Why is F&B Innovation Critical to China’s Future?

It’s no secret China has quite a few mouths to feed. Although this number is slowing, Pew Research still projects an additional 25 million Chinese by 2050. Add to this increasing disposable income, with 800 million Chinese expected to join the country’s middle class over the next several decades. These numbers point to a critical inflection point where demand will outpace production, leading to the potential for a war over domestic resources. Innovation will be key to combat this.

We hear a lot about how consumer tastes are changing in China: how Starbucks, McDonald’s, and KFC are impacting the daily lives of millions. While this is true, by and large the country still relies on traditional agricultural staples. Although people are eating out more, in a population of 1.3 billion this is more the exception than the rule. For most of the country going to the grocery store, or growing one’s own goods, is still prevalent.

At the same time, there is an ever-present fear of food provenance and safety. Scandals ranging from deadly baby formula to reused gutter oil, glowing pork to rat skewers flavored like lamb, justifiably make the public scared to put anything in their mouths.

 

 

The Government is well aware of these issues, enacting a number of measures to address them. Most notable is the Made in China 2025 Plan. This Plan aims to upgrade a number of domestic industries, with particular attention paid to agriculture and innovation. In the Plan, the Government wants to improve agricultural machinery and technology as a means of streamlining production capabilities. It also wants to beef up export orientation for domestic agricultural products. The underlying hope is that if products are good enough for the international market, then the Chinese public will regain trust in things made closer to home.

Savvy multinational companies have already found ways to be first past the post. When it comes to food, foreign firms certainly have a leg up on the competition. This is especially true of companies from countries considered “clean and green.” Provenance, safety, and transparency are all inherently built into these brands in the mind of the Chinese consumer.

But, not for long.

As domestic competition heats up, foreign firms will have no time to rest on their laurels. While a clean and green history might work today, by 2025 it may be obsolete. That means it’s critical for foreign agricultural companies to embrace innovation beyond current Government targets to stay relevant.

Metro Supermarkets is a great example of this. Their Star Farms program uses technology to add transparency and safety to the shopping experience. Using the Star Farms app, shoppers can scan QR codes to follow a fresh product’s lifecycle from seed to store. This includes information on who handled the product at every stage of its life. Other companies, notably in the wine industry, are playing with the same sorts of innovations.

 

 

With China, companies often get stuck on the massive numbers of consumers as a cash cow. Beyond the financial potential, though, there are real implications on the future market. Agriculture, food production, and provision are the most telling example of this. It’s truly incumbent on companies, especially those with knowledge and resources, to address these critical issues today. If not, that cash cow they’re all looking towards today will be withered and gone before they know it.