November 10, 2006

 

USDA advises exporters to do due diligence before entering Chinese market

 

 

Although the US still remains the top exporter of agricultural goods to China,  US exporters would still need to exercise due diligence if they hope to grab a slice of the China market, according to the China Exporter Guide 2006 released by the USDA  last week.

 

According to China Customs data, China imported US$35 billion worth of agriculture, fisheries and forest product imports in 2005. Imports of consumer-oriented agricultural products (not including fisheries, bulk or intermediate products )accounted for over US$3 billion of this total, the report said.

 

The report notes that food safety has become a major issue, especially in the major urban centers. Although these are nothing new in China, they have recently become favorite topics for the Chinese media, and even minor incidents in far-flung areas are now often reported nationwide, the report said.

 

This, along with SARS, swine disease and avian influenza scares, has created a widespread perception that many food products are unsafe. This feeling appears to be strongest at higher income levels, where consumers rely more heavily on processed or pre-packaged foods, the report said.

 

As a result, consumers in these income brackets are placing a premium on famous brands or buying in venues with a solid reputation, the report said.

 

According to the USDA report, higher-income consumers tend to be very health and nutrition conscious, from both a traditional Chinese and a more science-based perspective.

 

The report noted that the greatest successes for high-end US food products have been those aimed at hotels and restaurants (seafood and pork), and high-end products given as gifts (fresh fruit, wine and liquor). 

 

Acceptance of imported products as guarantee of safety and high quality is common, and US products have benefited.

 

The report noted that since refrigerated trucks are still scarce in China, it is difficult for the modern supermarkets to match the fresh produce and low prices of typical wet markets where most Chinese traditionally shop. The lack of such trucks also meant that each region to develop its own dairy, brewing and meat industries, making bulk purchasing harder.

 

Nonetheless, consumers are willing to experiment with new tastes, and it is difficult to predict what products will succeed without conducting actual research.

 

The report helpfully lists the distinctive tastes of each region.

 

Key regional distinctions include North and Northeast China (Beijing and north), where dishes tend to be salty; East China (centered on Shanghai) where the taste is sweet and spicy dishes are unpopular; Central China (Sichuan and Hunan), which are famous for hot and spicy food; and South China, famous for delicate tastes, seafood and an appetite for the exotic.

 

The report also lists overall preferences shared by most Chinese consumers:-

 

Chinese prefer fresh meats, soups and produce to canned or processed ones. Many buy fish or fowl live to be butchered on the spot.

 

They also prefer small-sized packages to 'economy' sizes, despite the higher unit cost.

 

The attractiveness of the package is important. Size, colors and design are all taken into consideration.

 

Chinese buyers are attracted to established brand names, which are seen as a guarantee of authenticity and superior quality.

 

The report advises that before jumping into the Chinese market, US exporters should invest in targeted market research and taste testing, adding that it is absolutely critical to identify a specific target group of consumers, and confirm the product's appeal to that group.

 

Failure to take the preferences of Chinese consumers into account is a common reason for the failure of new products, the report noted.

 

The report also cited examples of US products successfully breaking into the Chinese market.

 

For example, despite a widespread myth that Chinese people do not like cheese, pizza has proven immensely popular. One promotion in the inland city of Wuhan found Mexican foods to be a success, while another in Chengdu scored with boneless pork butt.

 

At the same time, enforcement of regulations governing standards and labeling for food products is becoming more rigorous.

 

To help US exporters understand these regulations, FAS has prepared a series of unofficial translations called the China Food and Agricultural Import Regulations and Standards Report (or China FAIRS Report).

 

The translations available are listed in the FAIRS Report Working Index, which is posted on the USDA's FAS website.

 

The report noted that although China strengthened its legal framework, Intellectual Property Rights (IPR) infringements of US agriculture and food products remain a serious problem.

 

"Stickering"and labeling domestic and third-country product with US identifications still occur. Other cases involve false branding and packaging of domestic and third-country products with US identification. There is also counterfeiting or mixing of domestic or third-country product together with US food including poultry, beef and pork.

 

The report exhorts the US industry to play an active role to protect food product IPR's.

 

IPR protection should begin prior to when companies or trade associations begin exploring the China market for their food or beverage goods, the report said.

 

The report also stressed the importance of registering and protecting trademarks in both English and Chinese languages, including obtaining collective marks for US collective organizations and USDA Cooperators or certification marks.

 

Furthermore, even if the US exporters do not deal in China, IPR protection could be helpful to prevent infringed-upon goods produced in China being exported to other markets, the report noted.

 

For the full USDA report, please click here