A quiet revolution is taking place in China’s agriculture sector which is likely to be a game changer for its rural economy and a window of opportunity for global brands.
he appetite for organic produce has swelled in recent years due to a long succession of high profile food safety scares, with a year-on-year increase in pesticide-free consumption of 30% in 2011.
Consumer confidence is at an all-time low, fuelled by food scandals exposed during in 2011 including cabbages sprayed with formaldehyde and milk laced with mercury. The most damaging episode occurred in 2008 when six infants died after consuming baby formula contaminated with melamine. The Chinese government recently proposed a five-year food-safety plan to streamline regulations and simplify food labeling. These reforms offer a green light for some of the sector’s big players to enter the market.
Earlier this year, Nestle and Coca-Cola made further inroads into the Chinese agriculture sector and will pump in a combined $700million over the next five years. A surprising byproduct of China’s effort to attract foreign direct investment (FDI) in agriculture has been the emergence of tech companies with no prior experience of food production. Cash-rich Lenovo, the world’s second largest maker of PCs has set up plantation and food processing divisions and Foxconn, who manufacture the iPad and Playstation, are also venturing into small-scale food production. Foxconn is already the largest private sector employer in the world’s most populous nation.
Capital-rich international companies have the leading edge on technology and specialist staff and for China’s growing high-end consumers it is all about trust and credibility. Due to high prices organic food in China represents less than one percent of total consumption but in a country with over 1.3billion hungry mouths to feed, this is still a significant market – and likely to continue its upward trajectory.
By Ray Montgomery
