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Exporter Guide

FOOD AND BEVERAGE IN CHINA Market Profile January 2012

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CONTENTS 1 MARKET STRUCTURE 3

1.1 Market Overview 3

1.2 Market Drivers 4

1.3 Market Potential 7

1.4 Import Trends 9

1.5 Key Players in the Market 12

1.6 Regulatory 16

1.7 Sustainability 17

2 MARKET ENTRY AND DEVELOPMENT 19 2.1 Market Entry Strategies 19

2.2 Long Term Strategic Issues 21

2.4 Distribution Channels 21

2.5 Pricing 25

3 MARKET RESOURCES AND CONTACTS 27

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1 MARKET STRUCTURE 1.1 Market Overview

China is one of the largest consumers of food and beverage in the world, and is also one of the largest producers. Rising incomes are adding sophistication to the market, with urban residents in particular spending a larger proportion of their incomes buying processed, packaged and imported food and beverage from supermarkets, and eating out in restaurants.i

Food Retailii

According to Euromonitor, the grocery retail sectoriii in China was worth US$504.4 billion in 2011. Euromonitor forecasts this will grow to a value of US$707.2 billion by 2016, a compound annual growth rate (CAGR) of 7 percent for the period 2011-2016. Supermarkets currently dominate the retail landscape with a market share of around 44 percent. Although this dominance is likely to continue, Euromonitor estimates that online food and drink will also make a staggering jump from US$485.6 million in 2011 to US$3.1 billion in 2016.

Foodservice iv

According to Euromonitor, the Chinese foodservice sectorv was worth $366.9 billion in 2011, and expected to grow to $494.8 billion by 2015. This represents a CAGR of 7.76 percent for the period 2011-2015. Full-service restaurants dominate the foodservice landscape, with a market share of around 72 percent, followed by fast food restaurants at around 25 percent.

Processed foodvi

The total processed food market was valued at US$140.4 billion in 2011. Processed foods grew at a CAGR of 13.3 percent between 2007 and 2011 and are forecast to grow at a CAGR of 10.1 percent between 2012 and 2016. Dairy registered the highest retail sales in 2011, with total revenue of US$28.0 billion, followed by bakery (US$19.3 billion) and dried processed foods (US$15.2 billion).

Between 2006 and 2010, the fastest growing processed food exports from New Zealand to China by compound average growth rate (CAGR) were chocolate (267 percent), wine (68 percent), spirits and liqueurs (51 percent), other food preparations (49 percent), and dried fruit / nut products (34 percent).

Winevii

Chinese wineries produce both rice and grape wines, with many grape wines providing competition to imported wines. Despite recent strong growth of imported wine (particularly from France, Australia, and New Zealand) domestic wine continues to hold a strong position, holding 89 percent of the China still wine market share. The overall Chinese wine retail market reached 2.0 billion litres in 2011 and is forecast to grow at a CAGR of 10

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percent to 2016. The highest segments by value are estimated to be ‘rice wine’ (2.1 billion litres), followed by ‘still red wine’ (1.3 billion litres), ‘still white wine’ (385.2 million litres), ‘still rosé wine’ (55.6 million litres), and ‘sparkling wine’ (1.8 million litres).

Fish and seafoodviii

China is a global seafood superpower. It is the largest consumer, importer, exporter and producer of seafood in the world, representing approximately 35 percent of total global production. China is also the largest producer of aquaculture products in the world, and the only country where farmed fish production exceeds wild catch.

According to the Chinese Ministry of Agriculture (MOA), China's annual aquatic production is approximately 60 million tonnes, and per capita consumption of aquatic products is approximately12kg. Due to the large amount of seafood processed for re-export, some industry figures even point to a consumption as high as 26kg per capita.

The Chinese consumer has a voracious appetite for seafood of all kinds, including live, frozen and further processed products. Consumption is rising in line with increasing purchasing power and a strong preference for seafood among Chinese consumers. Live freshwater fish leads demand in inland city markets, while frozen and processed products are more common in northern regions. Live ocean catch is popular amongst the wealthy elite of China’s booming east coast, with this demographic consuming a high proportion of New Zealand lobsters.

Meatix

China is self-sufficient in meat. Not having traditionally a strong red meat culture, beef, goat and lamb sales together account for only around 10 percent of total meat sales. Pork in contrast, accounts for around two thirds of total meat consumption in China, with poultry making up the remainder.

However, consumer preferences are changing, with many shoppers ‘trading up’ to higher-priced red meat as their protein source. With this trend, the total red meat market is expected to reach RMB668.6 billion by 2013. Chinese consumers perceive red meat as having higher status than poultry and pork, with strong preferences toward grain-fed beef.

1.2 Market Drivers

Rising disposable incomes, urbanisation, improved brand exposure and retail distribution, and changing urban lifestyles are driving major changes in the pattern of Chinese consumer demand. Although levels of consumption of many products, particularly processed foods, remain well below those in developed countries, they are rising quickly and will continue to do so as China's economy grows.x

• Economy / increasing consumer affluence: China has produced an average GDP growth of around 10 percent over the past ten years.xi This rapid economic progress has created a new middle-income group with much higher levels of disposable income. According to McKinsey, there are currently 13 million upper middle-income households

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in China (with incomes between RMB100,000 and 200,000, the equivalent of US$15,000 to 30,000).xii McKinsey forecasts that 76 million Chinese households will be this income range by 2015.

• Urbanisation: Urban populations have increased by an estimated 153 million over the past ten years, almost eight times the population of Australia.xiii By 2025 it is expected that urban areas will swell to 822 million people from 607 million at present. China’s major cities of Beijing and Shanghai will continue to be leading consumer hubs, though McKinseyxiv expects that other smaller cities, such as Taiyuan, Changchun and Yantai, will grow at a faster pace.

Beyond Beijing and Shanghai, McKinsey predicts that by 2015, nine large markets will account for 30 percent of luxury consumption in China. These will be: Chongqing, Dongguan, Foshan, Guangzhou, Hangzhou, Nanjing, Shenzhen, Tianjin, and Wenzhou.

• Food safety concerns: Consumers of imported food in China are generally high and upper-middle income locals and expatriates. These consumers can afford to pay higher prices for food and they are motivated to do so because of increasing concerns about food safety and health. Imported western-style products have a good reputation for being good quality, nutritious and safe. xv

• Health consciousness: Health and wellness remain a very important driver, with many new product developments focusing explicitly on healthier ingredients and processing. Across almost all the packaged food sectors, health and wellness has been the key selling point for new launchesxvi. For example, dairy and baby food players are increasingly focused on the safety and nutritional features of their products such as organic, traditional Chinese medicine qualities and functional benefits. The average Chinese consumer has a very developed understanding of food ingredients, with knowledge not only of nutritional benefits, but also of the ‘wetness’ and ‘dryness’ of foods.

• Demand for convenience: As Chinese lifestyles become increasingly urbanised and fast paced (for high and upper-middle income consumers), packaged and convenience foods have become more popular. Chilled processed food and frozen processed food are predicted to show relatively rapid growth in the near future.

• Improvements in infrastructure: The entry of overseas logistics companies has improved logistics and distribution in China. In addition, Chinese central and local governments have made significant efforts to develop national infrastructure, and there is still a significant amount of investment in the development of the transportation infrastructure. This has made it easier for consumers, particularly in remote areas, to obtain quality products. However, the national infrastructure still requires significant improvement to match the standards in most western countries.xvii

• Development of the retail industry: China’s retail industry is developing rapidly, particularly for channels such as supermarkets / hypermarkets. This has created opportunities for processed food products, as consumers became more likely to opt to

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grocery shop once or twice a week in retail chains such as Carrefour and Wal-Mart. Each visit, grocery shoppers tend to buy a variety of packaged food products to store in refrigerators, such as fresh milk, confectionery, sweet and savoury snacks, or daily necessities for cooking, such as sauces and dressings, or oils and fat products.xviii Online shopping has been growing at a rate of 35-50 percent in recent years and is estimated to have reached NZ$140 billion in 2011.

• Increasing consumer acceptance of wine: Wines are gradually achieving consumer acceptance. The influence of western eating and drinking habits has been key to this development, as have rising average incomes in China. Wine is now becoming a fashionable drink for the wealthy younger generations of urban Chinese, and the favoured drink of China’s elite. Not only is there more foreign wines available in restaurants and stores, but the number, variety and quality of domestic wines is improving, providing local consumers with greater choice. xix

Red wine is consumed by Chinese consumers almost exclusively as a table wine accompanying a meal. Growth in white wine sales has been mainly due to the preferences of younger and female Chinese consumers, who are actively seeking the sophistication of western brands. While there is still status associated with drinking imported red wine, younger consumers tend to favour the lighter, more fruit driven flavours of sauvignon blanc and aromatic white wines. Consumption of Rosé wine remains niche, although volumes have more than doubled in recent years. Sparkling wine sales have also increased amongst wealthy Chinese, who make purchases to celebrate special occasions, especially weddings.

• Imported fresh seafood luxury: Imported seafood is highly esteemed by Chinese consumers. Live seafood, especially lobster and abalone, are symbols of luxury. Little branding of live seafood takes place in China, but there is an increasing awareness of country of origin and quality of product where countries have made the effort to cement a strong position, such as Norwegian Salmon. Other important associations have been quoted as:xx

o Canada: Dungeness crab, oysters, lobster, and surf clams

o Australia: Rock lobster, crab, oyster, and abalone

o New Zealand: Greenshell Mussels™

Chinese consumers traditionally prefer live and fresh seafood products, but this is changing. Increasing demand for frozen and processed seafood provides an opportunity for New Zealand seafood companies to launch value added products and processed seafood for direct consumption in China, rather than re-export to other markets after processing.

Preferences can generally be distinguished by geography, but dining habits and tastes may still differ within the same province depending on proximity to urban centres. In much of inland China, live seafood is scarce due to isolation and under-developed cold

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chain and distribution systems. Therefore non-perishable seafood is more popular in provinces such as Inner Mongolia, Shanxi, Henan, Xinjiang and Tibet.

In major urban centres, traditional consumption patterns appear to be changing to suit the increasing pace of life. More families are turning to ready-to-cook, processed products, including fish, shellfish, molluscs, shrimp and prawns, sold in supermarkets and hypermarkets.

• Beef and lamb struggle against other meat products: Beef and lamb are commonly available in China, but represent a smaller share of the meat protein market when compared to pork and chicken:xxi Reasons for this include:

o China has no tradition of differentiating between lamb and mutton or valuing high-quality lamb.

o In the Chinese language, lamb, mutton and goat meat are all referred to as “yang rou” and lamb and mutton are both referred to as “sheep meat”.

o China may be home to the largest flock of “sheep” in the world, though more than half of these are in fact goats and most sheep are bred for wool, with little available for the dining room table, especially lamb.

o The domestic price for beef and lamb remains almost double that of pork and chicken.

Despite the relatively high volumes of product in the market, consumers are unfamiliar with beef and lamb as a main menu item. Instead, most of today’s low-value domestic and imported beef and lamb find their way into complex dishes, which often hide rather than highlight them as a standalone cuisine (apart from lower cuts which are used in ‘hot-pot’ restaurants). Currently there is little high value beef product from New Zealand in the Hotel-Restaurant-Institutional (HRI) sector, with some in the sector quoting variable quality as an impediments to purchasing from New Zealand. Australian grain fed beef dominates the premium end of the market and New Zealand faces strong competition from South America and local product in the remaining segments.

1.3 Market Potential

Chinese markets for food and beverages products are highly fragmented and the level of development varies greatly by region. It is helpful to think of China as a conglomeration of distinct regional markets, rather than as one large one. As a general rule, the eastern provinces are considerably more developed than the western provinces. International retailers are located predominantly in the primary and secondary cities in the more affluent coastal provinces. They are now increasingly moving towards lower order cities, with the more established global players such as Walmart and Carrefour appearing in some Tier 4 cities. Domestic retailers have been quick to adopt modern retailing techniques.xxii

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The strength of domestic suppliers should not be under-estimated and competition from competing suppliers in other countries is intensifying as many turn to China as their traditional markets continue to battle with economic challenges.

As with any sector in China, a long-term commitment and strategy, sufficient resources to develop the market, strong relationships, and flexibility are all vital. It goes without saying that a thorough understanding of the distribution and supply chain, importing and food safety rules and regulations, local branding and packaging needs, and the retail pricing / mark-up structure is also required.

Despite rapid developments in the last 20 years, China requires a different way of doing business and those that can adopt this, invest significantly in long-term market development, build a need for their products by demonstrating relevance to the Chinese consumer, and supply at a price that will allow the products to be sold competitively while allowing importers, wholesalers, distributors and retailers to achieve required margins will be best placed to succeed.

• Private label: Private label products are a new development in China. Each hypermarket, supermarket and convenience store chain in China has a unique private label offer: Carrefour, Great Value, Metro’s IKA, Tesco and Lianhua are private label lines from leading players. More imported private label products are being seen on Chinese retailers’ shelves. Metro has moved ahead of the pack in this regard, importing salmon from Norway directly and then packaging and selling it under its private label brand IKA. Carrefour is expanding the “O” organics brand, which is a Safeway private label selling well in coastal cities.xxiii

• Organics: Some analysts expect domestic sales of organic products in China to be as high as $3.6 to $8.7 million by 2015. However, China’s organic food market is still in the early stages of development. Organic products are distributed via conventional supermarkets or specialty stores. Consumption in China’s first tier cities is growing rapidly.xxiv

• Dairy: The United States Department of Agriculture (USDA) projected that China’s fluid milk consumption in 2011 would rise six percent to 13.1 MMT, following a four percent increase in 2010. Despite the fact that the dairy market sustained a high rate of growth during the past decade, per capita consumption of dairy products in China, especially in rural areas, is still very low.xxv

The USDA predicts that China’s Non Fat Dried Milk (NFDM) consumption in 2011 will rise seven percent to 156,000 MT. This is mainly due to a strong demand for infant formula, the primary channel for NFDM shipments. With 17 million babies born every year in China, demand for infant formula will continue to rise, with imported milk powder accounting for nearly all the growth. Infant formula is also less price-sensitive than other products as parents are willing to purchase despite rising prices.

Cheese is not a traditional part of the Chinese diet. However cheese is gaining a reputation, particularly with affluent parents, as being a good source of protein and calcium, especially for children. The prevalence of pizza restaurants and bakery stores

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has also contributed to the fast growth of cheese consumption. It is forecast that China’s cheese market will continue to grow rapidly in the next five years, and that growth will spread from 1st tier city markets to 2nd and 3rd tier markets. Ongoing economic development will increase Chinese consumers’ purchasing power, and make high-priced cheese products more acceptable for mass consumers.

• Wine: Still red wine sales are expected to continue their acceleration (volume growth was close to 26 percent in 2010), with stricter drink-driving laws also likely to push consumers to lower alcohol grape wines (<15 percent alcohol). With approximately 600 million young Chinese exploring new types of alcoholic drinks, the potential market for wine sales in the future looks promising.

Domestically produced grape wine will continue to be a large part of growth, with some of the local wines now competing against international wines. However, there remains strong potential for growth in imported wines.

• Seafood: China's appetite for seafood is expected to show strong growth for the foreseeable future, as the booming economy continues to raise living standards and the middle income group grows. New Zealand companies can play an important role in the growth of this sector.xxvi

Industry sources estimate over 80 percent of New Zealand’s seafood exports are destined for processing and re-export (the processing trade). With stronger marketing, there are opportunities to increase New Zealand’s supply of higher value seafood and aquaculture products such as rock lobster and abalone. It is also likely that China will increasingly look to countries such as New Zealand for a sustainable supply of aquaculture in coming years.

1.4 Import Trends

In 2010, New Zealand exported NZ$2.66 billion worth of food and beverage products to China. This makes China our largest export market for food and beverage products, accounting for 11.3 percent of our exports, followed by Australia (10.5 percent) and the United States (10.2 percent). New Zealand’s food and beverage exports achieved a CAGR of 36 percent between 2006 and 2010.xxvii

In the year ended December 2010, China imported a total of NZ$40.5 billion in food and beverage products. New Zealand was China’s sixth largest supplier of food and beverage products, accounting for 6.4 percent of all imports.xxviii

China’s Top Ten Supplying Markets for Food & Beverage Products, by Value (y/e Dec. 2010)

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Source: China Customs, via The World Trade Atlas

Processed foods

New Zealand is the ninth largest supplier of processed food and beverage items to China, supplying 3.6 percent of all imported goods in 2010. China’s significant processed food suppliers are France (18 percent), Brazil (11 percent), and the United States (8 percent). Although China is a milk producer (mostly for domestic supply), much of New Zealand’s processed food exports are dairy-based (see table below).

Wine

With international wine sales experiencing slow growth in recent years, increasing numbers of multinational brands have entered China. Chinese consumers’ rising demand for high-end Old World wine is reflected by France’s export dominance (46 percent share in 2010) and the rapid growth of French exports (87 percent increase in 2010 over 2009). Australia is the second most dominant wine exporter to China, with a 19 percent share in 2010 and growth rate of 53 percent between 2009 and 2010. This is in part attributable to strong television advertising for the Jacob’s Creek brand in China.

With a 1.4 percent export share by value in 2010, New Zealand has plenty of room for growth in the market. Signs of strong growth are encouraging, however, with an 85 percent increase in wine exports between 2008 and 2009, and 39 percent increase between 2009 and 2010.

Fish and seafood

In terms of aquaculture imports (salmon, mussels, and oysters), China imported US$678 million in value in 2010. Primary suppliers included the United States (29 percent), Japan (25 percent), and Russia (15 percent). China, however, is still a net exporter of aquaculture products, exporting US$1.1 billion in value in 2010. In 2010, New Zealand exported NZ$2.45 million of aquaculture products to China. This may not be indicative of

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the true level of New Zealand aquaculture exports to China, however. New Zealand also exported NZ$13.5 million to Hong Kong in 2010.

Meat

China is a net meat importer, importing US$2.2 billion in 2010, whilst exporting US$995 million in the same year. Brazil, the United States and Denmark are the leading sources, collectively supplying close to two thirds of all imported meat value. New Zealand, a top ten supplier, filled 4.4 percent of China’s imported product demand in 2010 and is China’s primary supplier of lamb (competing with Australia only). New Zealand is also China’s fourth largest supplier of frozen beef (supplying 8 percent of imported value), after Brazil, Australia, and Uruguay (collectively supplying just over 90 percent of imported value). Chilled beef is dominated by Australia.

Currently there is little high value beef product from New Zealand in the HRI sector. Australian grain fed beef dominates the premium end of the market and New Zealand faces strong competition from South America and local product in the remaining segment.

The majority of New Zealand sheepmeat exports to China are destined for reprocessing into lamb rolls and other products which are sold to local hotpot restaurants and retail outlets. The largest market is in the north part of China. Again in the premium chilled lamb market, Australia accounts for the majority of supply, although this is a very small import market at present.

New Zealand’s Top Ten Food & Beverage Exports to China by Value (y/e Dec. 2010)

Product Exports in 2010 ($NZ

millions)

% Growth 09/10

Main Competition (% share of imports in 2010)

Milk Powder 1,577.4 101.9 NZ (82%), Australia (6%), USA (3%)

Infant preparations and similar

182.7 -35.0 Singapore (37%), NZ (18%), Australia (15%, Netherlands

(9%)

Sheep meat 119.7 -4.5 NZ (57%), Australia (42%)

Animal Fats 111.3 13.9 Australia (69%), NZ (29%)

Butter and other fats and oils derived from milk

105.4 18.4 NZ (80%), Australia (8%), France (4%)

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Fish, frozen, whole 96.7 -16.7 Russia (39%), USA (18%), Norway (10%), Japan (7%)

NZ (2%)

Kiwifruit 71.4 11.0 NZ (79%), Chile (15%)

Cheese 67.7 37.0 NZ (48%), Australia (20%), USA (12%)

Caesin 57.3 79.3 NZ (59%), Netherlands (21%), Germany (5%)

Whey 41.7 35.0 USA (35%), France (18%), Germany (9%), Netherlands (8%), Finland (6%), NZ (6%)

Source: Statistics NZ / China Customs via The World Trade Atlas

1.5 Key Players in the Market

Processed foods

In 2010, domestic companies continued to lead China’s packaged food sales, with Mengniu and Yili ranked first and second respectively. Shineway, Hangzhou Wahaha, Bright Dairy & Food, Jinmailang Food, and China National Cereals (COFCO) were all within the top ten players. Multinationals were in a weaker place in packaged food sales in 2010, with Nestlé and Wrigley outside the top 10 in terms of overall packaged food value sales.xxix

Mergers and acquisitions have become an important strategy for both international and domestic enterprises to maintain sustained rapid development as well as gain technology, market, and other resources in a shorter time. The industry is expected to achieve strong constant value growth, with a CAGR of 8 percent over the next five years. The industry is therefore likely to become less fragmented, with leading players using resources to further consolidate their positions, whilst small players face extensive competition.

Wine

Currently, there are over 500 wineries in China. Industry data shows that the top three local wine brands (Changyu, Great Wall and Dynasty) control as much as 50 to 60 percent of the market. However, the high-end wine market is dominated by imported wine brands in the tier one cities of Beijing, Shanghai, Guangzhou and Shenzhen. Imported wine is sold through exclusive distributors who have competitive advantages and established sales networks to HRI channels.xxx

Fish and seafood

China is the largest producer of seafood in the world, representing some 35 per cent of total global seafood production. Aquaculture, capture, production and processing is concentrated in a few regional centres, notably around Dalian and Qingdao in the North

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and in Zhejiang, Fujian and Guangdong provinces in the South. Shandong, in the North East, is the largest seafood producing province. China has three main offshore fishing areas and its fishing vessels now travel globally. However, growth in seawater catch is zero or negative and freshwater catch is on a nominal rise, so most growth within the industry is from aquaculture.

Out of the top ten aquaculture products harvested in Chinese territorial waters, six are shellfish varieties, including the top three. While freshwater aquaculture is predominantly dependent on carp, which make up 72 per cent of the total, species such as shrimp and tilapia are gaining momentum. China is also the world leader in shrimp aquaculture, with many farms based in Guangdong province.

Meat

The top three local meat producers in China are COFCO, Jinluo and Yurun. COFCO is also estimated to be the largest meat importer in China.

Market Segmentsxxxi

Retailers in China often operate across market sectors. Some domestic players have hypermarkets, supermarkets, convenience stores, and specialty stores. However, the general trend is that that most imported products have found their greatest success in the hypermarkets and in specialty supermarkets. Some products, such as fruits and snacks, have much deeper penetration, and some supermarkets and convenience stores may be becoming more interested in imported products.

China’s Top Ten Grocery Retailers in 2010

Retailer Grocery Sales

(US$m)

% Change Grocery

Sales 09-08

IGD Grocery Retail Market

Share (%)

No. of Grocery Stores

Walmart China

7,465 +17.6 1.1 275

Auchan China 6,073 +12.5 0.9 157

Carrefour Group

4,623 +5.0 0.7 516

Lianhua 3,495 +5.3 0.5 4,930

Wu Mart 1,537 +22.1 0.2 469

Tesco China 1,328 -11.3 0.2 88

Seven & I Holdings

954 +22.3 0.1 105

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Lotte Shopping

734 +845.9* 0.1 76

Shanghai Hualian Lawson

512 +8.0 0.1 316

ParknShop (AS Watson)

456 +12.4 0.1 53

Source: IDG Retail Analytics, China Country Presentation, published February 2011

Hypermarkets

• Have a reputation for offering high-quality products that are appealing to affluent urban Chinese who are concerned with food safety issues.

• Generally offer more imported products than domestic supermarkets, and are more familiar with imported products.

• Offer large parking facilities, multiple stores and numerous restaurants and coffee shops that enable consumers to combine shopping and leisure activities. Most hypermarkets in China offer free shuttle bus service to nearby communities and constantly offer promotional items to attract consumers.

Major players: Carrefour, Wal-Mart, Metro, Lotus, Auchan and Tesco.

Supermarkets

• Quite a fragmented channel. There are a large number of regional small chain or independent supermarkets, especially in many second and third tier cities.

• Imported food is relatively rare in Chinese supermarkets. Products that do well in this sector tend to be commodity products already widely available, such as fresh fruit, frozen vegetables and nuts.

• Supermarkets seldom import directly, or even buy directly from an importer. Instead they usually to rely on wholesale markets and local manufacturers or distributors.

• The best possibilities are in the smaller, privately held chains, which are more likely to see the value of high-margin imports and tend to have better integrated distribution systems.

Major players: Lianhua, China Resources Vanguard, Suguo

Specialty Supermarket Stores and Boutique Stores

• Often located near high-end department stores and fashionable business centres.

• Generally have a high proportion of imported food products – ranging from 10 to 80 percent of products.

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• Not only present in first tier cities such as Shanghai but also in some second tier cities like Wuhan or Hangzhou.

Major players: City Shop Supermarket (Shanghai), City-Super, CRV Ole, BHG (Beijing Hualian Supermarket), Hisense Plaza in Qingdao and Jin Bou Da in Zhengzhou

Traditional Markets

• These exist throughout China, although they are no longer the dominant retail food source in the larger cities.

• Traditional markets fall into three general categories: wet markets, variety stores (xiaomaibu), and fruit stands.

• Wet markets specialise mainly in fresh vegetables, meat, poultry and seafood (mostly sold live), eggs, tofu and to a lesser extent, fruit and staple foods.

Online sales

Online shopping is growing rapidly in China, especially in first tier cities. More Chinese consumers have the opportunity to select and buy imported meat, seafood and beverages from the internet directly and some New Zealand food and beverage exporters have been successful with this business model. These online businesses are usually run by the food and beverage importers directly.

As there are fewer intermediaries in the supply chain, consumers can buy the imported products at lower cost, and importers save the expense of having their products listed on a retail shelf. Importers can also communicate with consumers closely and deliver product information more efficiently.

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 in the Chinese market (i.e. available in China) and are dispatched from a Chinese warehouse to the buyer.

Foodservice

The Chinese foodservice sector is extremely fragmented. In 2010 it was estimated that there were over 5.1 million foodservice outlets in China. The top 100 Chinese restaurants had a market share of only 6 percent in 2009, compared to 45 percent in the United States. Western-style restaurants account for only 1 percent of the market, and tend to be concentrated in the coastal cities. Fast-food restaurants account for approximately 23 percent of the market, the main players are: Yum! Foods (KFC, Pizza Hut), McDonalds, and Dicos.xxxii

Foodservice is a key player in introducing imported foods. High-end restaurants and hotels are less constrained by price considerations and more interested in presenting dishes and products that are unique. If successful, their efforts are likely to be copied by other restaurants, bringing them closer to mainstream middle-class consumers.

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It is important to note that while the sector as a whole has great potential, many parts of the HRI industry are not strong candidates for imported foods. Catering operations that run cafeterias and provide box lunches as well as small family-owned restaurants, account for a large portion of the industry and are extremely price-sensitive.xxxiii

1.6 Regulatory

Information provided in this section is for reference only. When negotiating supply contracts and before beginning actual export, companies are advised to consult closely with their importer or distributor.

Duties and tariffs

New Zealand has a free trade agreement (FTA) with China. This means that over the last few years, tariffs on many New Zealand’s exports of food and beverage products have been phased out or substantially lowered.

Note that to benefit from duty reductions under the FTA, a specific FTA Certificate of Origin is required by Chinese authorities. A common complication for exporters occurs when a consignment is shipped via a third country, rather than directly from New Zealand, in which case FTA declarations may not be recognised. Consequently exporters should pay close attention to how shipments are transported in order to ensure proper documentation and compliance in order to reap the benefits of favourable FTA tariffs. In some cases, a Certificate of Non-Manipulation, declaring that the container has not been opened since leaving New Zealand, may solve this issue. This topic is also currently subject to discussions between New Zealand and Chinese customs departments.

In some instances, Chinese Customs have insisted on the full clearance of shipments in order to access preferential tariffs. Where product is held in bonded warehouse and cleared in small quantities, the preferential tariff has only been allowed for the first clearance. New Zealand Customs is working with Chinese Customs on this issue.

To check the tariff reduction phases for New Zealand products and to find out more about the New Zealand-China free trade agreement, see the following link from the Ministry of Foreign Affairs and Trade (MFAT): www.chinafta.govt.nz .

Licensing and registration requirements

There are numerous laws and regulations relating to imported food and beverage products in China and these are updated or revised continuously.

Experience suggests that the regulatory, labelling and licensing processes should be undertaken through an in-market agent / distributor who is familiar with the application procedure and documents required, as these processes may be difficult to undertake from New Zealand.

China's new Food Safety Law was adopted on 28 February 2009 and was made effective from 1 June 2009. This law is to improve food safety in China through stricter monitoring and supervision, tougher safety standards, recall of substandard products and severe

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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.

The USDA provides a comprehensive overview of the new laws on its website, see: gain.fas.usda.gov.

Labelling requirements

All imported pre-packaged food must be labelled in both English and Chinese (simplified Chinese as used in mainland China). The following is the 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

• Country of origin

• Quality grade

• Code of national standard, or industrial standard, or enterprise standard for the product

• Special contents if there are any (eg. irradiated food)

For more detail see the following link to the “General Standard for the Labelling of Pre-packaged Foods” – see: english.aqsiq.gov.cn. It is important to have the labelling fully correct and compliant when importing into China as there have been cases of severe delays to correct non-compliant or incorrect labelling.

1.7 Sustainability

Datamonitor has noted that the Chinese middle income groups, with their increased disposable incomes, have brought about a rise in green consumer behaviour in the

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country, reflected in their sustainable lifestyle choices. A large proportion of survey respondents indicated that they regularly recycle household waste, repair household products instead of buying new ones, buy organic fruit and vegetables and use environmentally friendly shopping bags. Firms operating in this region can capitalise on these behaviours by tailoring products and services.xxxiv

While this Datamonitor report indicates a trend towards sustainability, suppliers would be well-advised to discuss this with their partners, importers, distributors, retailers, and other networks in China to ascertain what this means for their products.

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2 MARKET ENTRY AND DEVELOPMENT

2.1 Market Entry Strategies As one of the world’s largest and most rapidly growing food consuming and processing countries, China is very attractive for any food ingredients producers or exporters aiming to expand their business. China’s continuing domestic growth, despite the world economic crisis, increases its attractiveness even more. With the opportunities come challenges that call from strategically driven and well resourced market entry.

China is not a single market. It is extremely diverse and fragmented, in terms of product types and regional differences. Thorough market research is needed before entering China. Exporters need to consider how factors such region, age group, and eating preferences relate to their products.

Finding a local partner It is critical to find good importers and distributors. Try to find those that have both established wholesale and retail outlets and strong relationships in the target market. They should not only be able to make orders for a product but also drive penetration and growth. Experienced distributors should have food technicians on their staff and experience in working with other exporters. It is recommended to visit their facilities and warehouses, especially if a product is highly perishable.

Several visits to the market to meet with potential distributors or others in the supply chain and to understand the retail scene should be factored into the costs of entering the China market.

Marketing, promotion and branding

Exhibitions can be a cost effective approach to understanding the market and meeting agents / importers. Some valuable exhibitions in China include FHC (Food & Hotel China), China Fisheries & Seafood Expo, SIAL China, China International Meat Industry Expo, and FIC (Food Ingredients China).

When working with a distributor or retailer in China, it is not uncommon for there to be an expectation of contribution to the local marketing and promotion costs and it is recommended that these costs be factored into any pricing or margin analysis.

Exporters may consider emphasising the provenance of their product. For more thoughts on this, see New Zealand Trade and Enterprise’s Consulting Chef Robert Oliver’s comments in his ‘Beyond Food Safety’ blog here: blogs.nzte.govt.nz.

There is very little brand recognition of New Zealand in China. Further, the volume New Zealand produces in most categories can only have a very limited impact. Consortia or collaborative marketing may be helpful in overcoming supply and capacity issues, and may work to increase New Zealand’s brand recognition.

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Strategies for wine

Many high-end Chinese restaurants and domestic hotel chains remain proudly loyal to Chinese brands and feature a growing range of Chinese branded products, which are often expensive. This may have much to do with entrenched relationships and ownership models which give preference to national product. A surprisingly large number report only selling up to 10 bottles a day. Prices range from RMB50 into the thousands, and promotions are common place.

For a large part, only expensive western restaurants carry New Zealand wines. Lists are generally filled with mid- to high-level French, Italian, United States and Australian labels. Prices range from RMB200 to Grand Cru level in establishments whose clientele is well over 50 percent Chinese. High-end foreign players and powerful Chinese distributors dominate supply via well-developed and often exclusive relationships.

Major foreign-owned supermarkets devote a significant amount of retail space to wine, and some 80-90 percent of this is imported. Generally, less than 30 percent of the wine featured is white and less than 10 percent is Chinese branded, though this mix is changing fast as powerful Chinese wine companies are upping their marketing efforts. Prices in this channel range from RMB40 to over RMB1,000 per bottle, and many feature a Grand Cru selection to appeal to the high-end market.

Private label grape wine products are seldom seen in the Chinese market, with only a few retailers producing private label rice wines.xxxv

Strategies for meat

One of the recommended strategies for New Zealand beef and lamb producers is to concentrate on moving up the value chain through product development. This could involve developing ready-to-eat products (especially to add value to low value cuts) by preparing cuts of meat to suit long-term supply arrangements for China fast food restaurant chains.

There are opportunities to leverage New Zealand’s country image through claims around health and safety, lack of hormones and sustainability. A particular recommendation for lamb is to engage with Chinese cuisine styles that are familiar with it and integrate higher value cuts into the premium foodservice outlets that serve these cuisine styles.

There are also opportunities to build upon low-fat claims of grass-fed beef but the market situation is less than ideal from both a consumer preference standpoint and a supply situation in New Zealand. High quality snacks and ready-to-eat meals could be worth developing with Chinese partners.

Seafood

An extension of the China-New Zealand Free Trade Agreement to include live seafood, along with channel, product, and customer development are key issues for the New Zealand seafood industry in China. Stronger collaboration between industry groups for marketing and promotion purposes, such as those arranged by the Norwegian Seafood

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Export Council, would benefit seafood exports to China. Critical issues facing the New Zealand seafood industry in China include:

• an untold and unknown New Zealand brand story

• convincing those in the market about supply stability

• limited live catch supply chain infrastructure in market

• ensuring that importers have strong relationships with customs to ensure timely Customs’ clearance

2.2 Long Term Strategic Issues

Amongst those aware of New Zealand and its food and beverage products in China, New Zealand is perceived as a country with clean water and fresh air. These perceptions contribute to New Zealand’s brand image as delivering products that are healthy and safe. However, the broader population remains largely unaware of New Zealand and its food and beverage offer. Much more work remains around increasing broader Chinese consumers’ awareness of New Zealand in order to better leverage our branding and positioning in the market. At present, consumers are choosing products from other countries over New Zealand, regardless of quality, due to the strong branding and positioning work undertaken by those countries.

Of paramount importance is New Zealand’s reputation for food safety. Food safety scandals have been reported in different segments (for example dairy products, oil, meat, seafood and a variety of produce). As most scandals involve local products, consumers have been seeking imported brands to meet their need for reliable food, especially in infant formula. At the same time, government bodies are creating stricter regulations and stronger enforcement to protect the Chinese public.

Multinational giants with global resources such as Nestle, Unilever and Coca-Cola have well-established local operations and use mergers and acquisitions to increase market share. Asian neighbours with a strong understanding of Chinese culture and business practice such as Taiwan and Korea have also invested into the market. Chinese companies, whether state-owned enterprises like COFCO and Yili, or listed private companies like Mengniu, are mature and strengthening in market through the recruitment of multinational talent. Exporters should familiarise themselves with the market and seek to establish local operations to win sustainable growth in China. Merely trading products without marketing support is unlikely to guarantee long term success.

2.4 Distribution Channels

Exporters can choose to sell their products through Chinese importers or distributors, which is the most common distribution pattern. Any registered company can now import and export most food products freely, provided they have the relevant import licences.

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Therefore, it is the exporter’s imperative to select those who are reliable and have developed sales and distribution networks.

Direct distribution

The manufacturers / exporters set up their sales outlet and sell their products directly in China rather than through a local business organisation or person. The advantage is that the manufacturers / exporters can meet consumers directly and learn about market condition and trends. They can also control who buys and distributes their products. The drawback of this approach is the need to invest in developing a sales network and the high cost of learning to operate in a foreign market which is already well serviced by domestic suppliers and an increasing selection of imported products.

Direct selling to large sellers / processors / manufacturers

Some large sellers / processors / manufacturers are considering the direct sourcing of products from exporting countries to reduce costs. If connections to the supplier can be build, this could be an opportunity for producers / exporters, providing that stability of supply to agreed volumes is possible.

Issues to consider

Every year, cold chain logistical problems in China result in massive product losses. In 2008, it was estimated that each year China loses some US$9.25 billion of food products in transportation. For perishable products such as fruit and vegetables, total losses accounted for about 25 to 30 percent of total production.

These losses occur largely because only 15 percent of all perishable products are transported by refrigerated vehicles compared to nearly 90 percent in developed countries. Currently about 90 percent of meat products, 80 percent of aquatic products and a large amount of dairy products are shipped without cold chain logistics. In addition, there are no consistent standards for food quality and safety. There is inadequate inspection and ineffective enforcement. Fragmented, unclear rules and regulations exacerbate cold chain problems. There are no national laws or regulations governing food safety in storage, transportation, distribution and retail.

Wine

In China, wholesalers, retailers, restaurants, caterers, and distributors all sell wine to individuals and businesses from small to large quantities. A clear distinction between what is retail and what is not does not exist, which makes it difficult to analyse the total market size.

Traditionally, there are two sales channels for wine – retail and HRI. Anecdotal evidence suggests that 70- 80 percent of wine sales occur in the HRI channel. However, these figures differ greatly from the 50:50 ratios that industry bodies state. European and North American full-service restaurants and casual dining restaurants are forecast by Euromonitor to have the highest growth demand for wine in the next few years. Pub and

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bar sales of wine, as well as wine consumption in hotel wedding ceremonies, are also expected to drive growth.

The leading distributors of imported premium wine are still foreign companies, many of which have been in the wine business in China for a decade or more. These companies traditionally started serving premium foreign hotels and have grown into the HRI channels and many now have retail affiliations and are aggressively pursuing the gift market. Over the last few years, there has been a rapid emergence of locally owned wine import companies, which may erode this dominant position over time as local companies build experience, credibility and reputation.

Current distribution issues in China include the dispersed nature of multinational brand marketing, which is contributing towards the continued dominance of domestic brands. Many multinational brands currently work with multiple distributors that do not have standard management practices. For example, the Castel Groupe is estimated to have over 40 distributors in China, each marketing and selling the Castel brand individually. In contrast, most domestic brands enjoy a scaled production advantage and national management systems.

The established distribution companies are frequently approached by overseas suppliers, including companies from New Zealand, but are reluctant to take on additional labels unless they are a “sure bet” and are supported by significant marketing and financial support. This reflects the relative immaturity of the market and the fact that imported wine, especially at the premium end, is still out of the reach or unknown to most consumers. Leading distributors usually carry between one and four New Zealand labels.xxxvi

Fish and Seafood

There are generally four steps in China’s distribution process: importation, distribution, sub-distribution and retail. In practice, the number of stages can vary, but each step serves a function which is vital for the entire channel, adding value to the final product.

The main points of entry for fresh seafood include Shenzhen, Guangzhou and Shanghai. Shanghai is currently the most logical point of entry for direct seafood importation, especially for New Zealand products, given direct flight connections.

Live seafood distribution in China is traditionally dominated by seafood markets. Such seafood markets are typically large and provide a varied range of seafood products. Important examples include:

• Shenzhen Yantian Seafood Market

• Guangzhou Huangsha Seafood Wholesale Market

• Shanghai Tong Chuan Seafood Market

Distributors and sub-distributors usually have a resident booth at seafood markets. Distributors and sub-distributors often assume the role of the warehouse as well. At seafood markets like Tong Chuan, live product is stored by distributors on site in

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thousands of small swimming tanks. This is a very competitive but fragmented industry with many small players.

The roles of distributors and sub-distributors have formed according to access to clients and traditional practices. Those able to purchase products directly, and import and distribute them, have acquired a monopolistic position. Those who have access to sales channels and good relationships with retailers, but are unable to obtain products from the top of value chain, act as middle men. They employ sub-distributors on a case-by-case basis between themselves and retailers.

Distributors sell products through sub-distributors, or directly to retail outlets, e.g. hotels, restaurants and supermarkets. Whether sub-distributors are employed is dependent on client relationships and payment terms. Client and purchasing terms influence distribution as follows:

• Smaller volume buyers: Often visit their supplier’s booth, select their produce, pay cash and take it away in Styrofoam boxes.

• Hotels, restaurants and institutions (HRI): Orders are delivered directly, either on a daily basis or frequently throughout the week. Deliveries are aggregated and billed at the end of the month according to agreed terms. This is a key reason why many of the leading distributors prefer not to deal directly to the HRI industry.

• Supermarkets and hypermarkets have been introduced fairly recently to China and are becoming important outlets for retailing aquaculture products, both live and processed.

According local importers and distributors, there is little fundamental difference between live and frozen seafood channels. Often there are simply more sub-distributor links in the frozen seafood supply chain due to longer shelf lives and larger geographic distribution coverage. Seafood markets remain the major supply avenue for frozen seafood, but this is changing. The growing number and sophistication of retailers in China is increasing opportunities to promote branded items to the young and affluent, who increasingly to prefer shop at supermarkets.

Meat

Distribution and sales of imported meat continues to be driven by demand from relatively affluent first-tier and major cities on the eastern coast. North-eastern cities, such as Dalian and Harbin where low-end beef and lamb cuts are popular, are traditional ports of entry and remain the hubs for large volume importation.

Many distributors in China also act as importers. Effective distribution, especially outside of the main centres, is still an area in which foreign suppliers struggle to compete and more often than not choose to partner with local entities for geographical coverage. The further afield a product travels, the more steps there are in the value chain, in which numerous sub distributors with local relationships become key. Ownership of product may change hands many times before they reach the end-user.

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Few distributors have genuine national coverage, though many increasingly sophisticated operators service the major centres and a growing number of second and third-tier cities and provinces. China’s fragmented logistics industry has hindered cold-chain development for high-value temperature sensitive product, meaning the vast majority of Chinese people still buy fresh meat from traditional local markets.

2.5 Pricing Importers and retailers are the two key players in the value chain for imported products. In most cases one or several distributors share the total margin between these two parties.

Primary importers / distributors tend to keep the number of profit sharers to a minimum in first tier cities such as Beijing, Shanghai and Guangzhou in order to maximise their own profit and improve their price competitiveness. However, the advantage of fewer profit sharers is not always reflected in retail prices as any cost savings are offset by the higher margins demanded by higher costs and more intense competition.

Due to the geographical and channel complexity in China primary importers / distributors sometimes have to introduce one or several layers of sub-distributors to penetrate into lower tier cities.

The final mark-up for imported products can be from 50 percent to 10+ times the CIF (Cost, Insurance and Freight) price, depending on the category and channel. Generally, mark-ups are higher in HRI than in retail. To guarantee the total margin, most retailers and distributors expect greater margin per unit from imported products as the turn-over of imported products is usually slower than domestic mass-market products. At the same time, consumers accept the fact that imported products are priced higher than domestic equivalents and accept this price difference as reflecting higher quality.

It is suggested that exporters / manufacturers also take into account the expense of branding and promotion activities when developing their pricing strategy. Unlike earlier times, when imported products were rare and distributors were willing to commit fully to brand building, well-established distributors now have many more product options and thus stronger bargaining power.

Retail channel expenses

According to some multinational companies operating in China, retail channel expenses can be classified into three categories: non-performance trade expenses, performance trade expenses and branding expenses. Non-performance trade expenses include product listing fees, festival fees, goods return costs, store anniversary promotion expenses and other expenses required by retailers to make the product available to consumers. Performance trade expenses include promotion activities and in-store promoter salaries. Branding expenses are mostly for media promotion.

HRI channel expenses

HRI channel expenses are relatively less complex than retail channel expenses, but this does not mean that they cost any less. Distributors need to invest in maintaining the

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“guanxi” (relationship) with the decision makers in this channel. Product selection is based not only on quality, service and price, but also strongly on the personal relationships between the supplier and the decision makers.

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3 MARKET RESOURCES AND CONTACTS

Disclaimer:

This publication is provided to you as a free service and is intended to flag to you market opportunities and possibilities. Use of and reliance on the information/products/technology/concepts discussed in this publication, and the suitability of these for your business is entirely at your own risk. You are advised to carry out your own independent assessment of this opportunity. The information in this publication is general; it was prepared by New Zealand Trade and Enterprise (NZTE)

ASSOCIATIONS

China State General Administration for Quality Supervision, Inspection and Quarantine (AQSIQ) [English and Chinese] (for national laws and regulations, issues, notifications, etc.)

www.aqsiq.gov.cn

China Customs [English version] english.customs.gov.cn

China Food Industry Association [Chinese only] www.cfiin.com

China Meat Industry Association

[English and Chinese]

www.chinameat.org

China Ministry of Agriculture [Chinese only] www.agri.gov.cn

China Food Industry Association [Chinese only] www.cfiin.com

TRADE EVENTS

Food Hotel China www.fhcchina.co

China Fisheries & Seafood Expo www.chinaseafoodexpo.com

SAIL China www.sialchina.com

OTHER RESOURCES

Navigating China www.chinafta.govt.nz

China Wine Market Report www.nzte.govt.nz

China Seafood Market Report www.nzte.govt.nz

China Meat Market Report www.nzte.govt.nz

NZTE Consulting Chef Robert Oliver – Blogs on China Market

blogs.nzte.govt.nz/robert-oliver

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from publicly available and/or subscription database sources. NZTE; its officers, employees and agents accept no liability for any errors or omissions or any opinion/s expressed, and no responsibility is accepted with respect to the standing of any firm/s, company/ies or individual/s mentioned. New Zealand Trade and Enterprise is not responsible for any adverse consequences arising out of such use. You release New Zealan Trade and Enterprise from all claims arising from this publication. New Zealand Trade and Enterprise reserves the right to reuse any general market information contained in its reports.

i Economist Intelligence Unit China, January 2011. Consumer Goods and Retail Report. ii Euromonitor, December 2011. Grocery Retailing in China. iii The Grocery Retailing market covers retailers selling predominantly food/beverages/tobacco and other

everyday groceries. This is the aggregation of hypermarkets, supermarkets, discounters, small grocery retailers (convenience stores, independent small grocers, chained forecourt retailers, independent forecourt retailers), food/drink/tobacco specialists and other grocery retailers.

iv Euromonitor, Foodservice in China, published June 2010 v The Consumer foodservice sector is composed of cafés/bars, full-service restaurants, fast food, 100%

home delivery/takeaway, and street stalls/kiosks. vi Euromonitor. vii Euromonitor, January 2011. Wine in China. viii Redfern Associates / NZTE, May 2010. The China Seafood Market. ix Redfern Associates / NZTE, May 2010. The China Meat Market. x Economist Intelligence Unit, China: Consumer Goods and Retail Report, published January 2011 xi AC Nielsen, Chinese Takeaway, published 2010, Link:

http://cn.en.nielsen.com/documents/chinesetakeawayfinal.pdf xii McKinsey, Understanding China’s growing Love for Luxury, published 2010, Link:

http://www.mckinsey.com/locations/greaterchina/InsightsChina_LuxuryGoods.pdf xiii AC Nielsen, Chinese Takeaway, published 2010 xiv McKinsey, Understanding China’s growing Love for Luxury, published 2010, Link:

http://www.mckinsey.com/locations/greaterchina/InsightsChina_LuxuryGoods.pdf xiv AC Nielsen, Chinese Takeaway, published 2010, Link:

http://cn.en.nielsen.com/documents/chinesetakeawayfinal.pdf xv USDA, China Retail report, published January 2011 xvi Euromonitor, November 2010. Packaged Food - China. xvii IDG Retail Analytics, China Country Presentation, published February 2011 xviii Euromonitor, November 2010. Packaged Food - China. xixxix Redfern Associates / NZTE, May 2010. The China Wine Market. xx Redfern Associates / NZTE, May 2010. The China Seafood Market. xxi Redfern Associates / NZTE, May 2010. The China Meat Market. xxii IDG Retail Analytics, China Country Presentation, published February 2011 xxiii USDA, China: Retail Report, published January 2011 xxiv USDA, China: Organics Report, published October 2010 xxv USDA, China: Dairy and Products, published October 2010 xxvi Redfern Associates, The China Seafood Market Sector Overview, published May 2010 xxvii Statistics NZ, via The World Trade Atlas xxviii China Customs, via The World Trade Atlas xxix Euromonitor, November 2010. Packaged Food - China.

xxx Redfern Associates / NZTE, May 2010. The Chine Wine Market. xxxi USDA, China Retail Annual report, published January 2011 xxxiiAlix Partners, 2010 China Restaurant & Foodservice Review, published May 2010,

http://www.alixpartners.com/EN/LinkClick.aspx?fileticket=rJmA7L%2BoIz8%3D&tabid=89&mid=486&language=en-US

xxxiii Food Export Association of the Midwest USA and Food Export USA - Northeast , China Country Profile, published 2011, http://www.foodexport.org/Resources/CountryProfileDetail.cfm?ItemNumber=1007

xxxiv Datamonitor, Green Consumers in China, published August 2010

xxxv Euromonitor, January 2011. Wine in China. xxxvi Redfern Associates / NZTE, May 2010. The Chine Wine Market.