nation constructed an environment in which the dynastic families were typically Northerners. Moreover, this also explains the continental inclination of most Chinese dynasties, with a high regard for the tilling of the land, but with a dread for sailing out to the sea; a fear re-enacted by the Communist rulers until the 1980s.

The Northerners thus were the rulers and the Southerners the ruled. However, the Southerners have learned how to live a life of their own without too much interference by the rulers (the federalist tendency in Chinese culture introduce in the beginning of this chapter). The rulers through the ages have realized that and, in turn, have devised ways to maintain a basic level of control in the South, without antagonizing the Southerners too much. One typical way for the Emperor to establish his influence in a faraway region that was (reported to be) rebellious was the special envoy, who was given the Emperor’s sword as a token that he enjoyed the undivided trust of the Emperor. Such an envoy could decide over life and death.

Yanjing’s decision to establish South China Office in October 2003 can be interpreted as a continuation of this tradition. By that time, Yanjing was operating breweries in nine administrative regions of China, equally divided over the North and the South. However, the company’s head office was located in the capital, as was the Forbidden City in imperial times. It seems as if Yanjing, steeped in Northern culture, felt that it could operate the Northern subsidiaries sufficiently from Beijing, but that those in the South needed to have an office of their own. This would give the Southerners the feeling that they were to a certain extent in charge of their own affairs.

I have already pointed out that Yanjing has so far not been reaching out to a number of regions, including the very North of China. The very South, on the other hand, in particular the rich province of Guangdong, is frequently mentioned as a major objective. However, instead of directly acquiring a suitable brewery in that province, Yanjing attempted to attack Guangdong by means of a siege from its neighbouring provinces first.

Yanjing’s first acquisition outside the Beijing region, in Jiangxi’s Ji’an, was directly linked to a move South by Chinese analysts. A commentator in the Market Daily described the deal in Ji’an as a guarantee and condition for increasing market share in the South. He then continues by stating that it is ‘actually nothing more than a prelude to Yanjing conquering of the entire Chinese market.’ This statement shows remarkable insight in Yanjing’s strategy. When this article was published, Yanjing had only acquired two breweries outside the Beijing area. It seems that this reporter was being used as a mouthpiece of Yanjing’s management. The Market Daily is a publication of the People’s Daily, the national newspaper published by the Communist Party. Further in the article, Yanjing’s Vice-Party Secretary is cited as the main source of the ‘news’ published in this article. In a Chinese context, it is easy enough to perceive Yanjing as the tool of the central authorities in Beijing. Yanjing was served at the official State Banquets in the Great Hall of the People; it was the new Emperor’s favoured brew. The role of Yanjing as the Party’s envoy to the South is then only one step away, the sword being traded for a bag of money.

Another analyst more directly related Yanjing’s acquisition activities in the South as aimed at Guangdong. In this article, Yanjing’s subsidiaries in Ji’an (Jiangxi), Hengyang (Hunan), Guilin (Guangxi) and Hui’an (Fujian) are grouped together as each taking care of part of the Guangdong market, apart from their respective home regions. It reports that a Vice-General Manager of Yanjing has spent the period of December 2002 to March 2003 to forge this circle of breweries into a chain around Guangdong. This Vice-General Manager is referred to as ‘holding a flying office’ (feixing bangong), yet another expression that seems to allude to the office of special envoy of the emperor; who has traded the traditional horse for a modern plane.

The same article reports that Yanjing had been shopping around in Guangdong and has held negotiations with the Qiangli Brewery in Sanshui (near the border with Hong Kong) and the Doumen Brewery in Zhuhai (near the border with Macao). The talks with Qiangli failed, because Qiangli insisted on continuing the Qiangli brand, that was not performing very well at that time, while Yanjing did not want to link its strong brand name with one with a bad reputation. The reason for not acquiring Doumen was not given, but the article cites a Yanjing spokesman stating that the company was not considering an acquisition in Guangdong anymore, because the exorbitant price required by any Guangdong brewery exceeded the cost of a greenfield plant.

During the time that Yanjing was preparing itself for the attack of Guangdong, a peculiar incident occurred in Nanchang, the capital of Jiangxi. Late February 2003, a number of unidentified people purchased 400,000 bottles of Yanjing beer at more than 3600 retail outlets in Nanchang. Some of the offered a price higher than the actual retail price, while others offered to trade one bottle of freshly produced Yanjing beer for three bottles of Nanchang beer dating November 2002. Reporters investigating this matter found an abandoned warehouse with approximately 100,000 bottles of Yanjing beer piled up. The incident was never further reported, but after the short article appeared in a local paper, it was also published in Guangzhou (Guangzhou Evening News 2003) and even the national People’s Daily. Especially the latter fact seems to corroborate once more that even such a, seemingly, minor incident is a matter worth reporting in the ‘throat and tongue of the Party’ (dang de houshe; a slang term for the People’s Daily).

This incident indicates that, although Yanjing had already been active in the region for more than two years, it had not yet been accepted as a local beer. Regardless whether the ‘raid’ on Yanjing beer in Nanchang was an initiative of the local brewer of Nanchang beer, or that it was an act of local popular protest, the offer to substitute one bottle of recently brewed Yanjing beer for three bottles of the local brew that had been produced four months earlier is highly symbolic. Even though the campaign was apparently directed against Yanjing, the attackers subconsciously still attached a higher value to Yanjing than to their local Nanchang beer; three time higher to be precise. The alternative deal, offering a price higher than the regular retail price, has a similar symbolic value.

This incident also fits in with the identity of Yanjing as the envoy of Beijing, the central government, the Communist Party, etc. In the old days, the imperial envoys, in spite of the power invested in them by the Emperor himself, had to deal with suspicion and even downright display of dislike from the local people, including the local gentry. We should never forget the enormous symbolic power of the Yanjing brand. As Yanjing is a literary equivalent of Beijing, protest against Yanjing can be likened with protest against Beijing, and from there everything ‘Beijing’ stands for. I will revert to this mechanism in the final chapter, in which I will integrate the findings of the case chapters with the theoretical framework laid out in chapters 1 and 2.

Then finally, still unexpected, Yanjing decided to build a brewery in Guangdong after all. Beijing Yanjing Brewing Co., Ltd and Beijing (Industrial) Brewing Co., Ltd., two Beijing based daughter companies of the Yanjing Group, had entered into a joint venture in December 2004 to jointly build the Guangdong Yanjing Brewing Co., Ltd. The location selected was the Nanhai District of Foshan, a city close to Guangzhou, the capital Guangdong. The objective was to start production in June 2005.

A Yanjing spokesman motivated this move with three reasons:

  • Foshan was an excellent location, offering favourable investment conditions;
  • Foshan was an economically developed region, with a pool of affluent consumers;
  • Yanjing still did not have its own production facilities in Guangdong, which was a burden for the mother company in Beijing, as it had to ship the Yanjing beer all the way to Guangdong.

The latter is the most intriguing of the three. While Yanjing had been carefully laying a chain of breweries in adjacent provinces to attach the Guangdong market from four sides, now the establishment of a brewery of its own in the region was motivated as a means to lighten the burden of the mother plant. It seems as if the consumers in Guangdong had never really accepted ‘Yanjing beer’ that was not produced by the real Yanjing (the one in Beijing). While the acquisition of Huiquan was even celebrated by a party in the Great Hall of the People, yet another act that constructed the ‘central government’ identity of Yanjing, it was never able to penetrate the Guangdong market as hoped. Major competitors of Yanjing on the other hand, in particular Qingdao, were more successful in this region through local subsidiaries.

Actually, Qingdao acquired Doumen, after Yanjing broke off its negotiations with that brewery. Apparently, Guangdong consumers do accept beer from other regions, but only if it is produced by the mother company or brewed in their own home province. Yanjing then realized what it had exclaimed in despair a couple of years before: it is cheaper to build a Greenfield plant in Guangdong than to acquire an existing one.

With a brewery in Guangdong on the way, Yanjing now seems to have ended its journey to the South. Yanjing = Beijing = the central government rules in the South, be it through an entity with a Southern identity.

Latest news from Yanjing

Yanjing Brewing has generated a turnover of RMB 3.28 bln in the first quarter of 2018; up 3.35%.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

Yangmei – super yummy superfruit

Superfruits are still hot, in spite of the growing criticism on the excessive promotion of some of them.

China is well-positioned to gain from the superfruits craze (also see my post about the seabuckthorn). Yumberry, for example, is unique to the country, and produces good quality, clarified not from concentrate juice, but also excellent concentrate. China is good for 90% of the global yumberry production, with sporadic occurrence in Japan, India, Vietnam and Thailand. China produced 832,680 mt of yumberies in 2016, from 745,600 mt in 2012. Zhejiang province is the largest production region, with more than 570,000 mt in 2016.

Yumberry is the commercial name for the yangmei berry, a fruit of the wax myrtle; also known in English as waxberry (Myrica rubra), the fruit has a high antioxidant activity and high vitamin and mineral content. Yumberries look a little bit like a raspberry with a sweet-sour flavour similar to cranberry and pomegranate juice. Their texture is unique – slightly stringy like the flesh of citrus fruit – with a pit in the centre.

Super healthy

Yumberry juice is rich in antioxidants like proanthocyanidins and contains many vitamins including vitamin C, thiamine, riboflavin, and carotene. Yumberries are also said to help clear up hard-to-digest food in your stomach, cure stomach aches and “dispel summer heat.” They have been used since ancient times in China for medicinal purposes, and as early as the 16th century, the well-known herbal pharmacologist Li Shizhen said that yumberries could:

“Eliminate sputum, stop vomiting, helpful to digestion and alcoholic drinking … quench thirst, conciliate the five internal organs, cleanse stomach and intestines, remove the muddleheaded … and be efficacious to cure diarrhoea.”

Further, because the trees have a high tolerance to pests and diseases, they are often grown organically or with few pesticides applied to them.

66% of the output of 2016 was consumed as fresh fruit. 15% was processed into juice or concentrate, 5% was exported and 20% was wasted in various stages of processing. The latter is high for such a valuable product, but offal is unfortunately still a major problem in China.

Juice production is hampered by its short season which lasts only one month, in which processors struggle to process all the fruits on time. However, its rising popularity in the health beverage boom will certainly benefit the industry.

International interest

The international superfruit industry discovered the value of yumberries before health drinks started to get popular among Chinese consumers.

  • US juice supplier SunOpta has entered into an exclusive supply agreement with China’s Zhejiang Yumberry Juice Co., Ltd to market yumberry juice concentrate in North-America. The harvested fruit is carefully selected, pressed, de-pectinised, filtered, concentrated and pasteurised, before being shipped to North America.
  • Bombilla and Gourd, a US tea drinks company, has moved into the fruit juices sector. Its new Super Fruits line, launched last April, comprises four blends: orange/ mango, yumberry/lime, açaí/blueberry and pomegranate/lemonade, in 600 ml plastic bottles.
  • Fruttzo, another US fruit juice maker, has introduced a yumberry juice range. The ruby red, 100% juice has no preservatives, added sugars or added colours and comes in pure 100% yumberry form, or blended with pomegranate, blueberry or cherry. It is packed in 12 oz recyclable glass bottles and is on sale nationwide.
  • In the UK, Uren Food Group‘s innovation division Juicevibe has developed a yumberry juice blend, claimed to be the first in the country. The 100% juice blend has been listed by a major retailer. Endorsed by Heart Research UK, it has secured approval from the Food Standards Agency so the fruit will not be subject to review under EU novel food regulations.

At this moment, it is still uncertain if the yumberry has a future in Europe. While the supermarkets in my home country are flooded with blueberries, which are often rather tasteless, perhaps because the growers want to cash in on the superfruit image, instead of concentrating on making a tasty product, I have never seen a yumberry of yumberry product, outside China. Whenever I do, I will add my finding to this post.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

Mengniu – game changer of the Chinese dairy industry

China’s two dairy giants, Mengniu and Yili, are located in the self-styled Dairy Capital of China: Huhhot. What is their relation and the nature of their competition in the Chinese cultural context?

A blog needs to renew regularly. Although most of my posts introduce companies, after the post on COFCO I have never written another one featuring a single company. I will make up for that, starting with this post about one of China’s top dairy companies. This post is derived from a case study in one of my academic writings: Chinese Corporate Identity. Readers who are triggered to get a deeper understanding, please read that chapter, or better: the entire book.

Inner Mongolia – a bit Chinese and a bit Mongolian

Inner Mongolia is an administrative region of northern China of the same level as a province, but with a larger degree of political autonomy.

The greater part of Inner Mongolia is a plateau with elevations of about 1000 metres. The Yellow River flows north from Ningxia and forms a loop that encloses the Ordos Desert. Grasslands predominate on the plateau, where they sustain large numbers of grazing animals such as cows, sheep, goats, camels, and horses. Milk from all those animals has been part of the traditional diet of the Mongols. Apart from drinking the fresh product, milk is processed into a number of cheese and yoghurt like products. Horse milk is even fermented into an alcoholic beverage.

The population of Inner Mongolia is approximately 25 million, up from only 6.1 million in 1953. The rapid population growth since the 1950s is a result of better nutrition, increased health care services, and a substantial migration into the region of Han Chinese. More than 80% of the current population is Han. Mongols comprise the largest minority group in Inner Mongolia, and their presence is acknowledged by the government’s designation of Inner Mongolia as an autonomous region.

From orphan to entrepreneur

Mr Niu Gensheng (1956), Mengniu’s founder, is one of the most mythical among present day China’s entrepreneurs; more even than that of Jack Ma, the founder of Alibaba. Story has it that he lost his parents at the very early age of 3 months and was raised by a farmer called Niu (which ominously means ‘cow’). His foster parents gave him the name: Niu Gensheng.

Niu was hired by what was then called the Yili Dairy Factory in Huhhot, as a bottle washer, in 1978. From that humble position, he gradually worked his way up from work shop supervisor, subsidiary director, vice-director of the mother factory to Vice-President in charge of production of, what was then rename into, the Yili Group. Niu’s career did not pass by unnoticed. He has been granted a number of regional awards and was included in the 10 Top Young Entrepreneurs of Huhhot.

Ousted from Yili

For reasons that have never been actually expressed, a conflict developed between Niu and the other board members, resulting his removal from the board in November 1998. The Board issued a statement indicating that ‘Comrade Niu Gensheng no longer fitted his position.’ He was ‘advised’ to find a place to study outside his home region for at least two years. Judging by this ‘advice,’ it could have been that his fellow board members did no longer feel comfortable with a self-made man among their ranks. Niu grabbed this opportunity to enrol himself in the MBA course of the prestigious Guanghua Business School of Beijing University. He left Yili the following year.

Founding Mengniu

Already within the same year, 1999, Niu Gensheng and a group of more than 50 of his old subordinates at Yili and a number of private individuals, raised RMB 1.3 billion to establish Mengniu Dairy Co., Ltd. When asked during an interview how Niu could so easily convince a considerable number of his former colleagues at Yili to not only quit their comfortable positions, but also entrust a considerable amount of their savings to him, Niu’s own rationale was that he had the habit of sharing his income with his subordinates. His last salary as a Vice-President of Yili exceeded RMB 1 million, which he found more than he needed to make a good living. He often shared part of it with subordinates that he believed to have contributed to his success. In Niu’s eyes, he was cashing in on the goodwill thus accumulated during the establishment of Mengniu. This was good leadership in a communitarian culture like the Chinese.

Fastest growing private enterprise

At that point of Mengniu’s early age, the company was still in a situation Niu himself recalls as ‘four deficiencies:’ no raw milk source, no factory, no brand (he had registered a brand name, but it was unknown among Chinese consumers), no market. He contacted dairy plants all over China with a surplus capacity and contracted those to produce for Mengniu. Mengniu provided specifications, a brand name and technological assistance. Mengniu first created a market and only then built its own production facilities.

Mengniu turned out to be the fastest growing private enterprise in China’s history. The company generated a turnover of RMB 43 million in the first year of its existence, which was approximately 4% of Yili’s turnover of the same period. The turnover of 2002 was already RMB 2 billion, exactly half of Yili’s turnover of that year.

Foreign investment

A milestone in the history of Mengniu was its acceptance of foreign participation late 2002. Niu Gensheng himself had repeatedly stated in the national press that he was not in a hurry to follow Yili’s example in seeking registration on the stock exchange and expose Mengniu to the whims of speculators. It therefore was even a surprise to insiders when it was reported that Morgan Stanley, CDH Fund and China Capital Partners had signed an agreement with Mengniu to invest USD 26 million in Mengniu. As a result of that deal, the three foreign investors held a total share of 32%. According to a spokesperson of Mengniu, the Chinese side had attracted foreign participation to better compete with the other dairy giants like Sanyuan (Beijing) and Bright (Shanghai), that were heavily supported by their respective local governments. Morgan Stanley had already invested in a number of Chinese enterprises including Ping’an Insurance Company, Nanfu Battery Company and Heng’an International Group. CDH Fund had invested in 12 Chinese enterprises, also including Nanfu Battery and Sina.com, an important Chinese business Internet portal. China Capital Partners, a UK fund for investment in China, had invested USD 55 million in China since its establishment in June 2000. Following opening its door to foreign influence, Mengniu’s next step was to seek listing on the Hong Kong Stock Exchange in June 2004.

Cultural drivers of Mengniu’s success

Niu Gensheng’s strategy has never been to ‘push Yili from the market’, which would be the typical Western MBA textbook approach. Instead he kept praising Yili in his advertisements of Mengniu, position his company as a faithful follower of leader Yili.

He vouched in media interviews that Mengniu would not try to snatch raw milk sources from Yili and that Mengniu would never buy raw milk that did not comply with Yili’s specifications.

In the Chinese cultural context, Niu himself, and the Yili employees he had pulled from Yili, would still maintain friendly contacts with their former Yili colleagues. An aggressive strategy would not fit such relations. In the political field, the Huhhot authorities, while welcoming new entrepreneurial activity, would dislike a Western-style life or death fight between state-owned enterprise Yili and private newcomer Mengniu. Commercial competition must never harm the Confucianist ideal of harmonious society.

In short: Niu Gensheng’s entrepreneurial behaviour suited the Chinese communitarian culture and complied with the Confucianist principles of good governance.

Mengniu and Yili outside Inner Mongolia

During the following years and decades, Mengniu and Yili kept growing and expanding into other regions of China. In most regions, either Mengniu or Yili would be the first to enter, but the other would soon follow suit. While Mengniu kept profiling itself as the follower, in their de facto relationship they alternately acted as follower or leader (for concrete case studies see the above-mentioned book).

Mengniu turns SEO

The Chinese business world was shaken by the news that COFCO (see my post that positions COFCO as the next Nestlé) had acquired a significant share in Mengniu in 2009. The media, that had so far regarded Niu Gensheng as a favourite person to interview, now accused him of going against the tide. While privatization was the trend in Chinese economy, China’s most successful private company was now becoming a de facto state-owned enterprise. Niu was not shaken by the fierce criticism, as usual. He calmly replied that the real trend was that the differences between various types of enterprises in China (state-owned, private, foreign invested, etc.) were decreasing. He simply believed that Mengniu would be best off as a subsidiary of the emerging multinational COFCO. History has proven him right.

Food for thought

Mengniu Dairy’s entrepreneurial history provides a large bowl of food for thought. I will leave most of it for you, my readers, to think over. I will restrict to one challenging thought: considering the problems major dairy multinationals like Fonterra and FrieslandCampina are experiencing in China, how much could they learn from Mengniu, to grow roots in the Chinese cultural context? Nestlé, an early Western investor in China, seems to have done a good job in this respect. The key issue in embedding your Chinese subsidiary in the local society is forging valuable relationships, with business partners, but also with competitors.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

 

Shaji – seabuckthorn – the unknown superfruit

Shaji (sea buckthorn; Hippophae rhamnoides) is an indigenous fruit of North China. China is good for 90% of the world output of this fruit. It has been used as an ingredient of various foods and beverages in China for some time but is still not very well known abroad.

Shaji is regarded as a medicinal herb in TCM, but has been put on the official list of ‘herbs that can be used in food and medicine’ in 1987. Medicinal ingredients, including TCM, are not allowed to be used freely as food ingredients, but plants on that list are exempted from that regulation. The same applies for other super fruits like the yangmei (yumberry) introduced in another post.

Shaji have a high content of vitamin C, about 15 times greater than oranges. The fruit also contains high contents of carotenoids, vitamin E, amino acids, dietary minerals, β-sitosterol and polyphenols. Seabuckthorn oil is a good source for omega-7 fatty acid.

Shaji fruit can be used to make pies, jams, wines, etc. Fruit drinks were the earliest seabuckthorn products developed in China. Shaji berries are edible and nutritious, though very acidic (astringent) and oily, unpleasant to eat raw, unless ‘bletted’ (frosted to reduce the astringency) and/or mixed as a juice with sweeter substances such as juice of other fruits.

Sea-buckthorn berries combine nutritious agents usually only found separately. Its list of vitamin C, vitamin E and carotenoids reads like the label on a pack of multi-vitamin pills. All of these components are classified as natural anti-oxidants, which form a vital part of the body’s defence system.

Main Biochemical Contents of Seabuckthorn Oil

Contents Pulp oil (mg/100g) Seed oil (mg/100g) Residue oil (mg/100g)
Vitamin K 110-230 54-59
Vitamin E 206.9 171.0 300-600
Carotene 2.0-4.0 10-80
Carotenoids 30-250 300-870 1280-1860
Protein 95.55 7.06
Total acid 10.7 37.6
Total sterol 1093.6 720.6
Unsaturated fatty acids 87.4 % 66.8 % 70 %
Saturated fatty acids 11.8 % 38.8 %  –
Oleic acid 20-25 % 20-25 % 33 %
Linoleic acid 37.0 % 5-10 % 4 %
Linolenic acid 27.6 % 2.1 % 5 %
Unsaponificable matter 1-3 % 0.5-2.5 % 2-5 %
Total flavonoids 0.55 %

Since the discovery of the nutritional value of sea-buckthorn, hundreds of sea-buckthorn products made from the berries, oil, leaves, bark and their extracts have been developed.

China has become one of the largest producers and consumers of sea-buckthorn products in the world. Fruit drinks were among the earliest sea-buckthorn products developed in China. They have rapidly gained a reputation as both a satisfying drink and a nutritional beverage that enhances stamina and vitality.

Though seabuckthorn has been grown for many years in India and China, and its healthy qualities are well known, but it languishes behind other superfruits. While it is gaining increased recognition, seabuckthorn is lagging behind other so-called superfruits, such as açaí.

This is possibly because it has just slipped under the radar: applications are growing in the cosmetics and pharmaceuticals industry, and it is likely that the fruit will gain in popularity in the next few years.

The reason for China’s domination of the fruit is that China has long used the plant for soil and water conservation purposes. They typically grow in dry, sandy area, are tolerant of salt in the air and soil, and demand good sunlight.

The common seabuckthorn is by far the most widespread, with a range extending from the Atlantic coasts of Europe right across to north-western China. In western Europe, it is largely confined to sea coasts where salt spray off the sea prevents other larger plants from outcompeting it, but in central Asia it is more widespread in dry semi-desert sites where other plants cannot survive the dry conditions.

The female plants produce soft and juicy orange berries 6-9mm in diameter, rich in vitamin C (average 600mg/100g and sometimes up to 1 500mg/100g). Some varieties are also rich in vitamin A, vitamin E and oils.

The berries contain about 56-70% juice. However, the fruits have some drawbacks as far as processing goes. First, the shrubs are covered in thorns, which makes picking difficult. The fruit falls off the branches of its own accord at temperatures below -20°C, but obviously this method of natural harvesting will only work in very cold regions.

Entire branches can be removed, frozen, and then shaken to remove the fruits, but obviously this is damaging to the shrub. Mechanical harvesting, developed in the Baltic states, involves shaking the branches without freezing, but this method leaves half the berries unharvested and the shrubs can only be harvested every two years, so an effective annual yield is only 25%. In countries where labour is cheap, hand-picking remains the most effective way of harvesting seabuckthorn berries.

Must be blended

The other disadvantage is that pure seabuckthorn juice does not taste very nice. It has to be blended with other fruit juices in order to be palatable. It is also very high acid, so some form of sweetener (or a very sweet fruit juice) must also be added unless the juice is present in very small quantities in a blend. It lends itself well to being blended with pear juice, at a ratio of 30%. Seabuckthorn juice has a freezing point of -22°C, so it remains liquid even in sub-zero temperatures.

General consumer interest in seabuckthorn began about three or four years ago. China is ramping up its output of seabuckthorn. The total area in China under seabuckthorn is now a colossal 2.13 million hectares (ha), according to China’s National Administration centre on Seabuckthorn Development.

Of this total, 667 000ha are ‘wild’ trees and 1.5 million ha are cultivated, representing 90% of the world’s total population of such trees. The main purpose of seabuckthorn cultivation in China, as in India, is to control water and soil erosion and improve the ecological environment. The country is planting an additional 113 000 new seabuckthorn trees every year, as part of the Chinese government’s program to increase production of the fruit and its derivatives. The government is also funding schemes to develop new varieties which will require less or no watering during growth and which will produce much improved fruit yields.

Most seabuckthorn trees are planted in poor environments such as gullies and river beds. Fruit yields are very low. Under normal conditions, seedling plants begin to fruit in the third year and fruits will be harvested in the fifth year. Average yields are 0.75 mt/ha.

There are some 200 companies in China making seabuckthorn products, such as oils, pharmaceutical items and cosmetics. However, juice processing plants were first established in the 1980s, and plants to add the juice to other beverages appeared in the 1990s. In 2004, China produced about 10 000 tonnes of seabuckthorn juice.

Because of its healthy connotations, China sees it as an ideal fruit for organic production, and future development of seabuckthorn will move in this direction. Seabuckthorn is a key component in many health supplements and is now attracting attention as a component in juice drinks.

Shanxi-based enterprises unite

Shanxi province, China’s main producing areas of sea-buckthorn, set up an industrial association in Taiyuan, capital of the province, hoping to unite local enterprises to build their brands. This move came as most of the province’s sea buckthorn processing, production, and sales enterprises are facing operational difficulties. They hope to cooperate and adjust their industrial mode for future development. Statistics show Shanxi has more than 400,000 hectares of sea-buckthorn shrubs, accounting for nearly 70% of wild sea buckthorn across the country. Due to difficult harvest conditions and a long ramp-up time of 6 to 8 years buckthorn is a relatively expensive raw material.

However, in Shanxi, the fruits of sea buckthorn are commonly sold as fruit juice. The sea buckthorn industry is still at a very preliminary level as it has faced a series of problems, such as lagging scientific research, a lack of high-end products, small scale, poor marketing, and differentiated production standards. Other factors such as Internet sales and strong competition have squeezed the market share of Shanxi’s sea-buckthorn production companies. With its establishment, the association will help integrate industrial resources, give full play to their technology and talented people, and connect companies, bases, and farmers to form industrialization development modes.

Product overview

In this section I am introducing a few seabuckthorn-based products made in China to indicate how the fruit is currently used as a food ingredient.

Fine powder

Pure superfine seabuckthorn powder, void of any additive. Producer: Jinliang Food Technology Co., Ltd. (Shanghai).

Tea

Seabuckthorn tea produced by Wanmei (Perfect) China, Ltd. (Guangdong).

Ingredients: fructose oligosaccharides, seabuckthorn powder, black tea powder, citric acid, malic acid, Luohanguo (fructus momordicae ) extract, vitamin C, sucralose, lemon flavour,  ethyl maltol

Dried fruits

Dried seabuckthorn fruits, produced by Shihutang (Xinjiang). Consumption: put a few dried fruits in a cup of tea or glass of spirits (baijiu).

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.

 

Tomatoes in the Chinese kitchen and even more for export

The tomato belongs to a large group of plants of the nightshade family. Its cousins include potatoes, aubergines and bell peppers, all popular ingredients in China.

No one can pinpoint the exact dates these vegetables were introduced to China, but the general consensus is that they came through both the overland and maritime trade routes. The national output of fresh tomatoes for 2017 is estimated at more than 56 mln mt.

There is a chicken dish cooked by the Uyghurs in the north-western entry point of Xinjiang Uygur autonomous region that combines almost all of them. Known as “big pan chicken” or dapanji, it is a rich, tomato-based stew with chunks of potatoes, lots of onions and plenty of bell peppers. That probably gives us a hint on the early beginnings.

Good ingredients are treasured by Chinese chefs who often go out of their comfort zones to seek them out. Foreign imports such as potatoes are now staples, and the chili pepper, too, has been naturalised.

The tomato’s brilliant colour and natural umami flavour have made it another essential ingredient. In fact, the classic sweet and sour dishes of southern China now depend mainly on the tomato, where it used to be the hawthorn fruit that coloured and flavoured in the past.

It used to be harvested only in summer, although it is now available all year round, thanks to bigger, better greenhouses and a countrywide logistics network that connects north to south and east to west. Xinjiang is currently by far the largest production region of tomatoes in China. This product has become so important, that China has started investing in tomato production in neighbouring Kazakhstan.

The northern Chinese mainly consume tomatoes raw, in thin slices liberally covered with caster sugar. More than a few Europeans have to grow accustomed to eating sweetened tomatoes. The most favoured hot dish with tomatoes is tomatoes with scrambled eggs (xihongshi chao jidan), which is everybody’s favourite. I used to travel in China with a Dutch client who was not a lover of Chinese stir fried dishes, but he did like scrambled eggs with tomatoes.

Tomatoes are now used to stuff dumplings, pairing with such stronger-tasting meats like beef and lamb, and is cooked down to a sauce for hand-cut noodles. It is not only used to accompany noodles, but is actually worked into the noodles themselves, like spinach.

The love of tomato-flavoured stews in north-eastern China can also be traced to the Russian influence of the past. For certain older generations, the only Western restaurants in the capital at that time served Russian food. For them, Russian food meant a strongly tomato-flavoured borscht, a hearty tomato and beef stew and minced-meat-stuffed cabbage rolls slowly stewed in a thick tomato sauce. That was the pinnacle of gourmet eating in restaurants with names like Old Moscow, or Kiev.

Times have changed. Modern Beijingers still love their tomatoes, but they are more likely to consume them as pizza sauce or over spaghetti. Modern chefs, many coming from overseas, have also introduced other new ways of eating tomatoes.

Tomato paste

The top industrial tomato product is tomato paste. If your mind connects tomato paste with Italy and Italian cuisine, you need to update your settings. China, in particular Xinjiang, has the world’s prime production region for tomato paste for a number of years. Several Italian companies import it in bulk an can the Chinese product in Italy, to export again as a ‘typically’ Italian product. However, the exports of tomato paste have been dropping, partly due to adverse weather conditions and partly to regional protectionism that is on the rise globally. China has exported appr. 852,000 mt of tomato paste in 2017. That is considerably lower than the top year 2011, when China exported 1,128,459 mt.

Tomato-based ingredients

Although exported could increase again, the Chinese tomato processing industry needs to look for tomato-based ingredients with a higher added value. One such product is lycopene. It is offered as a dietary supplement claiming to aid the prevention of cardiovascular diseases and prostate cancer.

A good indication of the current situation of any food ingredient in China is looking at the participants of the Food Ingredients China (FIC) 2018 trade fair (March 22 – 24, Shanghai). The following table shows exhibitors of various tomato-based products at that fair.

Product number
Sun-dried tomatoes 1
Dehydrated tomatoes 1
Tomato paste 3
Tomato powder 7
Lycopene 9

It seems that suppliers of tomato paste or dried tomatoes do not regard FIC as their typical trade fair. However, FIC is clearly the place to look for tomato powder and lycopene.

Eurasia Consult Food knows the Chinese food industry since 1985. Follow us on Twitter.

Eurasia Consult Consulting can help you embed your business in Chinese society.

Peter Peverelli is active in and with China since 1975.