Belt and Road – Wheat and Yeast, and more

By now, the new motto of the Chinese government, the Belt and Road Initiative (BRI) aka One Belt One Road (OBOR), is known all over the world. Not only the national government, but also local governments in China, enterprises, and universities are rephrasing their goals and strategies in terms of OBOR. The Chinese food industry cannot escape this trend either, witness a conference held in October, 2018.

I have already posted a number of stories featuring wheat flour in this blog, including texts focusing on flour improvers, bread, and steamed bread (mantou). This is certainly not overkill. China has been the world’s largest importer of wheat for a number of years. The import volume in the 2015-16 season is estimated at 2 mln mt, an increase of almost a third compared to the previous season.

An important reason for that increase is the growing consumption of bread in China. Chinese domestic wheat is relatively low in gluten, which is fine for traditional Chinese products like steamed bread, dumplings or noodles. Bread, however, requires wheat with a higher gluten content. China used to import such wheat from Australia, the USA and Canada, but an emerging source of high gluten wheat for China is Kazakhstan. Chinese wheat imports from Kazakhstan increased from 40,000 mt in 2010 to 250,000 mt in 2014.

KazakhFlour

The fact that China and Kazakhstan are neighbours makes them more obvious trading partners than those faraway Western nations. However, the story is more complicated, more related products are involved, in particular another essential ingredient of bread: yeast. The favourite staple of Central Asia, the nan, is also a baked product using yeast.

Yeast feeds on molasses and Xinjiang, the Chinese border region with Kazakhstan, is an important sugar region in China with 14 sugar plants producing 250,000 mt of molasses p.a. Along the region’s Uighur majority, Xinjiang is also the home of a considerable Kazakh minority. Moreover, Kazakhs and Uighurs share the same Muslim religion, so there is a mutual understanding regarding Halal food regulations. This motivated China’s top yeast producer Angel (Yichang, Hubei) to establish a subsidiary in Yining, a city in Xinjiang close the border with Kazakhstan. A considerable part of the produce of that plant is exported to Kazakhstan. According to one source, ‘Chinese yeast is a famous in Kazakhstan as Coca Cola or Marlborough’.

Angel

Meanwhile, China has started investing in the continuous supply of high gluten wheat from Kazakhstan through an intensive aid program. The country’s wheat output in 2011 was 26.9 mln mt, but was almost halved in the following year, due to severe drought. The average wheat output per hectare in Kazakhstan is about 1/5 of that in China. The Chinese authorities have organized a number of government agencies and companies to combine their expertise in helping Kazakhs to improve their wheat production. One tractor maker in Shandong has developed tractors specially geared to the conditions in Kazakhstan. Chinese experts believe that this development aid can unlock the potential of another 20 mln mt of high gluten wheat p.a. And yes, much of that will find its way to China.

Oil from Kazakhstan – from buying to producing

The Aiju Grain and Oil Industry Group (Xi’an, Shaanxi) imports cooking oil, wheat and flour from Kazakhstan. Aiju’s Chairman noted during his visit of a trade fair in Almaty in 2015 that a considerable acreage of rich arable land is left unused in Kazakhstan. Aiju is now building two factories in the region, which will process up to 1000 mt of wheat and 1000 mt of sunflower oil a day, as well as a base to plant wheat and sunflower seeds over 33 hectares. The base will be finished by 2020 and create 300 jobs. Aiju intends to bring high-efficiency planting and processing technologies to Kazakhstan, which will help with local economic development. The company also plans to start importing beef, mutton, honey and milk from Central Asia too. This includes other countries besides Kazakhstan. Bai Qinbin, deputy director of port management for the Xi’an International Trade and Logistics Park, said the city’s large transportation network can help boost trade and investment between China and countries involved in the Belt and Road Initiative. “We are working on starting a service between Xi’an to Teheran this year, as the Middle East is in great need of Chinese goods, especially food and commodities for daily use.” Xi’an is one of the most important multimodal infrastructure hubs in China.

Tomatoes and more

The role of Xinjiang in the development of Kazakhstan’s food industry does not stop at wheat and yeast. Xinjiang is already the world’s largest supplier of tomato paste. One of these companies has invested in a tomato processing plant in Almaty. Chinese companies have so far offered to invest USD 1.9 bn to upgrade Kazakh food processing industry with 19 projects such as tomato, chicken and meat processing plants. According to Gulmira Isayeva, Kazakhstan’s deputy agriculture minister, Beijing’s USD 40 bn Silk Road Fund is planning investments in three projects, including one to move three tomato processing plants from China to Kazakhstan. Investments under consideration in Kazakhstan’s agriculture sector include USD 1.2 bn by Zhongfu Investment Group into oilseed processing; USD 200 mln into beef, lamb and horsemeat production by Rifa Investment; and USD 80 mln into the production of tomatoes and tomato paste by COFCO, China’s state agriculture conglomerate.

OBOR as milky way

Yili (Huhhot, Inner Mongolia; aka China’s Dairy Capital) has broken into the ranks of the world’s top 10 dairy makers in 2016, ranking 8th. The company is advertising its global strategy in terms of OBOR.

YiliOBOR

So OBOR really can create win-win situations.

Jiangnan University joins in

A founding ceremony of the  was held by Jiangnan University in Wuxi, East China’s Jiangsu province on Nov 16, 2018. Hong Liu, deputy director of the Jiangsu Provincial Department of Education, Liu Xia, deputy mayor of Wuxi, as well as presidents, experts and scholars from 49 universities in 27 countries involved in the Belt and Road Initiative (BRI) attended the ceremony (including the University of California, Davis (UC Davis), the University of Queensland, the University of Reading, Massey University and the National University of Singapore). During the ceremony, general secretary of the alliance, Liu Yuanfa announced the Taihu Lake Declaration, aiming to pool together the wisdom and strengths of the member universities to strengthen strategic communication and coordination in the food industry.

Shared Chinese and Kazakh interests in the agri-food industry

In May 2016, Gulmira Isayeva, Kazakhstan’s deputy agriculture minister, announced that Chinese companies were in talks to invest USD 1.9 billion in 19 agricultural projects as part of the BRI. According to a list of prospective investments that Isayeva showed to the Financial Times and statements from the project planners, agricultural investments under consideration include: USD 1.2 billion by Zhongfu Investment Group in oilseed processing; USD 200 million in beef, lamb, and horsemeat production by Rifa Investment; USD 80 million in the production of tomatoes and tomato paste by Chinese agriculture conglomerate COFCO and Evraziya Agroholding; and USD 58 million in a grain processing venture between China’s Aiji and Kazakhstan’s Total Imepx in northern Kazakhstan. Other projects include the establishment of feed lots and broiler poultry farms by CITIC and Kazakhstan’s Baiterek and an approximately USD 500 million investment by a finance group from Hong-Kong Oriental Patron in the development of “Kazexportastyk” for deep processing of agricultural products in Kazakhstan for export to the Chinese market.

In the future, Kazakhstan might also become a platform for certification and export of Central Asian agricultural products to China. According to Isayeva, laboratories are currently being established in the East Kazakhstan and Almaty oblasts. These labs will have technical equipment that meets the requirements of the General Administration of Quality Supervision, Inspection and Quarantine of China, a Chinese government body that will have the final say over whether or not to accredit enterprises. Using these laboratories, farmers from across Central Asia will be able to certify their products to be exported to China. China will trust the laboratory test results and will not re-examine the goods. Between December 14, 2015 and June 8, 2017, the Ministry of Agriculture of Kazakhstan and the General Administration of Quality Supervision, Inspection and Quarantine of China signed 6 protocols on phytosanitary requirements for export of wheat, horses, soy beans, wheat bran, honey, and the frozen meat of small cattle from Kazakhstan to China.

On July 11, 2017, Kazakhstan and China signed seven agreements worth a total of USD 160 mln at the Kazakh-Chinese Agriculture Investment Forum in Astana. Kazakhstan’s National Company Food Contract Corporation signed agreements with Xi’an Aijugrain & Oil Industry Group Co Ltd, Xinjiang Zhaofenghe Bio-technology Co., LTD, and Zhongxinjian LLC to supply 200,000 mt of grain and 100,000 mt of oil-producing crops to China, as well as construct a grain and oil-producing crops terminal at the Kazakh-Chinese border. Furthermore, Zhannur-Astana and Tianyang Yinhai Seed Co. agreed on the establishment of a seed cluster with a full grain processing cycle, including the transfer of advanced practices in seed production. The two countries also signed a memorandum of understanding aimed at the establishment of a model zone of agricultural cooperation on the basis of the National Agricultural Research and Education Centre, which will contribute to the establishment of joint processing plants and the introduction of new innovations in agricultural production.

Finally, Kazakh Agro-Technical University signed an agreement with China’s Northwest University of Agriculture and Forestry to create a joint agricultural technology park and with Chinese potato company XISEN on a joint experimental demonstration lab for growing potatoes.

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 and regularly travels to the remotest corners of that vast nation.

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 2019 was RMB 53.690 bln, and is expected to rise with 2.7% per year until 2024.

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.

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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 has accumulated a turnover of RMB 1.772 billion during the first 9 months of 2019; up 5.88%.

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.

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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.

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A top producer of walnut milk is Six Walnuts. It generated a net profit of RMB 7.459 billion in 2019.

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.

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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, e.g. Starbucks, as a vegetarian alternative for cow milk. Oatly’s introduction to China was aided by one of its Chinese investors: China Resources. Late 2019, Oatly had built up a presence in over 3400 outlets, including 2000 coffee shops and chains such as Pacific Coffee in China in first – and second-tier cities.

Yili Dairy (Huhhot, Inner Mongolia) has launched a range of oat milk drinks under the Zhixuan (‘vegetable choice’) brand in September 2020.

Hankou Factory Nr 2 (Wuhan) has launched a new drink combing oat milk and tea in 2020. In that way, the company was cashing in on two fads: protein beverages and milk tea.

At the end of September 2020, Shanghai-based oat milk start-up Oakidoki received funding of RMB 10 mln from Vision Plus Capital, two months after it was launched. Wang Xin, founder of Oakidoki, said the new funding will be used for marketing, research and development and recruitment. The firm has also collaborated with boutique coffee chain stores, creating more competition with international top plant-milk producers.

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.

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This market is getting so lucrative, that even an ingredient manufacturer like Jiangsu Howbetter (specialised in food texture and premix technology for dairy, beverage, bakery, and ice-cream) has launched a new plant-based beverage prototype made from peanut, walnut, almond, hazelnut, pine nut, cashew nut, pecan, Australian macadamia nuts, and Hawaiian macadamia nuts, which it showcased on the Food Ingredients China 2019 trade fair.

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 and regularly travels to the remotest corners of that vast nation.