The China opportunity
Host: Anna Plains Station
Written by David Stoate – Owner/Manager, Anna Plains Station.
Plenty has been heard in recent years about the opportunity that China represents for Australian business. The northern beef industry is at the centre of this opportunity.
The Department of Agriculture and Food in Western Australia has estimated that an increase in per capita beef consumption of 1kg per head in China would require an additional 6.5 million head of cattle to meet the demand. This represents approximately 25% of the existing Australian cattle industry. A one kilogram per person increase is quite a modest increase which in reality illustrates the enormity of the opportunity.
I recently had the opportunity to travel to China to see first-hand these opportunities. Traveling around Beijing, Shanghai, and Chengdu certainly confirmed all the hype. Importers were keen to source product as quickly as possible and prices in supermarkets we visited had all the visitors salivating at the prospects.
Some of the important factors to consider about the potential market for food products in China are:
- Food safety: Food safety is a critical element of exporting agricultural products to China with Australia well positioned to capitalise on this trend. The recent demand in Australian supermarkets for infant formula is a good illustration. A reputation for food safety will command a premium in China and the Northern beef industry is well placed to capitalise.
- Brands: Consumer brands for food products will also be an important element of the China opportunity. An obvious way to convey the food safety component of the product offering will be through a brand. Traditionally the Australian beef industry has not been effective in branding strategies. Regional Australian brands will be important in addition to national brands.
- E-commerce: The biggest e-commerce companies in the world are in China with most consumers accessing them via their smart phones. E-commerce will be equally important to the Australian beef industry as it is to other consumer good sectors.
Capturing opportunities in China will be challenging for the northern beef industry but the rewards will ultimately be substantial. It will take persistence, determination, strong partners, time, and patience to be successful in China. In the interim, it will also be important for the industry to not ignore existing markets that have served us well over the last twenty years or so. All of these markets have strong growth potential in their own right.
The milk prices works out to be $15 per litre.
The beef is a piece of wagyu – the price is 1380RMB for 500 grams which works out to be $600/kg.
Annabelle Coppin of Yarrie Station and myself in China.