Drinks galore – the Chinese typology of beverages

The Chinese typology of foods and beverages is one of the recurrent themes in this blog. The typical way in which such products are divided in categories in a certain region provides an interesting look on the influence of the local culture on eating and drinking.

This post will continue with this topic with the typology of beverages. This typology has even been officially laid down in a State Standard (GB), GB10789 to be precise. It discerns the following types.

Carbonated drinks

These are relatively new in China and still strongly connected to the Western lifestyle. China’s oldest carbonated drink: Beibingyang (Northern Ice Sea) has been revived recently, which I have introduced in a separate post on the reappearance of old brands.

Protein beverages

Although not a Chinese invention, this category is much more popular in China than elsewhere in the world. They have also been introduced separately in a previous post. Protein beverages are relatively viscous liquids made from various nuts or beans, or milk, or a combination. A number of them include probiotic cultures.

Bottled water

Paying a lot of money for something that you can get from your tap for a much lower price has also taken on in China. Apart from the large number of branded water, new mineral water brands keep appearing in China. Many are profiling themselves with the location of their source. The trend of 2015 in this category was mineral water from Tibet.

Some statistics of the past 5 years

Year Volume

(hls)

Increase

(%)

2015 841,016,000 7.60
2014 781,614,000 9.37
2013 665,114,000 13.01
2012 556,278,000 19.20
2011 178,900,000 23.67

The top brands in 2015

Brand market share

(%)

Yibao 20.4
Nongfu Spring 20.1
Chef Kong 11.0

 

Tea beverages

Tea is China’s national drink, but still, tea beverages have been introduced from overseas. When foreign ice teas were launched in China, many beverage makers tried to concoct their own versions. Tea beverages with various fruit flavours appeared one after another.

Milk tea

A rapidly growing subcategory are the milk teas, based on traditional milk or butter teas drunk by Mongolians and Tibetans.

Sizhou

The pictures shows the Sizhou brand milk tea, with the following ingredients:

Water, crystal sugar, whole milk powder, black tea, food additives (sucrose ester, sodium bicarbonate)

In the course of 2018, China’s tea aficionados have embraced a new trend, one that is encapsulated in the growing popularity of the milk tea brand, Hey Tea. Originally sold in a tiny alleyway in Jiangmen, southern China’s Guangdong province, the brand went viral on social media because of its signature “cheese” series — a cup of hot tea topped with light cheesecake mix. Since then, Hey Tea has developed into a franchise with more than 80 outlets in 13 cities across the country. In large urban centres such as Shanghai and Beijing, customers routinely wait for hours to get their hands on a cup of cheese tea. Hey Tea’s cheese-inspired beverages are just variations of the same milk-topped teas available at many urban teashops in China. Fresh milk, skimmed milk, and cream cheese are blended and poured on top of iced tea to create a layer of creamy froth about 3cm thick.

A new development in the Chinese tea beverage market is mixed tea drinks. Representative brands are: Teaka (tea + coffee), Chef Kong’s tea + milk, Cha pi (tea + fruit juice) and Hongchajun (tea + probiotics).

TeaPluss

Multinationals like Coca Cola cannot afford to miss out on the popularity of tea beverages in China. The company has launched a range of tea drinks branded Chunchashe ‘Genuine Tea House’. It is marketed as not containing sugar, but still leaving a sweet aftertaste. It comes in green, black and Wulong flavours.

Herbal tea

Traditional Chinese Medicine (TCM) is making an effort to cash in on the increasing interest in health foods among Chinese consumers, as has been introduced in earlier posts. The market value was estimated at more than RMB 40 billion late 2015. A very prominent application of medicinal herbs as food ingredients are the herbal teas that have become popular during the past few years. The first and most popular, Wanglaoji, is still based on a traditional recipe. Later herbal teas are marketed as modern health or functional beverages, comparing and competing with Western drinks like Red Bull. A very recently launched product in this category is Good Night (Wan An), produced by Wan’an Technology Co., Ltd. (Beijing). Ingredients are said to include:

natural GABA, theanine, chamomile and spina date seed

GoodNight

Wanglaoji launched its own cola drink, Wanglaoji Cola, in January 2018. The company promoted it during the Davos Summit.

Coffee beverages

Coffee being such a recent arrival in China, so closely linked to a Western lifestyle, it seems odd to find it as an officially sanctioned subcategory of beverages. However, they have become quite popular. Perhaps they are easier on the Chinese palate than the basic black brew. The have been introduced in this blog before, in a separate post.

Plant beverages

This category includes drinks made from the juice of vegetables and fruits, in various degrees of concentration. Cereal based drinks are also included. A subtype that is especially popular in China is called ‘fruit tea’ (guocha) in Chinese. The best English translation would be ‘nectar’. The are relatively viscous drinks with carrot or hawthorn pulp as the main ingredient. China’s top producer in this category is Huiyuan Fruit Juice (Beijing). The company was once an acquisition target of Coca Cola, but the deal was vetoed by the Chinese cartel watchdog. Huiyuan recently launched a range of juices in Malaysia under the Yami brand.

The latest addition to the fruit nectars is Zaoshanzha, a drink made from dates and hawthorn by Haoxiangni.

Another subtype is formed by the fruit vinegars. These beverages have become in vogue in the years 2015 – 2016 as health products that help burn fat. In the early stage, it looked as if they would become a success, cashing in on the general trend towards more healthy food in China. However, the tide seemed to turn mid 2018, when a prominent brand, Tiandi Nr. 1 (Tiandi Yihao)’s semi-annual report showed a turnover almost half that of the same period of the previous year.

Flavoured beverages

The literal translation of the Chinese definition of this category is: drinks made by combining food flavours, sugar or sweeteners, or acidifiers. We probably could also refer to these as: designer beverages. It is not always easy to distinguish these from other categories. If you boil tea leaves and the add other flavouring ingredients to the filtered liquid, you would have a tea beverage. However, a drink whose ingredients list includes tea extract, would count as a flavoured beverage.

Nutritious beverages

These include sports drinks and other functional beverages. This category started to boom in the course of 2016. As a result, Red Bull is confronted with an ever growing number of domestic competitors in China. One of the frist challengers (August 2016) was a vitamin drink by Want Want, presented in a gold-coloured can.

WantGolden

This product category is getting so popular, that a dairy company like Yili launched an energy drink of its own in April 2018: Huanxingyuan.

Solid beverages

These are sold in powdered from and infused before consumption. There is at least one traditional Chinese drink typically sold as such: suanmeitang or sour plum drink (literally: soup). A more recent, but still traditional, product is instant soy milk. Many members of the other categories are now also available in powdered form.

Yiben

The picture shows Yiben brand suanmeitang, which contains the following ingredients:

Water, fructose, crystal sugar, plums, citric acid, sodium citrate, plum flavour.

Senke Beverages has launched an innovative type of suanmeitang adding traditional Chinese medicinal herbs, marketed as ‘Lotus Leaf Suanmeitang‘, in the summer of 2018. Apart from quenching thirst, it is said to lower cholesterol and have a certain slimming effect.

Daring launches – low survival

Chinese beverage makers are quite daring in launching newly developed products on the market, where Western multinationals would organise more pilots to test the products’ reception by consumers. However, a recent survey by the China Food Industry Association reveals that only 5% of newly launched Chinese beverages survive. I guess that is test marketing the Chinese way.

 

How do Westerners appreciate this?

Are you getting bored with my academic stories? No problem, you can now relax watching this home brew video in which a Western lady living in China introduces here own favourite Chinese beverages.

Here is another Top 5, but then of the most bizarre Chinese drinks.

Latest trend: odd flavours

The structure of the Chinese soft drinks market is undergoing rapid changes. Consumers are developing an awareness of personality, paying more attention to individual needs and preferences. This has created a market for what Chinese have started to call ‘odd flavour water (guaiweishui)’. Laoshan, China’s first and for a long time only producer of mineral water, has launched Baishecaoshui (literally: white snake grass water). It is based on Baishecao (oldenlandia). Hey Song Sarsaparilla from Taiwan is also gaining popularity. The current top producer of mineral water, Nongfu Spring (see above), has also launched odd flavour drinks: Oriental Leaves (Dongfang Shuye), which does not contain herbal extracts, but a mix of flavourings and nutrients, and Red Pointed Leaves (Hongse Jianye), which contains extracts from American Ginseng, green tea and bamboo. This market is extremely volatile. The survival rate of new drinks is generally about 10%, and is now dropping to 5%, according to recent market studies. These products are catering to the young and young Chinese consumers have a low brand loyalty where food and drinks are concerned.

I will keep you informed by regularly updating 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.

 

 

 

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Chinese acquire a taste for olive oil

Healthy image

International olive oil producers are looking at China to increase their turnover, because the nation appears to have developed a taste for the healthy oil.

An telling story from the media is that of Cui Ronghua, a peanut exporter from the eastern port of Qingdao. His children were already drinking imported baby formula, so he decided that the family started cooking with imported olive oil as well.

Relying on imports

Because China’s climate is not suitable for mass olive production and more Chinese are realizing olive oil is generally healthier than most cooking oils, imports have surged in recent years, especially in top-tier cities such as Shanghai and Shenzhen, where 80% of olive oil shipped from Spain, Italy, Australia and Turkey is consumed.

China has imported 24,000 mt of olive in the first 8 months of 2018.

Jean-Louis Barjol, executive director of the Madrid-based International Olive Council, the world’s only international intergovernmental organization in the field of olive oil and table olives, said because China’s huge middle class is very conscious about food quality and health issues, the Mediterranean diet, which uses plenty of olive oil, is a practical way to maintain health.

“The numerous television advertisements released recently by Chinese olive oil importers and the campaigns led by export countries’ trade-promotion bodies to explain the uses of olive oil have resulted in a significant increase in sales, as well as the opening of hypermarkets in the nation’s main cities selling imported foods,” Barjol said.

“We found people in China are more inclined to buy extra-virgin olive oil, which does not require refining and is 20% more costly than refined olive oil,” said Amparo Chozaz, assistant managing director of the Spanish Olive Oil Exporters Association in Madrid.

Eager to gain more market share from their already established rivals from Italy and Greece in the China market, Spanish olive oil companies chose to join together in promoting their products under the name Spanish olive oil in the China market.

Chozaz said they spent 4.5 million euros ($6.19 million) on popular cooking programs featuring Spanish olive oil on Chinese TV stations, commercial websites and magazines. They also held national food events to boost their olive oil exports to China in 2013.

Despite the fact that olive oil accounts for only 1% of China’s total edible oil consumption, the country’s olive oil imports remained strong and hit 43,400 mt in 2013, an increase of 5.8% from the previous year.

China’s recent embrace of olive oil was a welcome change for Mediterranean nations, where olive oil prices plummeted in 2012 because of the weak EU economy and a bumper Spanish crop. China’s growing imports have helped support global olive oil prices.

The following table shows China’s imports of olive oil in the past few years.

Year Imports(mt)
2009 14,700
2010 20,200
2011 32,800
2012 41,000
2013 43,400

Outbound investment

The growing trade figure has also pushed Chinese companies to seek takeover targets overseas that can help meet demand for olive oil back home.

In 2012, six investors from China’s textile, garment and agribusiness industries secured a $15.47 million deal for the purchase of the olive oil company Kailis Organic Olive Groves, which owned 3,813 hectares of plantations in Western Australia.

Another major deal was sealed by Jiangxi Qinglong Group, which invested $32 million in Australia to purchase 5,000 hectares of olive plantations last year, as well as half of the shares in Tatiara Olive Processing Pty, a major olive oil processing company in Keith, South Australia.

The Chinese company intends to invest another $12 million to purchase new equipment and build needed infrastructure to ensure future production. This project is expected to produce 25,716 metric tons of extra virgin olive oil after 15 years and achieve sales revenue of $157 million by then. Both Australia and China will be its main target markets.

Shanghai-based Bright Food Group has bought a majority stake in Italian olive oil producer Salov Group, the company announced on Oct.7, 2014.

Shanghai Yimin No 1 Food Factory, a subsidiary of Bright Food, signed the deal with the Fontana family in Milan on Oct 1, according to a statement published on the buyer’s website.

Bright Food is a big name in dairy industry as well as categories of rice, pork and vegetable in China. It now has four listed subsidiaries.

In the online statement, Bright Food promised to stick to Salov’s values and missions and help promote its development in China.

Salov operates mainly in olive oil and other vegetable cooking oil. It distributes products under the Sagra brand name in Italy and Filippo Berio in overseas markets.

The oil maker currently markets its products in over 60 countries including China and maintains a leading position in Britain and the United States.

Domestic production

In spite of the adverse geographic conditions, a number of Chinese companies have invested in growing olives to take a part of this growing market with domestic products.

Tianyuan in Sichuan started planting olives in 1974 as part of State sponsored project. The company produces cooking oil and olive oil based cosmetics. Tianyuan cooperates with Chengdu University for its R&D.

Tianyuan

Garden City (the Chinese name is also pronounced Tianyuan, but with different characters) in Gansu is another domestic producer, established in 1998. It produces olive oil, cosmetics and olive leaf extracts.

OliveStory

China currently has 29 producers of olive oil with a total capacity exceeding 50,000 mt p.a. The amount of land devoted to olive growing was reported to amount to 86,000 hectares. Domestic production covers about 12% of the country’s current needs.

Exhibitions

The 16th China International High End Edible Oil & Olive Oil Beijing Expo 2017 was held in the China International Exhibition Centre, Beijing, April 17 – 19; the Shanghai International Exhibition Centre, August 30 – September 1; the Chengdu New International Exhibition Centre, October 12 -14.

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.

 

Harbin, Heilongjiang – where the West meets the East

It is about time to highlight another region in this blog. After Pu’er in China’s southernmost province Yunnan, I am taking you to the opposite in this blog, to Harbin, the capital of Heilongjiang, which shares a large border with Russia’s Siberia.

What Harbin has in common with Pu’er is that it is not a purely ethnic Chinese city. The name Harbin already betrays that it is not Chinese. A number of stories about the name’s original meaning; one is that it means ‘place to hang fishing nets to dry’ in Manchu, the language of the people with the same name. The Manchus were once a powerful nation, and the emperors of the last imperial dynasty of China, the Qing Dynasty (1622-1912) were Manchus, not Chinese.

Moscow of the orient

After the Russian Revolution, a large number of Russians fled to Manchuria, with Harbin as their unofficial capital. It gave Harbin its nickname ‘Moscow of the East’. A number of Russian buildings still survive, like the orthodox cathedral. Moreover, some Russian words entered the local dialect. The most famous one is lieba, from the Russian chljeb ‘bread’. It refers to a large round bread baked with beer yeast. This type of bread has become the symbol of Harbin cuisine.

Lieba

Watch this video for more information about the Russian influence on Harbin cuisine.

When the Japanese invaded Manchuria, they more or less let the Russians live there in peace, while the Russians accepted Japanese rule; they had no choice. In fact, for a short period, Russians, Chinese, Japanese, Koreans and several national minorities (in particular Manchus and Mongolians) lived in a peaceful coexistence in Harbin. This ethnic diversity has created an equally diverse local cuisine. Besides the afore mentioned bread, dairy products also became part of the diet of Harbin people, long before Chinese elsewhere started to appreciate the white gold. The potato, the typical staple of Western cuisine, has also grown roots in this city.

The consumption of coffee is also increasing rapidly in Harbin. Insiders report that there were more than 400 coffee shops in the city at the end of 2015, consuming about 60 mt of coffee beans per year.

Harbin Beer (better known as Hapi in China) is one of the top beer brands in China, though currently owned by Anheuser-Busch. The Harbin municipal government and Harbin Cultural Tourism Group are co-hosting the 2016 China-Harbin International Beer Festival, which will run from June 30th to July 17th at the Harbin Frozen World in Songbei district. There will be 11 beer tents, 16 food exhibition areas and four cultural exhibition areas. The total area of the beer festival is 600 thousand square meters

Agricultural region

Heilongjiang is one of the prime agricultural regions of China. The chernozem soil in Harbin, called “black earth” (Heilongjiang literally means: ‘Black Dragon River’) is one of the most nutrient rich in all of China, making it valuable for cultivating food crops. According to the municipal statistics of 2013, Harbin alone was good for more than 2% of the national grain output, 1% of the meat and 4% of dairy products.

BlackEarth

Heilongjiang is one of the major grain-producing areas in China, ensuring food security for the country. The grain output of the province reached 67.6 billion kgs in 2014, leading the country’s provinces since 2011 and accounting for one-tenth of the national total.

In recent years, the province has pushed forward agricultural modernization, promoted the green food industry and established marketing platforms for Internet Plus agriculture.

A sophisticated Internet Plus marketing platform has been established for rice products in the province. Heilongjiang rice is of high quality but used to sell poorly.

The following table shows the development of the total turnover of the Harbin food industry during the past few years.

Year Turnover(RMB bln)
2008 40
2010 50
2011 70
2012 90
2013 95

The processing of agricultural produce was still the most prominent activity in the Harbin food industry in 2013, as is shown in the following breakdown.

Activity ratio (%)
Processing of primary produce 68.0
Food production 15.3
Beverage production 8.6
Tobacco products 8.1

(tobacco is part of the food industry in Chinese statistics)

Top companies

Wondersun Dairy Industry Co., Ltd.

Wondersun is part of Heilongjiang’s biggest Agricultural State Owned Enterprise called Beidahuang Group. The company is ranked as fifth among China’s dairy enterprises and holds 7 subsidiary companies and 41 factories. Wondersun’s liquid milk ranks among the top ten in the country and was assessed as one of China’s most valuable brands in 2003. The company has formed a strong sales network that covers the whole country. Wang Jinghai, president of Wondersun, believes Heilongjiang is ideal for raising cows and producing dairy. The company is expected to sell products worth RMB 50 mln in 2015 through e-commerce channels and has set a sales goal of RMB 300 mln next year.

Heilongjiang Dairy Group Co., Ltd.

Heilongjiang Dairy Group was established in 2004, and the companies registered capital is 213 million RMB. It is one of the key national enterprises in the agricultural industry in China. The main shareholder is the Haerbin HIT group with 10 other small shareholders. The company has four brands, and the brand Longdan and Jinxing have a high reputation in the entire country.

Beidahuang Group

Beidahuang has 16 agriculture branch companies and Haolianghe Fertilizer Company. It is also the parent of Beidahuang Grains Co., Ltd., and Harbin Longken Malt Co., Ltd.. The company owns 624,000 hectares of land. The main crops are rice, soybeans, corns, wheat and brewing barley, supplemented with crops cash crops like red beans, kidney beans, pumpkin seeds, lucerne, medicinal herbs and flax. Haolianghe Fertilizer Co., Ltd. has an annual production of 200,000 mt of carbamide and other fertilizer products. Beidahuang Grains Co., Ltd. has an annual production of 1.4 million tons of refined rice and 100,000 mt of other byproducts. The yearly malt output of Harbin Longken Malt Co., Ltd. is 200,000 mt.

Harbin as gateway to China

Harbin has been on the radar of foreign investors from the beginning of China’s economic reforms.

Nestlé was one of the first Western multinationals to invest in China, with a joint venture for the production of infant formulae in Acheng, a suburb of Harbin in the 1980’s. This subsidiary of Nestlé has withstood all turbulent developments of China since then.

Nestle

Another multinational, McCain, started a potato processing venture in Harbin in 2005. The venture included a 7.5 ton/hour plant and two associated potato storage facilities. McCain Foods has been preparing for its expansion in China for a long time before it finally chose Harbin. The company stated that Heilongjiang Province produces the largest output of potatoes yearly. With its unique geological position adjacent to Russia, Harbin may prove an ideal investment location for companies who want to tap the Far East market, he said. The company decided to double its capacity in 2012.

Other foreign investors in Harbin include a yeast plant of Burns Philp. That makes sense, as bread has been part of the local cuisine for a long time. Even thought lieba is a kind of sourdough, yeast bread was easily adopted as a quicker alternative for the traditional Russian style bread. I myself have organized a number of baking seminars, when I was promoting yeast and bread improvers of Gist-brocades (now part of DSM) in China.

China has reacted quickly to cash in on the opportunities created by the trade war between Russia and the EU/US. This will be an extra large boost to the importance of Harbin as China’s northernmost foreign trade hub for food and agricultural products. Harbin’s ‘Russian’ background will certainly facilitate this development. The China Harbin International Economic and Trade Fair was renamed into Sino-Russian Expo in 2014.

The World Dairy Expo & Summit will be organised again in Harbin, april 21 – 24, 2016. The 2015 edition attracted 15,728 visitors from all over the world.

HarbinExpo

Organic and green food

Heilongjiang is China’s primary region for organic agriculture and Harbin is again a centre for this industry.

The municipal government has build a large modern food storage and distribution system for organic produce. The system includes a food logistics centre with an annual handling capacity of more than 1 mln mt, three distribution centres with a combined annual handling capacity of 1.5 mln mt and 11 grain depots each with a storage capacity of 200 000 mt.

HlGreenFood

McDonald’s sources the rice it uses on the mainland from Harbin. The city grows some of China’s top-quality rice. It has more than 600,000 hectares of paddy field producing 3.25 mln mt of rice a year as well as some 200,000 hectares of soybeans, none of it genetically engineered. It is not necessarily organic rice, but at least is produced according to China’s ‘green’ specifications.

Harbin also has annual corn output of more than 10 mln mt. The hybrid breed contains three times more protein than common breeds.

In addition to farming, the city government also invests in livestock breeding and processing. It has nearly 500,000 cows, 3 mln beef cattle and 11 mln pigs, and produces 880,000 mt of meat, 365,000 mt of eggs and 1.5 mln mt of milk a year.

The first flagship store for green food from Heilongjiang opened in Hong Kong in February 2014 offering more than 200 products. Of the 64 suppliers, 27 were based in Harbin.

Agreeable culture

Harbin is an interesting alternative to for international investors in the Chinese food and beverage industry. On top of the advantages introduced above, the people of China’s Northeast are known as easygoing and honest. The good people of Harbin are outstanding hosts, entertaining their guests with supersize dishes of fish and meat, to be washed down with lots of baijiu, traditional Chinese spirits.

HbDish

It may take a little longer to negotiate a deal. They take their time to get to know you and do not feel the urge to put on a business-like act when dealing with foreigners, as you often see in other parts of China. However, once the believe they have figured you out and the impression is positive, you are in.

Mulan – a food production centre in ‘greater Harbin’

The county of Mulan, in Harbin’s northeast, is an important site on the Silk Road Economic Belt. Its connection with Harbin has been strengthened by the completion of the Mulan-Songhuajiang Bridge.

Mulan has a population of 280,000 and covers an area of 3600 square meters. It administers six towns and eighty-six villages. There are thirty reservoirs along the Songhua River in the county and the forest coverage rate is nearly 50%. Mulan has been awarded various titles, such as “National Ecological Agricultural County”, “National Green Rice Production Base” and “National Rural Tourism Demonstration County”.

Mulan is also known for its, rice, coffee and beer. Located in the black soil area of northeast China, it enjoys distinct seasons, adequate sunlight and moderate rainfall, which contributes to the excellent quality of its crops. Hundreds of kinds of precious herbs grow in the 670,000 hectare forest and the abundant grassland feeds flocks and herds. With the improvement of agricultural infrastructure, Mulan has seen remarkable progress, especially in rice and red meat processing.

With the support of related policies and modern agriculture reform in Heilongjiang, the county has seized all opportunities to construct a grain production base, developing grain processing efficiency and funding a green food industry. It built an 8-square-meter agricultural production park to bring together various agriculture projects for cooperation.

In August, 2014, the Chinese Academy of Agricultural Sciences (CAAS) Grain Processing Technology Institute (Harbin) settled in the industrial park, the first national organization instituted by CAAS in Heilongjiang. It focuses on grain processing, product innovation and inspection services. This move inaugurates a new cooperation method between national research groups and local food industries.

In future, Mulan plans to expand the market to Russia, North Korea and Japan with the help of the Heilongjiang Silk Road Belt and, in three to five years, become the leading food research center of Northeast Asia. That development would improve Heilongjiang’s influence in the area. The government intends to pay more attention to ecological protection and sustainable development under emerging circumstances to create a better Mulan.

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.

Public nutrition in China

Many Western governments believe that citizens should be encouraged to take care of their own health and see to it that they get sufficient vitamins and minerals by eating a varied diet, with plenty of fresh fruits, vegetables, whole cereals and different protein sources. Adding vitamins and minerals to processed foods is allowed, as long as producers abide by the relevant regulations, but the government does not make public funds available to finance R&D and propagation of fortified foods.

Government policy

China is one of the nations that actively support public nutrition. This means that the government finances R&D into the field of food fortification and the promotion of fortified foods, as a means to enhance the general state of nutrition of the population.

This is not surprising, because the concepts of food, nutrition and medicine are much more intertwined in Chinese culture (Traditional Chinese Medicine TCM) than in the West.

The leading policy making organization here is the Public Nutrition Development Centre (PNDC), an organization under the State Development and Reform Committee of the State Council. R&D is coordinated by the Nutrition and Food Safety Institute of the Centre of Disease Control under the Ministry of Public Health.

This policy, combined with a population of approximately 1.4 billion people, has created a highly attractive market for suppliers of single nutrients, nutrient pre-mixes, and ready-to-eat fortified foods. The Food Ingredients China (FIC) 2018 trade fair (March 22 – 24) included 26 suppliers of various vitamins, and many more of minerals other nutritious food additives.

Nutrition pagoda

The Chinese love to give localise foreign things and ideas. The Western nutrition pyramid has been made Chinese by changing it into the nutrition pagoda.

From top to bottom, the recommended daily intake of various nutrients is as follows.

Oil &fat: 25 – 30 gr.

—————————————-

Milk & dairy products: 300 gr.

Beans & nuts: 30 – 50 gr.

———————————————-

Meat: 50 – 75 gr.

Seafood: 50 – 100 gr.

Eggs: 25 – 50 gr.

—————————————————-

Vegetables: 300 – 500 gr.

Fruits: 200 – 400 gr.

———————————————————-

Staples: 250 – 400 gr.

Water: 1200 ml.

—————————————————————-

(The garlic-man advises to walk at least 6000 steps a day)

Generous budget

The Chinese government has a made a generous budget available to develop pre-mixed micronutrients.

Most micronutrients cannot be simply added to and mixed with other ingredients. Manufacturers of fortified foods need to be sure that the nutritional value of their product when consumed meets the promise they make in the nutrition information on the packaging. Some nutrients lose activity during heating, while others may dislike a low or high pH value. Some nutrients dislike one another’s presence.

This means that many nutrients need to be buffered or treated otherwise. This is specialist knowledge held by a small number of specialist scholars.

These researchers develop processes to protect single nutrients and formulate nutrient pre-mixes in state sponsored research facilities. However, those organizations are less suited for industrial production. A number of more entrepreneurial researchers have set up companies for the production of ready-to-use nutrients during recent years.

Several of them have been very successful and have proved to be fierce competitors to the multinational players like FMC or DSM, who are competing for a share in this lucrative market. The basis of their success is exactly their forming a close and effective chain with government regulators, research institutes, nutrition professionals and food and beverage manufacturers.

VAoil

Ongoing projects

A number of projects has already been launched:

  • Infant formulae and ‘nutrition packages’ for primary school children; infant formulae are by far the largest application, as well as the best known one. The nutrition packages are ready to use packages of micronutrients for children of primary school age. Experiments have been conducted with the latter, handing out nutripacks to children (see picture below), but providing such packages has not been institutionalised so far. The packages use soy or soy protein as a basis and add Vitamins A, D, B1, B2, B12, folic acid, iron, zinc and calcium.
  • Vitamin A fortified cooking oil; as a rice eating nation, many Chinese lack vitamin A and the PNDC has been searching for the best carrier for this vitamin. Cooking oil is one vector that has been tried, in cooperation with COFCO. Products have been launched, but sales seems to be disappointing so far.
  • Wheat flour fortified with 8 nutrients; Vitamin A is also allowed in flour, another ingredient available in every Chinese household. Guchuan Flower has partnered with the government in developing fortified flour  This experiment seemed to have failed as well, because consumers are not willing to pay a premium price.
  • Fortified rice; in cooperation with Bühler, DSM has develop a process to fortify rice with several vitamins and minerals by making fake rice granules that are mixed with regular rice. This Nutririce is produced in Wuxi (Jiangsu). Bühler acquired DSM’s share in the plant late 2013, but DSM remains committed to developing this product. As rice is regarded as a strategic staple, this entire development process has been conducted in close contact with the relevant authorities.
  • Iron fortified soy sauce; iron deficiency is huge in China and soy sauce has been found a proper carrier for iron (EDTA iron). It is current the most propagated fortification project in China. A number of soy sauce manufacturers have launched iron fortified products, but again so far the results seem to be somewhat disappointing.
  • Iron fortified wet noodles and steamed bread (mantou); this multi-nation research project has been initiated by the Food Fortification Initiative (FFI) Secretariat in 2009 and executed by the Nutrition and Food Safety Institute of the Centre of Disease Control. The results were promising, but this has so far not resulted in the regular production of such fortified products.
  • Probiotics; the fortification of suitable foods and beverages with probiotics like oligosaccharides was officially launched in January 2007. A sufficient intake of probiotics promotes a healthy gut flora.
  • Iodine salt: until recently, iodine salt was required in all manufactured foods. This law changed in May 2018. Since then iodine salt is only required in specific cases like regions with iodine deficiency. Another aspect of the new rules was that iodine also has to be listed on the packaging of manufactued foods.

NutriPacks

The lack of progress of several of the the above mentioned projects seems to indicate that public nutrition in China still has a long way to go. Possibly, the many food safety incidents are negatively affecting these campaigns. Chinese consumers are still waiting for regular food to be safe for consumption, so there is little attention left for fortified food.

Moreover, as a result of the public food safety concern, the Chinese media regularly report about ‘excessive number of additives’ in certain foods like soft drinks or ice cream. Fortified foods need to comply with the regulation to indicate all ingredients on the label, so they may end up with an even longer list of ingredients than the non-fortified competitive products.

National Nutrition and Health Committee

China has created a special committee to implement the country’s national nutrition plan, according to the National Health Commission (NHC). Jointly established by NHC and 17 other government departments to coordinate and advance nutrition and health related work, the national nutrition and health committee held its inaugural meeting on Feb. 28, 2019, in Beijing. Among the key jobs are improving food nutrition and health standards that build upon food safety, and establishing subcommittees at local levels to organise nutrition education and training, to conduct pilot programs and spread scientific knowledge in this regard. The national nutrition plan (2017-2030) was released by the General Office of the State Council in July 2017, with the goal of raising awareness of nutrition among the Chinese people, reducing obesity and anemia among students

National School Milk Programme

The Chinese government has introduced the National School Milk Programme in 2000 to support the improvement of students’ nutrition and the development of the Chinese dairy industry. After a decade of operation, the programme reached more than 8 mln students by the end of 2011. And thanks to the Nutrition Improvement Programme for Rural Compulsory Education Students (NIPRCES) launched in 2012, the School Milk Programme more than doubled its coverage in the following years. At present, nearly 20 mln Chinese students receive milk in their schools every day on average. The School Milk Programme creates demand for higher quality and locally produced and UHT processed milk, sourced from licensed dairies. After the School Milk Programme was introduced in 2000, China’s raw milk production increased by 10% per annum over a period of 13 years, dairy cattle stock increased from 4.6 mln to 14.4 mln and annual dairy products consumption volume per person grew from 6.7kg to 27.86kg. A study made in 2009 shows that children gained an extra of 1.2cm in terms of height and 0.6 kg in terms of weight on average after receiving school milk regularly for three years. Though the School Milk Programme has expanded quickly over the past years, it covers only 15% of the total students at the stage of mandatory education. In light of increasing public attention on student nutrition status and the expansion of programmes like NIPRCES, the School Milk Programme is expected to benefit more students in the future.

Entrepreneurial initiatives

However, there is already a large number of fortified foods available in China. Many of them add single nutrients, in particular calcium. Calcium deficiency is rampant in China as well, and calcium compounds are easy to add to foods and beverages. Iron, zinc, magnesium and vitamins in various combinations are added too.

An interesting example is Mondelez (formerly Kraft) that is producing biscuits in China with 10 nutrients added. The following table shows the content of each nutrient per 100 gr of finished product as indicated on the consumer packaging.

Mondelez

Nutrient dosage
Vitamin A 833 IU
Vitamin B1 0.4 mg
Vitamin B2 0.4 mg
Niacin 4.0 mg
Vitamin B4 0.4 mg
Vitamin D 3.2 mg
Folic acid 58 mg
Zinc 4.5 mg
Iron 4.0 mg
Calcium 290 mg

Another example worth mentioning here is Bread Pan, produced by Oishi, a Chinese venture of Philippines based Liwayway Holdings. The bread is sold as packed slices and marketed as a breakfast food. It is flavoured with shredded beef. Added nutrients per serving are listed as follows.

BreadPan

Nutrient dosage
Vitamin A 43 iu
Vitamin C 9.80 mg
Vitamin D3 17.55 iu
Vitamin B1 0.50 mg
Vitamin B2 0.15 mg
Vitamin B3 1.30 mg
Vitamin B6 0.15 mg
Vitamin B9 11.70 mg
Vitamin B12 0.13 mg
Vitamin B5 0.40 mg
Calcium 63 mg
Iron 0.70 mg
Zinc 0.40 mg

Some manufacturers seem to struggle between the will to make their product more nutritious additives and the need to maintaining the texture and flavour of the original product. In other posts, I have pointed out that most industrial bread sold in China comes with an impressive ingredients list. Mankattan Food is offering a ‘fortified bread’ with the following ingredients.

Whole wheat flour, high gluten wheat flour, water, HFCS, yeast, shortening, salt, gluten powder, calcium propionate, calcium carbonate, compound enzyme (calcium sulfate, vitamin C, xylanase, alfa-amylase, glucose oxidase), calcium lactate, food flavour, beta-carotene, mixed vitamins and minerals (maltodextrin, ferrous pyrophosphate, nicotinamide, zinc oxide, vitamin B1, vitamin B2).

This bread indeed supplies the consumer with some additional nutrients, but also contains a number of non-natural ingredients that are not strictly needed to make artisanal bread.

Most of these manufacturers of fortified foods and drinks do not cooperate with PNDC. This indicates that lack of strategic and marketing knowledge is part of the problem in propagating public nutrition by the authorities.

Does it work?

So is a public nutrition policy like that of the Chinese government more effective that the propaganda to eat well policy of most Western governments? So far, no comparative research has been conducted. My personal impression (I have been involved in a global market survey concerning public nutrition) is that big city dwellers in China or West Europe usually have few nutrition problems. They have the knowledge about nutrition and have access to nutritious food ingredients. The difference could be in the poorer regions on those countries and the entire globe. It does make sense to add nutrients to staple foods or food ingredients that are used in most households.

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.

 

Food companies in China’s top 100/500

The list of the 2014 Top 500 Chinese enterprises in terms of turnover included the following food and beverage companies.

Rank Company Turnover 2013(RMB bln) Business
84 COFCO 189.05157 Food in general, see our blog on COFCO vs Nestle
94 Bright 159.38217 Dairy
165 Wahaha 78.27856 Beverages
168 New Hope 77.89271 Dairy
195 Wuliangye 63.09445 Spirits
253 Yili 47.77887 Dairy
257 Shuanghui 47.20541 Meat
299 China Salt 39.82552 Salt
307 Luzhou Laojiao 38.53574 Spirits
321 Zhengbang 36.04589 Meat, poultry
330 Wens 35.18706 Meat, poultry
337 Moutai 34.62301 Spirits
407 Qingdao 28.29098 Beer
430 Xiwang 27.12007 Corn processing
451 Weiwei 26,18069 Soybean milk
470 Daohuaxiang 24,86100 Spirits, beverages
482 Hope-Full 24,11415 Soybean processing

 

The two companies in the top 100 are both state owned enterprises that have succcessfully adapted to the new economic reality in China. Still, the second two are private enterprises.

Spirits remains the best represented type of business with four companies on this list. If we broaden the scope to alcoholic beverage in general, we can add Qingdao and COFCO (Great Wall Wine) as well, to make 6 out of 17 companies.

However, as Mengniu Dairy is now a subsidiary of COFCO, the current list also de facto comprises 4 dairy companies, 2 of which are in the top 100.

You may want to compare this list, which is based on the 2013 turnover, with the list of the Top Food Companies of 2014, which ranks the enterprises according to their estimated brand value.

Food & Beverage in China’s 2017 top brands

The 2017 China Top 100 brands have been published late May. I have extracted a sublist of the food and beverage companies in that list and simply add it to this blog, so we can compare the results with the situation of 2014. First the list.

Rank Brand Industry
6 Moutai spirits
9 Wuliangye spirits
19 Yili dairy
21 Mengniu dairy
25 Wahaha beverages
64 Chef Kang noodles
67 Shuanghui meat
73 Luzhou Laojiao spirits
74 Tsingtao Beer beer
80 Bright dairy
84 Kouzijiu spirits
85 Junlebao dairy
92 Huiyuan fruit juice
93 Changyu wine
95 Gujing Gongjiu spirits
96 Yingjia spirits
97 Daoxiangcun pastry
98 Quanjude Peking duck

Spirits stand out as the leading industry with 6 out of 18 brands in the national Top 100. Dairy is the runner up with 4. Quanjude is a restaurant chain rather than a manufacturing company, but it also markets vacuum packed ducks ready for consumption. Regular readers of the blog will recognize most of the names. Don’t hesitate to use the Search function to look for more information of each company in other posts.

Almost all companies have rising dramatically, in particular Moutai. Three years ago, only 3 F&B companies were included in China’s top 100, now 18. This corroborates what has been said about the Chinese food industry in numerous recent publications: it is rapidly becoming a pillar of the national economy.

This post concentrates on the top companies, but Eurasia Consult has a database of Chinese food & beverage producers of more than 30,000 companies.

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.

 

Protein drinks – the Chinese alternative for dairy

In previous blogs on dairy (traditional dairy, formulated dairy), I have pointed out that in spite of the rapid development of this industry in China, the taste of milk is still inhibiting for most Chinese. Especially the formulated products are meant to address this problem by creating a host of products that deliver the nutrition of milk, while disguising the creamy flavour that so many Chinese still find hard to get used to.

However, there is an alternative group of products that have a nutrition profile more or less like milk, but lack the problematic flavour, because it is plant based: protein drinks. While soy-based drinks have made considerable progress in Europe recently, as life style products, they have been popular in China for ages.

Traditional products like soybean milk have appeared in various modernised versions, and other protein drinks from almonds, peanuts, or coconuts have been added. Their popularity is evident from the large variety of products available in Chinese supermarkets. The total turnover for protein drinks in 2015 exceeded RMB 100 bln, and is expected to 258.3 bln by 2020.

The main technical problem to crack in these products is maintaining a proper emulsion. Protein gel is combined with an oil-in-water emulsion, which results in a non-heatstable liquid, which can only be countered with a mix of emulsifiers. Most recipes use sucrose ester, combined with monoglyceride, alginates, etc.

Let’s have a look at the most representative types, according to source.

 

Soybeans

Soybean milk is a traditional product in China. The earliest records of it date from the West Han period (2nd Cent. B.C.).

The process requires soybeans with a sufficient water content (10% – 14%). After the hulls have been removed, the beans are pressed and water is added. In the modern production process, a chelating agent like EDTA is added for stabilisation. The raw soy milk is cooked for about 10 minutes. After centrifuging, nutrients like fat, sugar, or vitamins and minerals (e.g. calcium to create the perfect alternative for milk) can be added. Flavours can be added too, either to strengthen the typical soy flavour, or adding new flavours, typically those of fruits.

China’s top producer of soybean milk is Weiwei, located in Xuzhou (Jiangsu). The company’s main product is instant soybean milk, which make it the most convenient of the protein beverages introduced in this blog. The other drinks are only available in liquid form.

Image

 

Soybean milk is so popular in China, that KFC has decided to add it to their breakfast choices in their Chinese outlets.

KFCsoy

Weiwei continued on this development by launching soybean milk in a bottle that resembles the classic Coca Cola bottle late 2017, even stronger suggesting that soybean milk can be consumed as a healthy alternative for soft drinks.

Another recent innovation by Weiwei is launching a range of canned soybean milk with various flavours, including coffee.

Almonds

Almond milk is not really an alternative for dairy, as milk is used as an ingredient. The recipe I consulted for this blog lists almonds and Chinese yam (shanyao) as the main ingredients and milk and honey as auxiliary ingredients.

The almonds are roasted, crushed and cooked with the milk and yam. The honey is added after the milk starts boiling.

Almond milk has been made popular in China by Lulu, a company based in Chengde (Hebei). The typical thin cans of Lulu have been on the market for more than two decades, as an alternative for milk, as well as a drink for those who cannot drink alcohol during a banquet. Lulu realised a turnover of RMB 2.112 billion in 2017.

It is thicker than soybean milk and quite sweet. One Dutch friend called it ‘liquid marzipan’ after his first sip. With ups and downs, Lulu is still a serious player in this market.

Image

Lulu’s turnover started to slip in 2017 and the company is trying to recoup market share by launching special protein beverages for children, like Xiao Lulu (‘Littel Lulu’).

Coconuts

Coconut milk will not be a new product for most readers. It is a traditional product of Southeast Asia, and that is the region from which it gradually conquered China. Those with 1.5-2% fat content have been very popular in China for many years, and the market continues to grow. The top producer of coconut milk in China is Yedao (literally: ‘coconut island’), located in the tropical island province Hainan.

Coconut milk is pressed from the flesh of unripe coconuts. Only some water and sugar are added.

Like Lulu’s almond milk, Yedao’s canned coconut milk quickly appeared in Chinese restaurants as the drink for drivers and other people who were unable to drink alcohol, but wanted something with a more stimulating taste than water or chemical laden soft drinks.

CoconuM

Walnuts

Walnut milk is made from walnuts and water. Walnuts are ascribed a number of medicinal properties, which are prominent in the marketing stories of the various manufacturers. Unlike the protein drinks introduced above, there is not ‘leading player’ in this market yet. Still, a National Quality Standard (GB/T 31325-2014) has been promulgated for walnut milk in on Dec. 5, 2014.

Image

An interesting development is that one Chinese coffee maker (Hogood) has launched a new type of coffee creamer made from walnut milk, marketed as Walnut 007.

Peanuts

Peanut milk, like the almond variety, is using the real thing as an ingredient. It is made from peanuts and milk, and even more than almond milk, peanut milk is more peanut-flavoured milk, like the ginger milk introduced in an earlier blog. It enriches the already nutritional milk with linoleic and arachidonic acid. And it covers the creamy taste of milk with a soft peanut flavour.

Yinlu in Xiamen (Fujian) is a major producer of peanut milk. The company is now under the control of Nestlé, which makes Nestlé the first foreign player in this market. Recently, Nestlé has announced that it is looking at updating its Yinlu peanut milk brand to satisfy consumers who prefer fewer additives and alternative ingredients.

Image

Yinlu has launched two products with multiple raw materials in 2017: red beans + peanuts and Job’s tears + peanuts.

The growing popularity of protein beverage has attracted the attention of the recently revived beverage brand Beibingyang. The company has launched a peanut drink of its own trying to create synergy between its well known brand name (including the polar bear logo) and the current interest in protein beverages.

Hickory

The latest addition to this growing range of beverage is the hickory protein drink from Tiannie Hickory Food Co., Ltd. (Guangyuan, Sichuan). The product has been launched in 2014. The raw materials are grown locally.

Tiannie

Sesame

Nanfang Food (Nanning, Guangxi) produces black Heiheiru brand sesame milk, a protein drink made from black sesame. Its ingredients list:

Water, black sesame, sugar, milk powder, starch, peanuts, sodium caseinate, sodium tri-polyphosphate, xanthan, CMC, carrageenan, monoglyceride, sucrose ester

This list shows that Heiheiru is not really a ‘sesame drink’, but a compound protein drink flavoured with black sesame. It partly owes its popularity to the colour black that is associated with a high anti-oxidant content.

Rice

Dashu Life Sciences (Jilin), in cooperation with Jiangnan University, has developed a new type of rice protein beverage under the Shangshanyuan (Sunshary) brand.

Oats

The oat drink Oatly has been introduced in China in the course of 2018 and is gaining popularity in coffee shops as vegetarian alternative for cow milk. Oatly’s introduction to China was aided by one of its Chinese investors: China Resources.

Compounds

Compound protein beverages have also appeared, like the walnut peanut milk produced by Taigeili in Chengdu (Sichuan). This company is known for innovative products like rose vinegar.

Image

Not so natural

Although these drinks are all marketed as healthy beverages (not health beverages, that is another category in China), the ingredients listed on the label of Hengyi Yinxue walnut beverage includes an impressive number of additives:

Water, walnut kernels, crystal sugar, additives (xanthan, polyglycerin fatty acid ester, sodium tripolyphosphate, sodium pyrophosphate, sodium d-isoascorbate, sodium dihydrogen phosphate), food flavour

This way of listing additives is presecribed by Chinese law. Interestingly, flavours are not regarded as additives in this regulation and therefore not listed within the brackets.

 

Foreign interest

The Reignwood Group, the Chinese distributer of Red Bull, has acquired a 25% stake in Vita Coco, a US producer of coconut juice, in July 2014. In China, through Vita Coco’s own feet on the street along with the approximately 2000 employees of Red Bull China, the brand will be available about 130,000 stores soon.

Minutemaid has launched its own range of protein beverage in China mid 2017.

The dairy empire strikes back

China’s top dairy companies have adopted an ‘if you can’t beat them’ strategy. Mengniu and Yili, the top 2, have launched their own protein beverages recently. Yili announced its plans during a public meeting at the end of 2014. Mengniu has entered into a joint venture with US-based WhiteWave Foods Company, a leading consumer packaged food and beverage company in North America and Europe early 2013. The jv is marketing WhiteWave’s Silk brand protein drinks in China. This product is common in the US and is an affiliate of Alpro, a brand in Europe, though its positioning in China is quite unique. With its convergence of flavours, Silk’s positioning as a 100% natural solution, targeting those that are lactose intolerant, could spell success for Silk in China, especially as consumers become ever more sceptical regarding the origin, nutrition, safety and environmental impact of the food and beverages they buy.

SilkAlmond

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.

 

Potato growing & processing in China

Few people know that China has already been the world’s largest potato production and consumption country since 1978.

The humble potato, a staple of many a European nation, used to have only a supporting role in Chinese cuisine, even though it has been grown in China for about 400 years. Known as tudou (literally: ‘earth bean’) in colloquial Chinese, or malingshu (‘horse bell tuber’) in more formal texts, the potato traces its history in China to the Ming dynasty, and was popularised by French missionaries in the eighteenth and nineteenth century.

As the name indicates, potatoes used to be seen as a vegetable in Chinese cooking. In home style cooking, in particular in Northwest China, where the potato is an indigenous crop, chunks of potato are added to stews, particularly with beef.

Chefs have created some deep fried delicacies, including tasty little patties and a finely shredded version of the French fry, which is sheer indulgence. Most common in the home and (home style food) restaurants, is the “tudousi“. This dish might come with strips of pork, slices chili, and pickled vegetables.

Image

Some cooks are even combining the foreign potato with very traditional Chinese flavours like the famous yuxiang (fish flavour) spice mix, creating dishes like yuxiang potatoes, shown in the picture below.

YXpotato

The ultimate dish in this series should be: Sweet and Sour Potatoes, a potato variation on the most typical of Chinese dishes in overseas Chinese restaurants: Sweet and Sour Pork.

SweetSourPotatoes

However, potatoes have started to challenge the great staples: millet, wheat and rice in China in recent years. The arrival of Western style restaurants and in particular fast food chains, have introduced potato dishes to virtually all urban Chinese. The countryside can be expected to follow soon.

Potato growing

China’s market year 2017/18 fresh potato production is forecast at 97 mln mt. The top regions, Inner Mongolia, Gansu, Yunnan, Sichuan and Guizhou, are good for 45% of the national volume.

The following table shows the regional output of potatoes in 2015.

Region Volume (mt)
Gansu 2,146,000
Inner Mongolia 1,883,000
Sichuan 1,612,000
Guizhou 1,503,000
Yunnan 1,444,000
Chongqing 1,017,000
Heilongjiang 565,000
Shaanxi 561,000
Ningxia 423,000
Hubei 415,000
Liaoning 383,000
Shanxi 362,000
Qinghai 362,000
Hebei 348,000
Hunan 285,000
Jilin 237,000
Fujian 231,000
Zhejiang 163,000
Guangdong 162,000
Anhui 49,000
Tibet 5,000

Potatoes are getting so important in China that the Zhengzhou Commodity Exchange (ZCE), one of China’s two agricultural commodities exchanges, intends to introduce potato trade. ZCE is reporting problems with obtaining the necessary permits from the China Securities Regulatory Commission and other relevant central authorities, that are said to need time to “consider more about the development of the market”.

The ZCE has been mulling over the launch of the product for quite a long time. The exchange disclosed its plan to introduce potato futures trading in early 2012, saying the contract was set to be launched by the end of that year. Later that year, the agricultural authorities of Gansu province said all preparations for potato futures had been completed.

Potato growing as poverty relief

Guizhou and Gansu province are expanding the amount of land they have planted in potatoes in accordance with a Ministry of Agriculture plan which calls for around 6.7 mln hectares of them by 2020. One out of 100 towns or villages in under-developed Guizhou province is Lutang, which now has much of its land for potato growing. The head of the village, Zhang Wei, says they have 1.15 mln kgs of top quality potatoes that they plan to distribute to farmers for free to use on 200 hectares of land. Local authorities say that as many as 60 percent of the households in the area living with poverty see the potato planting as a good method to help them generate income and two special cooperatives have been set up to keep prices stable and to ensure income. The planting area is expected to reach just over 660 hectares by 2018.

China to import seed potatoes from the UK

A potato deal signed in 2018 is expected to bring major benefits to Scotland, with around 70% of the 100,000 mt of seed potatoes exported annually from the UK coming from Scottish farms. Seed potatoes are varieties intended for replanting to produce new plants and tubers. They are grown in special conditions to lower the risk of disease. Scotland’s potato crop is recognized within the European Union for its high health status. The potato is now China’s fourth staple crop after rice, corn and wheat and demand for fresh potatoes is increasing at an annual rate of around 5%. “The rapidly-growing Chinese market offers huge potential for UK farmers,” said UK International Trade Secretary Liam Fox. “According to research by Barclays, around 60% of people in China would actually pay more for a product, just because they knew it was British.”

Frozen French fries

Only 10% of the national output is further processed into various (semi)finished products.

In the last three years, China’s rapidly changing lifestyles and eating habits have resulted in a booming fast-food industry. Chinese consumers, especially those who live in large urban areas, have accepted Western-style fast-food restaurants that serve French fries and other popular side dishes as a way of life in China.

China’s market year 2017/18 frozen French fries (FFF) production is forecast at 250,000 mt, a 10% increase from markt year 2016/17, driven by strong domestic demand. Experts forecasts China’s market year 2017/18 FFF imports at 120,000 mt, about a 5% decrease, due to increased domestic production. The United States continues to dominate China’s FFF import market.

Frozen French fries require raw materials compliant with strict requirements, such as shape, starch content, sugar content, and color. Therefore, processors usually contract with farmers to produce potatoes which meet certain quality conditions. After a poultry disease outbreak and other problems in that industry, which affected Kentucky Fried Chicken and McDonald’s, the largest buyers, production of frozen french fries has decreased considerably. Although the scare seems to be over, production is not expected to rise considerably soon.

Foreign investors

Still, a market like this is bound to attract international investors.

  • JR Simplot established in 1992 in Beijing’s Fengtai district, is a joint venture between US-based JR Simplot , McDonald’s and Beijing Agricultural, Industrial and Commerce General Company and primarily produces french fries and hash browns for McDonald’s and other East Asian customers. It was fined a record RMB 3.9 million for water pollution in April 2015.
  • McCain Foods started construction of a French fry processing facility in Harbin (Heilongjiang) in 2004. The new company, which was registered in the Harbin Economic and Technological Development Zone, was McCain’s first processing facility in Asia.
  • Aviko has a production facility in Minle (Gansu) since 2008, and in June 2014 signed another project in Zhangjiakou (Hebei), near Beijing. The latter is a partnership with Snow Valley Agriculture. The joint venture was dissolved in December 2018.
  • Conagra has acquired TaiMei Potato Industry Limited, a potato processor in Shangdu (Inner Mongolia) in July 2014.
  • Farm Frites has signed an agreement with Inner Mongolia Linkage Potato Co. Ltd. in September 2014, to set up a joint venture in Chifeng (Inner Mongolia). The Joint venture will build a new french fry factory and target the premium segment of the Chinese french fry market. Inner Mongolia Linkage Farm Frites Co. will be for 75% owned by Linkage, while Farm Frites will own 25%. Production was to start in 2017, but the construction of the plant seems to have been delayed.

The above list clearly indicates that while all international players are interested in developing the Chinese market, it has so far not been a smooth ride for any of them.

Top 3 brands

Instead of looking at volumes, this blog prefers to introduce ‘top brands’ from a popularity perspective. Here are the top 3 french fries chain outlets according to a Chinese consumer site.

1 Calbee Crazy Potato Calbee

2 Tudou Xinyuan (Potato Wish) TudouXinyuan

3 Mofa Tudou (Magic Potato) MagicPotato

 

Potato starch

China’s 2017/18 season potato starch production is forecast at 540,000 mt, a 20% increase from the previous year. Imports are forecast at 41,000 mt, up 10%. On September 16, 2017, China’s Ministry of Commerce extended the countervailing duties levied on potato starch imported from the EU for another 5 years. Potato starch imports from the EU are subject to countervailing duties ranging from 7.5% to 12.4%. The countervailing duty is not the only duty that applies to EU potato starch exports to China. The countervailing duty is in addition to an anti-dumping duty ranging from 12.6% to 56.7%, dating back to August 2006. The anti-dumping duty is up for review in February 2018..

Top Chinese producers of potato starch are:

Company Location
Huaou Starch Inner Mongolia
Lantian Potato Gansu
Beidahuang Potato Heilongjiang
Yundian Starch Yunnan
Weston Potato Qinghai

Potato starch can be used to make noodles, be it in combination with starches from other sources. Shanghai Suiquan Food Co., Ltd. produces ‘Potato Noodles’ with the following ingredients.

Water, potato starch, corn starch, cassave starch, salt, food additives (sodium dehydro-acetate)

Potato chips

Industry sources estimate China’s market year 2017/18 sliced potato chip and fabricated potato chip production at 450,000 mt and 350,000 mt, a 7% and 13% year on year increase, respectively. The total turnover of this product group was RMB 29 bln in 2017.

Potato chips have become a popular snack food in China. Most international players are studying their options, and some of them, like Pepsi (Lay’s), have started local production. However, not any potato will do. Each must be precisely the right variety, grown into an ideal shape and size and available on the exact schedule necessary to supply the chip factories in Beijing and Shanghai. Potatoes grown by local farmers don’t always make the cut. Unless they are handled as delicately as eggs, they risk bruising — a common side-effect of China’s manual farming techniques and crude distribution methods. To ensure the yellowish color of its Lay’s chips, Pepsi also requires potatoes to

be low in both sugar and water content. The ideal specimen is about as large and round as a baseball. Even now, Pepsi’s two farms still produce only about 40% of the potatoes Pepsi needs in China.

Other major potato chip brands (manufacturers) in China are: Calbee (Calbee), Lay’s (Pepsi), Oishi (Liwayway) , Shanghai House (House), Carrefour (Jishijia). P&G has negotiated with a potential partner in China for the local production of Pringles.

Top 3 brands

Here are the top 3 potato chips brands according to another Chinese consumer site.

1 Lay’s Lays

2 Capico Capico

3 Pringles Pringles

Capico is the only domestic brand in this list. Its producer, Dali Foods (Fujian) got listed on the Hong Kong Stock Exchange in November 2015. Dali is also one of China’s top producers of biscuits.

The following screenshot shows how the major brands seem to imitate Pringles’ packaging, while offering their chips for a significantly lower price.

PotChipsComp

The latest launch in this product group was from the Hengyou Group (Shantou, Guangdong). This company produces a range of potato chips under the Bidetu “Peter Rabbit” brand.

Mashed potato

The Chinese drive for developing novel foods is limitless. Baiguyou (Wuhan) has developed a range of instant mashed potato products under the Painini brand. It is packed in cups that can be filled with boiling water like cups of instant noodles. The product is available in several flavours, including: beef, walnut, curry, chicken, pumpkin, etc.

Potato-based instant noodles

Chinese researchers are developing a recipe and production process for instant noodles in which part of the wheat flour is replaced by potato flakes. This fits the efforts of the Chinese government to make the potato one of the country’s staple foods (see below) and will enhance the nutritional contents of instant noodles, possibly breaking the ‘junk food image’ of instant noodles. The following ingredients list appears in one of their publications.

Ingredients  ration (%)
Wheat flour 65
Potato flakes 35
Salt 2
Water as needed
Gluten 5
Complex phosphates 0.3
Sodium alginate 0.3
Soda 0.15

No such product has yet appeared on the market, but it is interesting to learn about these efforts.

Exports

The first Chinese potato chips were exported to the US in the course of 2015. However, it was not Capico, but Chak Chak, produced in Fuxin (Liaoning). Chakchak chips stand out by their bright colours, produced using natural anthocyanin. It is interesting to observe that an innovative product like Chak Chak can beat a generic version of the product (Capico) in getting accepted on the global market.

Chakchak

Potato as staple?

A discussion has started in China to improve the status of the potato as staple food. Vice-Minister of Agriculture Xu Xinrong posted a remarkable statement on the ministry’s website on January 9, 2015, entitled ‘strategies for turning potatoes into a staple’. In this concept, potatoes will gradually become China’s fourth largest staple food, after rice, wheat and maize. Xu Shaoshi, minister of the National Development and Reform Commission (an organization under the State Council), picked this up and added that potatoes will be mixed into bread, steamed buns and noodles to suit Chinese consumers’ taste and habits. the Ministry of Agriculture is planning for 50% of China’s annual production of potatoes to be consumed as a staple food on the domestic market by 2020.

As an emerging staple food in China, potatoes have to compete with bread, as introduced into our post on the position of bread in China elsewhere in this blog.

The Institute of Agro-Produce Processing Science & Technology of the China Academy of Agricultural Sciences is developing new applications of potatoes as staple food. One of the products in the pipeline is flour consisting of 35% whole potato powder and 65% wheat flour. Using machines also developed by the Institute, a range of pastas can be produced. In cooperation with Haileda Food (Beijing) it has developed a type mantou that consists for 30% of potato. The product was launched on June 1, 2015. The potato buns are yellower and harder than traditional versions. But they are more nutritious, containing extra vitamins and dietary fiber and less fat. The researchers have announced that they next step in this R&D project is to increase the potato content to 40% and further to 50%. Other potato products will also be developed, like: noodles, or bread.

 World Potato Congress in China

The 9th World Potato Congress (WPC) has been held in Yanqing county in northwest Beijing from July 28 to 30. More than 3000 representatives from over 30 countries around the world gathered in the capital for the top event by the global potato industry. More than 50 domestic and foreign well-known experts presented academic reports about the industry. Latest products and technologies were displayed during the event. There was an experience area showcasing potato food such as potato chips and potato mud to visitors. China Potato Expo, China Potato Congress and an international symposium on potato products and industrial development ran parallel to the WPC.

China Potato Expo 2016 was held in Kunming (Yunnan), June 27 – 29.

Experimental zone in Beijing suburb

Yanqing county in the northern suburb of Beijing is an ideal area to grow high-quality potatoes. The climate is perfect and the soil should produce bumper yields of the vegetable. Already the county has cultivated more than 10 varieties of potatoes at the seed stage. It is also the home of the newly established China branch of the International Potato Centre, a global scientific research organization that seeks to reduce poverty and achieve food security on a sustained basis in developing countries. The centre will be China’s first international agricultural research institution and will serve the rest of the Asia-Pacific region.

The Chinese Academy of Agricultural Sciences and the Beijing Xisen Sanhe Potato Co, one of the country’s largest seed merchants, have also set up shop in Yanqing, where they have been working on new strains of potatoes. The research and development at their facilities, and the new International Potato Centre should help increase production not only in the area but in the rest of the country. Plans are also underway to open a high-tech scientific park for potato research in Yanqing. The project will be a joint venture with neighboring Zhangjiakou in Hebei province.

Beijing Hengde Jiahui Equity Investment Co。 is looking to fund agricultural and food firms focusing on the potato industry, and has set up a center in Yanqing county.

Dutch potatoes in Inner Mongolia

HZPC of the Netherlands has signed an agreement with Geruide Potato Co., Ltd. (Inner Mongolia) to establish a potato growing base in Taipusi (Inner Mongolia). The joint venture was announced to start on January 1, 2016, and was projected to produce 50,000 mt of potatoes p.a. Although not officially announced, I assume that HZPC’s thinking is based on the expectation that it will become the main supplier of the above mentioned foreign potato processing plants in the region. However, so far (last check April, 2018) the project does not seem to have started yet.

Potato songs

Feng Xiaoyan, 52, a potato farmer-turned-entrepreneur, has even commissioned multiple potato-themed songs to help promote the consumption of potatoes. On a recent day, Ms. Feng appeared on a local television station to sing a warbling tune expanding on the tuber’s delights. “Fry up a plate of slivered potato, eat a slice of potato flatbread! Potatoes are our fortunate eggs, potatoes are our fortunate eggs.”

Potato research institute

Yunnan Normal University intends to set up a Potato Research Institute. The univeristy stated that the establishment of the Potato Research Institute is in line with the national development strategies of positioning the potato as a staple food, and is also in accordance with Yunnan’s development plan for a green economy, food safety, and plateau agriculture. It has set up a virus-free potato seed repository, with more than 1,200 germ plasma cultivated in China and abroad. It’s one of the largest in China in terms of potato genetic diversity.

Drinking potatoes

Mengjian Biotech (Inner Mongolia) has developed a health drink made from potatoes. The beverage has a high content of Superoxide Dismutase (SOD). It is not clear when the drink will be available for consumers.

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

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Peter Peverelli is active in and with China since 1975.