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China: strong consumer demand in a changing landscape

China: strong consumer demand in a changing landscape

The Bay of Plenty business community and kiwifruit industry took the opportunity today to hear about the changes afoot for agribusiness in China from some high-profile experts in this field, along with some of the opportunities ahead for New Zealand businesses.

Zespri and Export NZ hosted an event in Mt Maunganui for the local business community to share insights from Zespri’s China Advisory Board, as well as Zespri’s China country manager.

Successful agribusiness investor and ex-World Bank economist Dr Anning Wei sketched out the fragmented make-up of China’s agribusiness sector.

“Who owns land in China? Legally the collective owns the land with contractual rights for individual households to use the land for 30 years. Each household farm can be as small as less than one acre, which can present challenges when it comes to scaling up production.”

Dr Wei cited an example of 16,000 acres across a plantation region with 7,000 farms and noted that over time, change is coming as the owners of the contractual rights to use the land can now sell these rights to others and large commercial farms can be established. He also noted the emergence of local Chinese brands with great success, noting that Huawei phones now outsell Samsung and Apple across the country.

He outlined the transformation underway across China society with continuing urbanisation and a growing middle class. “There is a 50/50 urban-rural split in China and urban dwellers have two to three times the income. They buy and consume very differently,” – a theme also picked up on David Mahon, who described a series of interlocking markets across China. Dr Wei went on to outline the generational differences in consumption patterns with his three daughters shopping almost entirely online while “older people still like to buy with cash and touch the goods”.

Sam Shih – former CEO of PepsiCo China and recently-appointed head of Asia Pulp & Paper noted China’s economic growth slowing from double digits to single digits and the societal shifts which are changing Chinese consumers’ spending patterns. “As our population grows older and the one child policy is relaxed around the country, the average Chinese consumer is getting older and wealthier and they’re willing to spend… they want quality and food safety is firmly top of mind.”

Mr Shih also outlined the importance of getting the right people on the ground in China to drive and grow business.

David Mahon is a Kiwi who has run companies and investment funds in China for nearly three decades and he reassured the audience on the stability of the Chinese economy and the accompanying growing demand from consumers.

“To be successful in China, leadership on the ground need to be able to respond quickly to the changing market. For example in my view, Zespri needs to continue to integrate the principles of Zespri here in Tauranga with Shanghai. It must become a China company: Chinese companies now strive for international best practice and Zespri in China must be both an international company and Chinese company.”

Zespri China & Hong Kong country manager Lewis Pan updated the audience on Zespri’s strategy to grow sales, expand distribution and return value to growers in this important market. “While China’s share of Zespri’s market mix is set to remain relatively stable at around 17–19 percent of total volume, we have ambitions to more than double over the next ten years as volumes from New Zealand and our Northern Hemisphere supply increase.

“We’re growing our distribution footprint across the country further inland and looking to strengthen our relationships with retailers over time. Chinese consumers have enthusiastically embraced ecommerce and now we sell one of every five trays of Zespri Kiwifruit online, with this figure set to grow,” says Mr Pan.

© Scoop Media

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