China’s meat majors focus on convenience as incomes rise

By Mark Godfrey

- Last updated on GMT

China convenience meat offering is increasing
China convenience meat offering is increasing

Related tags: Beef, Retailing

There was a time when convenience for China’s meat-eaters was a bag of frozen pork dumplings. But today the offerings of convenience meat products are exploding across the aisles of China’s supermarket, with everything from pre-prepared frozen kebab sticks to American-style microwavable steaks on offer.

In a box emblazoned with the stars and stripes, a ‘Sharon’s Steak House’ (190g, RMB28) steak produced by Hebei-based meat conglomerate Fucheng Wuyuan looks a lot like the ‘Family Steak’ (also stamped with the US flag) box sold by Duo Wei Fang in supermarkets across Beijing at RMB19.90 (220g).

Store management at several outlets visited for this article explained a shift in floor space from raw meat to prepared and packaged product. "We sell more of the frozen ready-made meat than we did before, it doesn’t look as expensive as it did a few years ago,"​ said Wang Mingxia, deputy floor manager at the Jiuxianqiao Street branch of Vanguard, a leading Chinese supermarket chain. Others pointed to rising urban incomes, with young office workers in particular seeking out convenience.

Per capita urban incomes averaged RMB26,955 in 2013, up 9.7% year on year, or 7% when inflation is taken into account, according to China’s National Bureau of Statistics (NBS). Meanwhile, wages for urban residents grew 9.2%, according to the NBS. Urban incomes range from RMB11,434 yuan right up to "upper-middle-income"​ earners on RMB32,415 and a "high-income group"​ making RMB56,389.

With annual average urban income growth in the 8-10% bracket now for several years, China’s leading beef meat firms have adapted products to a more affluent, Westernised consumer base. For instance, several firms are supplying frozen ready-to-use beef packs for hot pots, a popular dining-out option in China but now becoming an option at home. These include frozen offerings from Inner Mongolia-based Kerchin Cattle Industry Co, which distributes 500g packs of thin-sliced and rolled beef for RMB69.80 under the banner ‘create a delicious life’.

Another big player, the ‘Grand Farm’ label, operated by DaZhuangYuan (also known as Heilongjiang Grand Farm Group), offers 400g packs of lamb meat for hot pot cooking for RMB42.80. Heilongjiang-based Grand Farm has the capacity to slaughter half a million sheep a year, but is also the number one Chinese importer of New Zealand lamb, and the top customer of New Zealand-based lamb producer-processor the Alliance Group.

China’s high-end retailers have also ramped up their convenience offerings, with BHG (part of the Beijing state-controlled Hualian conglomerate), for instance, selling 800g packs of own-brand lamb kebab sticks for RMb58.60 at its store in the affluent Sanlitun neighbourhood in Beijing.

With its logo done in Tibetan-style calligraphy and vivid packaging promising grassland-fed beef and sheep, Tianma Shengtai goes for value with small frozen chickens pre-flavoured in various tastes: the ‘desert spice’ option sells best, according to manager of the meat section at the Chaoyangmen branch of Wumart, a leading supermarket chain focused on northern China.

The convenience market also extends to heat-treated and dried meat snacks, among them dried sachets of duck at RMB25/180g sold under the Yushiyuan brand in Beijing stores, including a store at the city’s airport. Similarly, RMB24/100g sachets of spiced beef jerky sold under the Beijing Er Shang (a state-owned group) in supermarket chains including Wumart and Jinkelong.

Rising incomes and a build-out of modern retail chains have been key factors driving convenience offerings in China – those figures are in turn being helped by rapid urbanisation, with a resulting lift in rural incomes. China’s catering industry made revenues of RMB2.5 trillion in 2013, up 9% on the previous, according to the NBS, while retail sales, at RMB20.8 trillion, rose 13.6% year on year last year.

Retail and meat consumption look set to continue growing, given the per capita net income of rural households was RMB8,896, up by 12.4%, or 9.3% in real terms. Notably, some households are subsisting on RMB2,583 a year (according to NBS data on rural poverty), meaning there’s still much room for income growth in China.

A patchy cold chain may be the one big challenge to convenience meat retailers. Only 7% of food ends up on China’s modern supermarket shelves, according to Planet Retail, a consultancy. Meanwhile, 80% of food in China is transported by road in unrefrigerated trucks "resulting in a high amount of waste during transportation",​ according to Hans Peter Reust, China manager of Star Farm, a subsidiary of the Metro supermarket giant.

While China continues to have cold chain logistics challenges, the spread of big box retail is allowing expansion of big players like Grand Farm, whose president Chen Xibin has pledged to this year open a cold room that can store 20,000 tonnes of meat at a time as part of his big plans to enhance food safety and quality of local beef and sheep stocks.

Makers of trusty frozen dumplings, meanwhile, have not given up the chase. Zhengzhou Synear Food Co retails 720g packs of pork dumplings for RMB16, and has added new flavours like shrimp to capture a more affluent clientele.

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