A Look into China’s Food & Beverage Industry
Consumer trends in China’s F&B industry
China accounts for US$700 million market-share in the global food and beverage (F&B) market relying on its rapid economic development. Key drivers shaping this consumer market growth is the increasing GDP and greater consumer spending power, which in turn facilitate rapidly changing lifestyles, a growing aspirational middle class, and rising interest in health and wellness.
Foreign businesses entering the country must take into account the structural and cultural factors that shape Chinese consumers’ demand. An important factor that foreign brands often overlook is the difference in regional markets. For instance, first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen are better developed, have higher incomes, population, and a more Western lifestyle than other provinces. However, many tier-two areas are facilitating smart growth to accommodate new business so stepping down a tier or two – focusing on these less saturated markets may just offer up a lot more potential.
Companies entering China’s regional markets must continually invest in research and development to determine local preferences and offer customized products that suit Chinese palate.
With health awareness on the rise, more Chinese are paying closer attention to the ingredients in the food and drinks they consume. It’s important for F&B brands to consider consumers’ eating habits, the importance of safety messages and ‘healthy option’ labeling when promoting their products in China.
Companies entering China’s regional markets must continually invest in research and development to determine local preferences and offer customized products that suit Chinese palate. For example, Starbucks has managed to retain a stronghold in the largely tea drinking China by offering a unique menu that is suited to tastes and predilections of many Chinese consumers.
Market studies suggest that 82 percent of consumers from upper-tier cities prefer to buy foods and beverages online. To serve the growing internet population, over 59 out of 100 retail chains operating in China had established online stores by the end of 2011. This trend has only grown.
Step-by-step licensing for import of food
China has a multi-layered food regulatory system to ensure the quality and safety of imported food items. The regulation also varies for different types of goods, and while there are common laws, it is important to know what legislation affects your products. Here is the procedure for obtaining licensing for import, and how the changes to China’s food safety law can affect importers.
Step 1 – Complete exporters and importers registration
As an overseas manufacturer and exporter of food, you must register with the State Certification and Accreditation Administration (CAA) if the food product being exported is on the ‘List of Food Imports Subject to Enterprise Registration’. Some of the food products that have heightened safety requirements such as meat and health products require additional registration.
Moreover, as of October 2015, it is mandatory for exporters to register each shipment of food products online with the Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) department for tracking purposes.
Step2 – Complete documentation and pre-import licensing
Before the shipment of products, you are required to submit a series of documents, which are reviewed only after the shipment reaches China. Therefore, you must ensure that all your documents are complete and authentic to avoid any delay and storage cost.
Although the documentation requirements vary between products and product categories, you may prepare the following documents to import food products into China:
-A detailed packaging list;
-Bill of loading;
-Certificate of export from country of origin;
-Hygiene / Health certificate;
-Certificate of bottling date (for drinks);
-Certificate of free sale;
-Sample of original label;
-Sample of Chinese label; and
In general, food products entering China do not require pre-import licensing. However, if you are importing poultry or dairy products, you need to obtain the Automatic Import License issued by the Ministry of Commerce. Food items subject to import tariff quotas such as wheat, corn, rice, and sugar are required to obtain the Agricultural Products Import Tariff Quotas Certificate.
Step 3 – Ensure label compliance
Every food product imported in China must be labeled in simplified Chinese characters to complete the Customs clearance. In general, a label must provide following information:
-Standard name of foodstuff;
-List of ingredients as percentage;
-Name and address of manufactures, local agent, or distributor;
-Production date, best before, end date, and guidance for storage;
-Country of origin;
-Code of national standard/industry standard for production; and
-Special contents, if any.
Step 4 – CIQ food sanitary inspection and customs clearance
Once the shipment arrives in China, the food products are inspected by Customs officials for review of relevant shipping documentation and labeling requirements. The CIQ sanitary certificate is issued only if the documents are complete. The certificate is issued for every product shipment.
Licensing for import alcohol
For the import of alcohol into China, exporters must work in collaboration with a local import entity that is in possession of a valid business license, and personal and company customs and CIQ certificates. Once conditions are agreed upon, a contract can be signed with Chinese import agent and registered with General Administration of Quality Supervision (AQSIQ).
Then, the beverage for import must be labeled according to China’s food labeling standards. At customs, a country of origin certificate, health certificate, product ingredients list, product sales approval registration document, packing list, invoice, contract, and bills of lading will be required. Once customs receives the documents, customs will release the goods to the agent. Customs will then levy customs duties and other taxes, and will release a customs clearance document. At this point, the importer can collect the goods and proceed to deliver to the distributor.
Market strategies for foreign F&B companies
To know how to market and brand your products effectively in China, you need to take into account regional market differences and the ever-evolving dynamics surrounding consumer attitudes and behaviors.
Three takeaways for your China launch
-Your China market strategy will deviate from your home country strategy, and will vary depending on the type of product, location, and choice of distribution channels.
-You need to create a meaningful product, pack and activation strategies that engage and resonate with local consumers.
-After activation, don’t rest on your laurels, be agile on strategy, and plan for reinvestment of resources in order to maintain strong market position.
Source: China Briefing