David Cameron plans to double business between the UK and China within five years – but what part will grocery exports play, asks Alex Beckett
Among the 43 delegates flying the flag for British business in Beijing this week, the food and drink representatives cut lonely figures.
The majority of seats on David Cameron's plane to the Far East were filled by folk from the financial and energy sectors with only Diageo, Associated British Foods and Tesco flying the flag for the UK grocery industry.
But don't be fooled by the lack of critical mass: UK food and drink is set to form a key plank in the prime minister's plans to double business between the UK and China to £62bn within the next five years as testified by the fact that Tesco's Happy Valley store was Cameron's first port of call when he arrived in Beijing.
Manufacturers "must get their act together" and grasp the opportunity, says the Food and Drink Federation. Given the foundations laid by the likes of Tesco, the burgeoning demand for Western products and the fact it currently ranks a lowly 26th in the ranks of the UK's biggest export markets for food and drink [HMRC], that opportunity is sizeable. But so, unfortunately, are the challenges.
The key, say experts, is to develop a deeper understanding of what Chinese consumers actually want.
China's economy is expanding at 9.6% a year, more than 10 times faster than the UK's, and its burgeoning middle classes are developing increasingly cosmopolitan tastes. "The acceptance for dairy products has increased through higher consumption of products such as pizza," says Simon Waring, MD of Green Seed Group, which succeeded Food From Britain and now helps exporters all over the world crack overseas markets. "Supplying to high-end restaurants and hotels is also a huge opportunity."
Another surefire hit is perennnial export chart topper, whisky, and the Scots will be drinking a few drams in honour of Vince Cable this week after the business secretary thrashed out an agreement with the Chinese stipulating that only whisky produced in Scotland can be marketed as Scotch to Chinese consumers a deal expected to boost sales by tens of millions of pounds a year.
"It's a huge coup for Scotland but British confectionery, snack foods and other alcoholic drinks would also be suited to the Chinese market," says Charlotte Lawson, membership services director at the FDF and former Food from Britain director.
There is also an opportunity to tap key cultural trends, says Giles Blackburne, director of the China Britain Business Council. "The Chinese are very big on gift-giving, which could favour luxury confectionery and alcohol, although they don't have a particularly sweet tooth in terms of national palate," he says.
"They also have a deep-rooted belief in protecting the family and are pre-disposed to buy health and nutrition products. British products are held in high regard in this sense but it is essential to match products to local tastes."
Identifying demand for your product is just the beginning, however. The next challenge is to secure distribution, something that should be easier now a number of major Western retailers have a presence in China, including Tesco, Wal-Mart and M&S.
"Having familiar retailers will definitely help companies gain a foothold in the Chinese market as they will work with customary sales strategies," says Lawson.
In contrast to the increasingly strained supplier/buyer relationships in the UK, dealing with the likes of Tesco and Wal-Mart in China is generally a more pleasant experience, adds Waring. "Stores are locally managed businesses keen to differentiate themselves from burgeoning competition by working with new suppliers. The relationship with the stores is likely to be an easier experience."
Just don't mention China's record on human rights. Amnesty International has expressed disappointment with the government's reluctance to confront China over the issue, although it agrees British companies could become a force for good if they do set up shop or a factory in the People's Republic.
"We appeal to British companies to abide by their CSR policies and keep their eyes open to human rights violations," says Amnesty International spokesman Niall Couper. "In doing this, we believe they can become beacons of good practice on a worldwide scale."
However, he adds, without a vigilant attitude, it is "far too easy" for a company's Chinese base to slip into bad practice to the potential detriment of its reputation. He cites Walmart, which six years ago came under fire for allegedly turning a blind eye to abusive conditions in a Chinese toy factory.
A more practical challenge lies in the size of the country, which is 44 times bigger than the UK. A one-size-fits-all distribution strategy simply would not work, claims Blackburne. China now boasts the second-largest road network in the world but logistics are under-developed and distribution between the provinces would be problematic for exporters, he says.
"Strong domestic competition and the sheer size of the country will mean that a foreign company needs to set up an office in China if it wants to reach mass market," he adds.
Of course, that doesn't necessarily have to be on the mainland. Hong Kong remains a tried and tested way in, notes Lawson. As the UK's fastest-growing export market, Hong Kong, with its legacy of Empire, is a "fantastic entry point" she says. It has been invaluable in acting as an "educational bridge" to the superpower, giving Britain the means to learn about the market's idiosyncrasies, she adds.
One such idiosyncracy is the lucrative market in copycat products. "It is vital for British exporters to patent their products in China," says Lawson. "Copyright is a point that must be top of mind."
It was certainly on export broker Fresh Marketing's mind prior to the launch of posh crisp brand Burts Chips into China last week. In what is already looking like a export success story, the Devon-based crisp brand hit shelves of a Shanghai supermarket chain after a meeting with the chain's boss at Sial last month.
As well as trademarking the brand, Burts has had to extend the crisps' shelf life by an extra month and is embarking on a tour of the Far East next year in search of other export opportunities.
"The owner of the chain was convinced Chinese consumers will be more inclined to buy innovative, high-end British products but the real opportunity is among the growing ex-pat community who are less strapped for cash than the locals," says Barney Mauleverer, director at Fresh Marketing. "Once ex-pats have been seen with your products, Chinese white collar workers will generally follow."
As many manufacturers will follow in Burts' footsteps. With UK food inflation currently running at 4.4%, the domestic market remains challenging and there has never been a better time to consider the relatively untapped Chinese market. Next time Cameron takes a delegation to China, food and drink players could well occupy a few more seats on the plane.
Among the 43 delegates flying the flag for British business in Beijing this week, the food and drink representatives cut lonely figures.
The majority of seats on David Cameron's plane to the Far East were filled by folk from the financial and energy sectors with only Diageo, Associated British Foods and Tesco flying the flag for the UK grocery industry.
But don't be fooled by the lack of critical mass: UK food and drink is set to form a key plank in the prime minister's plans to double business between the UK and China to £62bn within the next five years as testified by the fact that Tesco's Happy Valley store was Cameron's first port of call when he arrived in Beijing.
Manufacturers "must get their act together" and grasp the opportunity, says the Food and Drink Federation. Given the foundations laid by the likes of Tesco, the burgeoning demand for Western products and the fact it currently ranks a lowly 26th in the ranks of the UK's biggest export markets for food and drink [HMRC], that opportunity is sizeable. But so, unfortunately, are the challenges.
The key, say experts, is to develop a deeper understanding of what Chinese consumers actually want.
China's economy is expanding at 9.6% a year, more than 10 times faster than the UK's, and its burgeoning middle classes are developing increasingly cosmopolitan tastes. "The acceptance for dairy products has increased through higher consumption of products such as pizza," says Simon Waring, MD of Green Seed Group, which succeeded Food From Britain and now helps exporters all over the world crack overseas markets. "Supplying to high-end restaurants and hotels is also a huge opportunity."
Another surefire hit is perennnial export chart topper, whisky, and the Scots will be drinking a few drams in honour of Vince Cable this week after the business secretary thrashed out an agreement with the Chinese stipulating that only whisky produced in Scotland can be marketed as Scotch to Chinese consumers a deal expected to boost sales by tens of millions of pounds a year.
"It's a huge coup for Scotland but British confectionery, snack foods and other alcoholic drinks would also be suited to the Chinese market," says Charlotte Lawson, membership services director at the FDF and former Food from Britain director.
There is also an opportunity to tap key cultural trends, says Giles Blackburne, director of the China Britain Business Council. "The Chinese are very big on gift-giving, which could favour luxury confectionery and alcohol, although they don't have a particularly sweet tooth in terms of national palate," he says.
"They also have a deep-rooted belief in protecting the family and are pre-disposed to buy health and nutrition products. British products are held in high regard in this sense but it is essential to match products to local tastes."
Identifying demand for your product is just the beginning, however. The next challenge is to secure distribution, something that should be easier now a number of major Western retailers have a presence in China, including Tesco, Wal-Mart and M&S.
"Having familiar retailers will definitely help companies gain a foothold in the Chinese market as they will work with customary sales strategies," says Lawson.
In contrast to the increasingly strained supplier/buyer relationships in the UK, dealing with the likes of Tesco and Wal-Mart in China is generally a more pleasant experience, adds Waring. "Stores are locally managed businesses keen to differentiate themselves from burgeoning competition by working with new suppliers. The relationship with the stores is likely to be an easier experience."
Just don't mention China's record on human rights. Amnesty International has expressed disappointment with the government's reluctance to confront China over the issue, although it agrees British companies could become a force for good if they do set up shop or a factory in the People's Republic.
"We appeal to British companies to abide by their CSR policies and keep their eyes open to human rights violations," says Amnesty International spokesman Niall Couper. "In doing this, we believe they can become beacons of good practice on a worldwide scale."
However, he adds, without a vigilant attitude, it is "far too easy" for a company's Chinese base to slip into bad practice to the potential detriment of its reputation. He cites Walmart, which six years ago came under fire for allegedly turning a blind eye to abusive conditions in a Chinese toy factory.
A more practical challenge lies in the size of the country, which is 44 times bigger than the UK. A one-size-fits-all distribution strategy simply would not work, claims Blackburne. China now boasts the second-largest road network in the world but logistics are under-developed and distribution between the provinces would be problematic for exporters, he says.
"Strong domestic competition and the sheer size of the country will mean that a foreign company needs to set up an office in China if it wants to reach mass market," he adds.
Of course, that doesn't necessarily have to be on the mainland. Hong Kong remains a tried and tested way in, notes Lawson. As the UK's fastest-growing export market, Hong Kong, with its legacy of Empire, is a "fantastic entry point" she says. It has been invaluable in acting as an "educational bridge" to the superpower, giving Britain the means to learn about the market's idiosyncrasies, she adds.
One such idiosyncracy is the lucrative market in copycat products. "It is vital for British exporters to patent their products in China," says Lawson. "Copyright is a point that must be top of mind."
It was certainly on export broker Fresh Marketing's mind prior to the launch of posh crisp brand Burts Chips into China last week. In what is already looking like a export success story, the Devon-based crisp brand hit shelves of a Shanghai supermarket chain after a meeting with the chain's boss at Sial last month.
As well as trademarking the brand, Burts has had to extend the crisps' shelf life by an extra month and is embarking on a tour of the Far East next year in search of other export opportunities.
"The owner of the chain was convinced Chinese consumers will be more inclined to buy innovative, high-end British products but the real opportunity is among the growing ex-pat community who are less strapped for cash than the locals," says Barney Mauleverer, director at Fresh Marketing. "Once ex-pats have been seen with your products, Chinese white collar workers will generally follow."
As many manufacturers will follow in Burts' footsteps. With UK food inflation currently running at 4.4%, the domestic market remains challenging and there has never been a better time to consider the relatively untapped Chinese market. Next time Cameron takes a delegation to China, food and drink players could well occupy a few more seats on the plane.
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