Food and beverage to China

(Last updated: 07 Oct 2008)

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 tastes develops, Australian food and beverage companies have a great opportunity to enter the China market. In 2006-07, Australian food exports to China were valued at $664 million (Source: Food Australia Report - Australian Food Statistics 2007).  

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 big hubs like 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 more discerning and are demanding:

• Higher quality
• Modern packaging
• Freshness
• Better nutrition
• Confidence in food safety and ingredients integrity
• Convenience
• More variety

Opportunities

Foreign-invested supermarket retailers such as Wal-mart, Trust-Mart, Makro, Jusco, Carrefour, Tesco, Lotus, Metro, Park’N Shop, 7-Eleven, Watson’s and major domestic chain store outlets such as Hualian, Lianhua, and Vanguard have expanded in China with speed. These supermarkets have become more diversified and sophisticated, and offer local consumers an increased range of imported foods and beverages.

The proliferation and growth in the number of food retail outlets and chains presents opportunity for Australian exporters of food to China. All of the foreign-funded supermarkets plan to increase their investment in China.

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, UHT milk, cheese, butter and margarine
• Seafood (eg. oysters, live lobster, live abalone, live king crab)
• Fresh fruit (eg. citrus)
• Wheat, barley and rice
• Frozen red meats (eg. beef, veal, lamb)
• Processed foods
• Wine
• Beer
• Natural fruit juice
• Convenience and ‘instant’ foods
• Confectionery and snack products

Australian wine exports to China have risen significantly. In 2007 China surpassed Japan becoming the largest export market in Asia for the Australian wine industry. Australia also ranked second largest overall supplier of bottled wine to China. Data released by the Australian Wine and Brandy Corporation (AWBC) highlights the importance of China as a key emerging market for Australian exporters. Over the calendar year ending December 2007, Australia exported over 17.9 million litres of wine to China, with a total export value exceeding A$55.7 million.  

The AWBC and Austrade work closely together in promoting a unified Australian wine industry marketing and educational message to the Chinese market. In August 2008, the AWBC and Austrade China announced a new, 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.

Both organisations support in-market initiatives including a China Australia Wine Importers Network (CAWIN) for importers and distributors of Australian wine in China. All Australian wines destined for export to China must have export approval from the AWBC. More information about Australian wine export licensing as well as Chinese imported wine regulations and requirements is available via the AWBC China market guide. For further information please refer to the AWBC website: www.wineaustralia.com

Given the continued opening up of the China market, and with a bilateral Free Trade Agreement between Australia and China under discussion, there is potential for further growth in Australian food and beverage exports to China.

Currently, however, a range of Australian food and beverage products are still not permitted for export into China, as protocols are yet to be negotiated and agreed between the Chinese and Australian governments. Exporters are encouraged to confirm their product eligibility to enter the Chinese market prior to 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.

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. The most recent China Entry-Exist Food and Beverage Quarantine and Inspection Industrial Standard took effect on December 1, 2007.  The new Standard adopted the internationally common use, 3MTM PetrfilmTM as one of its standards. 

All imported pre-packaged food must be labelled in both English and Chinese (simplified Chinese as used in mainland China) with the general standard for the labelling of pre-packaged food (GB7718-2004), the following is the example of minimum information to be listed:

• Standard name of foodstuffs
• List of ingredients
• Exact volume of each ingredient
• Net weight and volume
• Name and address of manufacture and local agent or distributor
• Production date, use by date and guidance for storing
• Quality grade
• Code of national standard, or industrial standard, or enterprise standard for the product
• Special contents if there are any (eg. irradiated food)

All imported pre-packaged beverage and wine must be labelled in both English and Chinese (simplified Chinese as used in mainland China) with the General standard for the labelling of pre-packaged beverage and wine (GB10344-2005), the following is an example of minimum information to be listed. Other information maybe required depending on the specific product and it is advised that exporters check with specialist logistical companies or relevant departments prior to exporting products to China:

• Wine name
• List of ingredients
• Alcoholic strength
• Original wheat juice and fruit juice volume
• Name and address of manufacture and local agent or distributor
• Production date, use by date and guidance for storing
• Net weight and volume
• Code of national standard, or industrial standard, or enterprise standard for the product
• Quality grade
• Production license

Note: Wine and alcoholic beverages over 10 per cent alcohol volume are not required to list the date of minimum durability (use by date/expiry date) on the label.

All imported pre-packaged foods for special dietary uses must be labelled in both English and Chinese (simplified Chinese as used in mainland China) with the general standard for the labelling of pre-packaged foods for special dietary Uues (GB13432-2004), the following is the example of minimum information to be listed:

• Food name
• List of ingredients and exact volume of each ingredient
• Nutrient
• Net of weight and volume
• Name and address of manufacture and local agent or distributor
• Production date, use by date and guidance for storing
• Edible method, recommended nutrient intake, and targeted people
• Code of national standard, or industrial standard, or enterprise standard for the product
• Quality grade

Please note that CIQ requirements often change and it is encouraged that exporters re-confirm requirements for labelling and other product certifications prior to dispatch of goods for export.

View the new legislation update (labelling announcement 44)

Labelling Announcement 44 affects all exporters of food, beverages and cosmetic products to China. Please note that an additional, separate announcement on labelling was recently made by the Shanghai CIQ – Announcement 4 – will only apply to goods arriving at Shanghai ports. 

Australian companies wishing to read an English translation of Announcement 4, and/or original Chinese language documents for both announcements can contact the Austrade Shanghai office to request email copies or alternatively contact their local AQIS in Australia for further 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. Many sites in China provide a platform for business information exchange, however physical transactions are primarily undertaken offline due to China’s undeveloped online payment system, and difficulties establishing the business credentials of some companies in China. 

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. Two sites that are worth looking at are:

• www.Alibaba.com – a popular e-commerce site for supply and trade leads
• www.8848.net – specialises in the development e-marketplaces, e-solutions and e-distribution

Distribution channels

Distribution channels into China are complex and changing constantly. Exports into China can be handled through a number of intermediaries including Hong Kong traders, private trading houses in China, state-owned trading houses, or a joint venture arrangement. 

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 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 Ministry of Commerce – http://english.mofcom.gov.cn
No.2 Dong Chang’an Avenue, Beijing
Tel: +86 10 6528 4671
Fax: +86 10 6559 9340

China Ministry of Agriculture – www.agri.gov.cn
No.11 South Lane
Agriculture Exhibition Center, Beijing
Tel: +86 10 6419 3366
Fax: +86 10 6419 2468

China Customs – www.customs.gov.cn
No.6 Jianguomen Neidajie
Dongcheng district, Beijing
Tel: +86 10 6519 4114 

Media

Beverage – www.beveragechina.org.cn
China Dairy Information – www.chinadairy.net
Fruit wholesale market – www.fruit.gov.cn
Wine – www.winechina.com/EN

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

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