6 Sept 2016
Accessing the Mainland the Priority for Market-Hungry Food Companies
While the vast size of the mainland market remains the Holy Grail for food producers across the globe, despairing of the strict import regime, many companies are now taking a more imaginative approach to distributing their wares abroad.
The vast potential of China's consumer market was very much front of mind for exhibitors at this year's HKTDC Food Expo, with a large number of suppliers from across the globe eyeing the country as the key market for their future expansion. Finding success in exporting food products to the mainland, however, remains a challenge for many, with strict regulations forming a tough barrier to entry.
Held concurrently with the HKTDC Hong Kong International Tea Fair, the International Conference & Exhibition of the Modernization of Chinese Medicine and Health Products (ICMCM) and the HKDTC Home Delights Expo, this year the Food Expo welcomed close to 21,000 buyers and 1,400 exhibitors from 26 countries and regions.
A number of group pavilions in the fifth floor trade halls made a return from the 2015 edition, including delegations from the Chinese mainland, Indonesia, Iran, Hong Kong, Japan, the Philippines, Poland, South Korea, Ukraine and the US. There was also a number of new group pavilions, most notably Latin America and a dedicated Chinese Medicine Zone.
Trade regulations were a common topic at the event, with some exhibitors set to gain from changing circumstances, while others have now been forced to look elsewhere to find markets for certain specialised foodstuffs. According to Przemyslaw Grabek, a Director of Go For Nature Limited, a Polish organic food specialist, his country's food exports now stand to gain from a number of economic measures being implemented by China.
He said: "In Japan, many Polish products are being accepted, but the Chinese market has the biggest potential. China is looking to build a new Silk Road and a high-speed railway link, with the main logistical hub set to be located in Poland."
Certain South Korean foodstuffs are also expected to benefit from recent policy changes in China. Sophie Lee is the Marketing Manager for EC21, a distributor working with Korean producers looking to export. According to Lee, the high bacteria content of kimchi, Korea's traditional fermented cabbage dish, has meant that the product has fallen foul of China's hygiene standards over recent years.
In December last year, however, the Chinese government began permitting the import of the product following a loosening of restrictions on Korean foods. Meanwhile, the import of another popular Korean dish – samgyetang, a chicken and ginseng soup – was agreed as part of a trade deal between the two countries earlier this year.
For other food suppliers at the expo, alternative markets are now actively being sought. Zen-Noh, a federation of agricultural cooperatives in Japan, for instance, was showcasing its high-grade wagyu beef at the trade fair, along with a number of its other products.
Highlighting the particular challenges his business has been facing, Tomohiro Nozue, General Manager of the company's export promotion division, said: "We have encountered a lot of difficulties with regard to quarantine when it comes to exporting wagyu beef. As a result, we can only cater to certain markets, such as Singapore and the US. Thankfully, those particular markets are performing well. China would be a great market, but we are not permitted to export there.
"We hope the regulations will be loosened in the future, but we don't think that will happen any time soon. I have, however, heard of people illegally exporting wagyu beef from Hong Kong to China in order to meet the substantial level of existing demand.
"In the meantime, we are looking to Europe, though the distance involved does mean that transportation costs are quite high, particularly for wagyu beef as it needs to be frozen throughout the journey."
Fresh developments in the food transportation sector were also highlighted at this year's event. Having only recently established their partnership, France's Chronopost Food and Japan's Yamato Transport Co were at the expo promoting their streamlined approach to food supply chains.
Explaining how this alliance came about, Paul Wagner, Chronopost's Development Director, said: "A couple of years ago we went to Japan and saw that there was practically one million shipments of food a day going out via trucks. These were going from business to business, business to consumer and consumer to consumer, something that is very rare to see elsewhere. We saw that they were doing it and felt we could do it too.
"We're going to be going direct from the producer to the consumer, taking advantage of the whole e-commerce situation. The world is getting used to directly ordering products online. We will be doing it for food and we're setting up supply chains across the world to do that piece by piece."
While China represented the key expansion territory for many exhibitors, suppliers from the mainland were also well represented. In line with this year's introduction of a Chinese Medicine Zone, a number of health foods – notably cordyceps and ginseng – were on display at the Jilin province pavilion. Meanwhile, over at the Hubei province pavilion, Hubei Yongxing Food had on offer its range of shiitake mushrooms.
Despite this selection, for some buyers the range of mainland produce on show seemed more limited than in previous years. For John Shen, a Shenzhen-based distributor specialising in the fresh seafood and vegetables sectors, this year marked his third visit to the Food Expo. Looking back on his previous experiences, he said: "I think this year there are more options from international exhibitors, but I would like to see more and better suppliers from the mainland."
Along with food products, a number of beverages – notably Malaysian coconut water and Japanese sake – were also on show. Coffee was particularly well represented, with Café Dávi showcasing whole coffee beans from Colombia and Indonesia's Fortunium presenting both high-quality kopi luwak beans and instant coffee. Even this sector, however, was not without its difficulties.
Johannes H. Gunawan, President Director of Jakarta-based Fortunium, said: "The main challenge we are facing is the harvest this year, something that has decreased globally, even while the demand for coffee is still growing. As such, there is a shortage and not all buyers understand why there has to be price increases.
"The industry, though, is only going to continue to grow. In particular the demand for green beans is likely to surpass demand for instant coffee in the very near future. Demand for instant coffee is strong in Asia, Africa and the Middle East. In the more advanced markets, however, instant coffee is in decline and is no longer such a good market."
Making a return after its 2015 debut was the expo's Halal Zone, a dedicated area that housed the Indonesia and Iran pavilions, as well as the Brunei stand. Meysam Yarmohammadi, a Director of YAR Diamond Nuts, a Tehran-based supplier of dried fruits and nuts, noted that although interest in Iranian pistachios and Estahban figs has been growing, the past year has seen a dip in the market. This, he said, was partly due to the on-going trade sanctions that Iran faces, with the problem being aggravated by cultivation problems.
Expanding on the problem, he said: "There isn't enough water for the farms, so they have to source the water from the ground. Growers are digging deeper into the ground, sometimes down to 700 metres. This water is salty and damages the trees, so they produce less fruit.
"Producers have decided to bring bottled water by truck to water the plants. This, however, costs a lot of money and has increased the price of the products."
While many of the business dealings at the Food Expo were taking place on the fifth floor trade halls, it was in the public halls on the first and third floors and the Gourmet Zone where the action was most intense. Over the five-day course of the event, some 490,000 members of the public visited the expo, turning the public halls into bustling marketplaces.
Instant noodles, in particular, proved a highly popular choice, with long queues and crowds at the stalls for green curry noodles and South Korea's Nongshim kimchi-flavoured noodles. Meanwhile a number of higher-end Spanish products, such as serrano ham and sangria, also attracted a considerable number of interested shoppers.
Several of the countries with group pavilions in the trade halls also had pavilions in the public halls, including China, Hong Kong, Japan, South Korea and the Philippines. Only the Canadian Food Exporters Association had a presence solely in the public halls.
Ivy Leung, Managing Director of Renu Canada, an Ontario-based wine exporter, this year debuting its ice wines at the Expo, said: "This is a great way for us to expose our products to the public and get a direct sense of what they think. We want to find distributors, but understanding what our consumers think is also very important to us."
The HKTDC Food Expo 2016 took place at the Hong Kong Convention and Exhibition Centre from 11-15 August.
Craig Bright, Special Correspondent, Hong Kong