China’s beef processors open franchise stores to target city slickers

By Mark Godfrey

- Last updated on GMT

Beef has benefited from pork and poultry safety scares
Beef has benefited from pork and poultry safety scares

Related tags: Steak, Meat, Han chinese, Beijing

It’s unconventional as most butcher shops go... but the ‘Kerchin Beef Shop’ outlet on Beijing’s Baijiazhuang lu is a hive of activity on a weekday afternoon.

Opened in February, in the heart of Beijing’s business and entertainment district, the outlet is staffed by a single salesperson and she has no knives or butcher’s apron. That’s because all her goods are sold dry or frozen.

A RMB62 (200g) steak comes packaged with sachets of oil and instructions on how long the steak should stay in the frying pan. Frozen beef balls are ideal for cooking with noodles, while a range of dry beef jerkies are suggested for travellers.

Saleswoman Ms Hao had a well-practised sales patter for would-be customers, many of them working in the nearby office towers: Kerchin meat is better (and costs more) "because the cattle grew up on the grasslands and that’s a lot better than most places where they are kept in the backyard and fed scraps",​ she told GlobalMeatNews​.

Kerchin, which has capacity to feed and kill 40,000 cattle per year, has been ambitious, opening nearly 200 self-owned and franchised stores nationwide, with plans for more, according to an introductory placard hung on the wall of the Baijiazhuang store.

Yet while there are six stores in Beijing and a single store in Shanghai, there are 58 in Hohot, the provincial capital of Inner Mongolia. Likewise there are 52 in the north-easterly province of Liaoning, which borders North Korea. In the semi-tropical south of the country, Kerchin has opened eight stores across the wealthy province of Guangdong.

With a complimentary magazine of recipes and lifestyle tips, the Kerchin stores are clearly geared to chime with the aspirational lifestyle of the country’s white-collar class. The Kerchin store on Baijiazhuang lu doesn’t just sell meat. Belgian and Polish chocolates are stocked alongside Kostritzer beer from Germany, Bacardi Breezers, and fruit juices made from South American fruits.

The colour of imported food packaging brightens up the store, says Hao. "A lot of our customers come in to buy chocolates and also buy a steak,"​ she adds. "It’s a lifestyle thing."​ Customers can take away a Kerchin magazine detailing beef cooking tips, menus and home-keeping tips.

The franchise model employed by the meat companies is driven, in part, by high listing fees charged by key supermarket chains, as well as the highly regional nature of retailing – in part due to logistical challenges – and the popularity of the franchise model in China.

Other major Chinese meat firms have also pursued the chain store model, though without the lifestyle trappings of Kerchin stores. An hour east of Beijing by high-speed train, Tianjin is home to stores run by the locally based Dawn Run beef company. While Inner Mongolia-based Kerchin competes with Changchun-based Haoyue Group for the north China market, another beef player, Fuhua Meat, located near Beijing, markets its beef through almost 200 hotpot restaurants, trading under the Fuhua Feiniu brand.

Meanwhile the lamb-focused Da Zhuang Yuan brand – also known by the English name Grand Farm – has no less than 50 stores in the northerly city of Harbin. But it has yet to open a store in either Beijing or Shanghai, according to a company official running a store adjacent to Harbin’s railway station.

The company sells only meat products in its stores, most of which are run by the company itself, but also franchises a number of the stores. "This is a profitable business if you have a good location and can sell high quantities. Many Chinese people want to invest in a good business idea,"​ explained the saleswoman. Items on sale include packaged beef steaks (local Chinese beef) at RMB24 each as well as pre-cooked lamb (RMB46/550g). 

In the period 1998 to 2012, real incomes in China rose by almost 250%, with per capita consumption of beef, pigmeat and poultry rising by over 40% in the same time period from 34.2kg per capita to 44.3kg per capita in 2011-13, according to the Food and Agriculture Organisation (FAO). It is projecting that meat consumption in China will increase another 20% over the coming 10 years, driven by income growth, changing diet and urbanisation.

China’s beef sales have benefited from food safety scares surrounding pork and poultry meat over the past year. Hao is confident sales will grow. Indeed, the average Chinese person eats just 4-5kg of beef per head each year – around one-fifth of the global average – suggesting plenty of room for growth.

Income growth and urbanisation will continue to drive the rise of China’s demand for food, particularly meat, in the coming decade, according to Jikun Huang, a professor-researcher at the Center for Chinese Agricultural Policy at the Chinese Academy of Sciences. He identifies beef, fish and milk as the three food items set to benefit most from "increased elasticity in both rising urban and rural incomes".

China’s beef production has been steady at 5.5 million tonnes over the past five years. A key trade-off is to be made between grain and meat, according to Huang. China could restrict maize imports to the 7.2 million tonnes limit it has set itself under WTO rules. "In that case meat imports would increase significantly,"​ he says.

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