Food and beverage to China
(Last updated: 16 Oct 2012)
Trends and opportunities
The market
With a population of over 1.3 billion, China is currently Asia’s second largest food and beverage market by value after Japan. As China’s economy grows and appetite for sophisticated consumer products develops, there are many opportunities for Australian food and beverage companies enter the China market. Processed Food exports from Australia to China have doubled in value in the past five years from $794 million to $1.511 billion.
The increased interest and demand for Australian food and beverages is being driven by China’s strong economic growth and its rising per capita income. Emerging second tier markets and wealthy coastal cities, not just the hubs of Beijing, Shanghai and Guangzhou are providing opportunities for Australian companies to access a greater share of the Chinese market.
Food consumption patterns in China have changed significantly as living standards have risen. Chinese consumers are becoming increasingly discerning and more and more are seek the following when making purchases:
- Higher quality
- Modern packaging
- Freshness
- Better nutrition
- Confidence in food safety and ingredients integrity
- Convenience
- More variety
Opportunities
Australia is recognised by local consumers as having a clean and green environment with good quality products and brands. Many Australian exporters have already taken advantage of this competitive edge by establishing a position as a supplier of products such as meat, dairy products, fresh fruits and seafood.
Market feedback has shown interest in Australian suppliers of:
- Milk powder(infant formula), UHT milk, cheese, butter and margarine
- Seafood (eg. oysters, live/frozen lobster, live/frozen abalone, crabs)
- Fresh fruit (eg. Citrus, table grape)
- Wheat, barley and rice
- Chilled or Frozen Meat (limited to red meat as there is no protocol in place for white meat and game meat)
- Processed foods
- Wine
- Beer
- Natural fruit juice
- Convenience and ‘instant’ foods
- Confectionery and snack products
Market access for Australian agribusiness products to the Mainland Chinese market remains a significant issue. Australia and China are negotiating a Free Trade Agreement at present, but there has been limited progress in the agricultural sector. In general, it is easier for processed foods and wine to access the China market.
For fresh produce, quarantine and protocol requirements act as hurdles to the market. However, Hong Kong has been the point of entry for fresh Australian produce into the China market via the so-called “grey” channel. Australia has legal market access for citrus, mango and table grapes and is currently seeking market access for summer fruit, cherries and apples.
Exporters are encouraged to confirm the eligibility of their product to enter the Chinese market before engaging in commercial activities with Chinese customers or directly investing in a Chinese business opportunity. Exporters can make initial enquiries to their local Australian Quarantine and Inspection Service (AQIS) office or Austrade.
Australian Wine Exports to China
Australian wine exports to China have risen significantly and China has surpassed Japan, becoming the largest export market in Asia for the Australian wine industry since 2007. Australia is also ranked second largest overall supplier of bottled wine to China. According to statistics released by Wine Australia, by December 2011, bottled wine exports to China increased by 26% to more than 30 million litres. China has grown into Australia’s major fine wine market and is now Australia’s third largest export market by value after the US and the UK.
Wine Australia and Austrade work closely to promote unified Australian wine industry marketing and educational messages to the Chinese market. In August 2008, Wine Australia and Austrade China announced a cooperative partnership for the China market. The partnership will work towards the effective development and coordinated delivery of the Wine Australia China Market Program and Austrade China’s business development and export promotion initiatives to the benefit of the Australian wine industry.
From July 1, 2012, Wine Australia will change from “program for membership” to the “user pays” model. Companies wishing to participate in Wine Australia’s Market Programs will select the activities and markets they wish to be involved in, rather than paying a set upfront membership fee which covers all programs. Activities that are beyond the scope of the Wine Australia core offering will be part of the new ‘user pays’, rather than one size fits all approach. More information can be found in the Wine Australia May Prospectus which describes the changes in detail.
Tariffs, regulations and customs
Following entry into the World Trade Organization, China has reduced its overall average tariff for agricultural products from 21.2 per cent to 15.3 per cent. However, China still has pockets of high tariff protection - as high as 65 per cent on some key products of interest to Australia.
Australia-China Free Trade Agreement negotiations are progressing on tariffs and other China market access issues. These include tariff rate quotas, standards and technical regulations. Latest information on Australia-China Free Trade Agreement negotiations can be viewed at Trade policy - Australian Department of Foreign Affairs and Trade.
Industry standards
All import foodstuffs and beverages are subject to inspections by the China Entry-Exit Inspection and Quarantine Bureau (CIQ). Quarantine and Inspection in China can be complicated and challenging, so be prepared and do not underestimate the cost, documentation and time required. Accessing up-to-date information on quarantine and customs requirements such as labelling and packaging requirements, food standards and allowable ingredient listings can be challenging.
All imported pre-packaged food must be labelled in both English and Chinese (simplified Chinese as used in mainland China). The updated general standard for the labelling of pre-packaged food (GB7718-2011) is applied to the labelling of all pre-packaged foods directly or indirectly offered to consumers. The following is the example of minimum information to be listed:
- Standard name of foodstuffs
- List of ingredients
- Quantitative labelling of ingredients (percentage of ingredient)
- Net weight and configuration
- Name, address and contact info of manufacturer and local agent or distributor
- Production date, use by date and guidance for storing
- Generic name of the food additives as used in the national standard
- Quality grade
- Food production license number
- Code of the product standard
- Special contents if there are any (eg. irradiated food, genetically modified, nutrition list for baby food or diet food)
For details about wine export from Australia to China, please check the Wine Australia website regarding compliance guidance.
Please note that CIQ requirements often change and it is encouraged that exporters re-confirm requirements for labelling and other product certifications with its importers in China or relevant departments prior to dispatch of goods for export.
China Food safety law
China's current food safety law was adopted on 28 February 2009 and was made effective from 1 June 2009. The law has been enacted to improve food safety in China through stricter monitoring and supervision, tougher safety standards, recall of substandard products and severe punishment of offenders. The new laws are applicable to both imported and domestically produced food and cover production and trading of food and food additives; packing materials, vessels, detergents and disinfectants for food and equipment used in food production; food additives and food-related products used by food producers and traders; and safety management of food, food additives and food related products.
Under the Food Safety Law, all imported food products, food additives and food-related products are subject to the national food safety standards of China. No pre-packaged foods may be imported into China without appropriate Chinese labels.
All foreign food distributors and producers that import food products into China are required to register with the state entry-exit inspection and quarantine authorities. Importers must record the foods imported and distributed in China, and must keep the records for at least two years.
For those ingredients or components not registered in China, it is required that applications to CIQ and the ingredients are registered as new-to-China components. Any food or food ingredient/component that has had an import history prior to the new Food Safety Law will be allowed entry even if there is no Chinese standard.
Update on Organic Food to China
Chinese certification systems and foreign organic certification systems have not been mutually recognized. Organic products that have not been certified by China, or products that have only been certified by an overseas organic certifying body, must not be labelled as “organic” or “in-conversion to organic” or other misleading labelling terms purporting to be organic.
In order to ensure the quality of imported organic products and to reinforce the regulation on organic produce, Chinese authorities have advised they will verify consignments in accordance with the Regulation on Certification and Accreditation and the Administrative Measures on Organic Product Certification.
Chinese Import Procedures
- In the event that imported products are declared as organic, or imported products are found at inspection to be labeled as “organic” on their packages, labels, instructions, or promotion materials; import verification shall apply which includes:
- verification of the certificate and logo;
- consistency evaluation between the product and its label;
- determination of whether the product logo used is within the product scope;
- for single and multiple entries, verification of the quantity identified on the certificate; and
- determination of compliance of any dual logo requirements.
- A Chinese organic certificate can be verified using China’s Food and Agriculture Products Certification Information System.
- Effective from October 2011, Chinese port officials will adopt a “case-by-case” reporting system based on the entry of organic products. In other words, each batch of imported organic products shall be reported to the Certification Supervision department within three days after they’ve had an inspection and quarantine. Information being reported to this department includes inspection number, product name and quantity (weight), trading value, organic certificate number, and the result of the inspection and quarantine. If imported organic products have not received a Chinese organic certificate, but display “organic” on product packages, labels, instructions, or promotion materials; it shall be reported as a “major issue”.
- Organic products that have not been issued a Chinese organic certificate can be imported as conventional products after they have been modified and comply with the relevant regulations and standards of China. If modification is not possible, these products shall be destroyed or re-exported.
Update on Decree 55- New requirement for online registration of exporters from 1 October 2012
A new decree (Decree 55) has been issued by China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), as part of China’s Food Safety Law. Decree 55 comes into force on 1 October 2012.
Decree 55 requires Australian exporters and agents, as well as Chinese importers, to complete a web-based registration process. Decree 55 covers a wide range of products under the jurisdiction of the AQSIQ Food Safety Bureau, and includes prescribed food commodities such as meat and meat products, aquatic products, egg and egg products, dairy products, bee products, and other non-prescribed foods such as biscuits and beverages.
The registration form can be completed via the following portal: http://ire.eciq.cn/. When accessing this portal, at the base of the page, there are detailed instruction manuals for exporter and agents, as well as importers, under the section “User Manual”. Whilst the manuals contain detailed step-by-step instructions as to how to complete the registration process, it is currently only available in the Chinese language, therefore exporters are encouraged to work closely with their importers to provide the required information.
Marketing your products and services
Market entry
There are a number of market entry strategies worth considering:
- Look for small or medium-sized private trading houses with subsidiaries or contacts in Hong Kong who can arrange payment in foreign currency and with a wide distribution network in your target local market. There are plenty of Chinese traders that have difficulties opening Lines of Credit (LC) and have a poor understanding of international trading practice.
- Don’t exclude all the large buyers, particularly those private trading houses who have been importing foods via Hong Kong traders. Some of them have started to buy directly from overseas suppliers and have gained basic experience in foreign trade. As a consequence it has become easier to do business with these companies directly.
- With the increase of business migrants from China to Australia, potential may exist for Australian suppliers to explore linkages in Australia with registered businesses in Australia which have linkages with China and are focused on Australia-China trade opportunities linked to their investment and migration to Australia.
- Ascertain that you are dealing with a reputable business partner but at the same time take full export insurance.
There are a number of actions that will help you succeed as a supplier:
- Get to know the market – Visit the market, establish a price range for your products, understand the sales and distribution channels, and know customers’ preferences.
- Proper due diligence – due to an increased incidence of scams in China, Australian companies are urged to investigate enquiries from China and consult with Austrade for assistance and referrals to professionals specialising in China due diligence checks and investigations.
- Find a local partner or agent – Choose slowly and carefully, look for a partner with a proven record, and ensure that the partner is able to handle import formalities.
- Test the market – Be aware that everything is different in China between each of the cities and provinces.
- Find your market segment and focus on it – Identify and develop a niche market. Try not to cater for the entire market by diversifying too early.
- Adapt your product to the local market – Adapt your product to local tastes, and make small adjustments to the product if necessary.
- Invest wisely in market promotion – Participate in industry specific trade shows, and make frequent visits to China.
With the rapid growth of Internet use and penetration in China, particularly in major urban centres, e-commerce is seen to offer considerable potential in China.
Although still niche, online trading is gradually expanding in China and there are a number of e-commerce sites and developers such as taobao and Yihaodian.
Please note that for online transactions of food and beverage products, all Chinese quarantine and customs requirements still apply. Online transactions are usually most popular among companies with products already entered into the Chinese market (ie. available in China) and are dispatched from a Chinese warehouse point to the buyer. www.Alibaba.com is a popular e-commerce site for supply and trade leads that is worth visiting:
Distribution channels
Distribution channels into China are complex and changing constantly. Exports into China can be handled through a number of intermediaries including import agent and distributors, wholesalers and sub-distributors, etc.
Only licensed importers can handle import procedures and have the right to import products. Most food distributors or traders do not hold import licenses and very few licensed importers act as distributors.
Different product categories require different import license and distribution channels. Currently, most food and beverage products are handled through Hong Kong traders. However, private trading houses in China have become increasingly more important for the importing of seafood, fruit and meat.
Links and industry contacts
Food–related resources
China Agriculture Science – www.caass.org.cn
Government, business and trade resources for China
China Customs – www.customs.gov.cn
China Quarantine and Inspection – www.aqsiq.gov.cn
China Ministry of Agriculture – www.agri.gov.cn
China Ministry of Commerce – http://english.mofcom.gov.cn/
Media
Beverage – www.beveragechina.org.cn
China Dairy Information – www.chinadairy.net
Wine – www.winechina.com/EN
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.