Beefing up China’s market

By Li Xuanmin Source:Global Times Published: 2017/7/9 17:18:39

High-priced imported US meat attracts Chinese beef-lovers, but challenges foreign rivals instead of domestic ones: experts

The first batch of imported US beef arrives at a warehouse of e-commerce platform Fruit Day in Shanghai in June. Photo: Courtesy of Fruit Day

 Starting from June 20, US beef is now permitted for exportation to China after the country's quality watchdog lifted a 14-year ban which was spawned by scare over mad cow disease. Over the past few days, imported US beef started being sold at major supermarkets and e-commerce platforms such as Sam's Club, Fruit Day and Tmall. Since US beef reentered the Chinese market almost two weeks ago, the Global Times has been speaking with several selling platforms, domestic suppliers and experts to find out the sales performance of imported beef and its influence on the domestic market. 

US beef, which recently reentered China after a 14-year import ban was lifted, seems to be satisfying some Chinese consumers' appetites despite a higher-than-expected price.  

"The first batch of imported US short rib sold out within the five days after June 26, the day it showed up on the shelves of the Sam's Club outlet in Beijing's Shijingshan district," a spokesperson, surnamed Li, from Wal-Mart Investment Co told the Global Times.

Sam's Club, a membership store under US retail giant Wal-Mart Store Inc, is the first physical store to sell beef from the US after shipment resumed.

Priced at 178 yuan ($26) per jin (500 grams), the first batch of beef is vacuum packed and arrived in China by air within 30 hours of export from the US, Li said, adding that the beef is subjected to "limited availability."

The second batch of US beef is expected to go on sale "soon," with more selections of beef cut set to become available, such as rib eye steak and sirloin, she said.

In addition to physical store channels, China's major e-commerce platforms also started to sell US beef a few days ago.

At grocery O2O platform Fruit Day, the imported US beef is priced between 158 to 178 yuan for every 200 grams. A spokesperson from the company told the Global Times on Thursday that "sales have been robust" ever since the beef debuted at the platform on June 30, but she did not disclose the exact number.

Alibaba-backed business-to-customer marketplace Tmall is also one of the first online shopping websites to import US beef. So far, the platform has seen 158 packages of specific US beef rib that weigh 907 grams being sold at 378 yuan.

"The US beef has high marbling and looks good, so why not give it a try? As a beef-lover, I'm excited to have more options on my dining table," an online meat shopper, who bought the US beef rib on Tmall, told the Global Times on the condition of anonymity.

Another consumer, a 30-year-old Beijing resident surnamed Wang, agreed. "When I fried the steak, I could smell the flavor, and it tasted delicious, juicy and a little bit sweet," she told the Global Times.

But despite the tempting flavor, Wang noted that she would not buy US beef too often because "the price is not very affordable."

High price, high-end market

Prior to its market arrival, domestic consumers expected the imported beef to be sold at a relatively affordable price, as the beef produced and sold in the US is much cheaper than that produced and sold in China.

A report by the US Department of Agriculture showed that every 45.4 kilograms of beef is charged at $116 to $126 in the US, which translates to 8 yuan to 10 yuan per gram.

"Domestically grown beef is priced at 30 yuan per gram on average," Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultancy, told the Global Times on Wednesday.

"Considering the hefty price, which is amplified by logistics costs and taxes as well as the detailed requirements of supply, imported beef from the US is therefore targeted at China's middle- and high-end markets'', said Ma.

Since June 20, US beef has been allowed to be sent to China as part of the China-US 100-day action plan for trade cooperation. However, there is a long list of criteria that causes the imported beef to be of high standard and therefore of high price and limited supply.

For example, only boneless and bone-in beef of cattle aged under 30 months may be imported, according to a statement on the website of the General Administration of Quality Supervision, Inspection and Quarantine of China.

Diversified competition

China's beef market has expanded rapidly over the past decade as consumers have actively been looking for healthy diets.

In 2016, imports of beef into China skyrocketed to $2.5 billion from $274 million in 2012, according to the US Department of Agriculture.

During the time when US beef was absent from the Chinese market, other foreign rivals, including Australia, Brazil, Argentina and Uruguay, claimed firm stake of China's meat market, especially in the high-end market.

Therefore, "US beef is placed at a disadvantaged position in the import market compared with other foreign competitors because of its low market recognition and late start," Ma said, adding that the current price of US beef is also slightly higher than that of Australian and Brazilian beef.

At Tmall, an Australian filet steak is sold at 111 yuan for 500 grams and those imported from Brazil are priced at 141 yuan for 500 grams.

Nevertheless, the spokesperson from Fruit Day stressed that US beef has its own unique characteristics because cattle in the US are fed with grain.

"Those characteristics make US beef different from what already exists in the market, most of which are grass-fed … In this regard, US beef is more tender and can be cooked quickly," Ma said.

Although Australian beef is currently dominating supplies to high-end steak houses, the Fruit Day's spokesperson predicted that more US beef would sneak onto those restaurants' menus in the near future.

And in the long-term, as US beef import mechanisms begin setting up and pricing moves to a cheaper and more transparent manner, it would gradually catch up with those early foreign starters, experts say.

As for domestic competitors, the restart of US beef imports may not affect them that much, according to Li He, chairman of Inner Mongolia Kerchin Cattle Industry Co, one of the largest local beef suppliers.

"Actually, China's beef market has experienced several peak periods due to increasing imports from some world-leading beef production companies, but none of them have had a devastating effect on the domestic market," Li told the Global Times.

Ma noted that domestic firms can also adopt the strategy of "diversified competition."

"Like other foreign rivals, US beef is shipped either via air or sea transport, which takes quite a long time, meaning that almost all packages are delivered in the form of frozen meat. On the other hand, local suppliers are able to deliver fresh meat in a short time, catering to domestic consumers' preferred choice of nutritive value and taste," he said.

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