Beef to build bridges to China

by Erica Shaffer
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Chinese investors will heavily influence the global beef trade, Rabobank says.
Chinese investors will heavily influence the global beef trade, Rabobank says.

UTRECHT, Netherlands – Growing demand for beef in China represents an opportunity for Chinese and foreign companies to claim territory in the country’s further-processing sector, Rabobank said in its latest report “Moving Globally; What role will China play in the global beef market?”

“Beef companies face the challenge of where to source consistent beef supply, but they also need to develop, and even create, new markets by delivering new products and addressing the needs for convenience, tailor-made value-added products,” Pan Chenjun, senior analyst from Rabobank said.

Demand for beef in China is expected to grow an additional 2.2 million tonnes to total 10.2 million tonnes by 2025. Investors in China will heavily influence the global meat trade as domestic production of beef lags behind consumer demand, Rabobank noted. Additionally, the beef sector could become the first agricultural sector where China attains high integration with the rest of the world.

“The new dynamics in the consumer market will offer global beef companies — typically suppliers of bulk beef to China —opportunities to focus on value creation and branding,” Rabobank said in its report. “In the meantime, Chinese beef companies will move globally to seek consistent supply and learn from their western counterparts. This trend will enable China’s beef players and global companies to actively work together and consolidate global resources and markets.”

Consumers in China buy beef products through retail and foodservice channels; there also are institutional buyers. But beef consumption in China is mostly driven by foodservice as Chinese consumers increase their meals consumed away from home, Rabobank said.

An emerging channel for beef sales in through e-commerce sites, and Rabobank advises suppliers to not take their eyes off this potential avenue for sales. Food safety concerns and high marketing costs mean online sales opportunities for perishable goods.

“Items including beef, sheepmeat, imported seafood and imported fruits … have been chosen to be the focus for online perishable food sales,” according to the report. “Online shops currently offer much more variety of beef products than supermarkets and hypermarkets.”

Further, online purchases of beef allow consumers to cook at home. Products are well packaged and branded; pricing is competitive. Although online shopping for meat remains a niche market, there is potentially a big market to penetrate in next decade, Rabobank said.

Rabobank estimates that imports of beef will fill 20 percent of China’s production, while domestic production will cover the remaining 80 percent. Therefore, outbound investments by China will increase in the next 10 years.

“Chinese beef companies aim to participate in the whole supply chain — from farming to processing — in order to not only secure resources such as grassland, but also to take a strategic step to integrate the whole value chain,” Rabobank reported. “During the process, both big companies and medium-sized companies will be actively participating in cross-border investments.”

Ultimately, robust demand for beef in China provides investment opportunities for foreign companies. Rabobank advised against participating in the farm-to-slaughter sectors which may contain hidden risks for foreign investors. The best opportunities exist in the processing-to-retail sector which will reap the benefits of strong consumer demand and emerging sales channels.

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