Chi­nese food firms look abroad to im­prove im­age

South Korea seen as a spring­board for com­pa­nies to ex­plore the in­ter­na­tional mar­ket and win con­sumers’ con­fi­dence on safety is­sues, re­ports Lyu Chang in Seoul

China Daily (Hong Kong) - - BUSINESS -

For a num­ber of years, the me­dia has been rid­dled with re­ports of the poor qual­ity of some Chi­nese food and bev­er­ages, rang­ing from in­fant milk for­mu­las and pork con­tam­i­nated by can­cer-caus­ing tox­ins or the use of ex­ces­sive amounts of ad­di­tives to wa­ter drawn from rivers con­tain­ing hun­dreds of dead pigs.

But a coll e c t i on of food com­pa­nies in the world’s largest ex­porter plans to change that per­cep­tion and prove that it can match qual­ity with quan­tity by qual­i­fy­ing for the cov­eted “Made in Korea” la­bel.

Nine Chi­nese food com­pa­nies, in­clud­ing Qing­dao NineAl­liance Group Co, Shang­hai TDL Food & Bev­er­age and Qing­dao Foods Co, plan to move into a food in­dus­trial com­plex in South Korea to have bet­ter ac­cess to the food mar­kets both in China and abroad.

Lo­cated in Ik­san, about 44 kilo­me­ters south of Seoul, the com­plex, known as Food­po­lis, will pro­vide food-re­lated re­search and de­vel­op­ment fa­cil­i­ties and lab­o­ra­to­ries with ser­vices through­out the process of food pro­duc­tion from con­tent de­tec­tion to pack­ag­ing as well as cre­at­ing res­i­den­tial ar­eas for work­ers for more than 160 in­ter­na­tional food en­ter­prises.

Of­fi­cials at Food­po­lis said they will pro­vide ad­min­is­tra­tive and le­gal sup­port as well as pref­er­en­tial poli­cies, in­clud­ing con­di­tional 50 years of lease ex­emp­tions to Chi­nese com­pa­nies to help them re­lo­cate to the zone.

De­tails on their in­vest­ments have yet to be worked out, said an of­fi­cial in charge of over­seas in­vest­ment at the State-owned agency for Food­po­lis, but th­ese com­pa­nies have all signed mem­o­ran­dums of un­der­stand­ing with South Korea’s Min­istry of Agri­cul­ture, Food and Ru­ral Af­fairs.

The deals could al­low the Chi­nese com­pa­nies to la­bel their goods as “made in Korea”, a move that the of­fi­cial said is cru­cial to re­gain­ing pub­lic con­fi­dence in China fol­low­ing a se­ries of food scan­dals.

Ear­lier re­ports said that one in 10 meals was cooked in China us­ing oil dredged from sew­ers. In 2008, a con­tam­i­nated milk scan­dal left six in­fants dead and an es­ti­mated 300,000 sick­ened.

Ex­perts said the pop­u­lar­ity of im­ported food in China is the driv­ing force be­hind the move, which has been fu­eled in re­cent years by fears of do­mes­tic food con­tam­i­na­tion.

“There’s a per­cep­tion in China that im­ported foods are of bet­ter qual­ity and of a higher stan­dard than do­mes­tic food,” said Chen Lian­fang, a se­nior an­a­lyst in the dairy sec­tor at Bei­jing Ori­ent Agribusi­ness Con­sul­tants Ltd. “So ‘Made in Korea’ prod­ucts have be­come more and more pop­u­lar in China and show the con­cerns over food safety.”

Shang­hai TDL Food & Bev­er­age Co Ltd, which spe­cial­izes in vitamin bev­er­ages, juices and dairy foods, boasts an an­nual rev­enue of $150 mil­lion. It signed an agree­ment last year with Food­po­lis, plan­ning to set up a fa­cil­ity there in or­der to co­op­er­ate with a Korean gin­seng com­pany.

“We want to de­velop and pro­duce a gin­seng-based bev­er­age. The col­lab­o­ra­tion will even­tu­ally broaden our port­fo­lio and strengthen our po­si­tion in the Chi­nese mar­ket,” the Shang­hai-based com­pany, a pro­ducer for Ja­panese brew­ing and dis­till­ing group Sun­tory, said in a state­ment.

As South Korean ro­man­tic soap op­eras ap­peal to more Chi­nese women, there is also a grow­ing ap­petite among the Chi­nese for Korean foods.

“I fol­low many Korean TV shows ev­ery week and am prob­a­bly in­flu­enced by that. Korean kim­chi and bibim­bap are among my fa­vorite dishes among all in­ter­na­tional cuisines,” said Elena Wang in a Bei­jing su­per­mar­ket where all kinds of Korean foods can be found.

Other Chi­nese com­pa­nies said they are sim­ply plan­ning to use South Korea as a spring­board for easy ac­cess to Korean and global mar­kets.

The Qing­dao Nine-Al­liance Group, one of China’s largest producers and ex­porters of chicken prod­ucts, said a pro­duc­tion plant in South Korea could help them get closer to the over­seas food mar­ket, tak­ing ad­van­tage of the coun­try’s ad­vanced tech­nol­ogy and trade ex­pe­ri­ence.

“Our pres­ence in South Korea will pro­vide a good op­por­tu­nity for us to take off as a global food com­pany be­cause South Korea has made free-trade agree­ments with many coun­tries, which would help spread our prod­ucts quickly world­wide,” said chief ex­ec­u­tive Wang He­ung Hu of the Qing­dao Nine-Al­liance Group.

South Korea has signed free-trade agree­ments with 47 coun­tries and is cur­rently ne­go­ti­at­ing with China. In con­trast, China has been build­ing 18 free-trade zones with 31 coun­tries and ar­eas and has signed free­trade agree­ments with 12 coun­tries so far.

The con­se­quence is Chi­nese food com­pa­nies will en­joy a higher com­pet­i­tive ad­van­tage than those at home with low­er­ing trade bar­ri­ers and the bet­ter ex­port ex­pe­ri­ence that South Korea has en­joyed with the US and Europe, ex­perts said.

“Chi­nese food com­pa­nies could ex­port their prod­ucts la­beled ‘Made in Korea’ not only to their do­mes­tic mar­ket but also to other coun­tries to ex­pand their food ex­ports where there is a grow­ing pref­er­ence for Korean food,” said Ahn Changgeun, se­nior deputy di­rec­tor of the Korea Na­tional Food Clus­ter Di­vi­sion at the Min­istry of Agri­cul­ture, Food and Ru­ral Af­fairs.

A sur­vey of 2,800 ur­ban fam­i­lies in China re­vealed that South Korea ranked sec­ond af­ter France in sat­is­fac­tion re­gard­ing the pro­cess­ing of food in the coun­tries of its ori­gin. And in the UK, Tesco Plc said, the de­mand for Korean food has in­creased by 140 per­cent over last year.

Chi­nese com­pa­nies in­clud­ing Shan­dong Baohua In­ter­na­tional Group, a ma­jor fer­til­izer maker and Jilin Sky-Scenery Food Co Ltd, which spe­cial­izes in corn-based prod­ucts, as well as in­ter­na­tional big food producers such as Canada’s SunOpta Inc, which spe­cial­izes in the sourc­ing, pro­cess­ing and pack­ag­ing of nat­u­ral and or­ganic food prod­ucts, and Ja­pan’s Jalux Inc, which spe­cial­izes in meals for the avi­a­tion in­dus­try, the cir­cu­la­tion of food ma­te­ri­als and duty-free shop op­er­a­tions, are all on the list.

So far, 88 com­pa­nies have signed the mem­o­ran­dum of un­der­stand­ing with Food­po­lis. Thirty-eight of them are nonSouth Korean com­pa­nies, in­clud­ing nine from China. The first stage of the en­ter­prise is ex­pected to be com­pleted by 2015, ac­cord­ing to Food­po­lis.

It is a com­monly held view that many Chi­nese food mak­ers have much to ac­com­plish in terms of qual­ity man­age­ment, tech­no­log­i­cal ca­pa­bil­ity and brand im­age.

The re­cent deals by Chi­nese meat pro­ducer Shuanghui In­ter­na­tional Hold­ings Ltd to buy the world’s big­gest pork pro­ducer, Smith­field Foods Inc, for $4.7 bil­lion in cash, the largest China-US takeover, to Bright Food (Group) Co Ltd’s pur­chase of Bri­tish ce­real com­pany Weetabix Ltd last year, were ef­forts by Chi­nese food com­pa­nies to make a name for them­selves glob­ally by ac­quir­ing renowned for­eign peers, said He Zhicheng, chief econ­o­mist at the Agri­cul­tural Bank of China.

But af­ter years of in­vest­ment in over­seas coun­tries, crit­ics said that China’s food sec­tor may have at­tached too much im­por­tance to the over­seas mar­ket.

“Build­ing a pro­duc­tion base in Korea may be one way to com­pete with food com­pa­nies on the in­ter­na­tional stage, but the ques­tion is whether they can fully learn the food tech­nol­ogy and safety pro­to­cols, an es­sen­tial fac­tor to help them im­prove food safety and di­rectly af­fect com­pe­ti­tion with other food com­pa­nies. Be­cause the Chi­nese have be­come savvy in choos­ing im­ported food, food com­pa­nies can’t win them over sim­ply with a la­bel,” added He.

The econ­o­mist added that some Chi­nese com­pa­nies in all sec­tors would be bet­ter off chan­nel­ing their cap­i­tal and ef­forts to­ward their own home mar­ket, which has seen a tremen­dous de­mand from its enor­mous pop­u­la­tion.

His words were echoed by Lian Ping, who said in­vest­ing in South Korea is a dou­ble-edged sword. Con­tact the writer at lvchang@ chi­

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