June 28, 2007

 

US$100 billion needed to fix China's food safety problems

 

 

Fixing China's multitudes of food safety problems would require a $100 billion investment, according to research from  A.T. Kearney research.

 

Besides food-safety standards, improvements would have to be made to warehousing, transportation, and training, according to the global management consulting firm, which presented its estimates at the CIES World Food Business Summit in Shanghai last week.

 

The analysis forecasts China's growing middle class would spend more than US$650 billion on food by 2017,

 

With a 17-percent growth rate on food expenses from China's middle class, food expenses of the group could total US$650 billion in the next ten years, from US$150 billion now.

 

No company would be able to build a big enough network to cater to the vast expanse of consumers. However, it can be done with a cooperative effort among all the major manufacturers, retailers, restaurants and distributors, said Jim Morehouse, senior partner at A.T. Kearney and leader of the study.

 

Morehouse listed the problems China faces today: a lack of consistent standards for food quality and safety, inadequate inspection, ineffective enforcement and the lack of a cold distribution chain.

 

Moreover, four out of five retailers fail to monitor temperature of products during shipping, and two-thirds do not check temperature upon receiving, he noted.

 

Morehouse said common standards, enforcement and private sector investments would be essential to build a national supply chain.

 

Chinese consumers are increasingly aware of food-safety issues and more are willing to put a premium on food safety. The development also meant more are willing to buy from retailers rather than wet markets, he noted.

 

By 2017, China would need 365,000 refrigerated trucks and five-billion cubic feet of cold storage. This meant a 12-fold increase in the numbers of refrigerated trucks and a 20-fold increase on the part of cold storage, he pointed out. 

 

While safer food practices comes with the hefty US$100 billion price tag, the benefits from reduced distribution costs, reduced waste and premium pricing for food safety should equal US$160 billion by 2017.

 

A.T Kearney serves the largest global clients in all major industries, with offices in major business centers in 33 countries.