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ChinaNews FOOD & FOOD INGREDIENTS REVIEW July/August 2013

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ChinaNews

FOOD & FOOD INGREDIENTS REVIEW

Table of contents

July/August 2013 www.giract.com

Editorial

Pg1 Editorial

Food Industry News

Pg3 Chinese soy stakeholders desire

cooperation on sustainable soy

Pg5 GM food influx a dilemma for

consumers, farmers

Pg7 China gives approval to GM soybeans

Pg8 Call for cheaper wine as economy slows

Pg9 Chilean investment in Chinese wine

Pg10 Wine makers join forces

Beer imports

Most valuable alcohol brands

Pg11 Probe into imports of EU wines

Pg12 Chinese quench their thirst for French

vineyards

Pg14 Bright future for white spirits

Pg17 China’s grocery market to reach USD 1

trillion

Pg18 Bread producers cheating customers, says

dietician

Pg19 Sugar imports declining

Fast food really fast

New tech can help to keep food safe

Pg21 Dairy statistics January– April 2013

Too much reconstituted milk

Baby formula industry to consolidate

Pg23 NZ starts infant formula brand register

for China

Pg24 Complaints spike over subpar baby

formula imports

Pg26 Honey laundering: two honey processing

companies charged in anti-dumping case

Pg 27 Bigger concentration of infant formulae

required

Dairy measures start at source

Pg 29 Dairy companies become bigger

Pg30 China steps up checks on milk formula

producers

China investigates Danone, Nestle on

milk-powder pricing

Food Industry News (Contd)

Pg32 Worried parents drive imported milk

sales

Pg33 Baby formula gets new import rules

Pg35 Multinationals face increased scrutiny

Pg37 China implements new import and export

requirements for dairy products

Pg38 Infant formulae: market shares of

international brands

Seafood businesses flounder amid

spending cut

Pg39 Shrimp exports

Pg40 The U.S. admin ruling on Chinese canned

mushroom

Milk powder prices lowered after

government probe

Pg41 Food watchdog probes tainted egg

allegations

Pg42 Food safety official in pesticides warning

Pg43 Watchdog: Trans-fat levels meet

standards

Pg44 Three provinces establish seasoning

league

Watchdog: Trans-fat levels meet

standards

Pg45 Better times ahead for catering industry

Pg47 Top cooking oil suppliers

Domestic rapeseed oil production faces

challenges

Pg48 Major advance to halt flow of 'gutter oil'

Pg50 Detection of illegal cooking oils in China

Pg51 China’s devastated wheat crop could spur

more food deals

Pg52 Looking to find, feed new food

consumers

Pg54 China eyes food security options in

Venezuela

Pg55 Apple juice exports

Pg56 Cooperatives can ensure safe food

Pg57 China's Bad Earth

(Table of contents continued on next page)

ChinaNews


Table of contents


Food Industry News (Contd)

Pg63 Ice on the rocks as 80% from 'illegal'

factories

Pg64 A Chinese trip for foodies and scientists

Functional and Organic Foods

Pg64 Malaysian bird nests allowed to enter

China again Dupont opens probiotic facility in China

Pg66 DuPont Sees Niche in Curing China's

Indigestion

Ingredient News

Pg68 US to levy anti-dumping duty on xanthan

gum from China

Solvay to boost vanillin production with

new Chinese facility

Pg69 MSG disappearing

Pg70 Pepsi to reduce use of toxic chemical

Stevia developer GLG to team up with

COFCO

Pg71 Tate & Lyle forms food systems joint

venture in China

Regional News

Fujian

Pg72 Fujian still China’s canned food province

Fujian tea output

Xinjiang

Pg73 Aksu attracting beverage investment

Beijing

Pg73 Fangshan wine cluster

Regional News (Contd)

Gansu

Pg73 Fields of sunflowers star in Gansu

Shanxi

Pg73 Friends in spirits

Hebei

Pg73 Huailai plans to be major wine region

Zhejiang

Pg77 Water grows scarce for thousands as

drought, heat blast landscape

Company News

Pg78 Desserts recalled in Taiwan, sold on

mainland

Pg80 Mengniu offers to buy Yashili

Pg81 French milk brand sets up in China to

woo worried parents

Pg82 Baby-Milk Demand Helps to Lift Danone

Pg83 Milkworld venturing into China

Pg84 Mead Johnson sees China infant nutrition

rebound

Bright Dairy keeps control of Synlait

Milk despite dilution

Pg85 How Nestlé finds clean milk in China

Pg87 Chinese dairy float for NZX

Pg89 Yili starts up new plant in Henan

FrieslandCampina cuts baby formula

prices in China as probe begins

Pg90 Fonterra reacts to China price probe

Pg91 McDonald's hopes to wow mainland

diners with rice

Pg92 Zhongyi to develop new whole grain

snacks

(Table of contents continued on next page)

ChinaNews


Table of contents


Company News (Contd)

Pg92 Canned fish to Russia

Campbell to Acquire Kelsen Group

Pg93 New sugar plant in Shandong

Nekta enters the Chinese market

Uni-Present can start in Hainan

Pg94 Moet toasts opening of first sparkling

winery

Pg95 Hawthorn wine

Yanjing: first quarter of 2013

High-end liquor sellers take a hit

Pg97 Kraft's new plant to double output

volume

Trade agreement opens doors for Lindt

Pg99 COFCO selling plant in Xinjiang

Pg99 Wahaha enters Russian market

Mondelez International Breaks Ground to

Expand Biscuit Plant in China

Pg100 Kvass war

Smithfield shareholder still presses for

break up

Pg102 Jollibee targets 500 stores in China by

2014

Nestle’s China investment shows need to

think local

Cargill expands commitment to

responsible supply chains

Special Features

Pg106 Growing your own food: Chinese

consumers’ response to food safety issues

Pg107 Balcony farmers are taking root

Pg108 Following nature's lead on food

Pg110 People power

Pg112 Harvesting the homegrown

Upcoming events

Pg114 Upcoming events

Glossary

mio '000 000

bio '000 000 000

k '000

t tons

kt '000 tons

kl '000 litres

lpd litres per day

klpd kilo litres per day

tpa tons per annum

ktpa kilo tons per annum

tpd tons per day

tph tons per hour

tpm tons per month

cpd cases per day

JV Joint Venture

M&A Merger & Acquisition

pa per annum

Sensex Stock exchange index

ChinaNews


Editorial


We would love to be original in writing this Editorial, but there is no way we can escape starting with

the obvious. After several months of keeping up the suspense, the Chinese authorities have published the

results of the investigation into illegal price fixing by infant formulae suppliers in China.

No one seems to be surprised about the findings. Almost all of the big names were found guilty. A

number of these companies have been handed out fines amounting to 3% of their 2012 turnover. The

level of those fines are the strongest indication so far of the exorbitant earnings these companies have

reaped in China lately.

However, even more interesting is that a few of the companies that have committed the same illegal

activities have not been fined, as they have ‘fully cooperated with the inquiry’. That decision reveals a

fascinating aspect of Chinese culture: once you have committed a crime and you have been found out

(when Chinese authorities start such an investigation, it means that you have been found out), you can

gain significantly from fully cooperating with the authorities, instead of making the inspectors’ lives as

difficult as possible, shredding papers, deleting emails, etc.

The big question is: did they have it coming? And our reply here is: ‘actually, they did’.

The prices of infant formulae in China have seen several hikes per year over the past few years. Chinese

parents have to pay several times more for the same formula than their counterparts in Europe, and in

any case, much more than could be justified by higher costs like transportation, import duties, or

commissions to local agents. The multinationals in this business have not just been cashing in on the

shortage of infant formula in China and the lack of trust of Chinese consumers in domestic products but

they have also greatly abused the problematic situation in China.

In addition, they have forced local agents to agree to fixed consumer prices that have made it impossible

for the agents to compete.

For some ‘business people’, this may sound like normal practice, but it makes us question the validity of

all that boasting about sustainability and corporate social responsibility that is published in the

promotional materials of these companies.

And then came Fonterra.

Disputable business practices are one thing, but that would at least not harm the high quality image of

imported infant formulae. It did so when Fonterra came with a warning that several batches of its

ingredients for infant formulae had been contaminated with botulism. This shocked China and the rest of

the world more than the 1976 earthquake. The world’s largest dairy manufacturer proved unable to

sustain a proper quality management system.

ChinaNews


Editorial

July/August 2013 www.giract.com Page 1

But, wait a moment; wasn’t Fonterra also involved in the melamine incident of 2008? With a 43% stake

in the main producer of melamine-stained baby formula, Fonterra then still tried to make the world

believe that it was not at all responsible for the misery caused by this formula.

Milk is a highly perishable product. The tightest quality control may not be sufficient to guarantee the

quality of 100% of the output of dairy products. However, in this case, all the signs seem to indicate that

the big names in baby formulae have been so busy cashing in on the problems of Chinese parents, that

quality control was low on their list of priorities. This is not the proper space to come up with answers,

but perhaps the fact that Fonterra is so large is part of the(ir) problem. We can imagine that total quality

control can be much more effective in smaller scale dairy operations.

If this is correct, then the same Chinese authorities who finally put an end to the price fixing are about to

commit a fatal error of their own. The Ministry of Information & Industry has announced that it will

soon publish a plan to facilitate a series of mergers in the Chinese dairy industry that should decrease the

number of dairy companies in China to 50. They believe that this will benefit quality control, and will

create opportunities for the resulting companies to become multinationals themselves. The acquisition of

Yashili by Mengniu reported in this issue could already be an early example.

Interestingly, criticism to that plan has already appeared in the Chinese media, questioning whether it is

up to the government to decide on mergers & acquisitions, instead of leaving that to the market parties.

The illustration shows a cartoon about this subject in the Chinese press.

We will wait and seen, and keep you abreast of the developments in our future issues.

ChinaNews is published every 2 months

by:

GIRACT 24 Pré Colomb

1290 Versoix-Geneva

Switzerland

Tel +41 22 779 0500

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ChinaNews


Food Industry News


Chinese soy stakeholders desire

cooperation on sustainable soy

The Round Table on Responsible Soy

Association (IRTRS) successfully concluded

RT8: The International Forum on Responsible

Development of the Soybean industry in Beijing,

China under the theme “Building Global Bridges

for Responsible Soy.”

Over 200 global delegates attended the

multi-stakeholder RT8, including soy industry

leaders and respected thinkers from the soy value

chain—from China and around the

world-gathered to dialogue about the responsible

development of the soybean industry and the

benefits of responsible soy.

“China plays an essential role in the international

soy industry and China is the most important

country of soy production and consumption,”

said Liu Denggao, Deputy Director, Chinese

Soybean Industry Association during Session I,

Developments in Chinese Soy Production,

Imports and Overseas Investments.

Co-hosted by the Chinese Soybean Industry

Association (CSIA), the conference is the RTRS’

8th annual conference, and the first held by the

association in the Asia-Pacific.

(Continued in next column)


cooperation on sustainable soy (Contd)

China was the first country to cultivate soy and

produced approximately 12 mio t in 2012/13

(USDA). It is also the world’s largest importer,

having imported 59 mio t in 2012/13 (USDA).

While the purpose of the RTRS conference is to

share knowledge and dialogue about responsible

soy between all countries and regions where soy

is produced and consumed, the program has a

special focus on China as the world’s biggest

market for imported soy as well as a major

producer

RTRS Executive Director Agustin Mascotena

opened the conference by expressing his thanks

to his co-host and his sincere hope for increased

cooperation and dialogue on responsible soy. “As

the global leader on responsible soy, the RTRS

welcomes the opportunity to convene a dialogue

on the solutions offered by responsible soy with

companies that produce, trade and buy soy in

Asia. RTRS soy benefits the environment

workers, and communities and helps companies

guarantee a long-term sustainable supply of

responsible soy into the future,” Mr Mascotena

said.

Soy production, especially in South America, has

been blamed for a number of issues including

environmental degradation, social breakdown

and worker exploitation. The RTRS was created

to tackle these issues and transform the soy

industry by creating demand for responsible soy

in all stages of the supply chain.

(Continued on next page)

ChinaNews


Food Industry News




Being a multi-stakeholder-based initiative, the

RTRS allows stakeholders with a wide range of

roles in global soy supply chains to have a global

dialogue and reach agreement on how best to

ensure economically viable, socially equitable

and environmentally sound soy production.

Gai Junyi, Academician of the Chinese Academy

of Engineering gave a rousing official closing

address at RT8 where he said to the packed room

that “China should take good care of its soybean

farmers and import responsible RTRS soy, while

providing more soy products as high quality

protein food for consumers worldwide.”

Other eminent speakers included Dr Cheng

Guoqiang, Secretary General and Senior

Research Fellow, Development Research Center,

of the State Council of China, Soy Market and

Policy in China. Dr Cheng told the delegates that

“Vegetable oil consumption will grow during

this period of higher income and that the policy

will remain open and supportive for the plant oil

market.”

Breakout Sessions at the Forum included such

topics as “Responsible Sourcing,” “Responsible

Soy and Food Safety Responsible Production”

and “Responsible Soy and Small Holders.”

In other RT8 highlights, a representative of the

European Retailers Soy Group (RSG) was

elected to be member of the newly formed RTRS

Executive Board at the 7th General Assembly for

members - immediately after the successful

conclusion of RTB. (Continued in next column)



RSG’s members include Ahold, Asda, Coop

(Switzerland), Delhaize, Migros, Marks &

Spencer, Sainsbury’s, The Co-operative Food

(UK) and Waitrose.

In addition, a representative of European animal

feed industry associations FEFAC was elected as

an RTRS Executive Board member. At the

General Assembly meeting which followed the

conference, RTRS members took the decision to

ban the use of Paraquat and Carbofuran

pesticides by 2017.

The RTRS membership includes large soy

producers as well as small farmers from

South America, India and China. Major global

traders like Wilmar, Cargill, Bunge and ADM

are also members, as well as consumer brands

like Unilever and Nestlé, global retailers

including Carrefour and Marks & Spencer,

NGOs including WWF, The Nature Conservancy

and Solidaridad, and financial institutions

including Rabobank and the International

Finance Corporation (IFC).

In addition to the organizations listed above,

other participants in Beijing included

representatives from FEFAC (European Feed

Association), MPRESID (Argentinean No Till

Producer Association), André Maggi, RSPO,

GMP International and the European Retailers

Group.


ChinaNews


Food Industry News




Speaking at the conference included such

respected people as His Excellency AarI Jacobi

Ambassador of the Netherlands to China,

Benjamin Ware, Sustainability Manager for

Nestlé, Daniel Nepstad from IPAM and Henk

Flipsen, Dutch Feed Industry Association.

On the Chinese side some of the key speakers

were Mr. Yang Shaopin, Chief Economist,

Chinese Ministry of Agriculture, and President of

the China Soybean Industry Association,

Liu Denggao,

Vice President of the China Soybean Industry

Association, and Hu Junlie, President of the

ChongQing Grain Group. (fif 3/6/2013)

GM food influx a dilemma for

consumers, farmers

Liu You, a farmer in Keshan (Heilongjiang) [1],

stopped planting soybeans last year, due to the

crop's low yield and economic return.



consumers, farmers (Contd)

He grows corn instead, which yields much more

than soybean and brings more income. "The

price of soybeans has kept almost unchanged

while the prices of corn and rice have been rising

in recent years," says Liu. In Keshan County, the

plantation area of soybeans nearly halved from

2007 to 2012, showing farmers having less

interest in planting the crop, a trend that is

playing out in many other rural areas.

The root for the decisions taken by Liu and his

peers can be found in China's rising imports of

genetically modified (GM) soybeans. By virtue

of the modifications, GM soybeans are more

economical to produce than their

conventionally-farmed equivalents. With

large-scale production of GM crops not yet

approved in China, domestic farmers of soybean

are being priced out of the market as the country

proves happy to look to imports for this most

quintessential of Chinese foodstuffs.


ChinaNews


Food Industry News




However, this is far from the only troubling

aspect of imported GM food. GM remains

controversial over doubts as to its safety. As it

flows into China, the country has to face up to

such questions.

Last week, China's Ministry of Agriculture

announced the approval of three varieties of GM

soybeans to be imported as processing materials.

The news triggered fresh domestic concerns

about safety, although there has been large-scale

commercial plantation of GM crops for years in

the United States and many other countries.

China began to import GM soybeans in 1997 to

meet surging domestic demand, according to

Peng Yufa, a senior member of the country's GM

crop bio-safety committee and a researcher at the

Chinese Academy of Agricultural Sciences.

Last year, China imported 58.38 mio t of

soybeans while the country's own soybean

production was about 13 mio t, official statistics

showed. For Chinese farmers, the plantation of

corn per mu, a Chinese measurement which

equals about 667 sq.m., can earn them about

RMB 300 to RMB 400 more in revenue than that

of soybeans on average.

This has prompted more farmers to stop planting

soybeans. In Heilongjiang, a major soybean

producer in China, the area used for plantations

of this legume reduced to about 40 mio mu last

year from about 70 mio mu in 2009.




Although edible soybean oil made from GM

produce is common in Chinese supermarkets,

most citizens worry about its safety despite

relatively lower prices than equivalents such as

peanut oil.

"When I buy edible oil, I will make sure whether

they have GM marks. After all, there is no final

conclusion as to the safety of GM products," says

a lady surnamed Zheng in Guangzhou, capital of

south China's Guangdong Province.

Results of an online survey conducted by

Chinese news portal sina.com showed on

Wednesday that about 85% of the 30 000 voting

netizens said they would not buy GM products

and 78% believed GM is harmful to people's

health.

To woo consumers, some companies in

Heilongjiang have tried to highlight their

non-GM soybeans.

For example, the Heilongjiang Jiusan Non-GM

Soybean Trade Centre was set up last September.

"The key is to allow and encourage Chinese

scientists to catch up with others and come up

with quality products, including safe GM

products. Only in this way can we change the

status quo of China's soybean products," says

Rao Yi, Dean of the School of Life Sciences at

Peking University. (cd 20/6/2013)

ChinaNews


Food Industry News


China gives approval to GM soybeans

China's agricultural authorities issued biosafety

certificates to three new overseas varieties of

genetically modified soybeans on Thursday,

allowing them to be imported as raw materials

for domestic processing.

According to a statement from the country's

biosafety committee in charge of agricultural

genetically modified organisms, the newly

approved genetically modified soybeans included

CV127 from German chemical producer BASF

and MON87701 and MON87701 x MON89788

from Monsanto Far East Ltd.

The three new varieties of genetically modified

soybeans, which fare better against insect attacks

and herbicide, have been approved for

commercial planting or consumption in many

countries, it said.

The news follows Monday's statement from

Brazil's agriculture ministry, which said on its

website that China had approved imports of three

varieties of Brazilian genetically modified

soybeans.

Antonio Adrade, Brazil's minister of agriculture,

livestock and food supply, participated in the

China-Latin America and Caribbean Agricultural

Ministers' Forum in Beijing on Sunday and

confirmed the information the next day.

Imports of Brazil's genetically modified soybeans

to China had previously been discussed by

Agricultural Minister Han Changfu and Andrade.



(Contd)

The approved soybeans include RR2 PRO, which

is resistant to caterpillars, a main threat to bean

crops in Brazil. The other two are CV127 and

Liberty Link, which have a better resistance

against herbicide.

As of April, Brazil had exported 7154 mio t of

soybeans valued at around USD 3797 bio —

5604 mio t were exported to China. "This

decision is very timely for Brazilian soybean

farmers," Andrade said, "because the companies

will have a few weeks to expand their

plantations."

Huang Dafang, a researcher from the

Biotechnology Research Institute at the Chinese

Academy of Agricultural Sciences, said on

Thursday that China began to import some

varieties of genetically modified agricultural

products as early as 2003 or 2004 to satisfy

domestic demand.

"At present, besides the United States, a

substantial proportion of genetically modified

agricultural products such as soybeans and corn

have been imported from Brazil and Argentina,"

he said, without providing specific data. Local

demand is mainly driven by increasing domestic

need for fodder and food processing, Huang said.

"Besides meeting domestic needs in terms of

quantity, imported genetically modified

agricultural products are always better than

domestic traditional varieties in terms of

quality," he said. (Continued on next page)

ChinaNews


Food Industry News



(Contd)

For instance, compared with domestic soybeans,

imported genetically modified crops have higher

oil and protein content, he said. (cd 14/6/2013)

Call for cheaper wine as economy slows

There is no industry definition for entry-level

wine or affordable wine. However, industry

industry experts said wine priced below

RMB 200 could be defined as entry-level wine

(Provided to China Daily). The wine industry in

China is paying more attention to less expensive

brands as an increasing number of Chinese

people seek more affordable imported bottles to

enjoy socially rather than for business purposes.

The figures from Wine Intelligence, a

London-based consulting firm specializing in the

wine business, show that in the first quarter of

2013, 69% of 1024 people surveyed aged

between 18 and 50 in China said they usually

spent less than RMB 200 on imported wine for a

casual occasion. Wine Intelligence did not

provide figures for previous years because there

was a change to its survey methodology.

However, Wine Intelligence said there is

growing demand for less expensive wine in

China. "There is a growing trend of drinking

wine for pleasure rather than buying it primarily

as a gift or serving it at banquets as a status

symbol and, along with this growth in more

casual drinking, there's also a higher demand for

wine at more affordable price points," said

Maria Troein, China country manager of Wine

Intelligence. (Continued in next column)


(Contd)

There is no industry definition for entry-level

wine or affordable wine. However, industry

industry experts said wine priced below

RMB 200 could be defined as entry-level wine.

"The Chinese, as in other mature markets, are

showing more interest in wine and getting to

know more about it. This has created new market

segments of young drinkers who like to drink

wine and that fits their lifestyles - whether it is in

restaurants, bars or even at home," said Joao

Gago, managing director of Boutique Wine Asia.

BwA is an imported-wine trading company in

China with annual trading volume of 20

containers of wine from more than 10 countries.

Gago said 50% of BwA sales are made up of

wine priced around RMB 90, an increase from

25% in 2012.

"Before it was not common to see a Chinese

person order a bottle of wine in a restaurant or

buy wine to share with friends at home. Now it is

becoming better appreciated. It has become part

of daily life, especially in bigger and more

sophisticated cities such as Shanghai," said

Gago. "Wine is said to be good for the health and

a bottle of wine might provoke more topics to

talk about in one's leisure time," said Wang Yue,

a white-collar worker in Shanghai.

The gradually maturing wine market in China

has made wine businesses in Bordeaux, France,

keen to introduce more affordable varieties to the

Chinese market to capture demand from ordinary

people. (Continued on next page)

ChinaNews


Food Industry News



(Contd)

In previous years, Bordeaux wine was considered

to be a symbol of social status and only suitable

for high-end business banquets. Bordeaux wine

traders are trying to change that image.

Every year, the Bordeaux Wine Council (Conseil

Interprofessionnel du Vin de Bordeaux, or CIVB

in French), a French group that represents more

than 10 000 Bordeaux wine producers and vine

growers, recommends to Chinese wine lovers a

selection of 100 Bordeaux wines that are best

adapted to the Chinese market and are priced at

the entry and medium levels (RMB 100 to 350 a

bottle).

"We want the customers to know that not all

Bordeaux wines are expensive. Some of them are

but there are also some that are affordable and of

good quality," said Thomas Jullien, Asia

Manager of the CIVB.

China has become the first export destination for

Bordeaux wine. In 2012, China imported a total

of 64 mio liters of Bordeaux wines, twice the

volume sent to Germany, its closest rival,

according to CIVB data. Changing market

conditions are also pushing Chinese wine makers

to develop less expensive brands to better fit

market demand.

"Our new products will be priced between

RMB 50 to 100 a bottle, affordable for ordinary

folk. This is in line with the relatively slower

economic growth this year," said Luan Xiuju,

Managing Director of China Foods Ltd.



(Contd)

The Hong Kong-listed consumer food arm of the

country's largest State-owned food conglomerate

China National Cereals, Oils and Foodstuffs

Corp Industry experts believe more affordable

wine will help cultivate a wine culture in China

and boost market demand in the long run.

"China's market is growing very fast but people

are still less familiar with the wine culture than

they are in Western countries. The most

important thing right now is to bring wine into

households as well as people's daily lives," said

Ma Wenfeng, a Senior Analyst at Beijing Orient

Agribusiness Consultant. (cd 3/6/2013)

This figure was only 4.4 litres in 1994. So,

although the average consumption is still

relatively low, the increase has been

considerable during the past decade.

Chilean investment in Chinese wine

A spokesperson of the Chilean Embassy in

Beijing has announced that the Chilean

government is considering to invest in a winery

in China. A company may be established in

Shanghai to determine the proper location and

other issues to prepare for such an investment.

(tjkx 23/7/2013)

China is already one of the largest destinations

for Chilean wines, so it makes sense that Chilean

investors are looking at the domestic industry as

well. However, it is unorthodox that the Chilean

government, rather than a commercial enterprise

is taking the lead in this matter.

ChinaNews


Food Industry News


Wine makers join forces

Against the background of possible anti-dumping

measures against wine imported from the EU, a

number of Chinese wineries in North and

Northeast China (including ones from Ningxia,

Shanxi, Henan and Hebei) have formed a league

to jointly develop the domestic market.

One of their joint endeavours is staring a web

shop for selling their products. (tjkx 24/7/2013)

It is interesting to see that these companies have

not taken this step earlier to join ranks in dealing

with the threat from abroad.

Beer imports

China imported 490 620 hls of beer in the first 5

months of 2013, an increase of 37.8% compared

to the same period of 2012. (tjkx 24/6/2013)

Most valuable alcohol brands

Hurun, the Chinese section of Fortune has

published the following list of the Chinese

alcohol brands with a value exceeded

RMB 1 bio.


Most valuable alcohol brands (Contd)

Rank Brand Type Value (RMB bio)

1 Maotai distilled 58.0

2 Wuliangye distilled 29.0

3 Yanghe distilled 16.0

4 Qingdao beer 14.0

5 Luzhou Laojiao distilled 10.0

6 Fenjiu distilled 5.9

7 Zhangyu wine 4.4

8 Jiannanchun distilled 3.6

9 Snowflake beer 3.6

10 Langjiu distilled 3.2

11 Yanjing beer 2.7

12 Harbin beer 2.5

13 Gujinggong distilled 2.2

14 Jiuguijiu distilled 2.1

15 Chongqing beer 2.0

16 Guyue Longshan rice wine 1.7

17 Shuijingfang distilled 1.7

18 Zhujiang beer 1.4

19 Tuopai distilled 1.2

(hurun 24/7/2013)

The distilleries are still the leading players in the

Chinese alcoholic beverage market. This list only

includes 5 breweries, 1 winery, Zhangyu and 1

rice wine producer, Guyue Longshan, as

opposed to 11 distilleries. This indicates that

there is ample space for growth for the newer

types of alcoholic beverages: beer and wine.

ChinaNews


Food Industry News


Probe into imports of EU wines

On Tuesday, the EU announced provisional

anti-dumping duties on imports of solar panels,

cells and wafers from China following a

nine-month investigation. China is firmly

opposed to the European Union's 11.8% tariffs

on the country's solar panel products, officials

said.

China's wine imports rose by 8.9% to 430 mio

litres in 2012, according to the General

Administration of Customs. The imports were

valued at about USD 2.57 bio.

The EU accounted for more than two-thirds of

the imports, with France being the biggest export

country. According to the 27-country bloc, the

duties on China's solar panel companies will be

imposed in two stages, starting at 11.8% for the

first two months, followed by 47.6% for another

four months.

"Overall, the duties will range from 37.2% to

67.9% at that stage. Those Chinese companies

which have cooperated will face lower tariffs.

Those which have not cooperated will face

higher tariffs," said EU Trade Commissioner

Karel De Gucht. Most Chinese solar panel

companies have encountered difficulties

continuing doing business in the European

market since the investigation.

"If the EU adopts the anti-dumping taxes on

Chinese companies, most of our export

companies will not be able to sell a single

product there," said Wang Donghong, publicity

officer at Jingwei Electronic Material.


Probe into imports of EU wines (Contd)

Colin Yang, vice-president of public affairs of

Trina Solar, said: "Our sales in Europe have

already been affected, because many local

partners are worrying about our price after the

investigation. Before the decision, the business

of our European partners and ourselves has

already been hurt."

Ministry of Commerce spokesman

Shen Danyang said the reduced tariffs show the

flexibility of the EU, and the temporary tariff of

11.8% instead of 47.6% shows the dispute

between China and the EU can be solved through

negotiation.

The ministry said that the trade relationship

between the two sides is an important foundation

for China-EU ties, and China doesn't want to see

the solar dispute affect the broader relationship.

Shen also said that Chinese solar products are

less expensive because of cheaper raw materials

and the Chinese solar panel industry's

technological improvements, not because of the

so-called dumping subsidy. The ministry said

trade protectionism will bring damage to both

sides. (Continued on next page)

ChinaNews


Food Industry News


Probe into imports of EU wines (Contd)

However, De Gucht said at the European

Commission that the United States also applies

duties to Chinese exports. "This is not

protectionism," he said. Some experts worry that

other economies may follow the EU's action and

start similar investigations.

Cui Hongjian, director of European Studies at the

China Institute of International Studies, said that

the China-EU relationship may face a

"cooling-down" period. Eighteen EU members

have voted against the solar panel case. Even

though this vote does not prevent the EU

Commission from imposing provisional

anti-dumping duties, member states will vote

again by the end of this year to decide if the EU's

final conclusion can be enacted or not.

(cd 6/6/2013)

Chinese quench their thirst for French

vineyards

The attack on Chinese students in Hostens, a

small town in the South-west of France,

allegedly by a group of French youngsters,

followed by the largest international wine fair,

Vinexpo, in Bordeaux, where Chinese investors

were very much present -- and active -- have

triggered much talk in France about Chinese

investment in the country's vineyards and a

backlash against it. Over the past couple of years,

there has been a significant rise of Chinese

investment in French wines, notably Bordeaux

wines. In line with this, China has recently

become the first export market for Bordeaux

wines. (Continued in next column)


vineyards (Contd)

But Chinese investors seem to want more than

being simple buyers. Many want wines to match

their tastes and those of their fellow citizens.

That's why they have started to invest in the

well-known Chateaux brands, wine domains or

wine trading companies.

Whether they are buying the entire vineyard or

only part of it, Chinese investors want to hold

greater control over the final product.

"There are two groups of Chinese buyers," says

Michael Baynes, an estate agent in Bordeaux.

One is typically from Hong Kong where the

people look "for something smaller, something

that is more for the passion of wine. And,

although they are commercially minded, they are

more interested in the wine product itself."

Baynes, co-founder of Maxwell-Storrie-Baynes

(affiliate of Christie's International Real Estate),

talks a bit differently about the mainland Chinese

who "will be thinking about all aspects of using

the resource to make some maximized returns."

Peter Kwok fits almost perfectly in Bayne's first

description. This businessman from Hong Kong

bought the Chateau Haut-Brisson in 1997, in the

Bordeaux village of Saint-Emilion. He has since

then "invested more and more to increase the

quality and the size of the vineyard," says

Charles Lemoine, in charge of wine marketing

for Kwok.


ChinaNews


Food Industry News



vineyards (Contd)

"He comes three to five times a year," adds

Lemoine, who describes Kwok as having a real

passion for French wine. Indeed Kwok is not just

a distant vineyard owner: his love for wine has

become a family matter and his children are now

very much involved in the business.

So does this trend really come as a big surprise?

French wine has always appealed to foreigners.

The Belgians, Dutch, English, Americans,

Swedes, etc. have been buying French vineyards

for decades, if not centuries.

Surely the fact that the Chinese are also starting

to invest in these same lands should be a

reflection of the global era, nothing more than

that.

For Jean-Pierre Rousseau, whose wine trading

company Diva Bordeaux was the subject of a

70% investment purchase by Shanghai Sugar

Cigarette and Wine, a subsidiary of Bright Food,

a state-owned food group, the Chinese are

looking for a sense of "recognition", one which

he describes as "social."

"They are attracted to a European lifestyle, they

are of course looking for expensive stuff and

wine is part of that lifestyle", he adds.

Undoubtedly, the Chinese seek to invest in

French vineyards for the reputation of the wines

and their quality. In a way, owning French

vineyards gives them credibility.



vineyards (Contd)

There are even investors who seem to

specifically target the Chateaux brands which

sound very French such as the "Lafite" or the

"Latour" names that are recognizable symbols of

French culture.

What would the Chinese say if Europeans started

buying 10 or 20 meters of the Great Wall of

China?

And the French appear receptive to Chinese

investment in their wine, particularly in the

Bordeaux region. Rousseau is himself

enthusiastic about the Chinese coming to

Bordeaux, "they come here to learn, they come

here to understand and when they bought some

chateaux; they were rather positive in improving

the quality."

The businessman also likes to wittingly remind

people that "in Bordeaux, we welcome them

much better than (if) they are in Burgundy."

In fact, he has a point. When Chateau

Gevrey-Chambertin was sold to a Chinese

investor, the winegrowers of Burgundy were not

impressed by the transaction and the manner in

which it was handled.

The head of the wine syndicate of

Gevrey-Chambertin, Jean-Michel Guillon,

expressed his disappointment saying that he and

his winegrower colleagues were "really sad to

see that the only chateau of the 12th century --

with the Clos de Vougeot- will be acquired by a

person foreign to the job."


ChinaNews


Food Industry News



vineyards (Contd)

Jean-Michel Guillon, who's been in the wine

business for more than 30 years, explains that the

purchase of this chateau may cause future and

significant financial difficulties for the remaining

winegrowers of the region.

As the Chinese investor outbid local vintners to

pay EUR 8 mio -- more than double the

estimated value of the property -- this will

change the market prices for vineyards and, as

Guillon indicates, taxes on succession rights to

these properties will also rise significantly.

But the selling of Gevrey-Chamberton has also

caused discontent among local growers because

of the nature of the region itself. Burgundy is a

lot smaller in comparison to the Bordeaux wine

region.

So any purchase of a significant vineyard in

Burgundy has a much greater impact on the

region. Domains are very often a family affair;

"each winegrower is also a winemaker," says

Guillon with a wholehearted voice.

"What would the Chinese say if Europeans

started buying 10 or 20 meters of the Great Wall

of China?" asks the Burgundian, semi-smiling,

semi-serious.

But ultimately French wine inspires admiration

among the Chinese, and the French have

something to gain out of this. Plus, the Chinese

are not "buying everything"; in Bordeaux, where

they invest the most, they have only acquired 1%

of the whole wine lands. It is not exactly a huge

loss. (cnn 27/6/2013)

Bright future for white spirits

The Chinese liquor industry is expected to have

impressive growth potential in the future despite

the present downturns caused by the

government's crackdown on luxury banquets,

said Frost & Sullivan, a US-based market

consultancy. According to a recent report by the

consultancy, the white spirit production will

reach 17.05 bio litres in 2016 from 4.94 bio litres

in 2007 with a compound annual growth rate of

14.8%. Sales revenue from white spirits is

expected to grow from RMB 110.9 bio in 2007

to RMB 926.5 bio in 2016, with a compound

annual growth rate of 26.6%.

The report attributed the robust growth potential

to the following factors. First, the white spirit

industry is closely associated with the

macroeconomy and currently China is still at a

stage of rapid economic development as well as

rising disposable incomes.


ChinaNews


Food Industry News


Bright future for white spirits (Contd)

Second, multi-sales-channels marketing

strategies have been vigorously used by domestic

alcohol makers, such as group purchases and

online sales, which have been greatly welcomed

by younger customers.

According to the report, Chinese white spirit is

one of the seven renowned distilled spirits in the

world. Sichuan, Guizhou, Shaanxi, Anhui and

Shanxi provinces are the most recognized origins

of it in China.

Each province has its own special drinking habits

and brands. There is Wuliangye in Sichuan,

Moutai in Guizhou, Xifeng in Shaanxi, Gujing in

Anhui and Fenjiu in Shanxi.

Sichuan is the most high-yielding province in

China. In 2011, white spirit output in Sichuan

made up around 30% of total output in China and

has maintained a compound annual growth rate

of 38% for nearly five years.

There are numerous famous white spirit brands

in Sichuan, including Wuliangye, Luzhoulaojiao

and Swellfun (Shuijingfang).

Shandong is anther traditional high-yielding

province, said Frost & Sullivan. In 2011, the

output of baijiu in Shandong made up around

10% of the total output in China, with stunning

revenue of around RMB 30 bio.

Taking Confucian Family Liquor (Kongfujiajiu)

as an example, since 2007, its sales volume has

maintained an annual growth rate of 100%.



But, there are also some restraints on the

industry, said Frost & Sullivan, such as local

governments' protection of local brands, which

jeopardizes fair competition in the market, as

well as a lack of product research and innovation

capabilities, as the new generation of young

customers seek personalized and diversified

products. Other major obstacles also exist, said

the consultancy.

At the end of last year, the central government

unveiled a series of anti-graft rules called "The

Limitation of the Three kinds of Government

Consumption". They include the regulation that

receptions for high-ranking military officials

should no longer include liquor or luxurious

banquets, which has led to a sharp decrease in

the purchase of white spirit by government and

business organizations. Some high-end white

spirit brands have faced a sharp decrease in

demand and sales volume. It did not take long for

the stock market to feel the effects.

Just two days after the announcement, shares in

Chinese distillers such as Wuliangye Yibin Co

and Kweichow Moutai Co fell. Shares in Moutai

fell 5.55% on the Shanghai Stock Exchange,

while shares in Wuliangye slid 3.02% on the

Shenzhen stock market. Moutai's market value

shrank by RMB 12.5 bio on the same day.

"Moutai and another two high-level alcohol

brands, which are popular with government

officials and military officers, account for 20%

of the total liquor market," said Jian Aihua, a

researcher with CIConsulting, a leading industry

research institution. (Continued on next page)

ChinaNews


Food Industry News



Yuan Renguo, Kweichow Moutai's Chairman,

said recently that the company will slow its

growth rate to reach an 18% year-on-year rise by

the end of this year.

"There has been a slump in Chinese liquor sales

and in the catering industry since late last year,

mainly caused by the government's anti-

corruption calls," said Su Qiucheng, head of the

China Cuisine Association. "Restaurant sales in

some big cities even posted negative growth,

such as Beijing and cities in Jiangsu and

Zhejiang provinces."

Duan Kaiyun, Assistant Secretary-General of

Beijing Cuisine Association, said: "The difficult

time will last for a long time because it is a key

part of the new government's vow to curb

corruption."

But Bian Jiang, Assistant Director of the China

Cuisine Association, said the habit of pleasing

business clients with extravagant banquets has

been deeply rooted in Chinese culture and will

not be reversed overnight. In addition to

government's anti-graft calls, food safety

scandals have also damaged development of the

industry.

Last year, the Hunan Provincial Administration

of Quality and Technological Supervision said

liquor samples from Jiugui Liquor Co contained

1.04 mg of plasticizer per kg, higher than the

0.3 mg per kg standard set by the Ministry of

Health.



Jiugui products were taken from shelves and

shares in the Shenzhen-listed company were

suspended when the scandal broke.

According to a statement released in March by

the Hunan-based liquor maker, its first quarter

profits plummeted 90% year-on-year and it

expects its first quarter profits to be RMB 8 mio

to RMB 12 mio compared with RMB 119 mio

during the same quarter last year. The China

Alcoholic Drinks Association said earlier this

month large-scale tests on China's liquor

products show that almost all alcohol products

contain plasticizers, with an average level of

0.537 mg/kg. They are used to thicken liquids.

"Although some alcohol brands are facing

difficulties in the short term, the Chinese liquor

industry is expected to have impressive growth

potential in the future because the post-80

generation will gradually become major

consumers," Frost & Sullivan forecast.

"The drinking habits of the post-80 population

will determine the future of the Chinese white

spirit market. The industry players who

strengthen their marketing efforts toward the

post-80 generation, such as their drinking habits

and culture, will eventually win more market

share," said Bian, of the China Cuisine

Association.

According to the association, in 2015, the

number of primary white spirit customers who

are between the ages of 30 and 49 will be 441

mio. (Continued on next page)

ChinaNews


Food Industry News



The post-80 generation will make up 22% of

them. In 2010, primary white spirit drinkers will

number 444 mio and the post-80 will make up

48.5% of them.

"The growth rate of high-end white spirits such

as Moutai and Wuliangye might slide in the short

term but, in the long run, the two brands,

especially Wuliangye, will rebound quickly. The

sales growth of middle or moderate high-level

brands such as Yanghe and Langjiu will rapidly

speed up. And the distiller that is successful in

the middle to high-end white spirit market will

be the ultimate winner," research and investing

firm Rising Securities Co said in a report.

(cd 17/6/2013)

China’s grocery market to reach USD 1

trillion

China, the world’s biggest food and grocery

market, is now valued at more than

USD 1 trillion and is forecast to be worth

USD 1.5 trillion in 2016, according to latest

figures published by lGD.

IGD research also found:

- The US grocery market will remain the

second largest globally and is predicted to be

worth USD 1.5 trillion in 2016. IGD expects

growth to accelerate from a compound annual

growth rate (CAGR) of 3.6% between 2010 and

2012, to 4.7% between 2013 and 2016;


China’s grocery market to reach

USD 1 trillion (Contd)

- By 2016, the Indian grocery market will

have overtaken Japan to become the world’s

third largest grocery market valued at

USD 566 bio;

- The gap between Russia and Brazil is fast

narrowing. By 2016, the Brazilian and Russian

grocery markets are projected to be worth

USD 468 bio and USD 467 bio respectively, with

Brazil set to climb to fourth position with a

CAGR of 9.1% between 2013 and 2016

- All of the BRIC (Brazil, Russia, India,

China) nations will be in the top five grocery

markets by 2016, worth just over USD 3 trillion

in total.

Joanne Denney-Finch, chief executive, IGD,

said: “For food and consumer goods companies,

the Asia-Pacific and Latin American grocery

markets offer long-term growth opportunities,

with many businesses already profiting from

entering them.

“The Chinese grocery market in particular, has

been growing at a rapid pace for several years.

Representing one fifth (20%) of the world’s

population, China has had a surge in the number

of higher-income earners, benefiting from a

significant rise in wages.

This has resulted in a soaring demand for new

products, brands and concepts — all of which

have helped fuel its growth.


ChinaNews


Food Industry News


China’s grocery market to reach

USD 1 trillion (Contd)

“International and domestic grocery retailers are

expanding quickly in China with diverse formats

and entering new regions. This not only creates

new supply chain opportunities for

manufacturers, but also presents a wealth of

choice for Chinese shoppers.

In Latin America, Brazil is also an attractive

growth market for global grocery players. Over

the next few years, Brazil will be hosting big

sporting events such as the World Cup and

Summer Olympic Games, presenting a further

boost for its economy and for the performance of

retailers and manufacturers operating in the

region.

“By 2016, the top 15 global grocery markets will

have a total value of USD 6.5 trillion. The top

five - US and BRIC - will increase their share to

65% - compared to 60% in 2012 - with a

combined value of USD 4.2 trillion.

“This offers plenty of scope for food and

consumer goods companies seeking international

growth and paints a positive picture for the

industry globally.”

Bread producers cheating customers,

says dietician

Most whole wheat bread sold in the city doesn't

contain whole wheat flour due to a lack of

national standards, a clinical dietician told

Shanghai Daily.



says dietician (Contd)

"Some whole wheat bread sold in the city is

made with common grains, not whole wheat, and

producers dye them with caramel pigment to

make them look brown to cheat consumers," said

Wang Xingguo, a clinical dietician. "The

common grains also provide a smoother texture,

which is preferred by most Chinese customers."

He added some consumers don't like the coarse

texture of genuine whole wheat bread, thus some

businesses have cut costs by eliminating the use

of whole grains.

At a Hualian chain store on Dagu Road, a

Shanghai Daily reporter found a package of so-

called whole wheat bread priced at RMB 10

made by Shanghai Taoli Food Co Ltd. It didn't

contain whole wheat flour. The listed ingredients

were wheat meal flour, milk powder, cream,

sugar, salt, water, yeast and additives.

Whole wheat foods are becoming more popular

among residents as they contain a variety of

vitamins, minerals, along with fiber and

phytochemicals.

Nutritionists say whole wheat bread is healthier

because it can help prevent cardiovascular and

cerebrovascular diseases and diabetes.

Wang said the amount of whole wheat used to

make bread is determined by producers because

there is no national standard. Some businesses

add bran or wheat germ instead of whole wheat,

he said.


ChinaNews


Food Industry News



says dietician (Contd)

Whole-wheat bread is made using flour that is

partly or entirely milled from whole or almost-

whole wheat grains. Recipes for whole wheat

breads vary considerably. (sd 6/6/2013)

Sugar imports declining

According to the China Customs, China has

imported 1.268 mio t of sugar during the first

half of 2013, down 12.22% compared to the

same period of 2012. (tjkx 23/7/2013)

Fast food really fast

Industry experts estimate that the value of the

Chinese fast food and food delivery market will

be RMB 1.8 trillion in 2017.

Although this includes major chains like KFC

and Pizza Hut, more than 99% of this value is

generated by Chinese style fast food.

(tjkx 6/6/2013)


Vice-Premier Wang Yang urged public and civil

groups to help supervise food safety, particularly

through modern technology.

"Given major challenges facing the nation's food

safety, like the colossal number of small

businesses and a decentralized food production

and processing model, a supervisory net

highlighting the general public is essential to

help ensure food safety," he said at the fifth

China food safety forum as national food safety

week kicked off on Monday.

Non-government industry associations of food

producers should also play a role in enhancing

food safety and quality, he said. Wang cited

practices in Guangdong province as an example.

"I regularly get text messages sent by the

Guangdong food safety authority asking mobile

subscribers, including me, to report any related

irregularities or even crimes," he said.

New-technology tools like text messaging should

be widely used to facilitate public involvement in

food safety supervision, he said. The forum was

held by government agencies including the food

safety committee under the State Council, the

Ministry of Public Security, China Food and

Drug Administration and the National Health and

Family Planning Commission.

Xu Jinghe, director of the legal affairs

department under the China Food and Drug

Administration, said that more public supervision

is being considered in the ongoing revision to the

country's Food Safety Law.


ChinaNews


Food Industry News



(Contd)

"The revised law will better encourage and

facilitate that," he said. Previous reports said the

revision was expected to be finished by the end

of the year.

Specific items like rewarding tips and reports

from the public, corporate insurance or

self-insurance programs, online food trading, and

a food safety tracing mechanism are being

considered, Xu said.

Special funds have been established in some

regions to reward useful public reports of food

safety scandals. But "few worked well to

encourage public involvement", he said.

If it was included in the food safety law,

however, "the situation would be largely

different", said Li Shichun, a law expert

specializing in food safety with the China Law

Society.

"The feasibility of the new legal articles should

be carefully studied to help with enforcement,"

he said.

For example, the public should at least have easy

and wide access to report food safety problems,

he said, adding that measures like introducing a

third party channel to receive public reports

should be considered.

"Many people are now reluctant to report for fear

of leakage of private information and potential

revenge by those breaking the law," he said.



(Contd)

Zhang Yong, chief of the China Food and Drug

Administration, said that regulation of food

safety is part of social management, so it requires

participation of all stakeholders including

government agencies, the public and the food

industry.

"Government supervision and law enforcement

alone can hardly ensure food safety given its

great variety and complexity," he said. However,

"industry practitioners should be first in line to

ensure and be accountable for food safety and

quality," he said.

Zong Qinghou, chairman of beverage giant

Wahaha, said: "To ensure food safety, all those

involved in the food chain, including farmers,

producers and sellers, must maintain credibility

and be honest to consumers, and provide safe and

healthy food." A fair distribution of profits

among producers and sellers is also important for

food safety, he said.

"A prominent problem for the food industry is

that most profits have been taken away by

retailers, such as big shopping malls, forcing

food producers to keep agricultural products that

they buy from farmers at a very low price," he

said. "This results in little profit for farmers,

forcing them to ignore the quality of agricultural

products or even adulterate them."

Fair prices should be ensured for farmers to sell

agricultural products to improve food safety, he

said. (cd 18/6/2013)

ChinaNews


Food Industry News


Dairy statistics January– April 2013

The Dairy Association of China (DAC) has

published a number of figures related to the first

4 months of 2013. 649 producers were active in

that period (7 more than in the same period of

2012). The following table lists their main

products, volumes and growth compared to the

same period of 2011.

Product Volume (t) Growth (%)

Drinking milk 7 215 000 13.45

Milk powder 459 000 -3.54

Other 652 000 -

Imports continued to grow, as is shown in the

following table.

Product Imports (t) Growth (%)

Milk powder 298 700 28.61

Whey 122 000 24.63

Lactose 24 600 6.39

Whey protein 4 600 -1.27

Infant formulae 38 900 37.24

Drinking milk 63 700 164.69

(hcfood 18/6/2013)

The illustration shows the development of Chinese imports of drinking milk during the past 3 years.

Too much reconstituted milk

The CEOs of two dairy companies have recently

stated that they believe that up to 60% of

drinking milk sold in China could be

reconstituted from milk powder. They derive this

conclusion from the rapidly increasing imports of

milk powder in China, suggesting that many

producers of ‘fresh milk’ are actually literally

manufacturing it from imported milk powder,

because this is lower in cost than using domestic

raw milk. (tjkx 22/7/2013)

This statement has aroused opposition from

many parties in the market. However, a

considerable number of industry experts,

including officials of the Dairy Association of

China (DAC) are calling for more transparency

in this matter. They are also proposing to

gradually reduce the ratio of reconstituted milk.

This discussion resembles that of a few years

ago, when the top Chinese dairy makers called

for stricter criteria for what can be sold as ‘pure

milk’. That proposition also met with violent

opposition. It will not be feasible to ban all

reconstituted milk in China any time soon.


Move meant to revive sector, raise consumer

confidence

About a third of the country's baby formula

businesses will be axed, in what experts are

calling a major consolidation of the industry. The

government has been trying to revive the

industry since the 2008 melamine scandal, but

consumer confidence is still lacking.


ChinaNews


Food Industry News



(Contd)

The move is part of a campaign to scrutinize

dairy businesses in the next three months to

improve the quality of milk powder products and

boost confidence in the industry, the Ministry of

Industry and Information Technology announced

in Beijing on Tuesday. "Of the 127 licensed

dairy businesses that produce baby formula

products, 25% to 35% will be cut. They are not

necessarily unqualified, but the country needs

more powerful alliances," Zhuang Pei, Deputy

Director of the metropolitan industry division of

the Shanghai Municipal Commission of

Economy and Information, said on Tuesday.

Only 30 of the licensed producers are active in

the market and have a stable sales volume, he

added. Industry industry experts said small-scale

enterprises, especially private ones, are likely to

be eliminated by the regulation, and more

mergers and acquisitions led by domestic giants

are expected. "The quality and safety of dairy

products has notably improved in recent years,

but they still require further improvements to

make local brands more competitive," said

Zhu Hongren, Chief Engineer of the Ministry of

Industry and Information Technology.

Song Kungang, Secretary-General of the China

Dairy Industry Association, said more than 60kt

of liquid milk for babies were imported in the

first four months of the year, a year-on-year rise

of more than 164%, and a total of nearly 600kt of

dairy products were imported, an increase of

nearly 25% from last year.



(Contd)

Sales in the domestic dairy industry slumped in

2008 when a scandal broke out over baby

formula that was tainted with melamine, an

industrial compound that can cause kidney

ailments but was added to milk to make it appear

to have a higher protein content. Six children

died from drinking the milk, and at least 300 000

others became ill.

In the next two years, China's quality watchdogs

carried out a tough battle to clean up the sector,

which saw the closure of nearly 70 baby formula

producers.

In addition to the requirement that every batch of

raw milk be tested for melamine after the

scandal, the government also demanded quality

supervisors stationed at factories to oversee the

whole process from raw materials to end product.

The baby formula businesses also made huge

investments to ensure and improve product

quality, according to industry experts.

Chenguan, one of the four dairy businesses that

specialize in baby formula production in

Shanghai, said in addition to the 64 items that are

required to be tested, it tests more than 20 other

items, such as the level of lutein.


ChinaNews


Food Industry News



(Contd)

"The national standard says the tested amount of

melamine in baby formula should not exceed

1 mg per kg, while our ceiling is 0.01 mg per

kg," said Sun Jing, brand manager of Shanghai

Chenguan Dairy Co Ltd.

Each of the businesses have established credit

and traceability systems, said Gu Zhenhua,

Deputy Director of Shanghai Municipal Food

Safety Commission Office.

"According to official test reports, dairy products

in Shanghai, especially baby formula, are 100%

reliable, but consumers don't think this way. One

of the popular goods residents buy from overseas

is baby formula," he said.

Due to excessive consumption, on March 1

Hong Kong put a regulation in place, limiting the

amount of baby formula people from the Chinese

mainland can carry when they depart to two cans.

One way to narrow the gap between the

government's guarantee and the reaction from

society is to further improve information

disclosure, Gu said.

"If consumers buy a product and they can check

its test reports online, they'll feel more

reassured," he said.

"We're urging businesses to display the test

results of every batch of product on their

websites." (cd 19/6/2013)

NZ starts infant formula brand register

for China

New Zealand's Ministry for Primary Industries

(MPI) is expected to publish this month a list of

registered brand names of New Zealand infant

formula products exported to China, Radio

New Zealand reported Monday.

The list would be made available to consumers

as well as Chinese authorities so they could

check that formulas carrying New Zealand labels

were valid. MPI introduced the new infant

formula brand register, which requires

companies exporting to China to have the

specific brand name included on the export

certificate, last month.

China had asked for brand information to be

added to export certificates as part of its efforts

to crack down on false labelling. MPI said 30

exporters had registered their brands last month,

and they were required to provide more detailed

information by July 6, including copies of actual

labels approved by Chinese regulators with

translations and associated formulation

information, said the report.

The main opposition Labour Party claimed

Monday that the new labelling requirements

would mean Chinese parents would receive more

information about what they were feeding their

babies than New Zealand parents. It was time for

the government to protect domestic consumers in

the same way by making Country of Origin

Labeling mandatory, Labour primary industries

and food safety spokesperson Damien O' Connor

said in a statement. (Continued on next page)

ChinaNews


Food Industry News


NZ starts infant formula brand register

for China (Contd)

"That would provide the same level of

information and protection for Kiwi parents as

these latest changes will mean for Chinese ones,"

said O'Connor.

New Zealand authorities are tightening

regulations on infant formula exporters after

concerns raised in China about the reliability of

some brands and products appearing in the

Chinese market, and as Chinese authorities

conduct their own investigations into infant

formula companies.

In June, New Zealand Food Safety Minister

Nikki Kaye said she had asked the MPI to

undertake an audit to identify any areas for

improvement, including verification, compliance

and testing regimes.

She had also ordered a check that New Zealand's

Overseas Market Access Requirements were in

line with changes being introduced in China's

regulations for infant formula.

New Zealand's infant formula exports are

estimated at about NZD 600 mio a year, with

approximately NZD 170 mio of that going to

China.

Cans of imported formula reportedly fetch up to

NZD 70 each in China and more than 200 brands

are estimated to be produced in New Zealand,

but most of them are produced at contract

manufacturing plants. (cd 23/7/2013)

Complaints spike over subpar baby

formula imports

Having low confidence in domestic baby formula

brands, Chinese consumers have turned to

imported formula but are finding a growing

number of problems with those products, too.

Consumers' low confidence in domestic baby

formula has led to a surge in complaints against

imported baby formulas as some businesses turn

to inferior foreign brands, experts said.

Nearly two-thirds of the complaints that the

China Consumers' Association received about

baby formula in the first half of the year were

about foreign brands.

The association received 744 complaints about

infant formula in the last six months, double the

number in the same period last year.

The association declined China Daily's request

on Sunday to say which brands got the most

complaints.

Nearly 90% of the complaints were over quality

issues, such as finding foreign objects - including

worms and iron wire - in the cans.

Some infants suffered adverse effects such as

diarrhoea and allergic reactions, and some

products were found being sold after their

expiration dates.

Industry experts said that one reason for the rise

in complaints against imported brands is that

some Chinese businesspeople have been taking

advantage of consumers' blind trust in such

brands. (Continued on next page)

ChinaNews


Food Industry News



formula imports (Contd)

Heitiki, a milk powder brand which its

distributor in Shenzhen claims is "a top brand" in

New Zealand, was discovered in 2011 to be

registered by Chinese businesspeople and

unknown to New Zealanders. "Some so-called

foreign brands are not really worthy of the name.

They're high in price but inferior in quality," said

Qiu Baochang, head of the legal team of the

China Consumers' Association.

Xile Lier, the Suzhou partner of the Swiss baby

formula manufacturer Hero Group, was accused

of deliberately mislabelling milk powder in

March. The company changed the expiration

dates and relabelled formula for older babies as

the pricier ones for younger babies. The infant

formula is sold on the Chinese mainland under

the label "Hero Nutradefense".

"Customers turned to foreign brands, especially

when it came to baby formula, after 2008 (when

the melamine-contaminated baby formula

scandal occurred)," said Wang Dingmian,

Chairman of the Guangzhou Dairy Association.

"Some Chinese people have sniffed out a

business opportunity."

Products manufactured and imported from

overseas but targeted solely at China have taken

root in recent years, Wang said. Dairy companies

should be cautious about quality issues to prevent

a crisis in brand trust, said Lin Jun, Director of a

dairy company that registers and imports milk

products from New Zealand but sells solely in

China. (Continued in next column)



"In addition to self-inspections and tests

conducted by Sutton Group, which would weed

out any batch that fails to meet standards,

New Zealand authorities test to see whether the

baby formulas meet the national standards there,

which allows the products to be shipped

overseas," Lin added.

The products also need to pass all nutrition and

bacterial-residual tests to attain approval from

China's Entry-Exit Inspection and Quarantine

Bureau to enter the country, he said.

Because some complaints involved sales

practices of brick-and-mortar and online stores,

experts urged efforts be made to close legal

loopholes that overseas purchasing agents take

advantage of.

Cao Mingshi, Deputy Secretary-General of

Shanghai Dairy Association, said online sales are

a problem as well.

"Many people have joined overseas purchasing

of infant formula in recent years to grab a share

of the booming business, but most of them sell

online and don't hold certificates of food

circulation permits as regular food sellers do,"

Cao said.

More than 133 000 baby formula products

labelled "purchased overseas" were found on

Taobao, China's leading e-commerce platform,

on Sunday.


ChinaNews


Food Industry News




Zhang Qing, the father of a 3-year-old girl in

Shanghai, said regulation of the industry should

be tightened.

"To echo Premier Li Keqiang's requirement of

ensuring supervision of baby formula be as strict

as it is for medicine, the country should regulate

the online market of baby formula as much as it

does for medicine," he said.

Drug makers and drugstores can sell medicines

online only with the approval of the China Food

and Drug Administration. (cd 29/7/2013)

Honey laundering: two

honey-processing companies charged in

anti-dumping case

In February, the U.S. Immigration and Customs

Enforcement agency (ICE) reported that five

individuals and two domestic honey-processing

companies, Groeb Farms and Honey Solutions,

have been charged for illegal importation of

honey from China. This indictment follows a

similar case in 2010, in which 11 individuals and

six corporations were charged with the same

crime, and is indicative of a federal crack-down

on honey laundering.




anti-dumping case (Contd)

The intent of an import duty is to protect

domestic producers from international product

being sold at less than fair market value, a

practice called “dumping.” In 2001, the

United States imposed a duty on honey imported

from China after finding them in violation of

anti-dumping policies.

The criminal actions led to a predicted loss of

over USD 80 mio in tax dollars, and reduced the

intended protection effects on domestic honey

producers. However, the evasion also has safety

implications, because contaminants have been

found in honey from China.

Honey is traceable to its source by examining the

types of pollen found in it. But filtration methods

are able to eliminate pollen in honey, making it

impossible to tell where it from. In a statement

given to Food Safety News, President of the

American Honey Producers Association

Mark Jensen said, “Elimination of all pollen can

only be achieved by ultra-filtering and these

filtration processes do nothing but cost money,

and diminish the quality of the honey.”

CEO Bruce Boynton of the National Honey

Board, a federal research and promotion board

under U.S. Department of Agriculture (USDA)

oversight, would argue otherwise; consumers

prefer honey without particles, and particulate

and air bubbles lead to faster crystallization.


ChinaNews


Food Industry News




anti-dumping case (Contd)

He has also contested the use of the term

“ultra-filtration,” which is a technical term

referring to a specific type of filtration resulting

in a product that all parties concede is no longer

honey.

Regardless of misnomers, it is true that pollen

can be removed through filtration, and that the

absence of pollen makes the honey untraceable.

The incentive exists to do so because it caters to

consumer preference, but it also makes easier to

launder.

The primary health concern of unregulated honey

is that antibiotics and toxins not approved by the

U.S. Food and Drug Administration (FDA) go

undetected. In particular, chloramphenicol – an

antibiotic linked to DNA damage and

carcinogenicity in children - has been used to

fight disease outbreaks in hives, and can be

detected in trace amounts in some honeys.

Additionally, toxins from lead contamination

may be present, and given its accumulative

nature, poses a larger threat then

chloramphenicol. (foodtank 18/6/2013)

Bigger concentration of infant formulae

required

The Ministry of Industry and Information has

announced that it plans to increase the intensity

of the of the Chinese infant formulae industry in

the coming years.


Bigger concentration of infant formulae

required (Contd)

Within 2 years, the country must have 10

companies with an annual turnover exceeded

RMB 2 bio. (tjkx 20/6/2013)

Mengniu’s recent acquisition of Yashili can be

seen as part of this endeavour. However,

although in theory the Chinese government can

‘further’ such a development, it will not be able

to do so by a simple ukaze. It will be interesting

to see to what extent it can be realised within that

time span.

Dairy measures start at source

Increased supervision to improve food safety and

consumer trust

Companies that produce baby formula will be

required to have their own dairy farms, according

to measures released by nine ministries on

Thursday. The move is designed to allow greater

supervision of the production process, help

ensure food safety and restore consumer

confidence in the industry, officials said.

Other measures include adopting stricter

management standards to supervise the baby

formula industry and registering all foreign

producers.

The measures were drafted by central

government departments including the China

Food and Drug Administration and the Ministry

of Industry and Information Technology.


ChinaNews


Food Industry News


Dairy measures start at source (Contd)

"A quality gap in the source of dairy does exist

between Chinese and foreign baby formula

products," said Teng Jiacai, deputy head of the

China Food and Drug Administration, "though

ours could match foreign counterparts in formula

design and production technology".

Chen Junshi, a member of the Chinese Academy

of Engineering at the China National Centre for

Food Safety Risk Assessment, said: "It would be

very difficult to ensure the quality and safety of a

company's source of milk if it does not have its

own farms".

Industry industry experts blamed milk sources as

the major reason behind a major dairy scandal in

2008, when excessive melamine was added to

milk to make protein content appear higher. At

least 300 000 babies were sickened and six died.

According to Wang Dingmian, executive council

member of the Dairy Association of China, most

milk sheds — which act as middlemen between

dairy farmers and producers — operated under

almost no supervision before 2008, resulting in

quality risks.

In response, agricultural authorities have

intensified supervision of dairy sources, and the

number of certified milk sheds has decreased

34% to 13 000, said Wang Feng, an official at

the Ministry of Agriculture's animal husbandry

department. Large dairy farms are also

expanding, and the number of farms with more

than 100 cows accounted for 35% of those, an

increase of 15.5% age points over 2008.



Several major dairy enterprises in China have

gradually stopped buying milk from individual

farms or milk sheds, and have turned to their

own farms, Chen said.

"But safety risks still exist for some small dairy

producers that rely on milk sheds for milk

sources," he said.

Chen Fuquan, vice-president of Yili Industrial

Group, one of China's largest dairy producers,

said the company had invested about RMB 9 bio

by the end of last year to build cow farms, which

ensure stable and high-quality sources.

Another major dairy producer, Yashili

International Holdings, will open a new factory

in Waikato, New Zealand, with an investment of

RMB 1.1 bio, to produce infant formula.

Lin Jinlin, spokesman for Yashili International

Holdings Ltd, said quality dairy sources are

important.

On Tuesday, China Mengniu Dairy, the country's

largest dairy producer, acquired more than 75%

of Yashili. Industry analysts expect more

mergers in the industry.

Gao Fu, an official with the Ministry of Industry

and Information Technology, said such

integration would enhance industrial resources,

consolidate brands and improve competitiveness.

The ministry has pushed domestic dairy

producers to "get married".


ChinaNews


Food Industry News



Gao hopes to see about 10 companies, with

annual revenues exceeding RMB 2 bio in two

years, taking up 70% of the industry.

"Out of about 120 baby formula producers in

China, only 15% have their own cow farms,"

said Wang Dingmian. "Many of these enterprises

that don't have financial capabilities to run cow

farms may have to quit."

It takes time to restore consumer confidence in

domestic milk powder as many consumers have

turned to foreign producers, Wang Dingmian

said. According to him, public confidence in

domestic dairy products hit a low after the 2008

incident, resulting in soaring sales of foreign

brand milk, which has accounted for 85% of the

market in some major cities.

However, a number of low quality foreign

formula milk brands also entered the Chinese

market, according to Xiang Jianjun, a researcher

with CIConsulting, a leading industry research

institution.

The General Administration of Quality

Supervision, Inspection and Quarantine said on

Thursday it would take stricter measures, such as

requiring all overseas dairy producers to register

in China before they can export to the country,

and banning companies from outsourcing baby

formula production.

Imported baby formula must arrive in packages

for retail to avoid repackaging and redistribution,

during which imported goods are sometimes

adulterated. (cd 21/6/2013)

Dairy companies become bigger

The notion of "too big to fail" is becoming

prevalent in the Chinese dairy industry. Pushed

by increasing demands for quality and safe baby

food, the government and industry members have

encouraged mergers and acquisitions to create

dairy giants, who are pressuring their foreign

rivals in pricing power and market

competitiveness.

On Tuesday, China Mengniu Dairy Co Ltd

agreed to acquire privately owned Yashili

International, one of the country's leading makers

of infant milk formula and baby food, for

USD 1.6 bio, making it the largest merger in the

domestic dairy industry.

The merger unveils the beginning of a series of

consolidations in an attempt to revive the

troubled industry.

An industry industry experts told China Daily the

Yili Industrial Group (Huhhot, Inner Mongolia)

[2] also intends to acquire Feihe Dairy

(Heilongjiang) [1] and Wondersun (Wandashan)

Dairy Inc. (Heilongjiang) [1] The three

companies have denied the rumour, but the

industry expert said the offer is to secure milk

suppliers of the latter two companies who have

quality dairy farms in Northeastern China.

After such mergers and acquisitions, the line

between Chinese and foreign brands is blurring,

said Song Liang, a dairy industry analyst at the

Distribution Productivity Promotion Centre of

China Commerce.


ChinaNews


Food Industry News


Dairy companies become bigger

(Contd)

"The integration with international standards and

levels will greatly improve the quality and safety

of domestic milk powder," he said.

A number of small producers are expected to be

axed in such moves. Cheng Qunshi, a nutrition

and food safety expert, said that of about 120

milk powder manufacturers in China, some small

enterprises have found loopholes in

implementing industrial standards. Many without

fresh milk suppliers and farms have difficulty in

controlling the quality and safety of the raw milk

they use.

However, industry analysts said making the

country's dairy industry bigger does not

necessarily make it stronger. Stricter quality

control and supervision are keys to improving the

dairy industry, Song said. (cd 21/6/2013)

China steps up checks on milk formula

producers

China will step up checks on infant milk formula

producers and eliminate sub-standard ones, a

government statement said on Thursday.

The China Food and Drug Administration will

consult the Good Manufacturing Practices

certification system used by drug producers to

improve standards in baby milk formula

production, said Teng Jiacai, Deputy Head of the

administration. Companies using sub-standard

technology and equipment shall be shut down,

the statement said. (Continued in next column)

China steps up checks on milk formula

producers (Contd)

In a similar overhaul in 2011, the General

Administration of Quality Supervision,

Inspection and Quarantine shut down 475 milk

enterprises.

China now has 127 infant formula producers and

manufactured about 600kt of the product in

2012.

Demand for infant formula is booming in China,

but confidence in domestic products was badly

hit after a milk scandal in 2008, which killed six

infants and sickened 300 000 over

melamine-tainting. (cd 21/6/2013)


milk-powder pricing

China is probing foreign milk-powder companies

including Danone and Nestle SA for possibly

violating anti-monopoly laws and setting prices

too high, the official People’s Daily reported,

citing a government agency.

The National Development and Reform

Commission, the country’s top economic

planning agency, started an investigation into the

pricing of infant formula sold by companies also

including Mead Johnson Nutrition Co., Abbott

Laboratories, Dutch producer Royal

FrieslandCampina NV, and local firm Biostime

International Holdings Ltd., the newspaper

reported today.


ChinaNews


Food Industry News



milk-powder pricing (Contd)

The NDRC has evidence the companies sold

products at high prices in China and their pricing

increased about 30% since 2008, according to

today’s report, which cited the agency.

Safety scares such as a melamine-tainted milk

powder scandal in 2008 which killed at least six

infants have increased Chinese consumers’

distrust of local milk and driven up their

purchases of foreign brands at home and

overseas.

The NDRC carried out a review of documents

related to product pricing at Glenview,

Illinois-based Mead Johnson’s China unit

recently, the company said in an e-mailed

statement.

The U.S. company said it is providing “full”

cooperation. Jonathan Dong, a Beijing-based

spokesman for Nestle, said the company is

working with the government on the matter.

Agnes Berthet-d’Anthonay, a Paris-based

spokeswoman for Danone, said the company is

“fully” cooperating with the authorities.

Jan-Willem ter Avest, a spokesman from Royal

FrieslandCampina, said he has no information on

the probe and will look into the matter. Biostime

said in a statement today that the company hasn’t

raised prices since 2008. Abbott couldn’t be

reached immediately for comment. The

investigation follows China’s attempt to

consolidate its milk-formula industry and create

strong domestic brands. (Continued in next column)



China targets creating 10 large companies in the

industry within two years, each with annual

revenue of more than RMB 2 bio, China National

Radio reported last month, citing Gao Fu, an

official at the Ministry of Industry and

Information.

Danone shares slipped 1.6% to EUR 56.57 at

1:13 p.m. in Paris. Nestle fell 0.6% to 62.20

Swiss francs in Zurich.

China Mengniu Dairy Co., the country’s largest

dairy producer, led gains by domestic dairy

companies after the report from the newspaper,

which is published by the Chinese Communist

Party.

Mengniu shares surged 4.1% to HKD 28.90 in

Hong Kong trading today, the biggest gain since

June 19. Inner Mongolia Yili Industrial Group

Co. rose 1.7% in Shanghai trading.

Biostime’s Hong Kong-listed shares declined the

most in almost two years on June 28 after the

baby-care products provider said one of its units

was under investigation for alleged anti-

monopoly law violations.

The company said last week that it will “actively

cooperate” with the investigation. The shares fell

1% to HKD 43.05 in Hong Kong today.

Mengniu Dairy offered HKD 12.5 bio to buy

local infant-formula maker Yashili International

Holdings Ltd. on June 18.


ChinaNews


Food Industry News




The acquisition was part of the government-led

push for consolidation, Mengniu Chief Executive

Officer Sun Yiping has said. COFCO, the

state-backed agricultural and food industry

supplier, owns 19% of Mengniu, according to

data compiled by Bloomberg.

Mead Johnson had a 14% share of China’s

RMB 77.9 bio milk-formula market last year,

according to industry researcher Euromonitor

International. Hangzhou Beingmate Group Co.

was second with a 10% share, followed by

Danone’s 9.2% and Yili’s 7.8%.

(theglobaldairy 2/7/2013)

Worried parents drive imported milk

sales

The first thing customers see as they enter the

basement of the Wal-Mart Qinghe store in

Beijing is a mountain of imported milk cartons.

Half a large stack of Euro-fit whole milk from

Germany, selling at RMB 9.9 per box, is almost

gone.

"My girl is going to stop taking formula milk, so

I have to get her some good quality milk," said

Liu Ying, a 30-year-old mother, carrying a

shopping basket filled with a range of imported

milk.

"I don't know which brand to take. Maybe I will

just take some from world-renowned dairy

production places, such as the Netherlands,

Australia or New Zealand."



sales (Contd)

Liu said she knows the imported milk, with its

five-month shelf time and long shipping distance,

may not be as good as local fresh milk but

"safety is my top concern".

According to Tesco Plc, the world's third-largest

retailer by revenue, imported milk is one of the

fastest-growing categories in their 132 Chinese

stores, with year-on-year sales gains of about

30%.

The United Kingdom-based retail giant said

Chinese like milk from New Zealand above all

and many young parents buy several cartons at a

time.

Imported milk is Chinese shoppers' favorite

choice on the Internet, too.

On the home page of Yihaodian, a major online

grocery store, imported milk is listed as the third

top category. Ads flash for promotion deals such

as buy one, get one free.

"Room temperature imported milk has been

available on Yihaodian.com since 2012," said

Viki Yang, a public relations executive at

Yihaodian, which is backed by

United States-based Wal-Mart Stores Inc.

"We sold around one container (around 30 t) per

month at the beginning and now we deal with

more than four containers per day."


ChinaNews


Food Industry News



sales (Contd)

Yang said Yihaodian has 74 milk brands from 21

foreign countries. The best-selling products are

Oldenburger, from Germany and Devondale,

from Australia. The e-commerce retailer said it

will greatly expand the sourcing of imported

milk to a wide range of countries, such as

Uruguay, to meet different taste demands.

According to the China Dairy Industry

Association, in the first four months of this year,

China imported dairy products amounting to

596 200 t, up 24.6% year-on-year. Imports are

being driven by infant formula milk, which

totalled 38 900 t in the first four months, up

37.2%, as well as liquid milk, which hit 63 700 t

in the first four months, a year-on-year surge of

164.7%.

"Domestic milk consumption has been increasing

for years, lifted by rising personal incomes and a

soaring milk-drinking population," said

Wang Dingmian, a Consultant with the

Guangdong Provincial Dairy Association. He

added that besides liquid milk, milk-based

beverages, imported cheese and yogurt may

become popular.

Lao Bing, general manager and industry expert

of the Shanghai-based Mental Marketing Dairy

Consulting, said: "Surging imported milk

consumption will have a negative impact on

domestic dairy industry chains" in light of

foreign products' allegedly competitive prices

and good reputations. But Lao said brisker sales

of imports are largely due to domestic milk

scares. (Continued in next column)


sales (Contd)

A series of milk safety scandals, involving milk

and infant formula have been exposed since

2008. Toxic chemicals were added to dairy

products to yield higher protein content. The

practice killed at least six infants.

The State Council, the country's cabinet, said it

will take effective measures to ensure the safety

of baby milk products. "Food safety is not simply

a food problem, it has become a social problem,

or even a national image-related problem," said

Ning Gaoning, board chairman of the China

National Cereals, Oils and Foodstuffs Corp, at

the Fifth China Food Safety Forum. "Large

Chinese food producers should play a leading

role in food safety and product quality, while

their mid-sized and small counterparts strongly

need self-discipline." (cd 3/7/2013)

Baby formula gets new import rules

China’s authorities released a policy Thursday to

further strengthen the quality and safety of baby

milk products, a move intended to restore

consumer confidence in the domestic dairy

sector.

The policy, released by nine ministries and

commissions including the China Food and Drug

Administration (CFDA) and the Ministry of

Industry and Information Technology (MIIT),

prohibits repackaging imported baby formula

from large bulk packages into small packages

and says that baby formula must be labelled in

Chinese before being imported to the mainland.


ChinaNews


Food Industry News



(Contd)

Companies exporting baby formula to the

mainland must register with the authorities

before May 1, 2014, Lin Wei, an official with the


Inspection and Quarantine, told a media briefing

Thursday.

The strict rules for imported baby formula

products are the highlight of the new policy,

which targets a market that is currently in chaos,

Song Liang, an analyst with the Distribution

Productivity Promotion Centre of China

Commerce, told the Global Times Thursday.

Because the profit margin on baby formula is

high, many domestic firms repackage imported

products into smaller sizes or produce goods in

their own overseas plants and claim they are

imported.

Only 20 out of the 200 “New Zealand” baby

formula brands sold in China are genuine, the

New Zealand Infant Formula Exporters

Association said in April.

Online purchases of imported products are also

growing quickly, which can lead to quality

problems as the sector has yet to see any

regulatory laws, Wang Dingmian, former

director of the Dairy Association of China, told

the Global Times Thursday.

China has 127 baby formula producers, but more

than half the market is held by foreign brands,

Wang said.



(Contd)

The newly released policy also requires that baby

formula be managed in accordance with

pharmaceutical rules, and that baby formula

producers own and control their own milk

sources.

The moves, which aim to enhance the safety of

domestic baby formula products and promote

scaled production, came after the MIIT said

Tuesday it expects that within two years, 70% of

the sector will be dominated by 10 large

domestic baby formula producers with revenues

exceeding RMB 2 bio.

Song Kungang, Secretary-General of the China

Dairy Industry Association, suggested Thursday

that the CFDA rule out producers with quality

problems and tighten verification for baby

formula production licenses.

China Mengniu Dairy Co announced Tuesday

that it will acquire milk powder firm Yashili

International Holdings Ltd, and analysts said the

sector would see an increasing number of

takeovers in the near future due to government

policies and market competition.

Song said there are currently over 120 domestic

baby formula brands, but two-thirds will exit the

market in three to five years.

However, Wang said that because milk products

have a short shelf life, it is better to use local

resources to make it (theglobaldairy 3/7/2013)

ChinaNews


Food Industry News


Multinationals face increased scrutiny

China is expanding its investigations into the

food, dairy and pharmaceutical industries, raising

questions about whether the days of

"supranational treatment" for multinationals have

ended.

The investigations signal that these companies

face increased scrutiny of their operations in the

country.

The State Administration for Industry &

Commerce is investigating the food processing

and packaging company Tetra Pak International

SA for possible abuse of market dominance.

The SAIC has organized more than 20 of its

regional agencies to investigate the allegations,

Zhang Mao, head of the market regulator, said on

Friday. It is also investigating 23 cases of

possible monopoly violations.

Tetra Pak China said in a statement that it has

received requests from the SAIC and will

provide relevant information about its operations

in China to fully cooperate with the government's

investigation.

Earlier, the National Development and Reform

Commission, the top economic planning agency,

started an investigation into the pricing of infant

formula sold by Switzerland-based Nestle's

Wyeth and other foreign companies, including

Mead Johnson Nutrition Co, Abbott Laboratories

and Dutch producer Royal FrieslandCampina

NV.



(Contd)

Nestle SA and Danone's infant-nutrition units cut

some prices after the government started looking

into possible price-fixing by global producers of

infant formula.

Domestic company Biostime International

Holdings Ltd, whose net profit rose 40%

year-on-year in 2012, is also being investigated.

The NDRC has evidence showing that the

companies' prices have increased about 30%

since 2008.

The world's largest dairy exporter, Fonterra

Cooperative Group Ltd in New Zealand, was

contacted on a "broad-ranging investigation of

consumer dairy products in China", and it is

cooperating with the authorities, the

Auckland-based company said.

Wyeth said this week it would lower the prices of

some baby-formula products by as much as 20%.

It said the reductions will save consumers an

estimated RMB 450 mio in the next 12 months.

Danone said its Dumex unit is preparing a price

cut, and it will disclose details later.


ChinaNews


Food Industry News



(Contd)

Some industry industry experts said

investigations might exert temporary limits on

milk powder prices, but Chinese parents' demand

for foreign brands would drive prices back up

again.

Wang Dingmian, an executive council member

of the Dairy Association of China, said

entrenched preferences for foreign brands would

not easily change.

As for domestic milk powder brands, the

government's actions would also have a limited

impact if the problems involving product quality,

milk sources and trust issues were not resolved,

he said.

Chinese consumers' loyalty to foreign brands is

thought to be pushing up their prices over the

long run. Guo Yuanyuan, the mother of a

2-year-old, buys high-end milk powder produced

by Wyeth regularly. Each can costs about

RMB 400.

"When I encounter piles of imported milk

powder at the supermarket, the price is the only

factor that matters to me," Guo said. "I believe

the more expensive the product, the better the

quality and thus the safety for children."

The government is also examining the costs and

prices of international pharmaceutical

companies, including GlaxoSmithKline Plc,

Merck & Co, Novartis AG and Baxter

International Inc, with the aim of improving the

pricing system for medicines.



(Contd)

According to an e-mail response from MSD

China, a unit of international drug maker Merck

& Co, said the NDRC announced cost and price

surveys on July 2.

MSD said it is a routine cost and price data

collection spanning the entire healthcare

industry, including local and multinational

pharmaceutical manufacturers.

The company said such surveys are carried out

on a random basis.

For example, this month, 27 drug companies,

including Boehringer Ingelheim GmbH, Astellas

Pharma Inc, GSK, Baxter and MSD, have been

chosen for the survey, together with large

domestic pharmaceutical and medical device

companies.

Wang Zhile, president of the Beijing New

Century Academy on Transnational Corporations

and a senior researcher on foreign direct

investment, said that an anti-monopoly

investigation is necessary to build up a healthier

market.

He said the move encourages all companies —

local or foreign — to play by the rules.

He said it is vital for the government to adopt

proper and internationally recognized methods in

investigations to yield a fair result. (cd 6/2013)

ChinaNews


Food Industry News


China implements new import and

export requirements for dairy products

On January 24, 2013, the State General


Inspection and Quarantine (AQSIQ) announced

the "Supervision and Administration of

Inspection and Quarantine of Imported and

Exported Dairy Products" (AQSIQ Decree No.

152, hereinafter referred to as the "measures"),

which were implemented starting May 1, 2013.

This announcement extends on the Relevant

Requirements for Implementing the Measures for

the Supervision and Administration of Inspection

and Quarantine of Imported and Exported Dairy

Products by AQSIQ Announcement No. 53,

which was released on April 15, 2013.

The "measures" refer to:

- The People's Republic of China Food

Safety Law and its implementing

regulations;

- The Import and Export Commodity

Inspection Law of P.R.C. and its

implementing regulations;

- The Entry and Exit Animal and Plant

Quarantine Act and its implementing

regulations;

- The State Council on Strengthening Food

and Product Safety Supervision and

Management of Special Provisions;

- The Dairy Quality and Safety Supervision

and Management Regulations and other

laws, regulations


China implements new import and

export requirements for dairy products

(Contd)

The "measures" cover the contents of the dairy

classifications and definitions, detailed

regulations on the contents of dairy imports,

exports products, risk warning, liability,

implementing the supervision and management.

Meanwhile, if the dairy importers and exporters

have objections on the inspection and quarantine

results, retesting can be applied for via the

Provisions of the Import and Export Commodity

Re-inspection Management Approach.

A further clarification of the contents and the

scope of application have been described in the

Implementation Requirements of “measures”.

Businesses exporting dairy products to China

should register in the registration system. For the

first import of dairy products, the importer or

agent should provide a testing report following

the national food safety product standard,

including the requirements of GB 2761 and

GB 2762.

For subsequent imports of dairy product, the

implementation requirements of “measures” are

shown in a recent SGS SafeGuards article in

Table 1.

According to the Implementation Requirements

of “measures” testing organizations are required

to obtain the China Metrology Accreditation of

Food (CMAF). The SGS China Agriculture &

Food Unit has 10 laboratories, which all hold

CMAF accreditation. (afj 6/6/2013)

ChinaNews


Food Industry News


Infant formulae: market shares of

international brands

A survey conducted in June 2013 showed that

the four leading infant formula brands in China

were foreign. The following tables list the brands

and their current market shares.

Brand Share (%)

Mead Johnson 12.3

Dumex 11.7

Wyeth 11.0

Abbot 7.7

(cftn 11/6/2013)


spending cut

Piles of high-end seafood — including lobsters,

crabs and abalone — sat quietly in the small

tanks of various vendors, during a visit to one of

the largest aquatics markets in northern Beijing

this week.

Store owners at the market, a major wholesaler

for restaurants in the area, said they were

disappointed by the sluggish levels of business

for expensive aquatic products in recent months,

the result of the ongoing decline in luxury

catering across the nation.

"Top restaurants have cut their demands for

high-end products," said one shop owner

surnamed Lin. "Expensive seafood such as

abalone and lobsters are difficult to sell, despite

prices dropping 30% compared with last year."



spending cut (Contd)

A kg of abalone now costs around RMB 80,

against RMB 140 a year ago, and a lobster can be

bought for less than RMB 100, according to

Li Jianchao, a restaurant owner in Beijing.

Abalone and lobster account for the majority of

high-end seafood dishes in luxury restaurants.

Sales of imported dried seafood being sold in

Jingshen Seafood Market in southern Beijing, for

instance, have dropped two-thirds with almost

zero demand from high-end restaurants,

according to a report in China Securities Journal.

In such a depressed market, many high-end

seafood traders have been forced to quit the

businesses altogether, the journal added.

High-end seafood products at lower prices have

lured many individual customers, however, while

some medium and lower priced seafood remains

popular, with some prices even rising, said Lin.

Bian Jiang, Assistant Director of the China

Cuisine Association, said a decline in retail and

wholesale seafood sales is inevitable, as the

catering industry slows, and the effects are also

hitting other related sectors of the industry, from

breeding, to feeding, fishing, and seafood

imports and exports.

"It has been the worst time for seafood-related

industries in a decade," Bian said.


ChinaNews


Food Industry News



spending cut (Contd)

Homey Group of Shandong province, a listed

food processing, aquaculture and ocean fishing

company with more than 30 subsidiary

companies, including 10 food processing plants,

said it expects to see a reduction in its first

quarter sales, according to China Investment

Securities.

In December, the government launched a

nationwide crackdown on graft and

extravagance, which is now being blamed for

what experts suggest is the biggest slowdown in

the catering industry in a decade.

Revenues of high-end restaurants in Beijing,

Shanghai and Chengdu were down at least 20%

during this year's Spring Festival.

In the first quarter of the year, many top catering

companies had to close branches or change their

menus. However, large chain restaurants have a

different view on seafood sales.

Jingya Group, for instance, reported its seafood

businesses have not been affected by the

government policies yet and its seafood buying

from suppliers in Shandong is little changed,

according to Ma Yuming, a Marketing Executive

at the company. (cd 14/6/2013)

Shrimp exports

The following table shows the region breakdown

of the exports of shrimps in the first 4 months of

2013 and the same period of 2012.


Shrimp exports (Contd)

Region 2013 1-4

(t)

2012 1-4

(t)

Growth

(%)

Beijing 13.9 5.7 146.9

Tianjin 163.1 293.7 -44.5

Hebei 248.2 272.0 -8.7

Liaoning 3 517.9 3 634.7 -3.2

Jilin 4.5 26.3 -82.8

Shanghai 1 818.9 3 079.5 -40.9

Jiangsu 1 538.7 2 036.3 -24.4

Zhejiang 13 627.3 17 698.9 -23.0

Anhui 323.0 195.4 65.3

Fujian 19 767.4 12 766.5 54.8

Jiangxi 0.0 12.4 -100.0

Shandong 5 759.5 9 108.2 -36.8

Henan 10.1 251.7 -96.0

Hubei 1 489.8 836.6 78.1

Hunan 0.0 67.2 -100.0

Guangdong 32 718.3 25 787.9 26.9

Guangxi 2 530.4 1 978.5 27.9

Hainan 1 381.2 1 688.4 -18.2

Yunnan 11.6 37.6 -69.2

(Mofcon 27/7/2013)

When we compare this table with that about

apple juice exports in this section, we once more

see a sharp increase in the exports from Beijing,

an inland city located in a water deficient region.

It seems that Beijing is growing as an export hub.


ChinaNews


Food Industry News


The U.S. admin ruling on Chinese

canned mushroom

On March 12, the U.S. Department of Commerce

announced its preliminary ruling of anti-dumping

administrative review on canned mushrooms

from China, affirming that the dumping margin

of China's Blue Field (Sichuan) Food Industrial

Co., Ltd. was 102.11%, Chinese general

dumping margin was 308.33% covering

enterprises Dujiangyan Xingda Foodstuffs Co.,

Ltd. (Sichuan) [3], Ayecue (Liaocheng) [4]

Foodstuff Co.,Ltd. (Shandong) [4], Jiufa Edible

Fungus Corporation (Shandong) [4], Ltd., and

Iceman Group Co., Ltd. (Zhejiang) [5].

On February 2, 1998, the Department of

Commerce started the anti-dumping investigation

under HS Codes 20031027, 20031031,

20031037, 20031043, 20031047, 20031053 and

0711904000. On December 18, 1998, the

Department ruled the Chinese dumping margins

from 123.16% to 198.63%. On March 30, 2012,

the Department made the 13th administrative

review on this case. (etochina 1/4/2013)


government probe

An increasing number of foreign and domestic

milk powder companies have cut the prices of

their products after the government launched an

anti-monopoly probe earlier this month.

The price cuts are considered an attempt to get

lighter fines if the companies are found guilty of

any wrongdoing, experts said.



government probe (Contd)

However, the moves have also raised worries

that domestic brands might be further squeezed

out of the market.

On Monday, Chinese infant formula maker

Beingmate Group Co., Ltd. (Hangzhou,

Zhejiang) [5] said it will lower its prices by 5 to

20% starting on July 10, in a bid to boost its

competitiveness and grab more market share.

Also on Monday, Dutch dairy producer Royal

FrieslandCampina NV has notified its retailers in

China that it will reduce its prices by 5%.

By taking the initiative to cut prices as a way of

showing that they are cooperating with the

government's probe, the move is also expected to

soothe consumers who have suffered from

increasing prices for years, and to get lighter

fines if the probe finds them guilty of any

irregularities, said Song Liang, a Chinese dairy

expert.

Xiang Jianjun, a researcher with CIConsulting - a

major industry research firm - said the

anti-monopoly probe is targeting foreign brands,

which are allegedly taking advantage of the

consumers' distrust of domestic brands to raise

prices frequently and are hurting consumer

interests.

Foreign brands, which have a market share of

more than 70%, are a major threat to local

brands, Xiang said.


ChinaNews


Food Industry News




On July 1, the National Development and

Reform Commission started an investigation into

the prices of infant formula products sold by

foreign companies, including Switzerland-based

Nestlé SA's Wyeth, Mead Johnson Nutrition Co,

Abbott Laboratories and Royal

FrieslandCampina NV.

The NDRC has evidence showing that prices

have increased about 30% since 2008.

Domestic company Biostime International

Holdings Ltd, which saw its net profit increase

40% year-on-year in 2012, is also being

investigated.

Nestle SA and Groupe Danone SA

infant-nutrition units cut some prices after the

probe was launched.

Leyou, a leading retailer of milk powder in

Beijing, said that Wyeth lowered the prices of its

products by 10% on average, with the highest

reduction at 20%. But all of the products for

which Wyeth lowered prices are domestically

produced, said Gong Dingyu, Chief Operating

Officer of Leyou.

Gong doesn't believe that the price cuts by

foreign brands will hit the market share of

domestic brands because brand loyalty among

milk-powder buyers is high. Mothers who

purchase domestic brands will not easily shift to

foreign brands as a result of the cuts, he said.




Wang Jing, 34, welcomes the reduced price of

foreign milk powder brands, which she purchases

two or three cans of per month for her 2-year-old

child.

Wang, who sometimes relies on supplies from

her friends in Australia, added parents don't

choose brands based on price, but quality and

safety. "Baby food is the only thing that we don't

take price into consideration," she said.

Dairy industry analyst Song said that first-tier

foreign brands in China have the capacity to

control the pricing structure. Also, the price cuts

will likely start a series of price decreases in the

industry and will have a chain effect, he added.

"The anti-monopoly investigation will burst the

price bubble and make prices return to their real

value," Song said. But he doubts that the cuts

will have a major impact on domestic brands.

"Most domestic milk-powder brands have their

markets in third-tier cities or even in smaller

regions," Song said. "They have no direct

conflicts in the market with their foreign

competitors." (cd 9/7/2013)

Food watchdog probes tainted egg

allegations

China's State Food and Drug Administration, or

SFDA, on Sunday began to check for food

companies processing lime-preserved eggs with

copper sulphate, following a scandal highlighted

in a media report.


ChinaNews


Food Industry News


Food watchdog probes tainted egg

allegations (Contd)

On Friday, China Central Television reported

that some egg processing plants are suspected of

using copper sulphate in the pickling of

lime-preserved eggs, a black-colored cold dish

popular around the country. Copper Sulphate can

be poisonous if swallowed.

The SFDA ordered the Jiangxi provincial food

and drug administration to investigate the issue

immediately, and required industrial and

commercial administrative departments, quality

supervision departments as well as food and drug

administrative departments nationwide to

supervise and examine all producers of

lime-preserved eggs.

Food additives and processing aid will be the

focus of the supervision, said the SFDA, adding

that companies found using copper sulphate to

process preserved eggs will have their production

licenses suspended and be punished strictly

according to law.

People suspected of violating the criminal law

will be transferred to the police, said the SFDA.

(cd 17/6/2013)

Food safety official in pesticides

warning

State standards for pesticide residue lag far

behind those of developed countries and are

putting health at risk, according to a senior

official with China's food safety watchdog.



warning (Contd)

China's mainland has limits on residue from 667

pesticides, while Japan has limits on some

62 000, said Xu Minghuan, of the General


Inspection and Quarantine.

He said the mainland's residue standards were

also lower than those in Hong Kong which has

limits on some 6100 pesticides, Xinhua news

agency reported. Meanwhile, the amount of

fertilizer and other additives allowed on farm

produce were about two times higher than

international standards.

Tests for pesticide residue on the mainland were

also failing as nearly 60% of 2200 food additives

and residues that pose a risk to health could not

be detected, Xu said. Low standards and poor

detection technology had a huge impact on

exports, he added.

Japan, for example, had increased the number of

banned pesticides and additives to 797 from the

former 63 on vegetables from the Chinese

mainland. It also set some 50 000 standards on

all kinds of chemical residue. Residue must be no

more than 0.01 mg per kg on produce. Xu said

such strict stipulations had affected some 30% of

China's agricultural exports, or about 6000

Chinese companies and the income of Chinese

farmers, he said. To solve the problem, Xu said

the country should first improve its detection

technology.


ChinaNews


Food Industry News



warning (Contd)

He said the country's land resources authority

had begun monitoring soil quality to curb the

amount of polluted farmland, but an evaluation

mechanism should also be set up to monitor and

record all potential sources of pollution.

Last year, it was reported that red wine from

three domestic makers contained excessive levels

of two pesticides, carbendazim and metalaxyl.

But the Ministry of Health later said the amount

was below the country's limits. (sd 17/6/2013)


standards

China's top food watchdog said the content of

trans fat in homemade baby formula abides by

national and international standards, contrary to a

media report claiming that some milk powder

contains too much of the substance.

"Test results showed the value of trans-fatty

acids in domestic baby formula products was

0.019 to 0.574 g per 100 g of milk powder,

which conforms to national and international

standards," said a notice that the China Food and

Drug Administration posted on its website on

Tuesday.

Tests of fatty acids and trans-fatty acids were

performed on 10 187 samples of baby formula

products manufactured on the Chinese mainland

in recent years, it said.



standards (Contd)

"Meanwhile, tests have found trans-fatty acids in

all the 197 samples of imported baby formula

and the value detected was 0.024 to 0.367 g per

100 g of the product," the notice said.

Hong Kong's South China Morning Post said in a

report on Monday that three popular mainland

milk powder brands － Beingmate's Baby Club,

Synutra's Super infant formula and Yili's Gold

infant formula — were found in lab tests

commissioned by the newspaper to contain trans

fat between 0.4 and 0.6 g per 100 g of the

product.

Nutritionists say trans fat can cause obesity,

diabetes, coronary heart disease and affect the

growth and development of infants.

There are two kinds of trans fat: natural and

man-made, like that in artificial fat and coffee

creamer, said Song Kungang, secretary-general

of China Dairy Industry Association.

"Trans fat is an inherent component of mammal

milk. Trans fat accounts for 4% to 9% of the total

fatty acids in milk and 2% to 6% in human

milk," Song said.

"No data have been shown to prove that natural

trans-fat in food has adverse health effects."


ChinaNews


Food Industry News



standards (Contd)

The Codex Alimentarius Commission, the

international food standards setting authority,

caps the limit of trans fat in baby formula at no

more than 3% of total fatty acids. The national

standard has the same limit.

The SCMP also said the tests found two popular

overseas formula brands that contained no trans

fat. Dairy experts suspect the test results were

fabricated.

A spokeswoman for Beingmate said they have

never added anything to milk formula products

that goes against mainland regulations, the

newspaper reported.

"It' is illegal to add artificial chemicals. But the

infant formula is safe and reliable if the

substance lies in milk naturally and the amount

accords with regulations," said Cao Mingshi,

deputy secretary general of the Shanghai Dairy

Association. (cd 10/7/2013)

Three provinces establish seasoning

league

The seasoning associations of Heilongjiang, Jilin

and Shandong have entered into a joint league to

help one another in regulation, product

development, food safety and other issues related

to the seasoning products industry.

(tjkx 14/6/2013)


Three provinces establish seasoning

league (Contd)

This is an interesting development. Chinese

provinces usually interact as if they were

sovereign states, so this league by itself is

innovative. Moreover, while Heilongjiang and

Jilin are neighboring provinces, Shandong is

located in another region of China. One would

expect Liaoning to participate in a kind of

north-eastern league.


standards

China's top food watchdog said the content of

trans fat in homemade baby formula abides by

national and international standards, contrary to a

media report claiming that some milk powder

contains too much of the substance.

"Test results showed the value of trans-fatty

acids in domestic baby formula products was

0.019 to 0.574 g per 100 g of milk powder,

which conforms to national and international

standards," said a notice that the China Food and

Drug Administration posted on its website on

Tuesday. (Continued on next page)

ChinaNews


Food Industry News



standards (Contd)

Tests of fatty acids and trans-fatty acids were

performed on 10,187 samples of baby formula

products manufactured on the Chinese mainland

in recent years, it said.

"Meanwhile, tests have found trans-fatty acids in

all the 197 samples of imported baby formula

and the value detected was 0.024 to 0.367 g per

100 g of the product," the notice said.

Hong Kong's South China Morning Post said in a

report on Monday that three popular mainland

milk powder brands － Beingmate's Baby Club,

Synutra's Super infant formula and Yili's Gold

infant formula — were found in lab tests

commissioned by the newspaper to contain trans

fat between 0.4 and 0.6 g per 100 g of the

product.

Nutritionists say trans fat can cause obesity,

diabetes, coronary heart disease and affect the

growth and development of infants.

There are two kinds of trans fat: natural and

man-made, like that in artificial fat and coffee

creamer, said Song Kungang, secretary-general

of China Dairy Industry Association.

"Trans fat is an inherent component of mammal

milk. Trans fat accounts for 4 to 9% of the total

fatty acids in milk and 2 to 6% in human milk,"

Song said.

"No data have been shown to prove that natural

trans-fat in food has adverse health effects."



standards (Contd)

The Codex Alimentarius Commission, the

international food standards setting authority,

caps the limit of trans fat in baby formula at no

more than 3% of total fatty acids. The national

standard has the same limit.

The SCMP also said the tests found two popular

overseas formula brands that contained no trans

fat. Dairy experts suspect the test results were

fabricated.

A spokeswoman for Beingmate said they have

never added anything to milk formula products

that goes against mainland regulations, the

newspaper reported.

"It is illegal to add artificial chemicals. But the

infant formula is safe and reliable if the

substance lies in milk naturally and the amount

accords with regulations," said Cao Mingshi,

deputy secretary general of the Shanghai Dairy

Association. (cd 10/7/2013)

Better times ahead for catering

industry

The growth slowdown in the country's catering

industry is over, with double-digit expansion to

return in the current half-year, according to the

China Cuisine Association.

Growth will hit 10% from July to December,

with industry revenue of RMB 2.6 trillion, the

association said in a report on Monday.


ChinaNews


Food Industry News



industry (Contd)

First-half revenue was up 8.7% to RMB 1.18

trillion. The growth rate was 4.5% points lower

than a year earlier and 4% points below overall

retail sales, according to the association. The

recovery will be driven by industry upgrading

and transformation, said Bian Jiang,

Assistant Director of the CCA.

Bian said two factors that caused the first-half

downturn - the government's austerity campaign

and a wave of bird flu cases - won't persist in the

second half. Also, measures to upgrade business

adopted by many restaurant companies are likely

to take effect in the current half. And with many

major holidays due in the coming months, the

industry will get a further boost, Bian said.

The government's austerity campaign proved

most effective at curbing consumption with

public funds in Beijing, where about 2 000

restaurants closed in the first half.



industry (Contd)

Industry experts noted that many high-end

restaurants in Beijing were located adjacent to

government departments or institutions and had

therefore been hit hardest. The impact on the

catering sector was nationwide, however.

Between January and May, the latest period for

which provincial rates are available, the growth

rate of most provinces was 10% age points lower

than a year earlier.

But the growth rates varied dramatically by

region. Among first-tier cities, the outcomes for

Beijing and Guangzhou were opposite.

In Beijing, a sample of 50 restaurants showed

revenue down 6%, with 15 high-end catering

establishments down 36%. The number of fast

food and take-out stores rose, while sit-down

restaurants were in decline. Volatile market

conditions, high costs and lower profits caused

these changes.

Guangzhou, however, was one of the few cities

still recording rapid growth. Its catering industry

expanded more than 10%, with March's growth

rate rising to 17.8%.

The H7N9 virus (a variant of bird flu) affected

the catering industry in Shanghai, Jiangsu and

Zhejiang in April.

Nonetheless, the industry is recovering slowly. In

June, the growth rate of revenue climbed back to

9.5%.


ChinaNews


Food Industry News



industry (Contd)

The government's move to crack down on luxury

spending has resulted in a harsh environment for

high-end restaurants.

According to a CCA survey of major restaurant

companies in the second quarter, per capita

consumption fell 15 to 39% at high-end catering

places and their revenue slid 22.6%.

In the first half, Beijing Xiangeqing Co Ltd

closed eight stores, estimating a loss between

RMB 160 mio and RMB 240 mio.

China Quanjude Group, the country's top roast

duck restaurant chain, only achieved revenue of

RMB 850 mio, down 6.5% year-on-year, while

its profit fell 32.1% to RMB 85 mio.

Xiao Nan Guo Restaurants Holdings Ltd and

Tang Palace (China) Holdings Ltd's interim

reports contained warnings that their net profits

probably fell. (cd 31/7/2013)

Top cooking oil suppliers

The China Grain Reserves Corporation

(Sinograin) has published the following list of

China’s top suppliers of food oils in 2012.

Company Volume (mio t)

Yihai Kerry 3

COFCO 1.1

Luhua 0.5

(hcfood 8/6/2013)


challenges

With lingering low prices of rapeseed on the

market and continuing influx of cheap foreign

rapeseed, domestic rapeseed has got into a fix,

the Economic Daily reported.

Every year, the nation launches the purchase and

storage of various crops including rapeseed, as a

measure to regulate market prices.

Food acquired on the state system, mainly

through China Grain Reserves Corp, from

farmers nationwide, will be auctioned.

This year, the situation seems even more

complex. The state’s store of rapeseed oil in

2011 was auctioned earlier, the first batch of

4992 t, and the second 200 t. But all the rest fell

through.

“Price inversion and the high cost of purchasing

and storage are the main reasons leading to the

unsold rapeseed oil,” said Wang Cheng, a sales

manager at Zhonghe Food and Oil Group, a grain

processor based in Hubei province, one of the

major production bases for rapeseed in China.

“The price of future Number 1401 rapeseed oil

on the market has fallen to RMB 8064 per t, and

the price of the spot rapeseed oil is only

RMB 9100 to 9500. But the cost of the country’s

temporarily stored rapeseed oil is as high as

RMB 10 200 to RMB 10 600 per t,” said

Chen Yanjun on July 16, a senior analyst from

China Zhengzhou Grain Wholesale Market.


ChinaNews


Food Industry News



challenges (Contd)

Although the prop price or the state purchase

price of rapeseed has been increasing, the market

price remains low. Now almost all the rapeseed

oil on the market is imported.

According to the Ministry of Agriculture,

rapeseed imports from January to May reached

1.655 mio t, a year-on-year increase of 37%.

The influx of cheap foreign rapeseed makes the

production of domestic rapeseed oil frustrating.

For farmers, growing rapeseed is a thankless

task.

“If I grow rape on all my 4 mu (about 0.27

hectares) of farmland in autumn, I could

probably get 600 kg of rapeseed the next spring.

Deducting all the costs, I could only get

RMB 300 to 400,” said Gong Zhengqiu, a farmer

from Hubei province.

Gong said that unlike 20 years ago, nobody

wants to grow rapeseed anymore. Most

farmlands are empty during the winter.

“Farmers used to rush to carry the rapeseed to

my house, but now it is very difficult to collect.

Sometimes you can hardly collect a car of

rapeseed even if you look for it for several days,”

food and oil broker Lu Guobing said.

Low quality of domestically grown rapeseed and

high production costs are two main reasons

leading to the difficulties facing rapeseed oil

market players.



challenges (Contd)

Oil yield rate of imported GM rapeseed is 42%,

with a water impurity rate of 11%, while

domestic rapeseed oil yield rate is 35% with a

water impurity rate of 14%.

Automation of rapeseed planting is low, and

labour costs can be as high as RMB 9000 per

hectare. Machine sowing technology has no

problem, but mechanical transplanting and

collecting are not ideal for domestic growers.

Current rape growing machines are all modified

machinery that was used to cultivate rice and

wheat.

“We need to develop specific rapeseed

cultivation machinery as soon as possible. In

addition, we need to promote concentrated land

cultivation to reduce labour costs,” said

Gan Yuhua, an official from the Hubei

Provincial Department of Agriculture.

The main growing season of rapeseed in the

south is winter. Pests are fewer in low

temperatures, so the plants are real safe food,

Gan added. (cd 24/7/2013)

Major advance to halt flow of 'gutter

oil'

Chinese scientists say they have made a major

breakthrough in the battle against "gutter oil" —

illegal cooking oil recycled from waste oil

collected from sources such as restaurant fryers

and drains.


ChinaNews


Food Industry News



oil' (Contd)

Experts at the University of the Chinese

Academy of Sciences have unveiled a kit that

can test the purity of cooking oil in one minute.

The breakthrough comes as authorities continue

to crack down on the illegal collection and

reselling of waste oil to restaurants and

supermarkets.

The test kit works by placing a small sample of

any cooking oil in a test tube with a

burgundy-colored reagent and then shaking

them, co-creator He Yujian said.

"If the color doesn't change, the oil is safe," he

said. However, if it becomes lighter, the mixture

can be compared with a color chart that shows

the severity of the contamination.

The change can be seen if the proportion of

illegal oil in the sample is 5% or more, the

professor of chemistry and chemical biology

said.

For sellers of illegal oil 40 make a profit, the

proportion of recycled oil in their products needs

to be at least 5 to 10%, He said, adding that the

test kit is suitable for most oils on the market in

China.

The university team has spent nearly two years

developing the reagent, with the aim of making

detection easy, fast and cheap. The professor said

he is looking for an enterprise to manufacture the

kit.



oil' (Contd)

"I'm a scientist, so I don't know how to market a

product. But the method is already mature," he

said. "I'd say if any company was interested, it

would take less than a month for industrial

manufacture."

The term "gutter oil" usually refers to oil

collected by using three illegal methods — oil

skimmed from kitchen wastewater, oil reused

several times by a kitchen (such as from a

deep-fat fryer) and oil extracted from animal fat.

"All illegal cooking oil contains molecules that

do not exist in normal oil," He said. "So we

created a reagent that reacts with these molecules

and changes color." Most other detection

methods require sophisticated laboratory

instruments, He said.

"But it is simply not possible for law

enforcement officials to take huge instruments

with them when they conduct routine checks at

small restaurants and markets."

Public concern over illegal oil began to grow in

2011 when police cracked a cross-province case.

But a laboratory test could identify only two out

of 10 oil samples from the illegal workshops.

By May last year, the Ministry of Health (later

merged to form the National Health and Family

Planning Commission), had received 762

proposed methods from the public for detecting

illegal cooking oil.


ChinaNews


Food Industry News



oil' (Contd)

The commission chose seven — four laboratory

methods and three immediate tests, without

disclosing the methods to the public. However, at

least one expert is not confident about testing

illegal oil.

"Illegal oil is especially complex to detect,"

Liu Zhihong, a chemistry professor at Wuhan

University, was quoted as saying by Nanfang

Daily.

Liu said there is no flawless method yet to

recognize all illegal oil. Some methods, like

nuclear magnetic resonance and gas

chromatography, are too time-consuming and too

expensive.

But He, from the University of the Chinese

Academy of Sciences, said, "Based on laboratory

results, our reagent has an accuracy rate of about

96%, which is enough for initial inspection and

detection."

He estimated the cost for each test using the

reagent to be no more than RMB 0.5.

Meng Lingren, 20, a consumer from Beijing, is

not confident about the reagent being available to

individual buyers.

"Richer families prefer buying big brands or

imported products, while people with lower

incomes generally may care less about the oil

quality," he said. Meng believes the reagent

alone is far from sufficient to protect consumers.



oil' (Contd)

"The quality test, although with good intentions,

will have little effect if there are no channels for

individual consumers to complain about the

gutter oil they find, along with severe

punishment for the manufacturers," he said.

(cd 25/7/2013)

Detection of illegal cooking oils in

China

In recent years in China, illegal cooking oil

incidents have led to serious food safety risks

and negative social repercussions. The illegal

cooking oils include the refined waste oil from

restaurants, repeatedly used oil and waste animal

fats. Because such cooking oils may contain

toxic polymers, peroxide and so on, they can be

dangerous to human health. The most common

clinical symptoms of poisoning include

headaches, vomiting and diarrhoea.

While monitoring purchase records and granting

administrative licences can be used to control the

problem of illegal cooking oil, a rapid and on-site

detection of illegal cooking oil is still necessary

and urgent in China.

Professor He Yujian and his group from College

of Chemistry and Chemical Engineering,

University of Chinese Academy of Sciences has

established two rapid and convenient

colorimetric techniques based on phase transfer

technology which can be used for rapid and

on-site detection of illegal cooking oils.


ChinaNews


Food Industry News


Detection of illegal cooking oils in

China (Contd)

Their work, Rapid colorimetric detection of

illegal cooking oils based on phase transfer

technology, will be published on Science China

Chemistry, 2013.

In the methods, developed copper ions and

cationic gold nanoparticles protected by poly

(diallyldimethyl ammonium) chloride (PDDA)

were used as the recognition probes. And the

illegal cooking oil could be detected by the

naked eye (see image).

The results showed that qualified cooking oil

mixed with 2.8% of the illegal cooking oil could

be detected, and more than 5% of the illegal

cooking oil could be accurately detected by the

naked eye. These methods were applied in a

blind test for a total of 235 samples; the results

showed that the accurate rates of the blind tests

were 95.7%.

Compared with the traditional methods, this

method is cost-effective and allows rapid and

simple colorimetric detection of illegal cooking

oils without complex pre-treatment. A national

patent has been applied for.

(foodprocessing 1/7/2013)

China’s devastated wheat crop could

spur more food deals

A combination of frost and too much rain has

wreaked havoc on China’s wheat crops, Reuters

reported Tuesday, which could force the country

to ramp up wheat imports.



spur more food deals (Contd)

Food supplies are already tight for China’s

1.35 bio people. The country ranks a lowly 42nd

in the world in food security, just ahead of

Botswana. Urbanization has made arable land

scarce, persistent food safety scandals have made

consumers nervous, and volatile food prices are

driving inflation.

So the failed wheat crop may induce Beijing to

encourage even more acquisitions of foreign

food companies to secure the technology and

natural resources that China needs to feed its

many hungry mouths.

China’s food scarcity worries are already playing

a major role in deal-making around the world.

The USD 5.6 bio purchase of US soybean grower

Gavilon by Japan’s Marubeni Corp was held up

by Chinese officials for nearly a year, and then

only approved with strict rules for the combined

company, which will provide a huge portion of

China’s soybean imports.


ChinaNews


Food Industry News




Then in May, China’s Shuanghui International

offered USD 4.7 bio for Smithfield, the United

States’ largest pork producer, prompting US

politicians to fret about whether China was

bolstering its strategic pork reserves at America’s

expense. Ben Becker, the press secretary for the

Senate Agriculture Committee, worried aloud to

the New York Times. “What if tomorrow it is the

biggest dairy producer? Or the biggest corn

producer?” Then America, he seemed to imply,

could run out of milk or corn.

Such fears are often overblown. After all, “It is

not as if China can order the world’s pigs to stop

reproducing,” the Times noted, adding that

agricultural economists say it would only be a

few years before the rest of America

pork-packing plants could replace the lost

capacity, even if all of Smithfield’s pigs were

eaten by China.

And China isn’t after Smithfield’s pigs—it is

after the company’s expertise in running an

efficient (if occasionally very gross)

protein-based supply chain.

It is implausible to think that China would be

willing or able to simply scoop up a massive

dairy company like Nestle or Danone, or a

leading corn processor like Archers Daniel

Midland. But the world’s top dairy producers,

already in the throes of a consolidation wave, are

only going to see more deals, analysts predicted

even before China’s recent wheat crop disaster.




As data from a report by the OECD (above)

shows, China already needs to import significant

quantities of grains and dairy. The OECD

expects China “will improve its food security and

remain self-sufficient in main food crops,” but

will also “slightly outpace its production growth

by some 0.3% p.a., similar to the trend of the

previous decade.”

It is that trend that will impact M&A—

occasionally with China buying expertise, in the

case of Smithfield, but more often in deals like

Gavilon-Marubeni, where global players

consolidate to better meet massive Chinese

demand.

And there is certainly room for further business

opportunities if China’s crops fail to meet their

targets, as with this year’s wheat harvests.

Foreign traders and analysts estimated to Reuters

that China will now need to import some

10 mio t of wheat, nearly double the previous

estimates and the most in a decade. With China

facing changing food demands from better-off

consumers and massive soil contamination from

its decades of industrial production, Beijing may

be pushed to do even more grocery shopping

overseas. (qz 17/7/2013)

Looking to find, feed new food

consumers

Agricultural firms step up their efforts to export

higher value-added products instead of cheap

produce, report Yao Jing and Ding Qingfen in

Zhucheng (Shandong). (Continued on next page)

ChinaNews


Food Industry News



consumers (Contd)

In the spacious workshop of Zhucheng Waimao

Co Ltd, a poultry producing and processing

company in Shandong province, workers

wearing white overalls and masks were cleaning,

cutting and packaging chickens. The rumble of

machines meant voices had to be raised when

people spoke.

All of the chickens being processed were

transported from nearby feeding farms managed

and owned by the company. The modern

production line looks clean and efficient.

This has changed a lot compared with several

years ago when the company was more like a

farm and was buying chickens from scattered

peasant households who could not guarantee the

quality of their chickens and other animals.

"We have invested more than RMB 20 mio in

establishing an experimental plant to push

innovation and ensure the quality and safety of

our poultry products," said Wang Jinyou,

General Manager of Zhucheng Waimao.

Wang's 38-year-old company is just one of the

numerous Chinese agricultural producers that are

struggling to move up the value chain against the

background of the country's determination to

upgrade and transform its foreign trade.

One of the most important improvements for

China's agriculture exporters is from selling

cheap fresh products to processed goods tagged

with higher prices. (Continued in next column)


consumers (Contd)

Japan, which is known for its strict regulations

over imported agriculture products, accounts for

70% of Zhucheng Waimao's total food exports.

"All of our products shipped to Japan have

passed quality tests since 2008," said Wang.

Right now, Wang is planning to develop new

cooked products based on different tastes and

cooking methods. In the meantime, he will raise

the price of existing new products.

Large packages will also be adjusted to offer

smaller ones, such as shrinking one bag of fried

chicken from 300 g to 160 g, to meet local

customers' demands. In order to cater to the

elderly in Japan, Wang will launch softer

products that are easier to chew.

Wang is also trying to switch to the Chinese

market. "The key factor for expanding in the

domestic market is cultivating our brand names.

Although we were not previously paying

attention to the Chinese market, we are now

realizing it has great potential," he said.

Today, China market accounts for 70% of

Wang's total sales in quantity. However, as for its

business value, China is worth just 40%.

Another high-yielding Chinese agricultural

product, garlic, which totalled USD 1.69 bio in

exports in 2012, is also taking off after

production was upgraded. In Pizhou in East

China's Jiangsu province, the garlic planting area

is about 467 mio sq.m. There are nearly 500 000

garlic farmers. (Continued on next page)

ChinaNews


Food Industry News



consumers (Contd)

Garlic exports from their account for 10% of

China's total exports of the root. In recent years,

36 companies have begun to conduct

garlic-processing businesses, with five engaging

in extended processing. Local government and

companies have invested RMB 200 mio in garlic

innovation and brand building.

New products made using better technology

include garlic oil, allicin, an organosulfur

compound obtained from garlic, and garlic

capsules. "10 t of garlic can produce one ton of

allicin with a purity of 10%. The value of the

garlic used will surge nearly tenfold to

RMB 200 000," said Du Feilong,

Deputy Director-General at Pizhou Bureau of

Commerce.

Garlic cloves will become the main exporting

product among extended processing products.

"The export of garlic cloves is 8 to 10kt every

year, which accounts for 10% of our total garlic

output every year," said Du. However, the

overall agricultural foreign trade has its

problems, with China's trade deficit in the sector

widening since 2004 as it relies more on imports.

(cd 23/7/2013)

China eyes food security options in

Venezuela

China is considering investment in Venezuela's

agriculture industries as part of a global strategy

to secure diverse sources of food supplies for its

burgeoning population.



Venezuela (Contd)

Venezuelan agriculture has suffered under

frequent state interventions -- from outright

nationalization to implementation of agricultural

policies criticized as being removed from reality.

Oil-rich Venezuela is recovering slowly from a

recession the government blames on weather

vagaries, including frequent drought conditions.

Opposition critics say state mismanagement of

agriculture is partly to blame. Venezuelan Vice

President Jorge Arreaza indicates his talks in

Beijing gave him hope joint ventures involving

China could bring great benefit to a sector seen

to be performing well before capacity.

Beijing has been touting its agricultural prowess

and optimum exploitation of land resources.

Critics cite China's environmental problems as an

indication that progress has been patchy.

Venezuela under former President Hugo Chavez

pursued close collaboration with China in

energy, defence and security, and technology.

Chavez died of cancer in March, soon after

handing over power to hand-picked successor

Nicolas Maduro. President Maduro's inner circle

includes Arreaza, husband to the late Chavez'

eldest daughter Rosa Virgina.

Before he was appointed vice president under

Maduro, Arreaza was minister of science and

technology. Arreaza indicated that bilateral talks

on agricultural collaboration advanced after

Chinese Vice President Li Yuanchao visited the

country in May.


ChinaNews


Food Industry News



Venezuela (Contd)

"Venezuela has 30 mio hectares of prime land

and great agricultural potential."

Arreaza said Venezuela's agriculture suffered

from lack of inaction by its absentee landowners.

He blamed "bourgeois" landowners for the

problem. Both Chinese and Venezuelan officials

say China has every reason to be driven by the

need to build agriculture-based alliances

worldwide. China's own soil has limited

potential, which has been further diminished by

recent urbanization in rural areas.

Arreaza discounted criticism of Chinese interest

in Venezuela's land, blaming it on opponents

inspired by "U.S. imperialism" and past U.S.

policies in the region. Both Chavez and Maduro

have blown hot and cold on normalizing ties with

Washington.

One of the ideas being pursued in Venezuela will

be modelled after a Chinese model for

establishing special economic zones to stimulate

the economy, he said. Maduro's government aims

to continue Chavez's ideal of reversing a

prolonged neglect of Venezuelan agricultural

sector that began with the discovery of oil in the

1950s. Right up to the start of the oil boom,

agriculture, fishing and forestry earned more than

half of the national income.

By 1988 that ratio dropped to 5.9% of

Venezuela's gross domestic product, the rest

supported by industrialization and oil exports,

both of which declined in later years due to a

spate of nationalizations by Chavez.

(upi 26/7/2013)

Apple juice exports

The following table shows the region breakdown

of the exports of apple juice concentrate in the

first 4 months of 2013 and the same period of

2012.

Region 2013 1-4

(t)

2012 1-4

(t)

Growth

(%)

Beijing 43 667.7 27 177.9 60.7

Tianjin 16.1 43.1 -62.6

Hebei 12.4 0.0

Shanxi 2 488.2 5 519.1 -54.9

Liaoning 3 339.0 3 134.3 6.5

Heilongjiang 198.0 264.0 -25.0

Shanghai 4.5 36.3 -87.5

Jiangsu 7.2 19.8 -63.6

Zhejiang 381.1 49.5 669.9

Fujian 0.9 1.2 -28.7

Shandong 22 958.9 32 282.5 -28.9

Henan 7 612.0 6 187.2 23.0

Guangdong 193.3 231.6 -16.6

Hainan 1 811.2 0.0

Sichuan 246.2 1 627.8 -84.9

Shaanxi 108 355.4 85 367.9 26.9

Gansu 5 733.2 33 301.7 -82.8

Ningxia 841.5 504.9 66.7

Xinjiang 769.5 1 673.1 -54.0

(mofcon 27/7/2013)

ChinaNews


Food Industry News


Apple juice exports (Contd)

Of the 2 traditional AJC region, Shandong and

Shaanxi, the former shows a serious decrease,

while the latter has decreased with almost the

same percentage. The Shandong based

companies are mainly state owned enterprises,

while those in Shaanxi are mostly owned by

farmer cooperatives. The increase of Beijing is

remarkable, but could be caused by the fact that

juice from other regions has been exported via

Beijing.

Cooperatives can ensure safe food

There is no doubt that China has a problem with

food safety and that it is in the interest of

everyone other than the few causing it to see an

end to the threat.

So why has the problem persisted? The answer,

unfortunately, is: Because the risk of those

responsible for food safety scandals getting

caught is low and the possible profits are high.

As long as this situation continues, basic

economic theory dictates that the problem will

continue.

The solution is obvious, though. Producers and

consumers should be directly connected in a

manner that will make the production process

transparent and identify those responsible for

tampering with food products to make more

profits.

Of course, one or two small farmers cannot do

this. But imagine the following scenario:



(Contd)

Residents of a village who produce a variety high

quality vegetables and meat products decide to

form a cooperative to ensure that their production

process is safe, even environmentally friendly,

and they hire an agricultural specialist to advise

them how to do it most effectively.

To sell their products, they set up a shop in a

nearby city, and take turns to man it. The shop

carries the name of the village, and consumers

are invited to visit the village to inspect the

production process.

Since the village's reputation and everyone's

livelihood are at stake, all the villagers will be

obliged to make sure that the production takes

place in an orderly fashion. An open invitation to

consumers to come and observe the production

process would only strengthen this tendency.

The guarantee of getting absolutely safe food

products will prompt quality-minded consumers

to buy from the village's shop, which will enable

the villagers to charge higher prices for their

products in the long run and make more profit

without resorting to illegal means.

Over time, other villages decide to follow the

model to get a slice of the pie, and some villages

even start to cooperate with each other in order to

make their production more efficient and to

diversify their sales by opening secondary sales

and production facilities such as restaurants

using only self-produced products, or starting

their own dairy.


ChinaNews


Food Industry News



(Contd)

In the end, even the larger producers get

pressured into ensuring the quality of their

products or to lose out in the competition.

Some supermarket chains, too, may get

interested in setting up their own food production

line to attract consumers looking for absolutely

safe food.

Could this work? The market for this kind of

"guaranteed food" is most likely there, because

many people in China are willing to go to great

lengths - from asking relatives in the countryside

to supply home-grown products to buying

foreign products (especially milk powder) online

- to get safe products.

Is it hard to imagine that enough consumers

would be willing to pay a little extra to make

sure that they, or their children, get fresh and

healthy food to help establish such a market?

This would definitely work on a smaller scale,

especially with communal ownership of the

production facilities, which would drastically

reduce the individual incentive to cheat.

On a larger scale, and with a more diversified

production process, however, one can look at the

Scandinavian cooperative model that began in

the 19th century and is still functioning today.

There, the landownership and primary

production was individual, while the shared

production facilities were communally owned.



(Contd)

Each farmer had one vote on how to run the

communal part of the business, while individual

pay out was based on individual production

output.

No matter who gives shape to (or starts) this

model, individual farmers, large producers (such

as certain dairy companies) and even

supermarkets, it would be beneficial to all. And a

new link between villages and cities could be

fostered, with Chinese consumers being able to

eat safe and healthier food. (cd 30/7/2013)

China's Bad Earth

In Dapu, a rain-drenched rural outpost in the

heart of China's grain basket, a farmer grows

crops that she wouldn't dare to eat.

A state-backed chemicals factory next to her

farm dumps wastewater directly into the local

irrigation pond, she says, and turns it a florescent

blue reminiscent of antifreeze. After walking

around in the rice paddies, some farmers here

have developed unexplained blisters on their feet.


ChinaNews


Food Industry News


China's Bad Earth (Contd)

"Nothing comes from these plants," says the

farmer, pointing past the irrigation pond to a

handful of stunted rice shoots. She grows the

rice, which can't be sold because of its low

quality, only in order to qualify for payments

made by the factory owners to compensate for

polluting the area.

But the amount is only a fraction of what she

used to earn when the land was healthy, she says.

The plants look alive, "but they're actually dead

inside."

The experiences of these farmers in Dapu, in

central China's Hunan province, highlight an

emerging and critical front in China's

intensifying battle with pollution.

For years, public attention has focused on the

choking air and contaminated water that plague

China's ever-expanding cities. But a series of

recent cases have highlighted the spread of

pollution outside of urban areas, now

encompassing vast swaths of countryside,

including the agricultural heartland.

Estimates from state-affiliated researchers say

that anywhere between 8% and 20% of China's

arable land, some 25 to 60 mio acres, may now

be contaminated with heavy metals.

A loss of even 5% could be disastrous, taking

China below the "red line" of 296 mio acres of

arable land that are currently needed, according

to the government, to feed the country's 1.35 bio

people.



Rural China's toxic turn is largely a consequence

of two trends, say environmental researchers: the

expansion of polluting industries into remote

areas a safe distance from population centres,

and heavy use of chemical fertilizers to meet the

country's mounting food needs. Both changes

have been driven by the rapid pace of

urbanization in a country that in 2012, for the

first time in its long history, had more people

living in cities than outside of them.

Yet the effort to keep urbanites comfortable and

well-fed has also led to the poisoning of parts of

the food chain, and some of the pollution is

travelling back to the cities in a different—and

for many, more frightening—guise.

"Pollution can be displaced only to an extent.

You can't put walls around it," says Judith

Shapiro, the U.S.-based author of the recent book

"China's Environmental Challenges." She is one

of a number of researchers and environmental

activists—including many in China—who warn

that pollution poses an existential threat to the

current regime. It is, she says, "perhaps the single

most significant determinant of whether the

Communist Party will maintain its legitimacy in

coming years."

China has long sought to industrialize its

countryside, dating to Mao's disastrous Great

Leap Forward beginning in 1958, when he

sought rapid industrialization by urging peasants

to set up backyard steel furnaces at the expense

of agricultural output.


ChinaNews


Food Industry News



The cumulative impact of decades of building up

rural industry is now taking an environmental

toll, particularly as industrial growth surges

forward in China's breadbasket.

In the once agrarian provinces of Hunan and

Hubei, industrial activity rose more than

threefold from 2007 to 2011, far outpacing

industrial growth in powerhouse Guangdong.

In some cases, factories are moving to the

countryside to take advantage of cheaper land,

often made available with the help of local

officials who want to boost growth,

environmental researchers say. In other cases,

urban leaders want factories to move out of

crowded cities.

The ensuing problems of rural pollution are

exacerbated by the fact that many small-town

governments have less capacity to properly

regulate complex industrial activities than their

counterparts in big cities, experts say. Rice

farmer Zhu Hongqing has seen the market fall

after a recent cadmium scare.

The consequences of this shift catapulted to

national attention in February, after China's

Ministry of Environmental Protection refused to

release the results of a multiyear nationwide

soil-pollution survey, calling the data a "state

secret."

The decision—brought to a head when an activist

lawyer pressed the ministry to reveal the

numbers—sparked an outcry online and in the

traditional media.



Criticism even came from the Communist Party's

flagship paper, People's Daily, which posted a

message to its micro blog that read: "Covering

this up only makes people think: I'm being lied

to."

The environment ministry hasn't responded to

requests for comment. In April, Zhuang Guotai,

head of the ecological department at the

environment ministry, said during a news

conference that the survey's findings would be

released after the results had been "verified" but

didn't elaborate.

The uproar over the soil survey was compounded

by a second controversy the next month, when

authorities in Guangzhou, the capital of southern

China's Guangdong province, revealed that eight

out of 18 samples in a survey of local rice

supplies had been found to contain excessive

levels of cadmium, a heavy metal that can wreak

havoc on the kidneys and cause severe bone pain.

Officials didn't say where the cadmium came

from, though the rice itself was grown in nearby

Hunan province, they said.

Cadmium is generally associated with mining

and the smelting of metals like zinc and lead, as

well as battery manufacturing, all of which are

common in Hunan.

Social media users expressed anger and

dismissed two subsequent province wide

investigations that showed excessive levels of

cadmium in only 5.8% and 1.4% of rice supplies.


ChinaNews


Food Industry News



"First water, then the air we breathe, and now the

earth. How can people still survive?" wrote one

user on Sina Weibo, a popular Twitter-like micro

blogging service. "I suppose we can always

move abroad or to outer space."

"Chinese people have a very deep connection to

rice," adds Liu Jianqiang, a former investigative

reporter who now serves as the Beijing-based

editor of China Dialogue, a non-profit media

organization that tracks environmental issues.

"If you discover some vegetable or fruit is

poisoned, you can say 'I won't eat it.' But rice you

can't avoid."

Chinese officials have repeatedly said that they

are serious about reining in pollution. A week

after the cadmium news broke, the new Chinese

president Xi Jinping said at a meeting of top

leaders in Beijing that he planned to set an

ecological "red line," warning that those who

crossed it would be "held accountable for a

lifetime," though he didn't provide specifics.

The threat to China's countryside goes far beyond

cadmium. In January, China's official Xinhua

news agency highlighted the dangers of

hazardous chemical waste in rural areas by

profiling Zekou, described by environmentalists

as a "cancer village" in the central province of

Hubei.

Residents blame a nearby industrial park for

more than 60 recent cancer-related deaths, most

of them of people under the age of 50.



The Ministry of Environmental Protection

publicly acknowledged the existence of such

"cancer villages"—which have unusually high

rates of cancer and, according to

nongovernmental organizations and researchers,

number in the hundreds—for the first time a

month later.

In March, state media reported that 168 villagers

who live near a battery factory in the eastern

province of Zhejiang were discovered to have

elevated levels of lead in their blood, the latest in

a stream of rural lead-poisoning cases tied to

battery and smelting facilities.

And then there are the pressures being placed on

China's farmland by the overuse of chemical

fertilizers. Mr. Zhuang, of the environment

ministry, said at his recent news conference that

only 35% of the fertilizer used in China was

being properly absorbed by crops. The remaining

65%, he said, was being discharged as pollution

that was seriously tainting China's farmland.

Runoff of nitrogen fertilizer, among the most

widely-used varieties in China, can contaminate

water sources and lead to soil acidification, soil

erosion and lower crop yields.

"If things carry on this way, the soil will be

unable to bear it, the environment unable to bear

it. It is a real problem," said Mr. Zhuang.

Between 2000 and 2011, the use of chemical

fertilizer—pushed by the country's exploding

demand for staples such as rice—rose 38%, to

more than 57 mio t a year, according to the

National Bureau of Statistics.


ChinaNews


Food Industry News



Such growth far outpaced the growth of total

irrigated farmland, which rose only about 15%

during the same period.

Experts say that the government is aware of the

threat posed by rural pollution, noting a pledge

by the environmental minister in March to make

heavy-metal pollution a major focus. The

Ministry of Land and Resources followed by

announcing in June that it would conduct its own

nationwide soil sampling to map pollution levels

around the country, though it isn't clear if the

findings will be made public.

Later that month, China's cabinet, the State

Council, discussed a draft amendment to the

country's environmental law that would, among

other things, stiffen punishments for polluters

and require tighter regulation of fertilizers.

In Dapu, where chemicals factory was built in

2008, some of the crops are too low-quality to

sell. The factory offers compensation to farmers.

But experts say that fear of transparency, a

lumbering bureaucracy and worries over how

China would cope if large areas of land were

declared tainted raise questions about the

government's ability to respond.

Removing heavy metals from farmland is a

complicated process that can take years—time

lost for farming. That is a chilling prospect for a

government tasked with supporting 20% of the

world's population on less than 10% of the

world's arable land.



Any major reduction in food security would hurt

the Communist Party, which has staked its

reputation in part on its ability to keep the

country's granaries full with minimal imports.

The government's refusal to release its soil

survey, meanwhile, has only added to fears that

officials know more than they are willing to say.

Launched to great fanfare in the state media in

2006, the survey was originally scheduled to be

completed in 2010.

In June last year, an environment ministry

official told the Xinhua news service that more

than 20% of soil samples in a trial program for

monitoring pollution, involving 364 rural

villages, had failed to meet national standards

and that the results of the survey would be

published "at the proper time."

"There's a general feeling that government

officials know the problem is really bad, and if

they disclose it, then the public outrage will get

ahead of the ability of the state to do something

about it," says Alex Wang, an expert in Chinese

environmental law at the UCLA School of Law.

For generations of readers in the West, the

profound ties to the land of China's farmers have

been vividly depicted by "The Good Earth,"

novelist Pearl S. Buck's 1931 portrait of one rural

family's struggles in the era before the

revolution. As the protagonist Wang Lung

discovers, even through years of famine and

hardship, Chinese must ultimately find their

sustenance in the soil.


ChinaNews


Food Industry News



Today, many of the country's rural dilemmas are

most visible in Hunan province, the source of the

cadmium-tainted rice discovered in Guangzhou.

China's top rice producer, Hunan grew nearly

26 mio t of unmilled rice, almost 13% of China's

total, in 2011.

Hunan's central role in feeding China is

encapsulated in a proverb that dates back more

than 400 years to the late Ming Dynasty, when

the province had a different name: "When

Huguang reaps its harvest, all under Heaven

want for nothing."

In recent decades, however, Hunan has also

become one of the country's top five producers of

nonferrous metals like copper and lead, with

mines and smelters that accounted for 7.5% of

the country's nonferrous metals in 2012,

according to Wall Street Journal calculations

based on provincial and national statistics.

"You have farms next to mountains where

mining is happening, and not enough attention is

placed on environmental protection," says Chen

Nengchang, a soil remediation expert with the

Guangdong Institute of Environmental and Soil

Sciences.

It is difficult to say how extensive Hunan's

cadmium problem is, just as it is hard to pinpoint

exactly where the cadmium in any batch of

tainted rice comes from.



In one of a handful of small studies done on

heavy-metal pollution in the area, published in

2008, Nanjing Agricultural University professor

Pan Gengxing found 60% of rice bought in

markets in a number of southern provinces,

including Hunan, contained cadmium in excess

of China's national standards.

That survey, however, was based on only 61

samples. Also, China's maximum allowable

cadmium standard, 0.20 mg per kg of rice, is

twice as strict as the widely used international

standard. Studies have shown that Hunan rice is

also polluted with excessive arsenic and lead,

and that some of the rice has made it into

markets.

Zhu Hongqing, a 42-year-old rice farmer who

lives down the road from Dapu in the village of

Yanqiao, believes that his paddies are clean.

They are located more than a mile from the

chemical factory in Dapu and many miles from

any mine.

But consumer paranoia, amplified by a lack of

information, means that the market for all Hunan

rice is suffering, with prices of milled rice

dipping as much as 14% since the cadmium scare

began before recovering slightly, according to a

manager at Jincheng Rice Mill in Hunan's

Yiyang City.

"I told my wife I have a very bad feeling about

this," Mr. Zhu said one recent morning while

surveying an early rice crop on the cusp of being

harvested. "It is going to be impossible to sell it."


ChinaNews


Food Industry News



The political sensitivity surrounding soil

pollution is evident back in Dapu, where

villagers were afraid to give their names for fear

of reprisals from local officials. The farmer who

is growing bad rice says that the village had long

been a clean and prosperous place. Residents

made a comfortable living selling rice, jujubes,

oranges and melons. That changed in 2008, when

construction began on an aluminium fluoride

facility.

The plant ran 24 hours a day, she says, sending

smoke over local fields when the southern winds

began to blow in late summer and polluting

irrigation systems to the point that even the

insects have fled. The fruit trees stopped bearing

fruit, and whatever did grow, no one was willing

to buy.

After villagers complained, the factory owners

agreed to pay compensation as long as farmers

continued to raise a crop. The Dapu farmer says

that she used to earn as much as RMB 10 000, or

USD 1630, each year from growing rice. Now

she gets about RMB 5400, or USD 880, to grow

rice shoots that don't produce any rice.

An official in charge of environmental protection

at the factory, Hunan Nonferrous Fluoride

Chemical, Co. Ltd., a subsidiary of state-run

China Minmetals Group, said that the facility

maintained strict environmental standards but

that faulty equipment and electricity problems

occasionally led to the accidental discharge of

excess pollution.



He said that none of the factory emissions were

harmful to human health and added that the

company paid pollution compensation as

required by regulations. "Conflict between

farmers and enterprises happens all the time

because chemical factories can only be set up in

the countryside," said the official, who only gave

his surname, Li. "I totally understand the local

people. I'm the son of a farmer myself."

Officials at the Hengdong Agricultural Bureau,

which is responsible for monitoring Dapu, hung

up the phone repeatedly.

(wallstreetjournal 27/7/2013)

Ice on the rocks as 80% from 'illegal'

factories

As much as 80% of the edible ice cubes in

Beijing's shops and restaurants come from

"illegal" factories, National Business Daily

reported. Only six manufacturers have

production license for edible ice in the capital,

making the total output valued at RMB 100 mio

in the summer season.

But the output of the whole market is valued at

RMB 500 to 800 mio, which means at least 80%

of the ice comes from non-qualified factories, the

report said.

Edible ice companies must have a QS, or Quality

Standard identification since 2005. And it costs

at least RMB 30 000 to cover the certification

besides building laboratories and hiring

inspectors, according to an agency for quality

certification. (Continued on next page)

ChinaNews


Food Industry News


Ice on the rocks as 80% from 'illegal'

factories (Contd)

Ice cubes at several restaurants were found to be

dirtier than toilet water, Chinese media reported

last week.

According to CCTV, ice cubes used by fast food

giants including KFC, McDonald's and

Guangzhou-based Kungfu at their Beijing

branches were tested to contain bacteria at severe

levels.

The KFC ice cubes contained levels of bacteria

which were 20 times higher than the national

limit, and 13 times higher than water samples

taken from toilet bowls.

"The market is in chaos," said an employee of an

ice company, "Costs are increasing and those

with qualification certificates would have closed

down if they didn't rely on big buyers."

(cd 31/7/2013)

A Chinese trip for foodies and scientists

Although for many years Chinese cuisine was

only prepared within the home or at local

restaurants, globalization and the opening up of

China have driven a demand for canned,

packaged and frozen food products.

In the US, the science behind packaging food for

mass consumption and distribution has

developed over decades; that process is behind in

China, where a number of food-safety scandals

have made the news in the last few years.



(Contd)

An exchange program between the University of

California Davis and Jiangnan University's food

science and technology department aims to

explore those developments, fostering discussion

between American and Chinese students and

researchers.

"Taste of China," led by UC Davis department of

Food Science and Technology professor Charles

F. Shoemaker, sends a group of American

students to China for a one-month summer

immersion program that includes on-campus

lectures in Wuxi, cooking classes and visits to

Suzhou, Hangzhou, Shaoxing and Shanghai.

"In the past, people really only came to the US to

study food, but these days it is important for our

students to get out and visit other countries to

learn about their food cultures too," Shoemaker

told China Daily after his return from this year's

trip. "So much of Chinese culture is built around

and over food, and I wanted to use the trip as a

way to look at China's history and science

through the lens of food."

With around 1800 undergraduate and graduate

students and 100 faculty, Jiangnan University's

food-science program is ranked China's best and

possibly the world's largest, Shoemaker said. The

curriculum is not dissimilar from UC Davis'

program, which is also highly ranked. Students in

food-science programs often go on to work for

large food corporations like Kraft and Nestle,

which employ teams of scientists.


ChinaNews


Food Industry News




(Contd)

As food products are shipped around the world

and can sometimes spend months on a shelf

before reaching the dinner table, the chemical

stability and safety of the food is absolutely

essential. The scientists tasked with ensuring that

the food remains fresh and also tasty have

generally studied food science and technology in

programs like that of UC Davis and Jiangnan

University.

Food scientists will likely have more and more

opportunities to branch out into the Chinese

market in the coming years, Shoemaker said. A

trip like "A Taste of China" is a chance to whet

their appetites, he said.

Students from other programs at UC Davis have

joined the trip, which also showcases Chinese

culture and history. Students live in apartments

on Jiangnan University's campus, and classes are

also held at the university.

On this year's trip the group visited Yum!

Brands, the parent company of KFC in China, in

an informational visit to learn about the inner

workings of doing business in China. Chinese

food companies are very focused on food

standards in the aftermath of various tainted food

scandals, and resulting deaths. The bad press and

government crackdowns have made food safety a

priority.

"There's been a rapid change in the way their

infrastructure and distribution systems work, and

China is finally catching up," Shoemaker said.

"Exchange and research programs are important

to that process." (cd 31/7/2013)

Malaysian bird nests allowed to enter

China again

The ban on the imports of Malaysian birds’ nests

has been lifted recently. The ban was

promulgated in 2011, when large concentrations

of nitrites were discovered in birds nests

imported from Malaysia. (tjkx 24/6/2013)

Dupont opens probiotic facility in

China

DuPont has launched production at its state-of-

the-an probiotic blending and packaging facility

in China. The new site in Beijing represents

DuPont Nutrition & Health’s first step in

packaging probiotics into ready-to-market

formats that allow DuPont to offer its customers

improved speed to market, quality and flexibility.

Investment and capacity were not disclosed.

In 2011, DuPont purchased a food processing

plant north of Beijing and converted it into a new

cutting-edge probiotic blending and packaging

site to serve dietary supplement and food and

beverage customers globally and more

specifically China and the Asia Pacific region.


ChinaNews





China (Contd)

The investment is part of a global multi-year

capacity expansion program for cultures and

probiotics in the United States, Europe and now

in China.

“Probiotics is a fast-growing segment of our

business and the industry is experiencing

double-digit growth rates annually around the

world and in China,” said Fabienne

Saadane-Oaks, vice president Health and

Protection, DuPont Nutrition & Health. “As we

continue to support the world’s growing

population, this expansion allows us to custom

blend and package high-quality probiotic

products for our customers in the fast-growing

dietary supplement and food and beverage

industries close to our customers, where we want

to be.”

The new facility will allow customers to source

ready4-market probiotic formulations consisting

of Danisco HOWARU premium and FloraFIT

custom probiotic brands. And, by DuPont

managing the process throughout, customers will

be assured of the highest standard of food safety

and quality.

“This expansion is a further reinforcement of the

DuPont long-standing commitment to China, our

customers and consumers. We are in action to

help address some major challenges facing the

world, among those is the need for nutritious and

quality food, resulted from population growth

and urbanization,” added Tony Su, president,

DuPont Greater China.



China (Contd)

The probiotic formulations offer unique

improvements for digestive and immune health

and other well-being benefits for the dietary

supplement, dairy and beverage markets.

Probiotic cultures will be sourced from the

company’s North American and European sites.

The new facility in China will be able to custom

blend the ingredients to meet the requirements of

local customers. China is already a significant

market for the YO-MIX dairy cultures from the

DuPonttm Danisco range. According to industry

estimates, in 2012 the market for probiotics

globally totaled more than USD 32 bio. That

total is expected to increase to USD 45 bio by

2018. More than 90% of the total is attributed to

food, beverage and dietary supplements.

DuPont has eight sites in China that provide a

range of food ingredients, from emulsifiers,

hydrocolloids (blended ingredients), enzymes

and sweetener ingredients to food protection

ingredients, soy protein, lecithin and fiber, and

molecular diagnostic solutions. (fif 16/7/2013)

DuPont Sees Niche in Curing China's

Indigestion

Just reading recent headlines about food-safety

scandals in China might be enough to give a

polite person indigestion. This week CCTV

reported that ice cubes found in some KFC

(YUM) and McDonald’s (MCD) Beijing

branches contained more bacteria than toilet

water.


ChinaNews





Indigestion (Contd)

Other recent media investigations have exposed

gutter oil “recycled” as cooking oil; rat meat sold

as “lamb”; and growth-chemical-laced exploding

watermelons.

But where there’s a problem, there’s often a

business opportunity: Companies selling

digestive aids, dietary supplements, are nutrition

products are now finding a hungry market in

China.

Last week DuPont (DFT) opened a new

state-of-the-art probiotics blending and

packaging facility in Beijing. Previously the

company operated a small pilot plant to test the

Chinese market.

Probiotics are the “good” bacteria—such as live

cultures found in yogurts—that can help

maintain a healthy digestive and immune system.

DuPont’s new facility will work with both

dietary-supplement and dairy companies in

China. (Continued in next column)


Indigestion (Contd)

According to industry estimates cited by DuPont,

the global probiotics market is valued at USD 32

bio and projected to grow to USD 45 bio by

2018.

Asia is seen as a prime growth region, says

Fabienne Saadane-Oaks, vice president for health

and protection at DuPont Nutrition & Health,

adding that the Beijing facility will cater to

“specific Chinese needs for flavors, formats, and

textures.” (Beijing grocers often carry

blueberry-taro root yogurt, for instance.)

According to DuPont’s research, the market for

health supplements in China is growing at a fast

15% a year. Supplements to enhance digestive

health are especially popular.

According to Saadane-Oaks, half of all diseases

caused by microorganisms in China are due to

contamination in the food supply. Word up:

Gutter oil is tough on the tummy.

China also has a nascent organic foods industry.

For instance, Green Yard, a small “organic”

dairy farm on the outskirts of Beijing, where

cows are fed only organic fodder, is becoming

popular among expats and capital foodies. (Still

unconfirmed is whether the cows breathe rarefied

air, apart from Beijing’s toxic smog)

(Bloomberg 24/7/2013)

We usually try to avoid including several items

on the same topic. However, these two items are

quite complementary.

ChinaNews


Ingredient News


ING US to levy anti-dumping duty on

xanthan gum from China

The United States decided on Thursday to levy

anti-dumping duty on xanthan gum imported

from China.

The US International Trade Commission (ITC)

claimed that the domestic industry was

threatened or materially injured by imports of

xanthan gum from China, setting the stage for the

Commerce Department to impose punitive duty

on these products. The Commerce Department

alleged on May 29 that Chinese producers and

exporters sold xanthan gum in the US market at

dumping margins ranging from 15.09% to

154.07%.

It said that imports of xanthan gum from China

were valued at an estimated USD 82.4 mio in

2012. Xanthan gum is used as a thickener and

stabilizer in three major sectors, namely, food

and beverage, consumer and pharmaceutical

products, and oilfield and industrial use.


US to levy anti-dumping duty on

xanthan gum from China (Contd)

The Chinese Ministry of Commerce has

repeatedly urged the United States to abide by its

commitment against trade protectionism and

work together with China and other members of

the international community to maintain a free,

open and just international trade environment.

(cd 21/6/2013)


new Chinese facility

Solvay has announced its decision to build a new

state-of-the-art facility to manufacture vanillin in

Zhenjiang (Jiangsu) [1], boosting its production

capacities by 40% and enabling the Group to

better serve the fast-growing Asian market.

Solvay Aroma Performance is the world’s

biggest producer of vanillin with facilities in

Baton Rouge in the United States and Saint-Fons

in France. Combined with the new plant in

Zhenjiang, expected to be operational by the end

of 2014, the company’s worldwide production

capacities for vanillin and ethyl-vanillin will

expand significantly.


ChinaNews


Ingredient News



new Chinese facility (Contd)

Demand for vanillin in Asia is outpacing

worldwide demand.

The Zhenjiang facility will be fully compliant

with both international and local stringent

regulations.

With this new investment, Solvay Aroma

Performance establishes a unique, sustainable

and global industrial fully integrated vanillin

platform, spread over three continents, and

controls the entire production chain, from

making the raw material catechol to flagship end

products like Rhovanil vanillin.

A network of fully equipped food application

laboratories and food technologists together with

a dedicated sales force cater for specific local

demands and serve clients worldwide with a

complete product range to meet strict regulatory

and customer safety requirements.

“The addition of this manufacturing facility in

China makes of Solvay a uniquely positioned

highly reliable partner for our worldwide

customers, especially those in the highly

regulated food industry. It is an important step in

our strategy to continue strengthening our market

position, by offering a truly global production

footprint that ensures full traceability for food

safety and to consolidate Solvay as the global

reference for food-safe vanillin” says Dominique

Rage, President of Solvay Aroma Performance.



new Chinese facility (Contd)

The Aroma Performance global business unit

includes Solvay Group’s diphenol and

fluorinated intermediates operations, comprising

three main product segments: flavors and

fragrances for the food and perfumery markets

(with its flagship vanillin and ethyl-vanillin

product line sold under the Rhovanil and

Rhodiarome brand names); intermediates for the

crop protection, pharmaceutical and electronics

markets; and finally, inhibitors solutions used for

by-products of the petrochemical industry.

As an international chemical group, Solvay

assists industries in finding and implementing

ever more responsible and value-creating

solutions. The Group is firmly committed to

sustainable development and focused on

innovation and operational excellence.

Solvay serves diversified markets, generating

90% of its turnover in activities where it is one of

the top three worldwide.

The group is headquartered in Brussels, employs

about 29 000 people in 55 countries and

generated EUR 12.4 bio in net sales in 2012.

(fif 2/7/2013)

MSG disappearing

Industry experts report that the MSG industry is

gradually disappearing. Some of the older small

players have tried to survive by adding chicken

essence to their product range, but most of them

failed in that market as well. (tjkx 2/7/2013)


ChinaNews


Ingredient News


MSG disappearing (Contd)

This may apply to the smaller companies, but the

large MSG producers are still going strong.

Actually, chicken essence still contains about

40% MSG, so it is more like an upgraded version

of MSG than a really new taste enhancer.

Pepsi to reduce use of toxic chemical

PepsiCo China said Thursday the company is

taking measures to cut the amount of

4-methylimidazole, or 4-Mel, in its caramel

coloring, after an American environmental group

reported Wednesday that Pepsi products contain

high levels of the cancer-causing chemical.

The Centre for Environmental Health found

Pepsi products bought in 10 states outside

California still contains high levels of 4-Mel.

PepsiCo China said in a statement to National

Business Daily that the caramel coloring Pepsi

used in China is legal according to local laws and

regulations.

A PepsiCo statement in response said their

caramel coloring suppliers are modifying the

production process to reduce the amount of

4-Mel. (Continued in next column)

Pepsi to reduce use of toxic chemical

(Contd)

"The work has been done in California; the rest

of the US will be completed by February 2014,"

the statement said. "PepsiCo suppliers are also

undertaking this effort globally."

Despite Pepsi's promise, Michael Green, CEH's

executive director, said, "Pepsi's delay is

inexplicable. We urge the company to take swift

action to provide all Americans with the same

safer product they're selling in California."

PepsiCo's share prices fell 1.2% on Wednesday.

An unnamed Chinese food expert said that safety

issues about 4-Mel have not come up in China.

"But it is possible 4-Mel can cause cancer," the

expert said. (cd 5/7/2013)


COFCO

Canada-based stevia firm GLG Life Tech plans

to team up with state-backed Chinese food giant

COFCO (Beijing) to develop food and drink

products containing the sweetener. The two sides

have signed a letter of intent to produce stevia

extracts and formulated products to sell in China.

The venture is GLG's second attempt in China. In

2010, it set up another business, AN0C, to sell

and distribute zero-calorie food and drink

products in China. However, demand

zero-calorie drinks in China was low and a

spokesperson said the venture is now "dormant".


ChinaNews


Ingredient News



COFCO (Contd)

"The AN0C (All Natural, Zero Calories)

products that we developed and marketed in

2011 proved that there was a market for low and

zero calorie drinks sweetened with stevia.

Unfortunately, at the time we launched there was

also a cool summer, some problems with our

bottles, and significant competitive response, so

we were not able to get any momentum. We

haven't had any funds to do the marketing

required to re-enter the market," he said.

"COFCO certainly could, they want to be able to

provide these types of products, and with us, they

don't need a lot of development time."

Reflecting on the prospects for the tie-up with

COFCO, China's largest food company, the GLG

spokesperson said rates of obesity and diabetes

were on the up in China. Government attention

on the problems, he said, could lead consumers

to look for zero-calorie products.

"In the past, they haven't been big buyers of low

or zero calorie products, but we think this will

change as the government focuses on these

issues," he said.

"When I first started to go to China just ten years

ago, hawking on the sidewalk and smoking

everywhere was the norm. Now it is much

different, and this is because the government

focused on the issues. Next will be obesity and

diabetes - hello, stevia". Restrictions on artificial

high intensity sweeteners in China could also

benefit the two companies, the spokesperson

added.



COFCO (Contd)

"What COFCO like about the deal is that they

can get a sweetener that is grown in China, does

not need imported sugar," he claimed.

COFCO's investments include a stake in Chinese

dairy Mengniu, which could become a customer

for GLG's stevia products. COFCO also owns

65% of one of the two bottlers for Coca-Cola Co.

in China.

In the US and Europe, yoghurt, cereal and ice

cream brands have used the sweetener, although

stevia has been most seen in soft drinks. The

GLG spokesperson said it was "too early to tell"

whether the venture would focus on drinks or

food.

Xiao Ming Hao, president of COFCO's Nutrition

and Health Institute, said: "We plan to increase

the health value of stevia from developments of

technology, basic application, products and

quality safety and to provide more health options

for the Chinese diabetic and obese population."

(justfood 14/6/2013)

Tate & Lyle forms food systems joint

venture in China

Tate & Lyle PLC has signed an agreement with

Yitong Food Industry Co., Ltd. (Xuzhou,

Jiangsu) [2] to form a Sino-Foreign Joint Venture

through the acquisition of a 51% equity interest

in Jiangsu Howbetter Food Co., Ltd, a leading

Food Systems business in the People’s Republic

of China. (Continued on next page)

ChinaNews


Ingredient News

Regional News



venture in China (Contd)

Under the terms of the agreement, Tate & Lyle

will acquire 22% of its equity interest from

Yitong and the balance of 29% from S.B

International, a wholly-owned subsidiary of a

Europe-based global food business (which has

been a shareholder in Howbetter since 2009).

Tate & Lyle also has an option to acquire

Yitong’s remaining 49% equity interest in

Howbetter at a later stage. The transaction is

subject to governmental approval which is

expected in the autumn.

Howbetter provides stabilizer systems and

ingredient blends for customers across China

mainly in the dairy and beverage categories. It

operates from a blending facility in Suqian and

has application laboratories in the nearby city of

Xuzhou, both in Jiangsu Province.

How better was one of the first domestic food

blending businesses in China to be awarded a

license to operate under new regulations put in

place in 2010. (Continued in next column)


venture in China (Contd)

Olivier Rigaud, President, Speciality Food

Ingredients for Tate & Lyle said: “The

combination of Tate & Lyle’s global blending

capabilities and recipe know-how with

Howbetter’s strong local expertise and

infrastructure provides us with an excellent

platform on which to accelerate the growth of

our Food Systems business in China.”

Feng Guang, Chairman, Yitong and General

Manager, Howbetter, and who will also be

General Manager of Tate & Lyle Howbetter said:

“Tate & Lyle and Howbetter are two highly

complementary businesses with the same

absolute focus on quality and customer service.

Together, we will be able to offer our customers

in China a significantly enhanced range of

products and technical expertise”. (fif 18/7/2013)

Fujian

Fujian still China’s canned food province

According the Fujian Food Industry Association,

the region’s 106 canneries produced more than

2.36 mio t of canned food in 2012, making it the

top production region in this sector in China.

(hcfood 1/7/2013)

ChinaNews


Regional News


Fujian tea output

The Fujian Bureau of Statistics reports that the

province has produced 166kt of tea in the first

half of 2013, up 7.7%. The type with the largest

growth was black tea, with a growth rate of

41.7%. (cbn 9/7/2013)

Xinjiang

Aksu attracting beverage investment

The Aksu region in Xinjiang has recently

become an attractor for investment from the

nation’s largest beverage companies, including

Uni-President, Wahaha, ChefKong and Huiyuan

and Jianlibao. This preference for Aksu is

attributed to the region’s abundant supply of

water. (tjkx 10/7/2013)

Beijing

Fangshan wine cluster

The Fanshan District, situated southeast of

Beijing, is regarded by many experts as ideal for

developing a wine industry. The local

government is actively supporting this by

establishing a Fangshan Wine Cluster. A number

of domestic and foreign investors have already

inspected the region. (tjkx 15/7/2013)

Beijing (Contd)

A first foreign invested winery, Chateau

Bolongbao, was established in Fangshan in

1999. Also see the item on Huailai (Hebei) in this

section.

Gansu

Fields of sunflowers star in Gansu

The sunflower industry is on a track to becoming

the second-largest agricultural industry in Gansu

thanks to the efforts of Gansu Joy.

On July 22, the Incredible China Photographer's

Tour will arrive in Minqin, a small little-known

county in Gansu province that has sprawling

fields of radiant sunflowers.


ChinaNews


Regional News


Gansu (Contd)

Major Asian media outlets will join the tour to

record the natural extravaganza, including those

from The Nation in Thailand, The Korea Herald

from the Republic of Korea, The Star

Publications and Sin Chew Daily from Malaysia,

The Straits Times from Singapore, The

Kathmandu Post from Nepal, The Statesman

from India, The Philippine Daily Inquirer and

Gulf News from the United Arab Emirates.

The tour is co-organized by China Daily and

Gansu Joy Agricultural Technology Co, which

manages the sunflower fields and produces

Westerner-brand sunflower oil.

Located at 38 degrees north latitude - called the

golden line for planting - Minqin county has a

sunny climate ideal for growing sunflowers.

Gansu Joy now cultivates 16 666 hectares of

sunflowers in Minqin and is preparing a new

plantation and processing facility in Lanzhou,

capital of Gansu province and it is expected to

put into service this September.

With total investment of RMB 1.87 bio, the new

site in Lanzhou will be ready in September.


Gansu (Contd)

It is projected to produce 50kt of high-end

cooking sunflower oil and 77kt of sunflower

protein products annually.

Sunflower oil contains abundant linoleic acid

that helps lower blood pressure, moderate

cholesterol levels and is good for cardiovascular

and cerebrovascular health.

Today coronary heart disease, stroke, cerebral

thrombosis, arteriosclerosis and high blood

pressure are on the increase, but using

appropriate oil can help, said Cao Wanxin, a

professor from the Xi'an Oil Science Research

Institute.

According to industry data, sunflower oil now

ranks third among all vegetable oils in

consumption worldwide. In Eastern Europe,

sunflower oil is second only to soybean oil. In

Japan and the ROK, sunflower oil is widely used

as a high-end product. In Japan it is often

presented as a gift.

Use of sunflower oil is increasing in China as

well. It is estimated that in 2015 its consumption

will reach 650kt, accounting 2% of the nation's

total cooking oil.

If the proportion can be increased to 5%, it will

mean a great opportunity for the industry,

analysts said. They noted that today consumers

choose cooking oil not only according to

standards for safety and hygiene, but also its

nutrition and health.


ChinaNews


Regional News


Gansu (Contd)

The increasing awareness of health among

domestic consumers in large part fuels the rise in

use of sunflower oil, they said.

According to Gansu Joy, sunflower oil is

smokeless at high temperature and is a good

choice for frying foods or baking. It is easily

absorbed by the human body and has pleasant

fragrance, the company said.

In addition to its effects in improving

cardiovascular and cerebrovascular health,

sunflower oil may also help improve one's

complexion because it is rich in vitamin E, the

company said.

The premium cooking oil market in China is now

dominated by foreign companies, especially

Spanish and Italian olive oil producers. Imported

from their places of origin abroad, the oil is

usually packed in small bottles and sold at high

prices.

Analysts said that China's high-end cooking oil

market has large potential and it is possible for

more domestic brands to sell their own superior

products to compete with foreign counterparts.

They also noted that government policy also

encourages domestic companies to develop

quality cooking oil.

In the 12th Five-Year Plan (2011-15) for the

food industry, the government has called for

companies to produce more diverse products

than traditional soybean oil.


Gansu (Contd)

Gansu Joy is expanding sales of its

Westerner-brand sunflower oil beyond the

province with sales channels in the nearby

provinces of Shaanxi, Qinghai, Sichuan, and the

Inner Mongolia and Ningxia Hui autonomous

regions, as well as big cities like Beijing,

Shanghai and Guangzhou and prosperous eastern

provinces including Jiangsu and Zhejiang. It has

also expanded into overseas markets such as

Japan.

Currently Westerner brand is the only

homegrown sunflower oil product to receive the

certification of "green, organic food" from the

Ministry of Agriculture. It has also been granted

the status as a "famous trademark of Gansu."

The company said it adheres to the goal of

pursuing the best quality through strict quality

controls of every link along the production chain,

starting from the selection of seeds to planting

and processing. It said that only high quality will

enable the company to gain a foothold in the

market as consumer are more aware of food

safety.

With intensive investment in research and

development, the company plans to develop

more sunflower-related products in the future.

The Gansu Sunflower Association started by the

company now has 31 members including

Lanzhou University, Lanzhou University of

Technology, Gansu Agricultural University and

the Gansu Academy of Agricultural Science.


ChinaNews


Regional News


Gansu (Contd)

In cooperation with academic partners, the

company has to date developed 11 sunflower oil

products and owns the intellectual property in a

sunflower protein convenience food.

With help from the China Association for

Science and Technology, the company also

established an exchange center on technology

and plans to invite experts and professionals

from both home and abroad to jointly work on

improvements in the sunflower industry.

The company said that the sunflower has many

benefits. Its seed can be made into oil, while its

flowers, leave, stem, pith and root can all be used

in traditional medicine.

Its petal and leaves can strengthen the stomach

and aid digestion, its pith can be made into

diuretic drug and other parts are effective in

reducing blood pressure.

In addition, growing sunflowers is a good choice

both ecologically and economically in the

western regions in China because it changes the

desert into oasis and helps local residents in the

quest to rise from poverty. (cd 18/7/2013)

Shanxi

Friends in spirits

Lüliang (Shanxi) has a signed a friendship

agreement with Semur-En-Auxois in France’s

Burgundy.


Shanxi (Contd)

This tie has forged a similar friendship between

the famous Fenjiu spirit produced in Lüliang and

Burgundy wine. (tjkx 13/6/2013)

Hebei

Huailai plans to be major wine region

10 new wine projects have been initiated in

Huailai (Zhangjiakou, Hebei) last year, involving

a total investment of RMB 540 mio.

The region is currenty the home of 33 wineries.

The local authorities have adopted wine making

as a pillar of the local economy and intend to

register the Shacheng region of Huailai as an

official DOC.

They hope that the number of wineries will

increase to 50 in the coming 2–3 years.

(tjkx 26/7/2013)

ChinaNews


Regional News


Hebei (Contd)

Huailai is located near Beijing, so this item can

be compared to the one about Fangshan in this

section. It is the home base of the Great Wall

brand, now part of the COFCO Group. It seems

that the region around Beijing and its twin city

Tianjin (the home of Dynasty, Remi-Martiin’s

Chinese venture) is becoming an important wine

region.

Zhejiang

Water grows scarce for thousands as drought,

heat blast landscape

About 58 000 people in Hangzhou (Zhejiang) are

feeling some of the worst effects of the summer’s

prolonged drought and extreme heat in the form

of scarcity of water for drinking, bathing and

other uses, according to Hangzhou Forestry

Bureau. More than half of them are in Yuhang

District, and the rest are at Chun’an and Lin’an.


Zhejiang (Contd)

At Baizhang Town in Yuhang, 5000-plus locals

have been short on water for over a month since

streams near the town dried up. They have had to

depend on a small fire truck that sends water into

the town everyday, shallow wells and tap water

from nearby towns via pipes.

The fire truck can only offer each household two

barrels of water a day, the water from the

shallow wells is neither abundant nor very clean,

and water piped from nearby towns is good only

for irrigating crops and is scarce as well.

“Over 5000 people are suffering from drought

ever since the 44 water intakes in the town dried

up a month ago,” says Ma Guojun, director of the

agriculture office in Baizhang Town.

In some places, the heat has been very extreme:

A high of 43.5 degrees Celsius was recorded in

Fenghua in east Zhejiang twice last week. High

temperatures in 27 of the 36 cities and counties

in the province surpassed 40 degrees Celsius for

more than a week. Fifteen people in Zhejiang

Province had died by yesterday from heat-related

illnesses.

Villagers in Yashan Village of Baizhang Town

said it had not rained since the end of June and

an artificial rain that officials produced by

seeding clouds was too small to do much good.

Before the fire truck was put into water service,

they had to carry water from villages kilometers

away.


ChinaNews


Regional News

Company News


Zhejiang (Contd)

The fire truck, from the nearby Huanghu Fire

Brigade, has only a small, 3.5 t water capacity,

but it is the largest such vehicle that can navigate

the area’s hilly roads, officials said. The truck

also supplies two barrels a day per household in

Dusong Village in the town, where “500

villagers haven’t had a shower for a whole

month,” resident Wang Daoliang said.

Residents are asking to have more water piped

in, and the local Yuhang Meteorological Bureau

says it is ready to seed clouds to produce rain

when there are clouds in the sky. Hangzhou has

spent RMB 80 mio on its drought response,

including trucking in water, irrigating farms and

seeding clouds. On Friday, Hangzhou began

cutting back on power usage with an “orderly

power utility” policy as a result of a daily

100-kw power deficit.

The policy requires that all nighttime

illumination of scenery must be shut off,

manufacturing that does not require continuous

operations is required to halt production for four

days a week and high-energy-consumption

enterprises must stay idle five days a week.

Department stores, hotels and office buildings

must reduce electricity consumption by 20%

during the morning peak.

Hot and dry conditions led to a forest fire that

broke out on the hills in Fuyang City in

Hangzhou a week ago that took firefighters two

days to put out. It rekindled on Thursday and

wasn’t put out again until Sunday.


Zhejiang (Contd)

The withering weather also caused the price of

fresh vegetables to rise 5.3% last week after

increasing 2.7% last month, according to

Hangzhou Statistics Bureau.

More than 77 000 hectares of farmland have

been damaged in Hangzhou, causing 646 mio

yuan in losses, Xinhua news agency reported.

Specialty crops in the area such as tea, lotus and

hickory nuts have been hit very hard.

While high temperatures will persist most of the

week, it should be a few degrees cooler, and then

the temperature is forecast to drop some more

toward the end of the week. (sd 13/8/2013)

Hickory nuts have become a popular snack in

recent years.

Desserts recalled in Taiwan, sold on

mainland

Desserts recalled by the Taiwan company

Uni-President were still being produced and sold

on the Chinese mainland on Sunday, two days

after they were removed from shelves in Taiwan

as a precaution.


ChinaNews


Company News



mainland (Contd)

Uni-President's Taiwan office recalled seven

products on Friday after they were found to

contain an ingredient bought from supplier Roci

Industrial Co.

Roci had previously been caught selling one

ingredient it produced after their expiration date,

namely locust bean gum, and agar powder, an

industrial additive.

The products recalled by Uni-President contained

a different ingredient, carrageenan, which is an

approved food-hardening agent. "Some of the

ingredients come from Taiwan, but I'm not sure

if the seven products, which were recalled in

Taiwan, are involved," said a man who gave his

name as Wang at the Beijing branch of

Uni-President China Holdings Ltd.

Wang said staff at the Beijing plant had not been

informed of a recall. The plant sells its products

in the capital, neighboring Tianjin and in the

provinces of Shanxi and Hebei, according to the

company's website.

When contacted, the other Uni-President

branches on the mainland denied using

ingredients from Roci.

Zhou Feng, who works in sales for

Uni-President's Wuhan branch, said the products

on the mainland are not related to the food scare

in Taiwan as they do not import ingredients from

the province.



mainland (Contd)

A worker at the company's Kunshan (Jiangsu) [1]

plant, who gave only his surname, Lin, said it has

its own suppliers of raw materials.

"It is impossible to import ingredients from

Taiwan. All our materials are from the

mainland," he said.

The seven products recalled were two pudding

products and five ice-cream products. The

pudding, which is the most popular of the seven,

is sold on the mainland, according to the

Uni-President China website.

In an outlet of FamilyMart, a chain convenience

store in Shanghai's Huangpu district, clerk Zhao

Weiyuan said there had been no notification that

the product needed to be removed from shelves.


ChinaNews


Company News



mainland (Contd)

Zhang Yusong, a spokesman for the Shanghai

industry watchdog, said if the company claimed

they had suppliers on the mainland and the

questionable products did not flow into the

market, Shanghai is not involved in the food

scare. "We'll release a notice of any possible

recall after an inspection on Monday," Zhang

said.

In a Saturday notice on its website, Uni-President

Taiwan said the products it recalled contain

carrageenan produced by Roci, adding that

preliminary tests on materials from Roci proved

they met food standards.

"We suspended the sales to protect the rights and

interests of the consumers and cooperate with a

judicial investigation. We will resume sales after

we conclusively ensure the safety of the

ingredients," the notice added. (cd 3/6/2013)

Mengniu offers to buy Yashili

Largest single domestic deal for baby formula

maker valued at USD 1.6 bio. Mengniu Dairy

Co. (Huhhot, Inner Mongolia) [2], the country's

largest dairy producer, has offered to acquire a

domestic baby formula maker in a deal valued at

about USD 1.6 bio, to boost its presence in the

highly profitable sector of the dairy industry.

The acquisition, which would be the largest

single deal in the domestic dairy industry, is

expected to lead to further integration in China's

milk powder business.


Mengniu offers to buy Yashili (Contd)

Mengniu is buying a 75% stake in Yashili

International Holdings Ltd from chairman Zhang

Lidian's family and Carlyle Group. It will also

offer to buy the rest of the company, giving

shareholders the option to sell at HKD 3.50 a

share in cash, or about 5% more than Yashili's

last trading price.

The move will help the Inner Mongolian

producer catch up with domestic rivals in the

baby milk formula market, which is estimated to

be worth more than RMB 50 bio, according to

Song Liang, a dairy industry analyst at the

Distribution Productivity Promotion Center of

China Commerce.

Last year, Mengniu's milk formula sales were

worth no more than RMB 300 mio, only

contributing 1.6% of its revenue. Yashili

(Chao’an, Guangdong) [3], ranked eighth in

China's milk formula market, had a growth rate

of 35.8% last year.

The acquisition would pave the way for

integration in the milk formula sector as demand

for baby food rises and the government pushes

for safer products. The domestic baby milk

formula market has been severely weakened

since a milk powder scandal in 2008 and is

losing its majority market share in high-end

products to foreign rivals.

The acquisition move also indicates the

government's efforts to encourage integration in

the dairy industry, especially in the milk formula

sector, said Jian Aihua, a researcher with

CIConsulting, a leading industry research

institution. (Continued on next page)

ChinaNews


Company News


Mengniu offers to buy Yashili (Contd)

Industry experts predict the 127 baby milk

formula producers in China will be halved,

making it hard for those with a smaller

production capacity to survive.

The Ministry of Industry and Information

Technology said on Tuesday that integration of

the milk powder industry is expected to involve

10 large companies with revenues exceeding

RMB 2 bio in two years, accounting for 70% of

the industry.

The State Council said this month China will

take measures to ensure the safety of baby milk

products and will draft policies to support

mergers and acquisitions among formula

producers.

The acquisition would be Mengniu's third this

year. French food giant Groupe Danone SA has

invested in two joint projects with Mengniu, a

move that will help improve Danone's sliding

market share in China and restore consumers'

confidence in the country's dairy market. Danone

will invest about EUR 325 mio in the projects.

Through the deals, Mengniu will probably

achieve breakthroughs in the high-end yogurt

sector, allowing it to rival domestic competitors.

Two months ago, to secure the quality and safety

of its milk supply, Mengniu announced plans to

pay HKD 3.18 bio, or HKD 2.45 per share, to

take a controlling stake, or 26.9% stake, in the

country's largest raw milk producer China

Modern Dairy Holding Ltd, which owns 22 dairy

farms nationwide. (cd 19/6/2013)

French milk brand sets up in China to

woo worried parents

French milk brand Candia announced Monday it

was setting up shop in China in a bid to ride on

the wave of booming demand for foreign baby

formula following a succession of food safety

scares. Chinese parents have become distrustful

of domestic milk brands, particularly after a huge

2008 scandal involving formula tainted with

melamine that killed six children and sickened

300 000 others.

Foreign brands have benefitted as parents choose

to buy non domestic products, driven by the

belief they are of better quality. Surfing on this

demand, Candia said Monday it had opened its

first shop on July 23 in the eastern city of

Wenzhou. Ten other shops will open before the

end of the year, centred around the eastern coast

in the cities of Hangzhou and Ningbo.

“The choice (we made) of a specialised

distribution system is essential in a country

where consumers have a heightened need of

reassurance on the origin of products,

particularly for milk and baby formula,” the

brand said in a statement. “The Candia brand

offers Chinese customers a source of direct

supply from France,” said Giampaolo Schiratti,

head of the brand.

Chinese demand for foreign baby formula is such

that many parents and networks of traffickers

have travelled far and wide to buy up stock,

forcing some stores abroad to limit sales in the

wake of shortages.


ChinaNews


Company News


French milk brand sets up in China to

woo worried parents (Contd)

The announcement comes as foreign formula

manufacturers already in China have come under

government scrutiny in an apparent price fixing

investigation. Several companies have since

announced they will cut prices for milk in what

has become the world’s largest market for baby

formula. (theglobaldairy 30/7/2013)

Baby-Milk Demand Helps to Lift

Danone

Strong demand for baby milk in China helped

Danone stem falling sales in Europe in the

second quarter, as the company tried to reassure

investors about growth in the Chinese market

after it cut prices on infant formula.

Strong demand for baby milk in China helped

Danone SA stem falling sales in Europe in the

second quarter, as the company tried to reassure

investors about future growth in the lucrative

Chinese market after it cut prices on infant

formula.

The maker of yogurt brands including Danone,

Dannon and Activia on Monday confirmed its

full-year targets, despite recent price cuts in

China amid a probe into foreign makers of infant

formula and inflation in raw-material prices.

Danone earlier this month cut prices for

baby-milk products in China after local

authorities started probing foreign makers of

infant formula for possible price fixing and

anticompetitive activity.



Danone (Contd)

China—which has become one of the world’s

largest infant formula markets—has been a key

growth driver for Danone since the rise of the

middle class there and as well as concerns about

the safety of Chinese-made dairy products.

Switzerland’s Nestlé SA, Netherlands-based

Royal FrieslandCampina NV and U.S.-based

Abbott Laboratories and Mead Johnson Nutrition

Co. are also under investigation.

All companies have cut prices and said they are

cooperating with authorities. Danone pared

prices by as much as 20%, while Nestlé sliced an

average 11% from its Wyeth Nutrition line of

baby products in China, where a can of baby

milk powder can cost up to four times more than

in Europe.

Analysts have said they are concerned such cuts

could weigh on Danone’s margins, adding to

continuing concerns over lackluster consumer

spending in Europe and an inflation of

raw-material prices recently. Danone Chief

Financial Officer Pierre-André Térisse said the

price cuts will have some impact on the group

but that this will be “manageable.”

“We are fundamentally positive for the prospects

of China,” he said on a conference call. Danone

aims for its second-half margin to be at least in

line with the 13.3% posted in the first six

months, which was down 0.49%age point from

the same period last year, mainly from

investments in boosting volumes in Europe. “We

will try to do more,” Mr. Térisse said.


ChinaNews


Company News



Danone (Contd)

“It is not entirely clear what the impact of price

cuts in China will be,” said Société Générale

analyst Warren Ackerman. “If input costs are

going up for milk powder and prices go down,

obviously your margin is squeezed but Danone

may try to get back some of the losses from price

cuts by investing less in promotions.”

Sales of baby formula in China are projected to

reach USD 29.5 bio in 2017, up from

USD 12.4 bio in 2012, according to research firm

Euromonitor International.

Foreign makers of baby milk like Danone have

benefited from Chinese parents rushing to their

products since a 2008 scandal—when dangerous

levels of an industrial chemical killed at least six

infants and made many more ill—scared them

away from locally produced baby milk.

The rush to foreign-made baby milk has even led

to some retailers in Europe rationing the

purchase of baby milk as Chinese visitors would

buy up cans of formula and bring or ship them

back home.

This trend, along with sales in China and Hong

Kong, helped drive 13.5% organic revenue

growth at Danone’s baby-food segment in the

second quarter.

Danone said sales for the three months ended

June 30 rose 6.7% to EUR 5.72 bio

(USD 7.6 bio). Sales growth was solid growth in

the U.S. and Russia.



Danone (Contd)

On an organic basis—stripping out acquisitions

and currency swings—revenue rose 6.5%against

analyst expectations for 5.7%.

In Europe, where sales have been falling sharply

due to weak economic conditions, second-quarter

sales fell 3% from a year earlier, organically, but

that was a better showing than in the first quarter,

when sales in Europe fell 5.1%.

For the first half of the year, Danone profit rose

10% to EUR 972 mio from EUR 881 mio a year

earlier, reflecting a higher valuation of its stake

in Moroccan unit Centrale Laitière.

Danone’s EUR 200 mio European cost-savings

plan is running on schedule and should also help

buoy margins in the second half of the year, said

Chairman and Chief Executive Officer Franck

Riboud in a statement.


Milkworld venturing into China

The New Zealand based dairy company

Milkworld has started selling its product in China

through its local agent Jianbang International

Trade Co., Ltd. (hexun 1/8/2013)

This news was released just before Fonterra

made headlines with its botulism-contaminated

whey powder. Although we have not received

further news about Milkworld, the company’s

launch in China will certainly have been affected

by Fonterra’s problems.

ChinaNews


Company News


Mead Johnson sees China infant

nutrition rebound

Infant nutrition company Mead Johnson has

announced its financial results for the quarter

ended June 30, 2013. Sales increased 4% to

USD 1055 mio. Sales growth was 8% in the

Asia/Latin America segment, partially offset by a

4% decline in the North America/Europe

segment due to the impact of businesses exited in

late 2012.

“We are encouraged by our revenue growth in

the quarter,” said CEO Peter Kasper Jakobsen.

“It allowed us to increase demand-generation

investments. Our China/Hong Kong business has

returned to positive volume growth after three

consecutive quarters of decline. We are fully

cooperating with the Chinese regulatory

authorities in the ongoing probe. We expect to

meet with them again in the near future with the

objective of reaching a final resolution. We

remain confident in our long-term prospects in

this important market. Sales growth was strong

across South Asia and Latin America, with a

majority of markets showing increases in market

share. In the North America/Europe segment, we

saw higher non-WIC market share in the U.S.

offsetting lower category consumption.

Importantly, we made significantly higher

investments in demand generation throughout

our global operations in order to drive future

growth.”

Sales for the six months ended June 30, 2013

totaled USD 2093.2 mio, up 5% from

USD 1998.9 mio a year ago. Sales increased 4%

from price and 1% from volume. (Continued in

next column)

Mead Johnson sees China infant

nutrition rebound (Contd)

EBIT for the first six months of 2013 totaled

USD 480.7 mio, down from USD 497.1 mio in

the same period of the prior year.

In the first half of 2013, as compared to the

prior-year period, higher sales and improved

gross margins were offset by higher

demand-generation investments, transaction

gains related to foreign exchange seen in the

prior year, and higher pension settlement

expense.

“We expect to deliver constant-dollar sales

growth of about eight% from core operations,”

Jakobsen said. “We anticipate growth across our

global portfolio will offset any sales impact from

recent price decreases in China. We will continue

to invest in demand generation where we see

opportunities to accelerate growth.” Mead

Johnson expects reported sales growth of 6%.

This reflects a 2% impact from discontinued

non-core businesses and a strengthening U.S.

dollar. (ingredientsnetwork 29/7/2013)


Milk despite dilution

The NZX is allowing Chinese dairy player Bright

Dairy (Shanghai) to keep control of Canterbury

milk company Synlait’s board despite a dilution

in its stake from a USD 120 mio public offering

of shares.


ChinaNews


Company News



Milk despite dilution (Contd)

The exchange said today it was granting

Canterbury dairy processor and exporter Synlait

Milk a waiver from a listing rule and that will

permit Bright Dairy to continue to appoint four

of eight directors even though its shareholding

will dilute to between 38% and 41% with the

USD 120 mio offer of shares to the public.

Bright Dairy holds 51% now, after it pumped

USD 82 mio into Synlait Milk in late 2010.

It is not buying any new shares in the share offer

to keep its holding at 51%.

Synlait Milk told the NZX that Bright Dairy

would not support the share offer unless it could

continue to consolidate Synlait Milk into its

accounts under China’s accounting rules and to

do that it had to have control of Synlait Milk’s

board.

NZX has agreed on the conditions the ”special”

governance arrangements are contained in

Synlait Milk’s Constitution and are fully

disclosed in the offer documents and every

annual report during which the arrangements

apply, and that Bright Dairy holds no less than

37% of Synlait Milk.



Milk despite dilution (Contd)

The NZX has also granted Synlait Milk a waiver

allowing the Bright Dairy-appointed directors

who cannot attend a meeting to appoint another

Bright dairy director to exercise their voting

right.

Synlait Milk announced its offer this morning.

The company is raising USD 75 mio from the

issue of new shares and would offer also up to

USD 45 mio of shares from existing shareholders

selling all of part of their shareholdings.

Synlait said an indicative share price would be

USD 2.05 to USD 2.65 for the shares. That

would give the company a market value of

between USD 305 mio and USD 372 mio.

Synlait Milk was expected to list on the NZX’s

main board on July 23. The USD 75 mio new

capital would be used for growth initiatives.

(global dairy 24/6/2013)

How Nestlé finds clean milk in China

Exploding watermelons, toxic peanuts, and

contaminated rice are just some of the food

hazards that routinely bedevil Chinese

consumers. The risks of contamination are

particularly far-reaching in the case of milk,

since more than 70% of Chinese mothers rely on

baby formula rather than breast milk to feed their

babies. Longstanding concerns regarding unsafe

milk in China came to a head in late 2008, when

the Chinese authorities accused more than 20

domestic producers of selling milk adulterated

with melamine.


ChinaNews


Company News



(Contd)

Six infants died and more than 50 000 babies

were hospitalized. In 2011, regulators closed

more than 400 dairy farms for violating

sanitation and certification standards.

Growing numbers of Chinese families have

responded by shunning domestic infant formula

in favor of imported brands. That’s creating

challenges for both local and multinational

companies selling dairy products in China. The

country’s largest dairy producer, China Mengniu

Dairy, on June 18 announced a HKD 12.5 bio

deal to buy Yashili International, a local infant-

formula maker.

The deal makes sense because “the government

is trying to consolidate the industry,” Guosen

Securities analyst Todd Yang told Bloomberg

News. The goal is to “better monitor both

upstream and downstream food quality.”

China Mengniu isn’t the only company

positioning itself to benefit from China’s

renewed focus on fixing its troubled food supply.

To see how one multinational is handling the

challenges, consider Nestlé, the world’s biggest

food company.

Like almost all other big foreign companies

selling dairy products in China, Nestlé relies on

imported milk powder for its infant formula. For

other dairy products, however, Nestlé stands out

for meeting its raw material needs by buying

fresh milk from Chinese farmers.



(Contd)

Domestic sourcing of milk can yield a significant

cost advantage, build the local supplier

ecosystem, and prepare the ground for the day

when Chinese parents start trusting local milk as

reliable enough for their babies.

That’s no easy task. Nestlé’s milk collection is

concentrated primarily in northeast China, where,

as in much of the country, the dairy sector is very

fragmented: More than 18 000 farmers supply

Nestlé with a daily average of 100 liters of milk.

Given this structure, there are many points where

milk can become contaminated, so Nestlé utilizes

what it calls a “factory and farmers” model that

eliminates the middleman.

Farmers bring milk directly to a network of

Nestlé-owned collection centers, none more than

an hour’s distance from the farm, where a

computerized system samples, tests, and tags

each batch of milk. To reduce further the risk of

contamination at the source, the company

provides farmers with continuous training and

assistance in cow selection, feed quality, storage,

and other areas.

Now Nestlé is implementing a more ambitious

strategy to transform its milk supply chain by

collaborating with local governments, banks, and

investors to accelerate the consolidation of

China’s dairy farms. Fewer, larger, and

professionally managed dairy farms will have

more reliable quality and use land and labor

more productively.


ChinaNews


Company News



(Contd)

Nestlé is building a new institute to upgrade the

training that staff at larger and more

professionally managed farms need. Around the

institute, Nestlé is building three demonstration

farms with thousands of cows. For farmers who

want to increase their scale, Nestlé is providing

credit guarantees to finance purchases of more

cows.

The Nestlé case offers five important lessons.

First, build visibility into and control over the

supply chain. Know your suppliers and, as much

as possible, their suppliers, too. Without

end-to-end visibility and control, you run the risk

of being blindsided along any of a number of

dimensions—product quality and safety,

environmental damage, safety and health of

workers, and theft of intellectual property, to

name just a few.

Second, ownership is not a necessary

requirement for control of the supply chain.

Visibility into and control over the supply chain

dramatically reduce the need to own the supply

chain. Capital is always a scarce and costly

commodity. Like Nestlé, most companies are

generally better off investing their capital in

downstream activities that offer greater

opportunities for differentiation and thus higher

returns.

Third, be proactive in providing training and

assistance to ramp up the capability of your

suppliers. In strategic markets such as China, it is

critical for you to ensure not just short-term but

also long-term success. (Continued in next column)


(Contd)

Like Nestlé, global companies can leverage their

knowhow and scale to help accelerate the

upgrading of their suppliers’ capabilities.

Fourth, prefer and, if possible, try to create more

consolidated (but not monopolistic) supply

chains. Greater consolidation means fewer

suppliers as well as fewer links in the supply

chain. As a direct result, there will be fewer

points which need to be monitored and where

things can go wrong. Also, bigger suppliers are

likely to be more professionally managed, to be

more productive, and to offer greater potential

for collaborative innovation.

Finally, believe in and practice the concept of

“shared value.” Nestlé is very clear that it wants

a long-term collaborative partnership with its

suppliers. More than once, the company has

unilaterally increased the price it pays to dairy

farmers to help them cover the rising cost of feed

and to give them an incentive to boost milk

supply the following year. Without a win-win

mindset, long-term partnerships are impossible.

(global dairy 24/6/2013)

Chinese dairy float for NZX

China’s Bright Dairy will retain four seats on the

eight-member Synlait Milk board, despite the

likelihood it will lose its majority ownership

status after the company’s planned initial public

offer and share market float, which is planned for

next month.


ChinaNews


Company News


Chinese dairy float for NZX (Contd)

Synlait Milk sought, and received, NZX

dispensation to keep the board’s structure as it is,

despite the prospect of its ownership falling to

around 40%, down from the current 51%, as the

result of the diluting effects of the share issue.

Canterbury-based Synlait Milk said it would seek

to raise USD 75 mio in new capital through the

issue of shares in a USD 2.05 to USD 2.65 range.

The company expects to list on the NZX on July

23.

The IPO and listing come at a time of intense

interest in the milk powder and formula industry,

and follow the successful launch of the Fonterra

Shareholders Fund last November.

Chief executive John Penno said Bright Dairy

had been consolidating Synlait Milk into its

accounts, so an agreement had been reached to

allow that to continue. After the issue, Bright

Dairy could continue to appoint four directors,

one of which must be a New Zealand resident.

The board would comprise three independent

directors and the board members would elect the

managing director, which would then be ratified

by the shareholders. The chairman, who would

get the casting vote, would be independent.


Chinese dairy float for NZX (Contd)

Former Finance Minister Ruth Richardson is on

the board at present, along with former Fletcher

Building executive Bill Roest. Penno said the

composition of the board was not unusual, given

Bright Dairy would still be a major shareholder

with 40%. “We think that we have got the

balance just right,” he told APNZ.

Penno said the USD 75 mio in fresh capital

would go towards projects over the next three

years worth a total of USD 183 mio, which he

said would also be funded by debt and operating

earnings.

“The infant formula market is growing very

quickly, and what we are seeing here is that they

[Chinese participants] are really turning their

attention to New Zealand to be the supplier of

high-quality products.”

At the indicative price range, Synlait Milk would

have a market capitalisation of USD 305 mio to

USD 372 mio, the company said.

The offer documents point to strong earnings

growth, with underlying earnings before interest

and tax almost doubling from USD 13.5 mio in

the July 2012 year to USD 26.9 mio in 2013 and

USD 32.9 mio in 2014. Synlait Milk is an

offshoot of Synlait Ltd, owned primarily by 100

or so New Zealand shareholders and 22.5% by

Japan’s Mitsui.

Bright Dairy is listed on the Shanghai stock

exchange with a market capitalisation of about

USD 3.5 bio. (globaldairy 25/6/2013)

ChinaNews


Company News


Yili starts up new plant in Henan

Yili Dairy has started production in its new plant

in Jiyuan (Henan) [4]. The new facility can

produce 390kt of drinking milk p.a.

(hcfood 16/7/2013)


prices in China as probe begins

FrieslandCampina Trading (Shanghai) Co., Ltd.

has announced that it is fully cooperating with

the Price Supervision and Anti-Monopoly

Bureau under China’s National Development and

Reform Commission (NDRC) as part of an

anti-trust investigation. Beijing has launched an

investigation into alleged price-fixing by foreign

firms.

The move from FrieslandCampina came as Swiss

giant Nestle pledged to "immediately" cut prices

on some formula products by up to 20%. The

company promised not to raise prices on new

formula products for a year. French firm Danone

says it will also cut the price of its formula in

China, but is yet to release any details.

Sales of foreign brands have soared in China,

which is the world's largest market for baby

formula, after tainted milk scandals damaged

their Chinese competitors.

The most serious scandal killed six children and

made hundreds of thousands sick in 2008 when

melamine was added to baby formula.

Baby formula quality remains the leading food

safety issue in China since the melamine-tainted

milk scandal. (Continued in next column)


prices in China as probe begins (Contd)

FrieslandCampina stated that it supports the

NDRC’s objective to ensure fair pricing; the

company will reinforce compliance with pricing

and anti-trust regulations. FrieslandCampina

commits to adjusting contractual terms to

explicitly emphasize adherence to China’s Anti-

Monopoly Law.

FrieslandCampina will also enhance its Code of

Conduct and provide comprehensive anti-trust

training based on Chinese laws.

To support Chinese consumers and offer more

value, FrieslandCampina will per July 8th, 2013

reduce its price of the full range of Friso products

in China by 5%.

FrieslandCampina’s value promise includes the

unique grass-to-glass system, in which the

company invests in managing the entire supply

chain from processing, marketing and

distribution to provide consumers with safe and

premium products. Friso for China is 100%

produced and packaged in the Netherlands and

distributed exclusively by FrieslandCampina.

FrieslandCampina remains highly committed to

the China market. The company continues to

fully cooperate with local authorities in every

market in which we have a presence, and plays

an important role in providing dairy products for

hundreds of millions of people all over the world

every day. (fif 8/7/2013)

ChinaNews


Company News


Fonterra reacts to China price probe

New Zealand’s largest milk product exporter,

Fonterra, is cutting prices on its Anmum milk

product brand in China amid a Chinese

investigation into high domestic prices of infant

formula.

It has been reported that high prices charged by

companies including Nestle, Danone and

Mead Johnson Nutrition have been the subject of

a National Development and Reform

Commission (NDRC) in China.

The NDRC is a macroeconomic management

agency with wide administrative and planning

control over the Chinese economy.

Fonterra president of Greater China and India

Kelvin Wickham said the group would cut prices

by 9% on its Anmum maternal health products

sold in China in light of recent industry-wide

price revisions.

“We are committed to providing high quality,

premium imported products to Chinese

consumers and we are also committed to being

an integral part of and long-term partner to the

Chinese dairy industry,” Wickham said.

The price reduction for Anmum Materna would

be effective from August 1. The Anmum brand

included formulated milks for women during

pregnancy and while breastfeeding.

Fonterra doesn’t directly sell infant formula in

China, an important growth market for dairy

companies and one of the world’s largest for

infant formula.



(Contd)

It has also been reported that Danone,

Netherlands-based Royal FrieslandCampina and

Nestle’s Wyeth brand have been reviewing

prices within the Chinese infant formula market.

South Island milk product exporters into China

are yet to see any impact on prices.

Westland Milk Products and Synlait Milk both

produce a variety of products for the Chinese

market including milk powder, butter and

infant-related products. But so far it appears it is

the larger multinational firms that are being

targeted by the authorities.

Westland Milk Products chief executive Rod

Quin said his company continued to export to

China as it had for 10 years, and had not been

directly affected by the pricing issue. He was

aware, however, of the pricing issue having an

impact on the multinationals.

“The (New Zealand) industry is very aware of

any change in the Chinese regulation,” Quin said.

“In this regard though I’m not sure it is a change

in regulation, rather a decision by the Chinese

government to (provide) incentive to manage

prices down, obviously with a view to say that

they think the market for infant formula has

become overheated.”

He also noted recent commentary from China

with regard to the quality of milk products and

issues around making sure Chinese consumers

got what they paid for. (Continued on next page)

ChinaNews


Company News



(Contd)

Synlait Milk chairman Graeme Milne was not

aware of any impact on Synlait from changes in

the Chinese regulatory environment. However,

he had yet to be updated by his executive team.

Chinese company Bright Dairy and Food Co has

a cornerstone stake in Synlait Milk.

Synlait tended to supply the Chinese market on a

business-to-business model, meaning it supplied

other companies which in turn supplied branded

products into shops, Milne said. “We’re not

involved at the retail end,” he said.


McDonald's hopes to wow mainland

diners with rice

With an eye on dinner tables in the Chinese

mainland, McDonald's, the world's leading fast

food operator, on Wednesday announced new

rice products for the mainland market.

Starting from June 10, the new products,

including chicken and beef rice wraps, will be

sold in all 1700 McDonald's restaurants on the

Chinese mainland.

The core menu, including the chain's staples like

the Big Mac and McChicken, will not be

changed, Kenneth Chan, chief executive officer

of McDonald's China, said in the press release.

"Our new dining options are examples of how

McDonald's innovates to bring more options to

our Chinese customers, because that's what they

want," Chan said. (Continued in next column)


diners with rice (Contd)

The company's strategy includes more efforts to

develop the night consumption market from 5 pm

to 5 am, thought it has put more emphasis on

breakfast, lunch and afternoon snacks in the past,

he said in an interview with Xinhua.

According to the latest data from McDonald's,

dinner foods account for half of foreign food

operators' sales in China and this market is

growing at a double-digit pace.

Meanwhile, McDonald's will set a series of

standards regarding rice quality and safety, Chan

told Xinhua. McDonald's sources the rice it uses

on the mainland from Harbin, capital of

Northeast China's Heilongjiang province, one of

the country's major grain production areas.

The company plans to maintain its

competitiveness and boost its overall business

growth by increasing the variety of the products

it offers, he said.

McDonald's opened its mainland first store in

Shenzhen, Guangdong province, in 1990. It has

currently more than 1700 outlets and over 90 000

employees on the Chinese mainland. It plans to

recruit 75 000 more this year, and the number of

mainland outlets is expected to reach 2000 by

2014.

The US -based fast food giant has about 34 000

stores worldwide. In 2012, McDonald's same

store sales rose 3.1% as revenues rose 2% to

USD 27.57 bio. (Continued on next page)

ChinaNews


Company News



diners with rice (Contd)

In 2013, the company plans to invest about

USD 3.2 bio of capital in opening 1500 to 1600

new restaurants and reinvesting in existing

locations. It targets a system-wide sales increase

of 3% to 5% and operating income growth of 6%

to 7%. (cd 6/6/2013)

Zhongyi to develop new whole grain

snacks

The Zhongyi Food Group (Hunan) [5] and the

School of Food Engineering of the Zhongnan

Forestry Science University have jointly set up

an Engineering Lab for the Processing of

Cereals’. Researchers have already developed

maize candy, sesame and oats chocolate and

raisins and oats chocolate. A common aspect of

all these products that they have a low in sugar

and high in fiber. Their cereal oligosaccharides

and oats fiber contents is 70-80%,

(tjkx 22/7/2013)

Canned fish to Russia

Jiabike Food Co., Ltd. (Ningbo, Zhejiang) [6]

has exported its first batch of canned fish (64.2 t)

to Russia. (tjkx 13/6/2013)


Campbell Soup Company announced that it has

entered into an agreement to acquire Kelsen

Group A/S from Maj Invest, a private equity

firm, and several other investors. Based in Nørre

Snede, Denmark, Kelsen is a producer of quality

baked snacks that are sold in 85 countries around

the world. Its primary brands include Kjeldsens

and Royal Dansk. Kelsen has established

distribution networks in markets in Asia, South

America, the Middle East and Africa as well as

the United States. It is a market leader in the

assortment segment of the sweet biscuits

category in China and Hong Kong, where growth

in sweet biscuits is outpacing the growth of the

USD 60 bio global sweet biscuits market.

Kelsen has been exporting premium Danish

butter cookies to China for more than twenty

years. Its Kjeldsens brand has strong awareness

with retailers and consumers in major cities, and

its sales in China have grown at a compound rate

exceeding 28% in the last three years. The

company generated DKK 1.043 bio in net sales

for the year ended Dec. 31, 2012. Aggregate net

sales have grown at a compound double-digit

rate since 2009. Kelsen employs 366 people

worldwide.

Denise Morrison, Campbell’s President and

Chief Executive Officer, said, “We are delighted

to welcome the Kelsen team to Campbell and to

add Kelsen’s distinctive brands to Campbell’s

outstanding portfolio of baked snacks, including

our Pepperidge Farm cookies and crackers in

North America and Arnott’s biscuits in Australia.


ChinaNews


Company News



(Contd)

Kelsen will give Campbell a solid platform for

growth in baked snacks in China and for the

expansion of our international footprint. The

acquisition of this successful business is another

important step in Campbell’s quest to delight

new consumers through expansion into

higher-growth spaces, including fast-growing

emerging markets.”

Campbell plans to operate Kelsen as a standalone

business based in Denmark, reporting to Luca

Mignini, President – Campbell International.

Mignini said, “Kelsen’s combination with

Campbell will represent a wonderful marriage of

complementary skills and capabilities. Its strong

position in China and Hong Kong will enhance

our presence in the region. At the same time,

Kelsen’s talented management team will have

the opportunity to leverage Campbell’s

marketing, consumer insights, R&D and supply

chain expertise to grow the business in both new

and existing markets.”

Brian Rønsholdt, CEO of Kelsen Group, said,

“Kelsen has been providing quality products to

consumers for over 75 years. We look forward to

joining Campbell and its family of trusted

brands. Campbell’s consumer-focused

capabilities and wide-ranging experience in

biscuit production will provide new resources for

enhancing Kelsen’s product lines and

strengthening our engagement with consumers

around the world.”



(Contd)

The terms of the transaction were not disclosed.

Closing is subject to regulatory approvals and

other customary conditions. Campbell expects

the acquisition to be modestly accretive

beginning in 2014.

Bruun & Hjejle in Denmark and King & Wood

Mallesons in Hong Kong served as Campbell’s

legal counsel. Maj Invest and Kelsen investors

were advised by FIH Partners and Kromann

Reumert served as legal counsel. (fif 18/6/2013)

We will see more and more that international

M&As will affect the Chinese market as well.

New sugar plant in Shandong

The new plant of the Lingyunhai Sugar Group

(Rizhao, Shandong) [7] has been put in

operation. The new facility has a capacity of

1.2 mio t p.a. This will increase the company’s

total capacity to 2.4 mio t p.a., making it the

largest sugar producer in the world.

(tjkx 19/6/2013)

Nekta enters the Chinese market

New Zealand based fruit juice maker Nekta is

entering the Chinese market with its range of

infant formulae. The company has started its

sales campaign in Fujian. (hcfood 9/6/2013)

Uni-Present can start in Hainan

Uni-President’s new beverage plant in Hainan

[8] is expected to start producing in September

2013. (tjkx 23/7/2013)

ChinaNews


Company News


Moet toasts opening of first sparkling

winery

Moet Hennessy, the wine and spirits unit owned

by French luxury group LVMH, inaugurated

China's first winery dedicated to the production

of premium sparkling wine on Friday, in the

Ningxia [10] Hui autonomous region.

Domaine Chandon (Ningxia) Moet Hennessy

will release its first bottle in 2014, bearing the

Chandon brand.

"The winery not only helps support our group's

total business in China in the future," said

Christophe Navarre, CEO of Moet Hennessy, "it

also indicates our long-term vision in this

fantastic market.

"No matter if the Chinese market goes up or

down, we will always be here, and we want to be

part of China's future."

Located close to the Helan Mountain near the

capital city Yinchuan, the winery - with an

operational area of 6300 sq m - will follow the

company's worldwide procedures to ensure the

highest quality sparkling wines.

It will benefit not only from the support of

Chandon's international winemaking expertise

and latest production facilities, but also from

Ningxia's ideal climate, said officials, where the

soil and the environment are all perfectly suited

to growing Chardonnay and Pinot Noir grapes.

"Moet Hennessy has always been committed to

providing high-standard winemaking expertise to

make the finest quality wine," said Navarre.



winery (Contd)

"With the company's international resources, we

believe this new operation will provide Chinese

consumers a great sparkling wine."

Mark Bedingham, the managing director of Moet

Hennessy Asia Pacific, told China Daily that the

sparkling wine produced in Ningxia will initially

satisfy local demand but in the future it will also

look at exporting the product.

"The wine market in China is booming and its

growth is dramatic. This opening marks another

significant milestone in Moet Hennessy's

continued efforts to help develop wine in China,

and is another sign of the company's commitment

to China," said Bedingham.

In May, the company also launched a new

winery in Deqin (Yunnan) [11], in the famous

area of Shangri-la.

"The winery in Yunnan is dedicated to top

quality, premium wine. So, to produce the best

red wine in China, we are willing to wait longer,"

added Navarre.


ChinaNews


Company News



winery (Contd)

Bedingham said the pricing of its premium

sparkling wine produced in Ningxia will not be

as high as that of the red wine made in Yunnan.

The image of its perfect wine drinker in China,

he added, is "young consumers who are looking

for a high-quality lifestyle".

The output of sparkling wine in Ningxia will be

larger than the winery in Yunnan.

"In most of the world's major wine markets,

sparkling wine accounts for just 0.9 to 3% of

total demand," said Bedingham. "But the 1% of

China's wine market, which is still increasing, is

a big number. I believe as a pioneer in the

sparkling wine sector in China, we will achieve a

high market share after we release it next year."

Six years ago, Moet Hennessy acquired Wenjun,

a Chinese white spirits producer in Sichuan

province, and Navarre said it has been moving

quickly to sell Wenjun in luxury markets.

"Now we have a rich portfolio in China's luxury

spirit and wine markets," said Navarre.

Statistics from International Wine and Spirit

Research show that sales of wine and spirits in

Asia-Pacific are forecast to overtake those in

Western countries by 2016.

By then, the total amount of wine consumed

every year is expected to rise from 3.39 bio cases

to 3.68 bio cases, with 75% of that increase

coming from China. (cd 29/6/2013)

Hawthorn wine

Researchers of the Weifang Engineering College

(Weifang, Shandong) [12] had developed a new

type of hawthorn wine. The raw material is

grown abundantly in the Qingzhou region of

Shandong. The research has been conducted in

cooperation with Shengshi Hongda Industrial

Group (Shandong). (tjkx 30/9/2013)

Yanjing: first quarter of 2013

Yanjing Brewing (Beijing) has produced

11.3 mio hls of beer in the first quarter of 2013,

up 7%. The turnover in the same period was

RMB 2.868 bio, up 9.8% and the net profit

RMB 45.49 mio, up 20.16%. (tjkx 11/6/2013)

As the prices of raw materials have been

decreasing recently, the profitability of the

brewing industry is on the rise again.


Kweichow Moutai Co Ltd. (Zunyi, Guizhou)

[13] - China's top liquor producer - has seen

nearly flat growth in revenue in the first half of

the year, hit by the government's campaign to

crack down on lavish spending using public

funds. (Continued on next page)

ChinaNews


Company News



(Contd)

The company said its revenue for the first six

months of 2013 was RMB 17.9 bio, up 0.6%

year-on-year, or RMB 100 mio. The

government's campaign has hit high-end liquor

companies the most, industry experts said.

In the first four months of the year, liquor

production volume was 3.81 mio kiloliters, an

increase of 6.9% year-on-year but down 10.36%

points compared with the same period last year.

To boost sales, Moutai has slashed prices to

attract more customers in the mid-range market.

In mid-July, the company said it planned to

reduce the prices of some products by up to 50%.

But industry experts are not optimistic about the

company's expansion plans in the mid-range

market, where its distribution channels are not

established well enough to compete with local

brands.

For years, Moutai has relied heavily on high-end

group consumption and specialized stores to

develop sales.

To change its distribution channels, which used

to target luxury spending, to aim at ordinary

customers will take considerable time and effort,

said Ma Fei, an industry consultant.

Meanwhile, Moutai's peers are also posting

lackluster results. Jiugui Liquor Co Ltd said its

first-half revenue has seen a rapid decline,

resulting in a nearly 90% drop in profits.



(Contd)

Sichuan Tuopaishede Group said because of the

government's austerity campaign and the

restrictions on the sale of alcoholic drinks within

the military, sales of its high-end products have

fallen significantly, as has its net profit, which is

expected to be down about 80% for the first half

of the year.

Another top liquor brand, Wuliangye Group,

launched mid-range products priced between

RMB 200 and 500 this month. The group is

seeking a flattened distribution channel for all its

products to reboot its profits, said Wang

Chuancai, an industry consultant.

Tang Qiao, chairman of Wuliangye Group, said

it is changing its product structure that used to

emphasize the sales of its high-end product lines,

bringing in 70% of revenues.

He said the sales target for this year has been

lowered to about RMB 30 bio, only slightly

higher than last year's RMB 27.6 bio.

Tang said the days of demand exceeding supply

are over. This year the inventory situation has

forced them to change their strategy for

development.

Xie Ji, an analyst at the New Food Industry

Institute, said with the decline in spending on

luxury drinks and growth in public consumption

of liquor, the two sides will eventually overlap in

the product range priced between RMB 100 and

300. The liquor products of this price range will

make up half of the industry total sales in the

future, he said. (Continued on next page)

ChinaNews


Company News



(Contd)

An increasing number of distributors who used to

represent mid-range liquor brands have now

shown strong interests in Wuliangye's new

products, Xie said.

But he added the evolution is far from over.

After the tumult of contraction, stability in the

market is only the first step. Dealing with

overcapacity will be a major challenge, he added.

For example, he said, there are about 2000 liquor

manufacturers nationwide. A number of small

liquor producers are very likely to disappear.

(cd 1/8/2013)

Kraft's new plant to double output

volume

Kraft Foods China has started the construction of

a RMB 545 mio plant in Suzhou (Jiangsu) [14] to

expand production capacity. The plant, which

will be more than double Kraft's production

capacity in Suzhou after it is completed in

August 2014, brings the total investment of Kraft

Foods in Suzhou to RMB 1.14 bio.


Kraft's new plant to double output

volume (Contd)

"We will continue to boost marketing and

innovation efforts for our key brands and to

further expand our sales channel coverage in

China," Shawn Warren, president of Kraft Foods

China, said in a statement yesterday.

China has become the fastest growing market in

Kraft's global business and the company has been

stepping up efforts to add local flavors to cater to

Chinese consumers.

The company produces Oreo and Chips Ahoy

biscuits as well as Cadbury chocolates and Halls

cough drops. China's snack-food market is

valued at over RMB 75 bio last year, said market

research firm Euromonitor. (sd 14/3/2013)


The recently signed free trade agreement

between Switzerland and China will help Swiss

chocolatier Lindt & Sprngli to establish itself as

the preferred premium chocolate brand in the

country, according to the company.

As one of the originators of the globally

renowned Swiss chocolate culture, Lindt's

heritage dates back to the year 1845.

Ever since, the name Lindt has stood for

premium chocolate, delighting consumers with

innovative products of the highest quality, said

Andreas Pfluger, vice-president responsible for

Asian market.


ChinaNews


Company News



(Contd)

"These are exactly the attributes that we want to

pass on to the demanding Chinese chocolate

lovers," Pfluger said. Lindt products have been

available on the Chinese market for the past

decade via a network of distributors.

After years of double-digit growth in the market

for premium chocolate, the company decided to

establish their own base here. In August 2012, a

Lindt & Sprngli subsidiary in Shanghai was

opened to incorporate the Swiss premium

chocolate tradition into Chinese culture.

The subsidiary had a strong start, driven by the

company's number one brand Lindor, which sold

particularly well in metropolises like Shanghai,

Beijing and Guangzhou. With its festive red and

gold-colored premium packaging, Lindor is

becoming increasingly popular as a gift,

especially for the Chinese New Year. "We are

continuously expanding our presence in China,"

Pfluger said.

Currently, Lindt chocolates are available in more

than 40 cities at nearly 3000 sales outlets. To

guarantee the perfect condition of its products,

the main distribution channels are gourmet food

outlets and department stores, Pfluger said.

"For the near future, we believe that Lindt &

Sprngli China will manage to establish itself as

the preferred supplier for premium chocolates

and therefore contribute to our overall sales

results.



(Contd)

"The recently approved Free Trade Agreement

between Switzerland and China will further

support this expansion," Pfluger said.

He believes there is tremendous potential for

growth in the Chinese market. Currently per

capita chocolate consumption on the Chinese

mainland is about 100 g a year, compared to

500 g in Taiwan, 1.6 kg in Japan and 12 kg in

Switzerland. More and more chocolate is being

sold in China. And the number will grow even

larger.

At present, per capita consumption in the

mainland's first-tier cities is already equal to that

in Taiwan. However, compared to figures in the

West there is still a huge potential to be explored,

Pfluger said. To better cater to the Chinese

customers, the company has designed a special

strategy, he said.

"We realized that a successful sales concept is

needed to introduce our brand to a new market

with little to no chocolate tradition," Pfluger said.

"This is why we created special Lindt Boutique

corners in department stores to present to the

consumers our unique chocolate expertise and

allow them to taste the outstanding quality of

Lindt chocolate.

"So far, 100 Lindt Chocolate Corners have been

established, and we have plans to open many

more over the next couple of years," he said.


ChinaNews


Company News



(Contd)

"By taking part in selected events, such as the

House of Switzerland during the Beijing

Olympic Games in 2008 and the World

Chocolate Wonderland in Beijing in 2010, our

Lindt master chocolatiers impressively presented

their craftsmanship and expertise as well as our

fine chocolates to a growing audience by

convincing them of our outstanding product

quality." (ccd 1/8/2013)

COFCO selling plant in Xinjiang

COFCO (Beijing) has announced that it intends

to sell its fruit processing subsidiary in Khotan

(Xinjiang). Due to lack of raw material, the

subsidiary has been operating at a considerable

loss. A key product of that plant is apricot jam.

(pd 29/7/2013)

Wahaha enters Russian market

The Wahaha Group (Hanghzou, Zhejiang) [9]

has entered the Russian market with its tea

beverage. A first batch has been shipped to

Wladiwostok. (hexun 24/6/2013)


Mondelez International Breaks Ground

to Expand Biscuit Plant in China

Kraft Foods (Suzhou) Co. Ltd. [14], part of the

Mondelez International family of companies,

today hosted a groundbreaking ceremony for the

expansion of its biscuit plant in Suzhou, China.

With a total investment of approximately

USD 85 mio, the project spans 30 000 sq.m.

(more than 98 000 sq.ft.) and is expected to be

completed in August 2014.

The project will more than double the plant's

current capacity and create 340 new jobs. The

Suzhou plant will feature state-of-the-art

production lines to make Oreo and Chips Ahoy!

biscuits to meet the growing demand from

Chinese consumers.

This project is consistent with the company's

previously announced strategy to invest in

emerging markets to drive sustainable, profitable

growth.

"We deeply appreciate the Suzhou government's

help and support for Kraft Foods China and this

project," said Shawn Warren, President of Kraft

Foods China. "Since the introduction of Oreo and

Chips Ahoy! to China in 1996, the country has

become our second-largest market for these

brands globally, after the United States, due to

our consistent focus on quality, innovation and

marketing. After this project is completed, the

expanded plant will be a model in our global

supply chain network."


ChinaNews


Company News


Mondelez International Breaks Ground

to Expand Biscuit Plant in China

(Contd)

"The Kraft Foods' Suzhou plant has set examples

in the Suzhou Industrial Park in terms of

production efficiency, energy savings, emissions

reductions and community involvement," said

Madam Sun YanYan, Vice Chairman of the

Suzhou Industrial Park Administrative

Committee. "We're pleased to see that this

project will further drive the development of the

local economy."

Mondelez International currently operates two

manufacturing plants and a regional biscuit

research and development center in Suzhou.

(yahoo 17/6/2013)

Kvass war

A cold war has recently erupted in China about

who is the manufacturer of real kvass. One of the

oldest local manufacturers, Qiulin (Harbin,

Heilongjiang) [15] has referred to the beverage

of Wahaha as ‘fake’ on its microblog account. A

large company like Wahaha is not likely to

remain calm over such an allegation. The

industry is waiting to see how this verbal war

will develop. (hcfood 15/7/2013)

As kvass is a Russian beverage, it makes sense

that a company in Harbin was the first to

introduce it to China. During recent years, a few

companies in other parts of China, mainly the

country’s northern part, have tried their luck at

launching a kvass of their own, without success.


Kvass war (Contd)

The giant Wahaha has the financial means to

finance a major marketing campaign and it is

probably that campaign that has made Qiulin

decide to initiate this, un-Chinese, direct verbal

attack.


break up

A key shareholder in Smithfield Foods Inc has

hired advisers to help break up the US pork giant

and sell it in pieces rather than allow it to be sold

intact to China's Shuanghui International

Holdings Ltd, according to a regulatory filing.

Starboard Value LP, a 5.7% shareholder in

Smithfield, said it hired New York-based Moelis

& Co and Business Development Asia LLC to

help get a better offer for Smithfield shareholders

than the USD 4.7 bio deal which would be the

largest Chinese takeover of a US company if

completed.

In the filing, Starboard, a New York-based hedge

fund, reiterated its belief that Virginia-based

Smithfield, the world's largest hog farmer and

pork processor, would be worth more if it were

broken into three parts - US pork production, hog

farming and international sales of fresh and

packaged meats - and then sold.


ChinaNews


Company News



break up (Contd)

The advisory firms will assist it in "identifying

and connecting any strategic or financial buyers"

for Smithfield's "individual business units" and

finding a "sum of the parts transaction that could

qualify as a superior agreement", Starboard said

in the filing.

Starboard, which laid out its criticisms of the

Smithfield deal in a letter to the company's board

last month, did not reply to an e-mail from China

Daily requesting further comment on the hedge

fund's decision to hire advisers.

Smithfield agreed in May to be acquired by

Shuanghui (Luohe, Henan) [16], the main

shareholder in China's largest meat-processing

enterprise, for USD 34 a share, or USD 4.7 bio.

The agreement, which the companies said they

expected to close in the second half of this year,

also includes USD 2.38 bio in assumed debt.

The proposed deal is under review by the

Committee on Foreign Investment in the United

States (CFIUS), an interagency panel that

investigates foreign investments in connection

with national security issues. The proposed deal

is seen as helping China - the world's largest

consumer of pork - meet demand for the meat, as

its increasingly prosperous residents eat more

protein.

Since the proposed deal's announcement, US

Senators have raised questions about the Chinese

company's ability to comply with food safety

standards if the transaction goes ahead.



break up (Contd)

US lawmakers also have raised concerns about

foreign ownership of the nation's food supply.

Ken Goldman, an analyst at JP Morgan Equity

Research of America, said he believes the

transaction will be approved, as CFIUS works

out a "compromise solution".

Although pork itself doesn't directly affect US

national security, a bird flu outbreak this spring

and the discovery of thousands of dead pigs in

Shanghai's rivers, has added to China's "negative

reputation" in the protein industry, the analyst

said. Deaths tied to tainted milk and a chicken-

processing plant fire also have fueled food safety

concerns.

Observers, however, expect the proposed

Smithfield deal to win regulatory approval, due

to the companies' assertion that the merger is

driven by growing pork demand in China and not

a strategy to export pork to the US. The

agreement is unlikely to raise traditional antitrust

concerns because it doesn't give Smithfield -

already the world's largest hog farmer and pork

producer - a larger share of the US pork market.

Smithfield CEO Larry Pope recently told the US

Senate Agriculture Committee that the nation's

pork producers "struggle" to build market share

in the US as Americans' pork consumption

dwindles. As pork is only the third most

consumed US meat, producers are forced to look

outside the US for growth opportunities, he said.


ChinaNews


Company News



break up (Contd)

Since announced, the proposed Smithfield deal

has received support from local, state and

national officials, unions, hog farmers,

academics and US food industry peers, Pope

said.

The transaction apparently has cleared one US

regulatory hurdle, as the waiting period for

objections to be filed with the US Justice

Department expired Friday. The company

already has satisfied antitrust authorities in

Mexico and Poland.

The proposed deal still requires approval by

Smithfield shareholders, who had long been

critical of Smithfield's stock price with Pope in

charge before the transaction was announced.

In its June 17 letter to Smithfield's board,

Starboard said the proposed merger "significantly

understates a conservative sum-of-the-parts

valuation of the company," which it put at

between USD 9 bio and USD 10.8 bio, after tax,

or approximately USD 44 to 55 per share. That

projected price represents a premium of 29% to

62% to the USD 34 per share Shuanghui deal,

according to the letter.

Starboard's letter noted that Smithfield's

hog-production and pork divisions are the

world's largest, and its international division

includes interests in hog farming, meat

processing, and branded meat operations in

Poland, Romania, UK and Mexico.



break up (Contd)

"It is our belief that the divisions of Smithfield

are easily separable and had the company

explored a sale of these businesses in separate

transactions, shareholders may have received far

more value than the USD 34 per share

consideration contemplated by the proposed

merger," Starboard's letter said.

"We question whether the board gave sufficient

consideration to a sale of the divisions in

separate transactions, or whether it focused

primarily on an all-cash transaction for the

company as a whole, which we believe would

entail a much more limited universe of

potential." (cd 16/7/2013)

Jollibee targets 500 stores in China by

2014

Homegrown food giant Jollibee Corp. is aiming

to boost its footprint in China to 500 stores,

according to founder and president Tony Tan

Caktiong. The food and beverage conglomerate

currently has 400 stores across its brands in

China and is looking to add another 100 by next

year. In China, Jollibee operates brands Yonghe

King (which was acquired in 2005),

Hong Zhuang Yuan (in 2008) and San Pin Wang

(in 2012).

“One of the reasons why our profit growth in the

first quarter 2013 of 33% was strong was

because a big part of that came from China. We

have a very good trend and our estimate is by

next year we will reach 500 existing brands

stores,” said Caktiong. (Continued on next page)

ChinaNews


Company News



2014 (Contd)

In Jollibee's first quarter 2013 results, China led

the growth with 27.1% sales increase. Southeast

Asia and the Middle East grew 23.8%,

Philippines 10.3% and US 9.2%.

In 2011, Jollibee established headquarters in

China — a research and development center in

Beijing and a food processing center in Anhui

province.

The food conglomerate whose brands include

Jollibee, Greenwich, Chowking, Red Ribbon,

Mang Inasal and Burger King, has been steadily

expanding its brands internationally, particularly

to countries with large Overseas Filipino

Workers (OFW) populations.

According to Caktiong, sales in their stores

across the Middle East has also been doing well.

Middle East is a key destination for Filipino

nurses, engineers, maids, and others who seek

greener pasture abroad.

“More of our stores in the Middle East have very

high same-store sales. [There are] double-digit

growth rates across countries in the Middle East.

In Saudi Arabia, Dubai and Kuwait the same-

store sales are very strong,” he said.

Caktiong said that while they have had a lot of

offers from Myanmar, they haven’t yet looked

into the opportunity. Myanmar is one of the key

developing markets investors have been eyeing

for expansion.



2014 (Contd)

“We’ve not really looked at Myanmar yet but

there are a lot of interested parties who are

convincing us to move there,” Caktiong shared.

The food conglomerate has also recently voiced

interest in expanding in Indonesia and India.

The international expansions come as part of

Jollibee's strategy to have a 50:50 ratio for its

foreign and local businesses in the next 5 to 7

years to maintain overall growth trajectory.

Jollibee currently has 80% of its operations in the

Philippines and 20% based abroad. “Probably by

the end of the year this ratio will change slightly

to 79% Philippines, 21% abroad," he said.

The stellar performance of the Philippine

economy, however, is making officials rethink

the target ratio. The Philippines grew 7.8% in the

first quarter, one of the highest rates in the world.

"While business abroad is growing well, the

Philippines is also growing well. When both are

doing well it is difficult to quickly change the

ratio," said Caktiong.

"The Philippines is growing so fast so if you

want to change the ratio you have to grow

faster," he explained.

In 2012, the Jollibee group opened a total of 223

new stores: 135 in the Philippines and 88 abroad.

At the end of the year, it was operating a total of

2 074 stores in the Philippines and 554 stores

overseas. (rappler 28/6/2013)

ChinaNews


Company News


Nestle’s China investment shows need

to think local

Success in emerging markets is dependent on the

ability to think locally. However, while domestic

players do have the home field advantage,

multinational corporations benefit from stringent

internal structures and expertise in areas such as

supply chain management. Could the best way to

drive growth be to combine the strengths of each,

creating “multi-local” operations? Nestle would

seem to think so.

I’ve been to a few factory openings in my time.

But never have I attended one as extravagant as

the ceremony to officially open the Nestle-Yinlu

dairy facility in the eastern Chinese city of

Chuzhou (Anhui) [17] on 11 July.

The occasion kicked off at 9.28am, a time picked

because the Feng Shui master consulted by Yinlu

suggested that this would help to guarantee the

success of the 370 000 sq.m. factory.

Drumming girls, a Chinese dragon, cannons

firing gold confetti and fireworks (as well as

some comparatively dry remarks from Yinlu and

Nestle management along with local government

officials) followed.

As I sat in the already baking morning sun, an

obvious truth was driven home. China, for all its

potential size and scope, is an entirely different

market to the western countries that so many

food multinationals call home. As multinational

food groups – from Hersheyto Arla – look to

bulk up their operations in markets like China, to

ignore this simple truth is to court failure.



to think local (Contd)

To get around this, in categories where domestic

players have an advantage – so areas excluding

nutrition and coffee – Nestle has developed joint

venture arrangements with local partners such as

Yinlu and confectioner Hsu Fu Chi.

“An important building block for Nestle in China

is the development of local partnerships,” Nestle

group CEO Paul Bulcke told the audience in

Chuzhou. “They allow us to stay closer to the

Chinese consumer and meet demands for…

healthy, safe and nutritious products.”

Alongside consumer insight, another distinct

advantage that Yinlu has is its distribution

structure. Yinlu followed Mao Zedong’s

example: starting in the countryside and then

moving into the city, one industry pundit

explained. This means that, where the majority of

multinational corporations operating in China are

struggling to get out of second or third-tier cities,

Yinlu has a strong rural footprint.

But multinationals do have the upper hand in

some areas. Take the Nestle-Yinlu pairing.

Nestle brings to the table a lot more than its deep

pockets and global R&D capabilities. (Continued

on next page)

ChinaNews


Company News




The company is an expert in supply management

and the development of strong internal structures.

In the case of Yinlu, in which Nestle took a 60%

stake two years ago, the Swiss food giant has

helped in the development of a stronger

management structure.

As Yinlu chairman Chen Qing Yuan

acknowledged in a press conference following

the ceremony, the company had previously been

run with the entrepreneurial spirit typical of its

founders. However, as a company grows and

extends its reach these attitudes can only take

you so far.

One Yinlu source told just-food that the company

had been presented with a number of options

when it was considering how to enter its next

phase of growth two-to-three years ago. This

included the possibility of a private listing.

However, if it had pushed ahead with this option,

the demands of trading on the stock exchange

would likely have required Yinlu to bring in

external management. The partnership with

Nestle was considered a favourable option.

By leveraging the local know-how and – never to

be underestimated – consumer understanding of

Chinese companies and combining this with the

rigorous approach to issues such as food safety,

supply chain and professional management

present in large international corporations and it

would seem that you have a winning recipe.

Nestle was certainly keen to emphasise its

commitment to its joint venture partnerships in

the country. (Continued in next column)



“The new Yinlu factory… is just one more

example of our commitment… to build these

partnerships into even stronger businesses,”

Bulcke said. “We are on an historic and exciting

journey in this country.”



responsible supply chains

As part of its commitment to operating

responsible supply chains, Cargill announced a

new assessment tool to help food and beverage

customers achieve their growth, cost reduction

and risk mitigation goals by identifying,

prioritizing and quantifying risks and

opportunities in its supply chains. The

announcement was made at the 2013 Institute of

Food Technologists (IFT) Food Expo. The new

tool allows Cargill and its customers to rapidly

identify and assess areas of risk and opportunity

so they can take action on responsible sourcing

issues that may negatively or positively impact

business, such as labor practices, the

environment and biodiversity.

The tool translates these risks and opportunities

into specific financial terms by assigning cost

and revenue implications to those identified in

the assessment as having the highest likelihood

of occurrence and highest business impact. The

company’s unique approach facilitates

collaboration and alignment across all partners in

the supply chain to move quickly to address

issues and opportunities. (Continued on next page)

ChinaNews


Company News

Special Features



responsible supply chains (Contd)

“Customers, consumers and other stakeholders

are increasingly demanding more information

and communication around what’s happening in

our extensive supply chains to mitigate corporate

or brand risk, find opportunities for cost

reduction, or use sustainability as a potential

platform for growth,” said Scott Portnoy,

corporate vice president of Cargill’s food

ingredients & systems businesses.

“However, sustainability investments often

struggle to gain traction as many organizations

fall short of quantifying a return on investment.

Our tool delivers a business case that enables

responsible decision making and action.”

This assessment tool is the most recent example

of Cargill’s continuous work in creating ways to

improve its supply chains. In just the last few

years, Cargill has announced:

- Cocoa pods - Its Cocoa Promise aimed at

promoting sustainable cocoa production.

The promise focuses on three areas:

training farmers, supporting farming

communities and investing in the long-

term sustainable production of cocoa

- A pledge to supply its customers in

Europe, United States, Canada, Australia

and New Zealand with palm oil certified

by the Roundtable on Sustainable Palm

Oil and/or originated from smallholder

growers by 2015 (this excludes palm

kernel oil products)



responsible supply chains (Contd)

- This commitment will be extended to

cover 100% of our palm oil products and

all customers worldwide – including

China and India – by 2020

- Soy field. A partnership with The Nature

Conservancy that helps Brazilian soybean

farmers comply with the Brazilian Forest

Code

Sustainability issues continue to be an important

topic among customers. In a recent survey of

Cargill’s food and beverage customers, 93%

identified sustainability as one of the most

critical issues of importance to their businesses.

The most common cited focus areas were setting

objectives and goals for sustainability and

responsible sourcing. (fif 16/7/2013)

Growing your own food: Chinese

consumers’ response to food safety

issues

Regular readers of these pages do not need to be

reminded of the various food safety problems

that have stubbornly occurred and re-occurred in

China during the past few years.

The loss of confidence in the domestic food

industry has triggered a number of peculiar

responses among Chinese consumers. One of

them is Community Supported Agriculture

(CSA).


ChinaNews


Special Features


Growing your own food: Chinese

consumers’ response to food safety

issues (Contd)

A number of articles about various forms of CSA

have appeared recently in China. We have

collated them in a special column in this issue of

China News.

Balcony farmers are taking root

With growing wealth, concerns about food safety

and the fever for online shopping, more urbanites

are taking to farming on their own terms.

Zheng Jinran reports in Beijing.

The perfect storm of two major trends in China -

online shopping and growing concerns about

food safety - has given birth to a generation of

urban farmers.

More urban residents, many of whom are young

people between the ages of 25 to 35 living in

metropolises such as Beijing, are growing

vegetables and herbs on their balconies or rented

farmland in the suburbs, and turning to Taobao, a

major online shopping service provider in China,

to start their apartment gardens.

Online searches for vegetable seeds at Taobao

has increased by 280% over the past year,

according to the company.

"That means, every day, more than 6000 people

went to online shops at Taobao expecting to buy

seeds and tools that can convert their balconies

into a small vegetable garden," says Lu Qi, a

public relations officer from Taobao.



(Contd)

Xue Ling, 26, has been planting vegetables on

the balcony of her apartment in Jinan, capital of

Shandong province, since 2010. "It is the only

way to keep my food, at least the vegetables,

clean and safe," she says.

"Then I found out that many of my friends have

realized the importance of eating vegetables.

They have been busy planting this year and

asked for my help to get tools for them," says

Xue, who opened a shop for vegetable seeds in

April because of the demand.

"The sales in my shop are much higher than I

expected. More than 2000 bags of seeds have

been sold since then," she says. "They plant

vegetables not to save money but to guarantee

food safety," Lu says.

A number of food scandals have rocked the

nation in recent years, including the discovery

that cucumbers were found with contraceptives

and another incident where leeks were found

filled with toxic pesticides. The latest crop to join

the list of tainted foods is the Yantai apple,

which was found, wrapped in paper bags

containing chemicals. (Continued on next page)

ChinaNews


Special Features



(Contd)

Xu Jian, 36, an urban farmer in Hangzhou,

Zhejiang province, spent about RMB 1000 in

seeds and organic fertilizer on farmland he

rented. He paid RMB 3560 to rent the 30-sq.m.

farmland for two years. But the move did not

come without its consequences: His mother

moved out of their hometown to help him plant

the vegetables.

"Planting vegetables by myself may cost more

money than buying them from the market and

they might consume extra energy. But the risk of

having polluted food is everywhere. I don't want

my 3-year-old daughter to suffer from any of it.

It is great fun to plant in the farmland and share

the spoils with my colleagues," he says, adding

that every weekend his family drives to the

farmland.

Taobao has taken notice of the demand for

vegetables. In addition to selling seeds and tools

for urban farmers, the major online shopping

provider has begun selling fresh vegetables and

other organic food like rice on an independent

website called agri.taobao.com as of early June.

"About 1000 farms and companies want to join

and provide their organic products on this new

platform," Lu says. "But these green products

such as fresh vegetables have special

requirement in packaging and transporting, so the

sales are not large." For those urbanites who

crave a bigger plot to grow their crops, the

website has a bigger plan: Offering farmland for

its users to rent. The option should be available

in June. (Continued in next column)


(Contd)

Taobao will soon release rules to regulate land

owners and tenants. The website will also soon

provide a platform where plots on a farm will be

offered for rent. "But in the initial state, only

residents in Hangzhou and Shanghai can enjoy

this new service," Lu says, adding that it could

possibly expand to cover all cities in China in the

near future.

"More cities will see the free and convenient

exchange of extra vegetables or other agricultural

products," he says. "But there are many problems

in achieving this goal, including the packaging

and we don't know when it will come to

fruition." Xu's contract for the farmland he rents

will end in December. "I'll still rent some land to

plant vegetables, but maybe this time I'll try to do

it through the website. I hope it will work to offer

me and more people with appropriate land

options," he says.

Following nature's lead on food

No tomatoes in winter. No oolong tea after Tomb

Sweeping Day. Do not treat meat as an everyday

staple. The initial impression is that she keeps to

the stringent regime of a sustainable lifestyle, but

Shi Yan says it is all totally natural - if you live

on a farm. She is probably the best-known

advocate of community-supported agriculture in

this country, and she is totally committed.

"If you live and feed on the farm, you have more

vegetables and grains. And you can only kill a

pig once in a while. It cuts down the

consumption of meat." (Continued on next page)

ChinaNews


Special Features


Following nature's lead on food (Contd)

As for the tea, she says oolong tea before

Qingming (Tomb Sweeping Day) is better

because pesticides are rarely necessary then.

"Whatever nature dictates, it is often the best,"

the 30-year-old post-doctorate graduates say. She

calls herself a "new farmer" and has been

preaching the cause for many years in her slow,

calm, measured tones.

Shi is on the sustainability lecture circuit, often

appearing in a simple linen shift with her hair

tied up in a ponytail and wearing sandals that had

just trudged through the farm fields. She has

been doing this since she came back from six

months' of hard labor on the Earthrise Farm in

Minnesota in 2008.

"Once you build up an intimate relation with the

land, life is different," says the city-bred

agriculture scientist from Baoding, Hebei

province. It was the hands-on experience from

dawn to dusk that taught her the CSA concept

from the ground. She wrote a book on her return

and quickly became a champion of the

movement.

Her first project, initiated with her heavyweight

graduate program supervisor Wen Tiejun from

Renmin University of China, is Dondon Farm in

western Beijing. It made its name as a rented plot

of land that hires farmers and promises clean,

natural produce for customers who order and pay

in advance.



It was a success, although the founder says with

all modesty "it was because we broke the ground

at the right moment, when concern for food

safety was extremely high." The farm is still

thriving after three years but Shi wanted to

address the bigger issue - the sustainability of the

rural community "where we are determined to

live".

As head of the year-old CSA model farm, Shared

Harvest, she recruits land-owning farmers who

are willing to work on the land themselves. Shi

monitors the farming process, markets the

produce to customers who are willing to pay for

their vegetables in advance, and shows them

around when they visit.

"Having another stakeholder means more

transparency, customers can get what they want

to know not only from us, but also from different

farmers," she says, "and if there are

disagreements, all the better.


ChinaNews


Special Features



"It is the farmers who benefit from the model

more than anyone else. Farming should be

rewarding enough to let them stay on the land."

For now, Shared Harvest makes RMB 0.45 for

every 500 g of vegetables sold. It has already

cleared the red, and even projects a sizable profit

at the end of 2013, when the number of members

will exceed 600. Her hope is that these members

will care enough about what they eat to come

down to the farms more often and take part in the

whole process.

To encourage them, Shi tirelessly updates

progress on the plots and posts reports online on

her various social network accounts, sharing

everything from pop quizzes on botany to the

farms' daily delights and woes to quotes from

Mother Teresa.

"They ask me why my photos always look so

good. I tell them the photos show the love of the

photographer," she says as she carefully packs

bunches of kale into delivery boxes. This is all

part of her routine, and she attends to it with the

eye of a committed lover. She highlights the

beauty of deformed tomatoes and crooked

cucumbers with a dash of humor, arranging them

into heart and swan shapes that are posted online

with a poetic line or two. That's attracted about

30 000 fans to her weibo account.

It is part of her larger plan to educate consumers:

That perfect-looking vegetables may not be safe,

and that buying from your neighborhood farmer

reduces "food miles" and carbon emission.



Yolanda, an expectant mother who is a member

of Shared Harvest, is definitely a Shi Yan fan.

"Shi has her feet on the ground, but she upholds

an ideal at the same time. I admire her for the

stamina and her vision for a better future. I trust

her. I've seen the farm myself and I can let go of

all my worries about food," she says.

Shi current lives, works and has her research

base at Mafang village where she has 40 pigs,

2000 chickens, 30 geese and three farms. Her

loving husband works with her and more than 20

young colleagues who all affectionately call her

"boss".

"Shi Yan taught me not to lie," says Chen Li,

who is in charge of sales for Shared Harvest.

"That's almost against a salesman's instinct. But

honesty is the core of our business."

Chen joined the enterprise a year ago because he

believed Shi's initiative is "small and beautiful",

and that "it could only be done by someone who

is adamant and innocent at the same time".

"I marvel at how people are willing to help her

because she's so trustworthy," he says.

(cd 14/7/2013)

People power

Farmers supported by their communities may be

the answer to China's concern over food safety,

efficient land use and the unbalanced distribution

of rural-urban demographics. Sun Ye goes out

into the countryside to find out if this model will

work for the country. (Continued on next page)

ChinaNews


Special Features


People power (Contd)

The physical manifestation of the trend is a box

of vegetables that appears on the doorstep every

week, filled with seasonal produce with an

occasional wormhole, but is still warmly

welcomed. It is also the chance to meet and get

to know the farmer who supplies the box, and the

opportunity to bring the children down to the

farm to take part in the sowing and the

harvesting.

It is the building of a community, one that is

prepared to pay a premium up ahead for the

assurance that vegetables on the table are grown

according to safe practices, are sustainable,

seasonal and as far as possible, free from an

overload of pesticides. It is a chance to meet and

meld with other members of the community who

have the same passion and beliefs.

This is what community-supported agriculture

(CSA) looks like in China, for now. But looking

beyond the summer tomatoes and winter

cabbages that are purchased even before they are

sown, CSA is a new concept that goes against the

traditional, or is a return to old systems -

depending on how you look at it.

More importantly, it is a trend triggered by

rampant food-safety problems thrown up in

attempts to adequately feed a growing country

of 1.35 bio. Huge waves of urban migration are

yet another problem as the younger generations

abandon the hard and thankless efforts of

cultivation in their villages and head out to the

bright lights.


People power (Contd)

CSA encourages young farmers to go back to the

land, and offers them a business model that gives

them insurance against fluctuating prices brought

on by inclement weather, unpredictable harvests

and natural disasters.

CSA involves the communities around the farms,

and is a model that has worked with varying

success in North America, Australia and

New Zealand.

In China, CSA is only at its juvenile stages, and

it may grow up to be a very different child.

Shared Harvest in suburban Beijing takes its

name from a CSA guidebook. It has also become

living proof for this farming model since its

inception in mid-2012.

It is a cooperative that supplies more than 400

members with weekly boxes of green vegetables

- all of which have been paid for upfront.

This new initiative has also helped its farmers, by

educating them on agricultural methods that are

sustainable, with an emphasis on the long-term

rather than short-term bounties. For example, the

farmers would probably not have given up the

use of pesticides on their own.

"It is simply scary," says Liu Xiancang, the

director of the Liu village co-op that's

responsible for supplying the vegetables that get

sent out to Shared Harvest members.

(cd 15/7/2013)

ChinaNews


Special Features


Harvesting the homegrown

City folks are just as concerned about the food

they put in their mouths, often more so than rural

residents. That's why many are turning to their

tiny balconies for sustenance. Eric Jou reports on

a growing trend.

Imagine growing organic lettuce, tomatoes and

cucumbers all without pesticides and chemicals.

Then imagine being able to harvest such

vegetables without even leaving home or

changing out of your pajamas to go to market.

That is the promise of urban farming, of growing

fresh produce in limited spaces.

As more and more people migrate from rural

China to the cities, many of them wind up living

in cities such as Beijing. According to the

National Bureau of Statistics of China, more than

163.36 mio people moved from their hometowns

to other locations to work in 2012.

Such transient psychographics can be both a

blessing and a curse, particularly when it comes

to food.

Urbanites are eager for opportunities to

reconnect to nature. And they face many

challenges of time and space.

Urban farming is basically about growing

produce and food in an environment with limited

space, and it is slowly gaining popularity in

Chinese cities. Dannan Hodge, co-founder of

urban farming company High Rise Homestead in

Beijing, says it is a popular concept with a lot of

benefits.


Harvesting the homegrown (Contd)

"You know what's going on with your food, there

are no pesticides or herbicides - nothing that will

negatively affect your health," says Hodge. "A

lot of farmers who do traditional farming have

vegetables they grow for sale and vegetables they

grow for their own consumption. They grow

them differently because they know the

chemicals they use are hazardous."

High Rise Homestead works to help Beijing

residents to "grow their own" at home. They

supply products such as frames that train plants

to grow upward, kits for growing produce on

inclined surfaces and vertically stacked planters.

Windowsills and balcony gardens are all in the

picture. Hodge says the most popular plantings

on balconies are vegetables because they're

simple to grow, even strawberries, cherry

tomatoes and gourds.

"It really does inspire people to eat healthy - you

can't grow a bag of chips," she says. People -

especially children - get excited to see their own

food grow, food that they planted and will

harvest themselves.

"There is also a health benefit where people are

inspired to become more conscious consumers,"

she says. High Rise Homestead is working to cut

down the supply chain by sourcing materials

locally. Elizabeth Jane Ashforth says the idea of

growing food indoors is great. Ashforth is a

doctor of marine biology who tried to build her

own sustainable system within her apartment in

Beijing, and she says growing food indoors can

create wonders.


ChinaNews


Special Features



"People in general have lost a connection to

where their food comes from and how difficult it

is to grow actually," says Ashforth.

"Doing something like this adds a bit of greenery

to your home, it just makes you feel connected to

the environment and that can only be a good

thing." American Tim Quijano has recently

started giving DIY lessons on setting up

aquaponic ecosystems.

Aquaponics is similar to a hydroponic setup

where plants are grown in water, except

aquaponics introduces fish into the equation.

A simple aquaponics setup involves a fish tank

with possibly edible fish, a water pump, a second

layer above the tank where the plants are grown

and a light source.

The fish eat and create waste and the pump

siphons the water to the upper layer to fertilize

and water the plants. The water then drains back

into the lower tank.

According to Quijano, some aquaponics setups

can support edible fish such as tilapia. A fellow

with the Princeton in Asia organization, Quijano

says his main passion is working on

environmental issues. Quijano started working

on aquaponics during a move from one

apartment to another.

"What got me started was that I had this fish tank

in my apartment that I moved into this year and I

thought how I could do something fun with this,"

says Quijano. (Continued in next column)


"I like having new projects and learning new

things. It just hit me one night that I could learn

something about aquaponics," adding that he's

spent "many hours on Youtube researching

growing my own food".

China has a rich history and culture of being self-

reliant when it comes to food, says Quijano.

Pointing out recent food safety scares and the

migration of workers from the countryside to the

cities, Quijano says that there is a wealth of

agriculture knowledge in Chinese cities.

"I live in a large apartment complex and the

grannies that are there, they have set up little

makeshift greenhouses with a stick of bamboo

and a tarp. There's so much knowledge and

there's such an appreciation for it."

Aquaponics newbie Andrew Morrissey attended

one of Quijano's workshops on a whim after

seeing an online posting about it.

"I came to see what it was about and whether I

could do it at home and grow some tomatoes for

the family and make me more useful," says

Morrissey,

"I don't know about farming but I am never

going out and buying vegetables again but if I

can get something going and it works. If it can

get bigger over time with a bit of experimenting

it can be a lot of fun. Maybe I can get some

edible fish. It would make the wife very happy."

(cd 15/7/2013)

ChinaNews


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Dates: September 5 - 9

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2013 China (Beijing) Int’l Healthy Potable

Water Exh. (SIHWE)

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Location: China Agricultural Exhibition

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Upcoming events (Contd)

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6th

Wine China Expo

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Centre


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2013 8th

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3rd

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China Int’l Meat Industry Exhibition

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(Shanghai) Exhibition

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Dates: October 20 - 22

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GIRACTFast food really fast . New tech can help to keep food safe . Pg21 . Dairy statistics...

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Transcript of GIRACTFast food really fast . New tech can help to keep food safe . Pg21 . Dairy statistics...