Industry Update July 11 th, 2018 Market Research for the Promotion of Argentine Beef in China
China s Beef Industry a snap shot Fragmented, under supplied but improving Overview China s beef industry is fragmented. 11 million producers produce 53 millions heads of cattle and an industry output of 7.2M Tonnes of beef in 2016 with a value of USD 73million. (Source: GIRA) Typical production systems are grass feeding (majority) and feed lotting (emerging), where animals are fed for 7 months to 500kg and 95% of China s beef farmers are small (<10 head). Down stream segment is consolidating, investments in processing plants shows an upward trend and there is a trend to deal with end users directly, primarily through e-commerce 2
China s Market Access Map 16 Countries enjoy access and more will follow 16 countries are allowed to export beef products to China: Argentina, Australia, New Zealand, Chile, Costa Rica, Uruguay, United States, Canada, Brazil, Ireland, Mexico, Hungary, Belarus, Mongolia, UK and South Africa Source:AQSIQ 4
Frozen beef import volumes 2017 Imports of frozen beef in 2017 were 688,530 tonnes valued at 2.9 Billion USD The leading five importers Brazil (29%), Uruguay (22%), Australia (20%), New Zealand (13%) and Argentina (12%), totaling 95% of imports Origin Import volume (Tonne) Import value Average price (Million USD) (USD/Tonne) Share (%) Brazil 197,565 872 4,414 29 Uruguay 195,874 641 3,273 21 Australia 109,840 593 5,399 20 New Zealand 79,107 382 4,829 13 Argentina 86,334 370 4,286 12 Canada 8,977 79 8,800 2.64 U.S. 1,937 20 10,325 0.67 Costa Rica 3,754 14.9 3,969 0.50 Chile 4,113 14.6 3,550 0.49 South Africa 967 4.3 4,447 0.14 Mexico 33 0.2 6,061 0.01 Ukraine 27 0.13 4,815 0.004 Hungary 2 0.009 4,500 0.0003 Total 688,530 2,991 Note: market share is based on import value Argentina 12% New Zealand 13% Australia 20% Others 4% Brazil 29% Uruguay 22% Frozen beef imports by origin Source:China customs data 5
Average beef price export to China U.S. beef shows the highest price for both chilled and frozen beef among all the contrives New Zealand has the the lowest price for chilled beef, approximately 3 times lower than U.S. chilled beef Uruguay has the lowest price for frozen beef, approximately 3 times lower than U.S. frozen beef Country Chilled (USD/Tonne) Frozen (USD/Tonne) U.S. 19,030 10,325 Canada 8,800 Mexico 6,061 Australia 11,166 5,399 New Zealand 6,596 4,829 Ukraine 4,815 Hungary 4,500 South Africa 4,447 Brazil 4,414 Argentina 4,286 Costa Rica 3,969 Chile 3,550 Uruguay 3,273 USD/Tonne 20.000 18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0 Chilled Frozen Average beef price export to China 6
Chilled beef import by origin 2017 Chilled beef imports were 6,558 tonnes valued at USD 73.6 Million The three leading importers are Australia (90%), USA (7%) and New Zealand (3%) Chilled beef creates a halo of premium image around countries with chilled access Origin Import volume (Tonne) Import value Average price (Million USD) (USD/Tonne) Share (%) U.S. 7% New Zealand 3% Australia 5,911 66 11,166 90% U.S. 268 5.1 19,030 7% New Zealand 379 2.5 6,596 3% Australia 90% Total 6,558 73.6 Chilled beef imports by origin Note: market share is based on import value Source:China customs data 7
Chinese beef consumption Steady consistent consumption growth Current consumption level is around 6.5kg per capita beef in 2017 (MLA) expanding to 8.1kg per in 2027 (GIRA) Beef consumption is forecast to grow to 7kg per head by 2022 creating a demand of 10 m tonnes and increase of 1M tonnes on 2017 The Chinese Government is increasing pressure on food safety and traceability, this will have some effect on the grey channel but it will remain as an important source of imported beef. Kg 9 8 7 6 5 4 3 2 1 0 2012 2013 2014 2015 2016 2017 2022f 2027f Beef per capita consumption Source: AAC interviews and analysis, and MLA reports 2018 9
Consumption trends First Tier cities dominate consumption First Tier cities such as Beijing, Shanghai and Guangzhou are the largest cities that consume beef. 50% of First cities respondents consume beef once to twice a week compared to a 38% level in other cities Tier 1 cities 50% Offline modern retail plays an important role in the beef market. 42% of survey respondents purchase beef from offline modern retailers E-commerce is an increasingly important platform in China, particularly for imported beef. Although it is still a market segment accounting for a small market share it is expected to grow at a faster rate than traditional retail (at around 15.9% compared to 9.5% in offline modern retails) (Source: MLA) Other cities Modern retails 38% 0% 20% 40% 60% Comparison of beef consumption frequency between First Tier cities and other cities in China 42% Traditional market 28% Specialist 19% Online 11% 0% 10% 20% 30% 40% 50% Source: AAC interviews and online survey, MLA reports Where beef consumers purchase beef 10
Reasons to purchase beef The reason why you purchase beef Health and taste are the most popular reason why consumers purchase beef The least important reason % 50 45 47 45 Not very important reason Generally important reason Important reason % of important reason 40 35 30 25 20 15 38 35 The most important reason 24 10 5 0 Health Taste Diversity Beef make you more strong Easy to cook at home Reason of purchase beef Source: face to face interview and online survey 12
Beef purchase location Preferred beef purchase location and purchase frequency? 42%(222 out of 531) respondents prefer to purchase beef in modern retail/ supermarket Face to face was in supermarkets, traditional markets still dominate for beef purchases locations. Online is an emerging channel for beef especially for fresh/chilled beef, due to the cold chain logistic limitations % Once a month Twicea month 3 timesa month 4 times a month Others Specialist butcher 19% Traditional market 28% On line 11% Modern retail/supermarke t 42% % of beef purchase frequency at location 45 40 35 30 25 20 15 10 5 42 30 40 19 36 26 31 27 Beef purchase location Source: face to face interview and online survey 0 Modern retail/supermarket On line Specialist butcher Traditional market Beef purchase location 13
Criteria to purchase beef What is the most important purchase criteria when purchase beef Quality is the most important criteria, followed by price. First Tier cities focused on quality whereas Tier 2 cities have a closer quality : price ratio % 80 % of the most important criterion 70 60 50 40 30 20 71 44 34 27 10 0 Quality Price Traceability Country of origin Beef purchase criteria Source: face to face interview and online survey 14
Country of origin Is the country of origin important when purchasing beef? 60% respondents know the country origin of the beef products they purchase 75% respondents believe country origin is very important Do not know 40% Know 60% Unimportant 25% Important 75% Awareness of country origin Important of country origin Source: face to face interview and online survey 15
Awareness of Argentina Consumers awareness and association with Argentina? 86% of respondents have heard of Argentina 23% of respondents have had the experience of consuming Argentine wine Many respondents know Argentina because of the football Team (60%) Do not know 14% Purchase Argentina wine 23% Know 86% Others 65% Purchase Argentina beef 12% Awareness of Argentina Association with Argentina Source: face to face interview and online survey 16
Experience with Argentine beef Have consumers tried Argentina beed and are consumers interested in trying Argentine beef? 18% of respondents have tried Argentine beef There is a good interest to try Argentine beef as 64% of respondents would like to try Some of the respondents mentioned that they may have tried Argentina at restaurants without their knowledge, since some of the restaurants only said it is imported beef. Have tried 18% Have not tried 82% Are not interested (36%) Interest 64% Experience with eating Argentina beef Interest in Argentina beef Source: face to face interview and online survey 17