Foreign food brands well set in China

23 August 2012

BEIJING: Foreign food brands stand to gain further ground in China, where shoppers remain concerned about the safety credentials of indigenous alternatives, new figures show.

Ipsos, the insights provider, polled 2,100 people, some 61% of which stated that their trust levels in Chinese brands had declined during the last 12 months.

This result is largely due to repeated safety scandals in various categories, as 76% of interviewees would switch products if a line they currently bought was implicated in such an incident.

Jennifer Tsai, managing director of innovation and forecasting at Ipsos Marketing, argued the industry's rapid expansion – from a value of RMB47.3bn in 1978 to RMB7.8tr in 2011 – actually poses difficulties.

"The challenges have also increased amid the food industry's robust growth," she told the China Daily. "'Lean meat powder', melamine-tainted milk, gutter oil and chemical dyed steamed buns ... all of these have drawn much attention from Chinese consumers." 

In all, 28% of interviewees planned to buy greater quantities of overseas food brands and products going forward instead of items made by indigenous companies.

A 77% share of respondents bought dairy goods manufactured by foreign corporations, a reflection of several health-related incidents dating back to 2008, which have involved operators like Yili and Mengniu.

Grains and oil posted 57% on this metric, while children's food came next on 56%. Heinz is one organisation that has targeted the latter category, where its business has doubled since 2007.

"Heinz as a brand name, is almost synonymous with baby food in China," Hein Schumacher, the firm's local president, said at a recent analyst day. "We are very firmly rooted in that country and I would say, with a high birth rate, that is a very favourable position to be in."

Mead Johnson and Nestlé are among the other major overseas players in this sector, as is Danone. Pierre-André Terisse, Danone's chief financial officer, has expressed confidence about its prospects.

"Both Mead Johnson and ourselves have been able to supply product to the consumer which is safe enough, addressing its needs and attractive. And we have as a result both developed our market shares," he said on a conference call. "I see no reason to assume that this is not going to continue."

Tim Wang, general manager of Ecolab, the food safety firm, added that this situation could change. "If Chinese companies recognise the problem and strengthen their social responsibility and improve product quality, Chinese consumers buying imported products will not be an inevitable trend," he said.

Data sourced from China Daily/Seeking Alpha; additional content by Warc staff