ChinaNews Vol 5-12.pdf · DQY rules the roost in modern poultry industry p.49 Origin Agritech...

ChinaNews

FOOD & FOOD INGREDIENTS REVIEW

Sept/Oct 2012

TABLE OF CONTENTS

Sept/Oct 2012 www.giract.com

p.1 Editorial

Food Industry News

p.3 Producers see red over ‘wine subsidies’

p.4 China’s thirst for wine boosts European

producers

Imported wine consumption up

Average wine consumption

p.5 Females emerge as key fast food

consumer in China

Australian cows to China

p.6 China’s food safety is a major problem

p.7 China fattens pig farms to tame pork

prices

p.8 Scottish food ambassadors target China

p.10 What are the ecological costs of China’s

future food imports?

p.12 Chinese firms ramp up presence in

Thailand

p.15 China’s import of Chilean fruit on the rise

p.16 Want to grow a pig?

p.17 Chinese restaurant chains face challenges p.18 Pesticide puts crab food safety at issue

China- Market Access

p.19 Green fingers and green houses

p.21 China overtakes US as largest crop

importer

p.23 China is UN’s valuable partner for food

security

p.24 Jumbo shrimp on the block

p.25 Food packaging fails safety tests failed in

China

Functional and Organic Foods

p.26 Nutrition information obligatory

p.28 S. Korean ginseng producer to open Jilin

plant

p.31 Haute herbs experience

Ingredient News

p.32 New ingredients approved

CP Kelco appoints Azelis as exclusive

distributor for China

Firmenich opens R&D center for

fragrances, flavors and ingredients in

Shanghai

p.33 Ingredient prices

Regional News

Ningxia

p.35 Helan emerging wine region

Company News

p.36 Wahaha runs to buy British snack brand

KPU

Wuliangye invests in expansion

Distell buys majority stake in Chinese

liquor distributor

p.38 Lenovo acquires third distillery

From IT to distilled

Qingdao to start new plant in Jiangxi

China’s first wine entrepreneur

Maotai, the national liquor?

Bright’s Guo complains and needs to

recant immediately

p.40 Menguiu to increase sourcing raw milk

Chinese eye Tasmanian dairy farms

p.41 Bright Dairy removes cheese with banned

additinve from shelves

Bright Dairy recalls baby product for

banned additive in latest goof

p.43 Synutra to invest in French dairy project

p.44 Darfield’s first shipment off to China

(Table of Contents continued on next page)

ChinaNews

FOOD & FOOD INGREDIENTS REVIEW

Sept/Oct 2012

TABLE OF CONTENTS

Sept/Oct 2012 www.giract.com

Company News (Contd)

p.45 Yili launches breakfast cheese

Wantwant becomes dairy company

Nestle launches nationwide health

education programme for elderly people

Nestle sees 20% growth in China

p.46 Danone to be settled in Sichuan

Pepsico funding 16 schools in 15 Chinese

cities

Chef Kong divests from Weiquan

Maclean’s targets international growth

DQY rules the roost in modern poultry

industry

p.49 Origin Agritech inaugurates Xinjiang corn

seeds processing centre

p.50 Cargill finds a sweet spot in China

p.51 Kellogg Company and Wilmar

International announce China joint

venture

p.53 KFC vows to pursue expansion in smaller

markets

Traditional News

p.54 Top soy sauce producers 2012

p.55 Soy sauce production

Over 30% of Chinese consume too much

aluminium

Delicacy is no longer a piece of cake

Focus Topic

p.57 Shocking trials

p.60 Hunan denies kids used in GM food test

Scientists decry rice experiment on

children

p.61 GM rice test researcher suspended from

work

Upcoming Event

Glossary

mio '000 000

bio '000 000 000

crore '0 000 000

k '000

lakh '00 000

t tons

kt '000 tons

lpd litres per day

klpd kilo litres per day

tpa tons per annum

tpd tons per day

tph tons per hour

tpm tons per month

cpd cases per day

JV Joint Venture

M&A Merger & Acquisition

pa per annum

Sensex Stock exchange index

p.62 Upcoming events

Sept/Oct 2012 www.giract.com Page | 1

ChinaNews FOOD & FOOD INGREDIENTS REVIEW

Editorial

The period covered by this issue of ChinaNews has been one characterised by public outrage. The first

outrage was caused by a publication by Greenpeace about tests on the digestion of genetically

engineered rice in children, supposedly having been conducted in Hunan, backed by the American

USDA. When we read the rapidly growing news stream about this issue, we decided to make it a

Special Focus topic, as we often do with issues that are extensively discussed in the media. Very much

to our surprise, the publication stream stopped quite suddenly, never to be resumed. As can be read in

the Special Focus (we do not easily come back on a decision like that), the cause of events was

exceptionally quick, from the first publication, to public outcry, official denial, investigation to putting

someone under investigation. Then this topic became very quiet. It is obvious that organisations

involved want to bury this incident as quickly as possible and the news that someone may be charged

seems like an easy way out by pinpointing a scapegoat, rather than fully investigating the course of

events.

The second bout of outrage lasted much longer, and has still not subsided at the time of writing these

lines. Bright’s CEO, Mr. Guo Benheng, has given an interview in the media in which he ventured to

complain about what he believed to be excessive quality checks by the health authorities. Such checks

have become standard in the wake of the never ending stream of food safety incidents in China.

Mr. Guo made a bold statement during that interview, stating that ‘they [the authorities] may check

you to death’. This statement itself already aroused indignation in the media and the public. However,

the story quickly evolved as a classic Greek drama, and Mr. Guo saw his hubris punished by two food

safety incidents involving products by Bright. We do not know what happened to Mr. Guo (he is

probably hiding on a far away island, in the deepest cave of China, or in a monastery in the

Himalayas), but it must be a nightmare for Bright’s PR officers. This is so bad that no apology can

suffice. Mr. Guo will have to resign, but we are still waiting for that news, so we need to keep up the

suspense until the next issue. The photograph still shows Mr. Guo in all his glory, but the cartoon

depicts him as ‘blowing up a cow’ (chui niu), which is a Chinese slang expression for boasting. It is as

if this expression was coined with Mr. Guo in mind.



Editorial

The sad conclusion of both incidents is that in spite of all the rhetoric about improvements in food

safety, the fundamental structural problems are still unsolved. A semi-government research institute is

implicated in a scandal involving trials on children and the CEO of a huge state owned enterprise

behaves as if he cannot be touched by law. Money seems to be the big motivating force in both cases,

as is illustrated by one of the cartoons with this Editorial. The entrepreneur is milking the cow for

money, while ‘dairy specifications’ has to sit aside as an old man who has nobody’s attention. The

trials with the engineered rice will undoubtedly have been accepted with a substantial fee. Bright is

one of China’s top food companies, with a growing international presence. In particular, Bright’s

recent international acquisitions have made it the pride of the nation. However, that is not enough to

justify the lax attitude to food quality and arrogant attitude towards quality inspections.

This may be a small, but still significant, ‘bright’ spot in all this misery: Chinese consumers and

journalists are no longer the sheep that follow their leader or can be made to follow the dog. They are

aware of their rights and articulate of their indignation. Even before the problematic products, Mr. Guo

was fiercely criticised for his remarks. Although the Hunan authorities tried to mitigate the accusations

at first, they at least had to make a gesture by ‘finding’ a culprit. Chinese leaders need to appease

public opinion, lest it turn against them.

Is this then a lost period in the history of the Chinese food industry? Absolutely not. It is booming as

usual and the remainder of these pages are dedicated to reporting all this to our readers.

ChinaNews is published every 2 months

by:

GIRACT 24 Pré Colomb

1290 Versoix-Geneva

Switzerland

Tel +41 22 779 0500

Fax +41 22 779 0505

[email protected]

www.giract.com



Food Industry News

Producers see red over 'wine subsidies'

The government has been asked to investigate if

European winemakers are being subsidized and

dumping their produce in China, a move analysts

said is Beijing’s latest response to the European

Union’s rising trade protectionism against China.

The China Alcoholic Drinks Association asked

the Ministry of Commerce to launch an

investigation into wine imports from the EU, said

Wang Zuming, secretary-general of the

association’s wine sub-branch, on Monday.

"We have noticed a clear intention to sell

European wines in the Chinese market at below-

cost price", Wang said.

"There is also sufficient evidence to show that the

EU has heavily subsidized its wine industry and

exporters”.

Some analysts view the move as a series of

responses to the EU’s possible probe of China’s

solar panel exports.

European solar companies recently asked the

European Commission, the executive arm of the

EU, to probe Chinese exports to the EU. The

commission will decide in September whether to

launch the probe.

China’s wine complaint came after its four major

solar companies, including New York-listed LDK

Solar Co, asked the government last week to start

anti-dumping and anti-subsidy probes into

polysilicon exports from the EU.

The EU produces about 16 mio t of wine a year

and accounts for 69% of global output.

Wine imports from the EU to China in 2008 were

35.9 mio litres, but the figure rose to 169 mio

litres in 2011, the association said.

(Continued in next column)

Producers see red over 'wine subsidies' (Contd)

European wine producers increased their share of

the Chinese market to 14.32% last year, from

4.94% in 2008. During the first quarter, wine

imports from the EU, mainly from France, Spain,

and Italy, surged by 24% from a year earlier.

A source from the Ministry of Commerce told

China Daily, on condition of anonymity, that the

government will probably start an investigation

"very soon”.

"China has the capacity to fight back if the EU

launches an investigation into China’s solar

products”, Zhou Shijian, a senior trade expert at

Tsinghua University, said.

"Such an investigation will do more harm than

good to the EU”, he said, without elaborating.

The United States and the EU have been

aggressive in launching trade probes into Chinese

goods amid the global financial crisis but China is

learning to fight back, Zhou said. "China is

getting wiser and more mature in protecting its

own commercial interests under the World Trade

Organization framework”.

US solar power manufacturers, including

SolarWorld USA, accused Chinese solar

companies last year of selling panels in the US

market at prices that were far below what US-

made panels could be sold for. In May, the US

announced anti-dumping duties on Chinese solar

makers ranging from 31% to 250%.

China then announced it would launch an

investigation into US polysilicon exports.

Conflicts grow As the debt crisis worsens and unemployment

rises, the EU is targeting Chinese exports, an

analyst said.

(Continued on next page)



Food Industry News

Conflicts grow (Contd)

Jonathan Holslag, research director at the Brussels

Institute of Contemporary China Studies, said

trade conflicts are "inevitable” but a spiral of

retaliation is in no one’s interests. "It is time for

China and the EU to sit down to hold candid and

straightforward discussions on where we are and

where we need to go”, Holslag said.

The EU joined the US and Japan in March to

launch an appeal to the WTO against China’s

export policy on rare earths. The European

Commission said it was considering charging

duties on made-in-China products to offset

alleged subsidies. The commission believed that

European companies were hesitant about asking

Brussels to take protective measures for fear that

China would retaliate against their business

interests. Reports in May said the European

Commission also prepared a case against China’s

telecom equipment companies including Huawei

and ZTE Corp. (cd 21/8/2012)

Imported wine consumption up

According to Wine Intelligence, China has

already 19 mio people who regularly consume

imported wine. 22% of the respondents, good for

41% of the market value, indicated that they

drank imported wine for business purpose.

(tjkx 24/8/2012)

This means that most of them will not pick up the

tabs themselves; their employer will.

Average wine consumption

According to insiders, the per capita wine

consumption in China is currently 0.38 litres. For

urban dwellers this figure is 0.7 litres. These

statistics are much lower than the global average.

This, combined with the growing interest in wine

among Chinese consumers, indicates that the

growth potential of this market is huge.

(tjkx 6/9/2012)

China's thirst for wine boosts European producers

China's thirst for fine wines is buoying European

producers as domestic consumption dries up. As

the Eurozone debt crisis squeezes household

spending, Europeans have less to splurge on life's

little pleasures, and wine producers have felt the

pinch. Exporters are now looking to new markets

like China -- home to 1.3 bio people -- to boost

sales.

Richard Halstead, co-founder of Wine

Intelligence, a consultancy on wine branding, says

that China is a huge growth market for producers

and there is a scramble for quality European

brands. "China represents effectively the biggest

growth prospect that the wine industry has had

probably for a generation", said Halstead.

For Greek wine producers China represents a ray

of hope. Greece is suffering under a harsh

government austerity program and businesses are

being crippled by a lack of competitiveness. But

Greek-wine importer Mary Paternas believes it

could play a big role in the future of Greek

exports. "Their (Greek) wines have got better and

better and are doing really well”, she said. "They

managed to get into China, doing well in America

and Canada and exporting to Australia".

European exports to non-EU countries rose 12.7%

in 2011, with exports to China seeing the biggest

increase, up 49%, according to Eurostat, the

statistics division for the European Union.

Exports to Hong Kong were up 28%.

Halstead says the European crisis might even

provide a boost in exports for wine producers as

they seek new markets. He said: "If the Euro

weakens significantly, if there is loss of

confidence, actually that is something that wine

producers might find positive because they'll be

instantly more competitive in third party markets

like the U.S. and Asia". (cnn 6/9/2012)




Food Industry News

China's thirst for wine boosts European producers (Contd)

One-stop shops to showcase South Australia's top

food and wine in China South Australian food and

wine will be showcased in two "one-stop-shop"

outlets to be built in China, giving local producers

and exporters direct access to a market of more

than 7.6 mio Chinese consumers.

The SA produce centres are expected to open in

about 18 months and will give visitors the

opportunity to eat, buy and order the state’s food

and wine. Agriculture, Food and Fisheries

Minister Gail Gago, who recently made her first

ministerial visit to China, said the centres would

give SA producers and exporters more direct

access to markets in China. Ms Gago said they

would likely feature restaurants, shops and

information and marketing on regions of South

Australia while also operating as a wholesaler to

Chinese outlets. They would focus on food quality

and safety and would also provide accreditation to

available products.

The centres will be based in Nanping, with a

population of 3.06 mio, and Zhangzhou, with a

population of 4.6 mio, both in Fujian province on

China's east coast. The State Government is

expected to begin discussions with local

producers about their potential involvement in

coming weeks.


China's thirst for wine boosts European producers (Contd)

"Fujian Province has recognised South Australia's

competitive advantage of premium food and

wine, grown and produced in a clean and safe

environment”, Ms Gago said. "The Chinese have

a burgeoning economy, a burgeoning middle class

that are very interested in quality food ... (and)

want assurances and reliability about the quality

and safety of those products”.

They're interested in basically all our primary

produce and also processed foods. "They love our

seafood; fresh fish, abalone and lobster".

The centres would be paid for and run by the

Chinese, in consultation with SA officials.

Ms. Gago said there was scope to build more

stores if the first two proved successful.

Her visit to China also explored opportunities for

SA university researchers to partner with the

Chinese on food quality, hygiene training and

technology. "They're very interested in research

links to support food quality and hygiene safety

standards”, she said. (dailytelegraph 5/9/2012)

Australian cows to China

China is not only a major destination for

Australian dairy products; recently published

statistics indicate that almost 80% of dairy cattle

exported by Australia are destined for China.

(chinafeed 18/8/2012)

Females emerge as key fast food consumer in China Not only do more female consumers in China eat

out at fast food restaurants than men, they also

seem to be more adventurous eaters, according to

a new market research report released this week.




Food Industry News

Females emerge as key fast food consumer in China (Contd)

It is a gender divide that reveals differing

consumer patterns between men and women, says

the Mintel report released this week. For Chinese

females, dining out is treated as a social occasion,

shared with friends, kids, colleagues and family

members, points out the report. That may be why

71% of women said they eat out at foreign fast

food restaurants, compared to 66% of men.

Throw in a coupon, promotion or meal voucher,

and Chinese females are more likely to patronize

the restaurant given that they're "always on the

lookout" for a good deal, analysts say. This is

especially true of women in their 20s and 30s,

also known as the "coupon generation" who are

particularly savvy when it comes to clipping e-

coupons from group buying sites and

downloading discounts onto mobile devices. On

the other hand, analysts also found that women in

China are more likely to pack their own meals

from home: 30% of females’ brown-bag it

compared to 19% of men. While overall, three-

quarters of Chinese consumers indicated the

willingness to try new fast food products, that

number is higher for women – 79% -- compared

to men, 72%. (mysinchew 28/8/2012)

China’s food safety is a major problem

Last month, in the 2012 FIVB World Grand Prix

Finals, China’s women’s volleyball team fell to

countries that did not even qualify for the 2008

Olympics, where China won Bronze. The coach

blamed his team’s abysmal performance on their

vegetarian diet, saying that the athletes had not

had any meat for three weeks. The players were

certainly not vegetarians: they abstained from

meat lest contamination of chemicals such as

clenbuterol interfere with their urine tests. The

excuse was not as lousy as it initially sounded:

early this year,


China’s food safety is a major problem (Contd)

China’s State General Administration of Sports

issued a document forbidding its athletes from

consuming meat outside of official training

facilities. The sports incidence epitomizes the

rapidly rising concerns about food safety in

China. Twenty years ago, with the exception of

the few expats living in China, few there would

consider food safety a problem. Today, almost

everybody I spoke with in China – people I knew

well and those I did not – expressed their concern

about adulterated food. My speculation that food

safety problems in China have worsened is

substantiated by the website “Throw out of

window” created by Wu Heng, a postgraduate of

Fudan University, to track China’s food safety

incidents from 2004 to 2011. In the spring of

2012, a survey carried out in 16 major Chinese

cities asked urban residents to list “the most

worrisome safety concerns”. Food safety topped

the list (81.8%), followed by public security

(49%), medical care safety (36.4%),

transportation safety (34.3%), and environmental

safety (20.1%).

Due to government incentives to cover up or

downplay problems associated with social-

political stability, it is difficult to gauge the full

extent of food safety problems in China. An Asian

Development Bank report released in 2007 (prior

to the tainted baby formula scandal) estimated

that 300 mio Chinese might be affected by food

borne disease annually. Food borne disease can

result from consumption of food contaminated by

toxins, pathogenic bacteria, viruses, or parasites.

While it is relatively easy to link a health problem

(e.g., acute diarrhoea) to infections resulting from

the consumption of contaminated food or water, it

is unlikely for chronic health conditions (e.g.,

cancer) caused by food tainted with toxic

chemicals to be included in annual statistics, even

though illegal food additives or noxious

substances in food are becoming a major health

hazard in China. (Continued on next page)



Food Industry News

China’s food safety is a major problem (Contd) A 2011 study published in the Chinese Journal of

Food Hygiene suggests that more than 94 mio

people become ill annually from bacterial food

borne diseases alone, which led to approximately

3.4 mio hospitalizations and more than 8 500

deaths. By way of comparison, the CDC estimates

that food borne bacteria, viruses, and microbes

combined cause forty eight mio Americans to fall

ill, 128 000 hospitalizations, and 3 000 deaths a

year.

What is to blame for China’s food safety crisis? In

an opinion piece published in the International

Herald Tribune this month, I argued that the crisis

highlighted China’s failure to establish a code of

business ethics as its market economy expands

faster than government regulators can keep pace.

In the absence of effective regulations and moral

constraints, private profit too often trumps public

good. Ironically, what is happening in China is

exactly what Karl Marx described 150 years ago.

He said that with adequate profit “there is not a

crime at which [capital] will [not] scruple, nor a

risk it will not run, even to the chance of its owner

being hanged.” In a country where serving God is

still suppressed, and “serving the people” is no

longer in vogue, serving money seems to be the

main attractive option”. In an October 2011

nationwide online survey of nearly 23 000 adults,

more than half of the respondents did not think

complying with ethical standards was a necessary

condition for success in Chinese society (again,

by way of comparison, only 24% of financial

executives in the U.S. say illegal or unethical

conduct may be necessary for success).

As a Tsinghua University professor said, since

counterfeiters and adulterers are also victims of

other unsafe food, “this is a society where

everybody intoxicates everybody.” Wu Heng

echoed this by warning that Chinese are

“exchanging faeces to eat”.


China’s food safety is a major problem (Contd)

A neo-Hobbesian world of everyone against

everyone is probably an overstatement. However,

a functioning society needs basic moral codes in

order to restrain dangerous behaviors. In a make

believe world where that baseline morality is

suffering a great leap backward, a social

breakdown may not be a far-fetched scenario.

(cnn 28/8/2012)

China fattens pig farms to tame pork prices

The Jiahua pig farm in eastern Zhejiang province

is on the frontline of China's battle with food

inflation, a prime example of how a shift in

farming practices may someday stabilize the price

of the nation's favorite meat - and soothe a

perennial headache for Beijing. Pork prices are so

volatile and have such an influence on inflation in

the world's second-largest economy that many

Chinese joke that CPI stands for the "China Pork

Index". Annual inflation ticked up slightly to 2%

in August from a 30-month low in July, reflecting

in part a turnaround in pork prices, which climbed

after a summer dip, returning to levels last seen in

May. For the moment, pork supplies are ample.

Record profit margins for pork last year meant

that people of all stripes, from peasants to coal

millionaires, invested in pigs. That's good news

for the Communist Party, which is sensitive to

any potential for public unrest ahead of a once-in-

a-decade leadership transition later this year. The

Party blames inflation for demonstrations in

Tiananmen Square over 20 years ago, and keeps a

lid on prices by fiat if necessary.

But while headline inflation has trended unusually

low in China this summer, pork prices and food

inflation risk exploding higher in coming quarters,

testing the government's resolve to keep a lid on

prices even as it faces a cooling economy.




Food Industry News

China fattens pig farms to tame pork prices (Contd)

In the long run, China's move from small

backyard pig pens to industrial mega-farms could

help calm volatile boom-bust pork cycles and help

bring inflation more under control. With their

economies of scale and more stable production

plans, bigger farms such as the Jiahua Pig

Breeding Co are expected to help curb sharp

moves in pork prices. "The faster the trend to

scale-up and the faster that backyard breeding is

phased out, the more volatility will be

dampened”, Hua Jianqing, Jiahua's president and

principle investor, told Reuters from his

headquarters in rural Zhejiang. "It won't be a year

or two. My analysis is that it will take three to five

years to reach the balancing point". Jiahua keeps

5 000 breeding sows at a time, and raises 100 000

pigs a year.

Squirming and oinking, young sows are lined up

daily for buyers peering through a glass window.

Those that are picked are shipped hundreds of

miles to help seed yet another mega-farm. Large-

scale operations with more than 3 000 pigs now

account for about 20% of China's herd, but huge,

North American-style farms of Jiahua's size

account for only about 2%. Record-high margins

last summer created a classic boom in investment

in pigs, but now a drought in the U.S. is pushing

up the price of grain used for feed, prompting

small farmers to slaughter their animals and

setting the stage for a possible supply shortage in

months to come.

Small farmers still raise enough hogs - about one-

third of the national herd - that their decisions to

buy more piglets or sit out a season can make a

big difference in prices. "If fewer choose to rise,

in the third quarter of 2013 we see a shortage of

pork and a run-up in prices", said Andy Rothman,

China strategist for CLSA in Shanghai.



The latent risk of a spike in food inflation is one

of the concerns keeping Beijing from loosening

policy too much, even as the vast manufacturing

sector shows signs of contracting. Although a

dramatic, 18.5% drop in pork prices in the year to

August helped bring food inflation to 3.4% last

month, food prices are still up 5.9% so far this

year, running above Beijing's overall inflation

target of 4%. The huge investment necessary to

create a large commercial operation means the

larger farms will stay in business even during a

downturn, unlike many smallholders. "If the price

is not good, we can sell off some piglets. But we

wouldn't sell them all", said Manager Xu at a

cooperative farm with a few hundred pigs in

Luohe in Henan Province. Jiahua, for example,

cost RMB 110 mio to set up in its 73-hectare site,

which includes 32 long brick pens. The farm

employs 200 people.

Hua is investing RMB 300 mio in a newer farm

three times the size under construction north of

Shanghai. "We think of pig rising as

supplementing farm household income but

nowadays you need to be rich to raise pigs", said

Shi Tao, analyst for eFeedlink in Shanghai. Still,

while larger farms are, in theory, better able to

weather rising costs, few have gotten to the scale

where they can hedge grain prices on China's

notoriously volatile futures markets. Jiahua

sources grains from a regular supplier in the

North, buying more when it looks like prices are

rising. To cut costs, the farm has its own feed

mill. "This year prices have not been too stable,

but we buy in scale to hold down costs. We buy

corn by the container and buy medicines

wholesale", said Zhong Dongshan, a manager of a

farm with 3 000 pigs in Jiangsu Province, North

of Shanghai. But while the march to scale may

benefit Chinese consumers and Beijing by

capping pork prices, investors may find it takes

longer than expected to turn a profit.




Food Industry News


What is currently a short, sharp cycle in pork

prices will lengthen as farms get larger, with each

downturn in the future becoming longer and more

severe as low-cost producers tough it out, said Shi

Tao, analyst with eFeedlink in Shanghai. In the

past, "peasants reacted immediately to price drops

by selling the pigs they had and not raising more",

he said."Now the larger-scale farms won't cull

sows, they can absorb losses longer while smaller

producers drop out”. (reuters 9/9/2012)

Scottish food ambassadors target China

Scotland is planning to establish a network of

food ambassadors in China as the country

switches increasingly to a western-style diet.

A campaign run by Scotland Food and Drink

(SFD), has already installed an ambassador in

Shanghai, whose role is half-funded by its

members in the salmon and seafood industry.

But James Withers, the chief executive of SFD,

believes there is an increasing demand for

western-style produce in the Far East,including

meat and milk, which are not traditionally part of

their cuisine. Withers pointed out that 500g tins of

powdered milk from Ireland were retailing for the

equivalent of GBP 40 in China, a legacy of the

tainted baby-milk scandal which caused the death

of six children four years ago.

“Ireland is selling skimmed milk powder at a

huge premium, based on the fact that there is very

little limit on what Chinese parents will spend on

their children in terms of food and health. Also

there is a distrust of domestic production”, he

said. He added there was also scope for small

artisan cheese makers to target Asia. “In more

affluent parts of the big cities in China, there is a

demand for these new types of products”, he said.


Scottish food ambassadors target China (Contd)

The group will enlist the services of an export

manager in Germany, who was hired in April by

Quality Meat Scotland to promote Scottish beef

and lamb but who will also dedicate his time to

other sectors. Withers said the move to create a

global network dedicated to food and drink will

help Scottish producers “catch up” with rivals in

Denmark, Ireland and New Zealand whose food

exports far surpass those of Scotland despite

being similar in “size and clout”. He said overseas

agency Scottish Development International (SDI)

has offices in 25 countries, but not all of them are

key export markets. He said: “The Irish Food

Board has ten offices around the world dedicated

to food and drink alone.

“We have the first person on the ground in

Shanghai, but Ireland is putting four more people

in Shanghai alone dedicated to food and drink.

“New Zealand is also very active and so is

Denmark – we need to catch up. “SDI does a

fantastic job for us in food and drink, but the

reality is it has to cover every other sector of the

economy as well”. He insisted the new model

would not be a burden on Scottish public sector

budgets, as the new roles would be part-funded by

industry. A spokesman for SDI said: “Although

food specialists would be independent of SDI,

they would still work closely with SDI on the

opportunities we identify”.

Margaret McGinlay, director of food and drink at

Scottish Enterprise, said: “Key to Scotland’s

economic success in exporting is the collaborative

approach and, working closely with a range of

key partners including Scotland Food and Drink,

we have seen food and drink exports hit a record

high of GBP 5.6 bio in the last year, exceeding the

industry’s targets six years ahead of schedule.

“We continue to work closely with the industry to

explore opportunities for further dedicated

support through overseas specialists”.

(scotsman 2/9/2012)



Food Industry News

What are the ecological costs of China’s future food imports?

China’s growing agribusinesses and demand for

soybeans and meat is bringing intensive farming

and the risk of further deforestation in Brazil and

beyond. Tom Levitt reports. “We believe that

Chinese investments shouldn’t be too different

and should respect the environment”. The

dynamics of Chinese agriculture are changing.

While it may still be largely self-sufficient in

food, the country is expected to enter an era of

rising food imports and in particular, animal feed.

But how ready is China to take responsibility for

the environmental impact of this growing

overseas food footprint?

Over the past two decades, China has seen a

monumental surge in soybean imports. By 2030,

China is expected to consume 72 mio t of

soybeans from overseas – more than one-quarter

of the world’s total soybean production today.

The impact, environmentalists fear, is greater

pressure on uncultivated forested land in Brazil,

the world’s second largest soybean producer after

the United States and a major exporter to China.

In 2011, more than 67% of Brazil’s soybean

exports were sent to China. By no coincidence,

the South American country is now emerging as a

major focus of investment for China’s expanding

agribusinesses.

Inside China, the country is fast approaching the

limit of its own available farmland resources – the

so-called “red line” for food security of 120 mio

hectares of arable land, set by the government.

China’s solution, according to Deborah

Brautigam, a professor at American University

and senior research fellow at the International

Food Policy Research Institute, has been to import

cheaper agriculture commodities like soybeans

and maize while saving its farmland for higher-

value exports like fish and vegetables. The other

force driving the rise in soybean and maize

imports is a corresponding rise in meat

consumption in China.(Continued in next column)

What are the ecological costs of China’s future food imports? (Contd)

Increasingly that meat is coming from large-scale

commercial farms – not small-scale or household

farmers – and dependent on animal feed rather

than food waste. In a detailed assessment of likely

trends for Chinese agriculture in 2030, Laixiang

Sun, professor at the School of Oriental and

African Studies in London, says he expects to see

pig and poultry numbers in intensive farms

increase by “at least 2.5 times between 2000 and

2030”. This type of intensive livestock farming

relies on cheap agricultural crops. What this

means, says Sun, is that while China will still be

able to feed itself with domestic supplies of grain,

overall self-sufficiency in food in China was

likely to fall. He expects imports of maize to

reach 16 mio t by 2030 and imports of soybean to

rise to around 72 mio t by 2030.

The rapid expansion of soybean cultivation in

Brazil over the past two decades has contributed

to huge increases in the rate of deforestation in the

Amazon – one of the world’s most biodiverse

regions and home to 10% of all species known to

scientists. Soy production accounted for about

10% of total deforestation in the Amazon between

2000 and 2005, according to estimates from

Columbia University. In the next five years, that

figure dropped to 2% as new production moved to

previously cleared cattle pasture. While it may not

always be a direct cause of deforestation, soybean

production can still be an indirect driver, suggest

observers, by raising land prices, pushing land

users into forested areas and creating impetus for

infrastructure improvements like roads which,

then promote further forest clearance. "The

agribusiness sector wants more. The hunger for

development made Brazil the third largest

exporter of agricultural products...but the

economic model chosen for the region ignores the

Amazon environment and its people", says




Food Industry News


Greenpeace Brazil, which is campaigning for zero

deforestation in the Amazon by 2015. Tragically,

the competition for lucrative farmland and

resources in the Amazon region is also linked to

violence and death. The Brazilian land rights

group Catholic Land Pastoral estimate 1 600

activists have been murdered in the Amazon state

of Para over the past 25 years. It says the killings

– mostly targeted at small subsistence farmers and

indigenous peoples - are usually carried out by

gunman hired by loggers, ranchers and farmers,

just 1% of murder cases have led to convictions.

“A battle has been declared that is expressed in

the violence against those considered obstacles to

development and progress”, say the Catholic Land

Pastoral. Deforestation has another globally

significant impact. As well as being home to

critically endangered and unique wildlife and

other biodiversity, the Amazon rainforest is also a

major carbon sink, absorbing carbon dioxide and

helping to stem global warming.

Further deforestation could reverse that, with

forest clearance resulting in the release of carbon

held in the soil and trees. China’s link to

deforestation in the Amazon may not end with

imports of Brazilian soybeans, thanks to the

growing expansion of Chinese agribusiness

companies at home and abroad. Although still

relatively small in comparison to US commodity

giants like Cargill, the companies have the

support of the Chinese government as they seek to

buy agricultural assets. One of China’s largest

state-owned feed importers, the Chongqing Grain

Group, announced last year it was spending USD

500 mio to build a soybean plant in Brazil, which

reportedly, could be followed by a further multi-

mio-dollar investment in soybean plantations.

Another, Sanhe Hopefull Grain & Oil, is reported

to be putting USD 7.5 bio into soybean processing

facilities in Brazil (Continued in next column)


in a deal that also includes constructing a railroad.

Greenpeace’s Amazon spokesperson Marcio

Astrini toldChina dialogue he still hoped China’s

growing influence in Brazil would not lead to a

fall in environmental standards in the country.

“We believe that Chinese investments shouldn’t

be too different and should respect the

environment”. As they expand their global reach,

Chinese agribusinesses are also changing the

landscape of farming back home. The new face of

agriculture in China is no longer the household

farmer but people like Liu Yonghao, president of

the USD 8.8 bio agribusiness New Hope Group

and China's fourth richest person. His company

claims to process 750 mio fowl and 8.5 mio pigs a

year and already owns 16 feed factories outside of

the country.

Professor Sun still expects small-scale livestock

farms to persist, taking advantage of support for

their use of local labour in rural areas, where

intensive farms have comparatively less need for

workers. But others suggest the incentives for

such types of farming are fast disappearing. “I

anticipate that large-scale corporations will soon

take over the vast majority of China's household

pork production (probably in a decade or two)”,

says professor Li Jian, from the University of

Iowa, who has studied the decline of rural pig

farming in China. “Major traditional values of pig

farming are vanishing, for example, few farmers

now depend on pig manure for farming and fewer

and fewer families depend on raising pigs for

holiday feasts etc. Under such new socioeconomic

conditions, fewer and fewer farmers will find pig

farming a profitable and attractive production”.

The accelerated exodus of rural livestock farmers

will not only see more large-scale intensive farms

with associated problems of pollution and reliance

on imported animal feed - but also bring more

people into urban areas, worsening existing urban

environmental problems such as air pollution and

congestion.(Continued on next page)



Food Industry News


The World Bank estimates agriculture’s share of

employment will continue to fall, from around

30% today to 12% by 2030. “Smallholder farmers

are capable of producing the food necessary to

feed their country, but face increasingly difficult

barriers” concludes a recent report, from the

international NGO Grain, which campaigns for

farmers’ rights. “Government decisions to rely on

agricultural commodity imports serve the interests

of agribusiness and its need for cheap sources of

feed but threaten the land, livelihoods and local

food systems of communities across the globe”, it

adds.

After the Brazilian Amazon, Chinese agribusiness

is expected to join other international speculators

in exploiting forested and biodiversity-rich land

across Africa. But, despite a glut of media

coverage about “land-grabbing” deals, (some of

which has been reported in China dialogue)

Chinese involvement in land deals in Africa is, so

far at least, minimal. “I had an expectation to see

much more Chinese involvement in African

agriculture. Basically it hasn’t happened. They

have been going to Asia and South America

instead”, says professor Brautigam. She says

high-profile land deals involving sugar plantations

in Ethiopia and bio fuels in the Democratic

Republic of Congo have not progressed, with

China sticking to smaller deals, driven by

commercial interests rather than food security.

While Chinese interest in agriculture in Africa

remains unfulfilled in the eyes of some observers,

its investments elsewhere, particularly in Brazil,

are growing. It must now decide whether feeding

its citizens at home can be achieved without

leading to environmental damage overseas.

(China dialogue 11/9/2012)

Chinese firms ramp up presence in Thailand

The Second Thai-Lao Friendship Bridge connects

the Mukdahan Province in Thailand with

Savannakhet in Laos. A fourth bridge connecting

Chiang Rai Province in Thailand with Ban

Houayxay in Laos has been approved by

authorities and will be partly financed by China.

Investors view the Southeast Asian nation as a

springboard into the rest of the region, as Wei

Tian reports from Bangkok. In the second act of

Siam Niramit, a historical cultural performance

about ancient Thailand, popular among foreign

tourists in Bangkok, a 16th-century Chinese

trading boat docks at a port on stage. Fully loaded

with delicate silks, porcelain and other treasures

from China, the arriving outsider quickly wins

over the hearts and minds of local residents.

Today, the humble trading vessel has been

replaced by thousands of planes and cargo ships

transporting goods between the two countries

worth bio, ensuring ties between the two nations

are strong and deep-rooted, both socially and

economically.

According to the latest statistics from the

Thailand Board of Investment (BOI), for instance,

China was the country's second-largest source of

foreign direct investment in 2011. Chinese

companies have applied to take part in more than

180 investment projects in the last five years,

worth a total investment of USD 4.15 bio. Data

from Thailand's travel bureau show China has

become the largest source of visitors to its famous

southern seaside resort of Phuket. The importance

given to links with China is clearly illustrated at

the newly built multimillion dollar Bangkok

Suvarnabhumi International Airport, where notice

boards and signs are in Thai, English and Chinese.

Liang Wanshan is among the new generation of

Chinese coming to Thailand. As general manager

of COFCO (China National Cereals, Oils and

Foodstuffs Corp) Biochemical (Thailand) Co Ltd,




Food Industry News

Chinese firms ramp up presence in Thailand (Contd)

Liang was sent to establish a local team after

China's largest food processor, manufacturer and

trader spend RMB 100 mio to buy a local citrate

factory last year. Eight months after Liang first

arrived in Thailand, a modern factory is taking

shape in the east of the country's Rayong

Province. "At first, I was shocked by how simple

and crude the factory was", Liang said. Apart

from investing in the site, the company spent

another RMB 100 mio on upgrading and

overhauling the equipment on site, 20% of which

was in the necessary environmental protection

systems. "Maintaining a good relationship with

local residents is vital for foreign investors in

Thailand, and environmental protection was

always a sensitive issue", he said, adding that the

previous owner had issues with local residents

over the factory's environmental record. COFCO

decided right from the start it needed to play a key

role in the local community.

Having already hired 80 employees locally, Liang

said he expects to have a full capacity of 300

people when fully operational next year. "We are

keen to employ as many local people as possible

in senior management positions", he said.

According to a recent report from global

management consulting company McKinney &

Co, one of the biggest issues facing Chinese

companies looking for international expansion

remains being able to find enough managers with

overseas experience. It said creating the perfect

balance between local people and incoming

Chinese has to be carefully planned, and success

can often depend on whether that balance is right.

Liang said that he insists his Chinese managers

employed to work in Thailand have been fully

trained, not only in the local language and laws,

but also in local culture and customs. "We also

provide Chinese lessons for our local staff", he

added. Within his workforce there are also

Chinese managers hired locally, such as



Jing Jing, a Chinese graduate who has been

working and living in Thailand for more than five

years. "It is actually been quite easy to knit myself

into the local community”, said Jing, a graduate

from Guangxi Zhuang autonomous region who

speaks fluent Thai, "because we don't actually

look that different, which helps too". After

generations of immigration, the Chinese are the

second-largest ethnic group in Thailand,

accounting for 14% of the country's total

population. "I also like the fact that most things

are cheaper here, the lifestyle is very easy going,

plus flight tickets from Nanning (the capital city

of Guangxi Zhuang autonomous region) to here

are actually cheaper than to many Chinese cities,

making Bangkok closer to home than Beijing or

Shanghai”, added the 30-year-old office worker.

"I know many like me who have married local

people and others who have bought property or

become successful entrepreneurs”. "Many are

now being hired by Chinese companies who have

established an office or factory in Thailand", she

said, adding that she knows of around 100 of her

college friends working for Chinese companies in

Bangkok, including for some big names such as

Huawei and Haier. Since 2007, nearly 30 Chinese

companies have established a presence in the

Rayong Industrial Zone, involved in industries

ranging from electronics and auto parts, to rubber

and metal. COFCO Biochemical said that one of

the reasons for its acquisition of a local factory

was to secure a better supply of raw materials,

particularly cassava, and a crop grown for its

edible starchy root which is a major source of

carbohydrates, of which Thailand is a main

producing area. "The acquisition will help

diversify our raw material supply, and contribute

to the expansion of our citrate business, further

improving regional distribution and enhancing

economic benefits", the company said.




Food Industry News


Apipong Khunakornbodintr, director of the

investment promotion section at the Royal Thai

Embassy in Beijing, said a major benefit for

companies like COFCO building facilities in

Thailand is to avoid tariff barriers. Holley Group

Electric (Thailand) is an example - a power meter

maker subsidiary of Holley Group China which

has made great use of its factory in Thailand. It

used to face a 30% special tariff when trying to

export to Peru, for instance, from the Chinese

mainland. The establishment of a factory in

Thailand helped it get around that tax barrier, as

no such barriers exist between Thailand and Peru,

and some other countries. "That's the initial

reason for many Chinese investors coming to

Thailand, but once they are here, they discover

there are many more advantages", Apipong said.

According to information from BOI, foreign

investors are also exempt from corporate income

tax for a maximum of eight years, followed by a

50% reduction for another five years. As a result

of those kinds of incentives, the number of

approved investment projects from the Chinese

mainland increased from 16 in 2006 to 36 in

2011, with the total investment volume up from

THB 2.5 bio (USD 79 mio) to THB 16.9 bio.

"Compared with domestic workers, local

employees are more mannered, but at the same

time, less flexible", said Liang. Although salaries

in Thailand are lower than in China, the efficiency

may not be as high either, because local workers

often need to manage more closely, can lack

initiative, and working overtime is just

"unimaginable". "But on the other hand, the

quality is good, and a high standard can be

guaranteed”, he said. Meanwhile, another major

issue being reported by Chinese companies is an

overcapacity of firms in some sectors, leading to

vicious price competition among rival investors.

COFCO has to share the market with two other

Chinese-funded citrate producers in Thailand,

including privately funded Sunshine Biotech

International. (Continued in next column)


According to Apipong, there is no surplus in

production in this case, yet, but elsewhere he said

some Chinese investors are exploiting the local

market, by simply using their operations in the

country as export bases. "Price competition is

unlikely, as we will normally ask investors to

detail their pricing structures within their

investment contract", he said. However, with

more Chinese companies entering the local

market, favorable conditions such as tax

reductions compared to China for exporters could

be cancelled for certain industries over the next

five years, to avoid any possible overcapacity.

"Chinese companies should work closely with

organizations such as the Chinese-Thai

Enterprises Association to build relations and

discuss their competitiveness and common

practices to avoid issues such as over-capacity",

he adds.

According to the BOI, the majority of Chinese

companies investing in Thailand are still centred

on the manufacturing, whereas higher-value

added industries such as alternative energy are

target sectors that Thailand is hoping will attract

more overseas investment. During a meeting with

his Thai counterpart Yingluck Shinawatra in

Beijing in April, Premier Wen Jiabao proposed

expanding bilateral trade between the two

countries to USD 100 bio annually before 2015,

enhancing cooperation particularly in

telecommunications, technology, energy and

agriculture. Yingluck said her country would play

a positive role in boosting ASEAN-China

cooperation.

According to Wang Jian, an officer with the

ASEAN-China Centre, established last year to

promote trade and investment exchanges within

the area, the trade volume between China and

ASEAN countries is expected to reach USD 500

bio in 2015 from the current level of USD 360

bio. (Continued on next page)



Food Industry News


During a visit to China in August, Thai Industry

Minister Chaiwuti Bannawat was quoted by

Guangxi Daily as saying that investment from

China, worth another 20 bio baht this year, is

likely. The Thai government is actively pushing

construction of traffic networks, including a high-

speed railway linking south-western China's

Yunnan province to the northeast of Thailand.

"The northeast of Thailand will be a transport hub

for the ASEAN region after the network is

established", said Wiboon Khusakul, Thailand's

ambassador to China. "Chinese businessmen are

more familiar with the coastal region in east

Thailand, but know very little about the north

where there are abundant opportunities".

Although the project is still at the discussion

stage, Wiboon said it would only be "cost-

efficient" if the railway finally reaches Singapore,

suggesting speeds could reach 250-300 km/hour.

(cd 11/9/2012)

In earlier issues of ChinaNews we have indicated

that COFCO seems to be developing into a major

challenger for Nestlé. The increasing

internationalisation of COFCO is corroborating

this prediction.

China's import of Chilean fruit on the rise

Food exports from Chile to China saw a strong

increase of 35% year-on-year to USD 438 mio in

2011; according to Chilean government figures

underscore the South American country's position

as one of the major fruit suppliers to China.

Chilean fruit take up a substantial share of China's

fruit imports. According to data from ProChile, a

trade promotion organization at the Chile's

Ministry of Foreign Affairs, Chilean cherry

exports in 2011 accounted for 75% of China's

total cherry imports, while plums accounted for

71%; grapes, 58%; and apples, 54%.


China's import of Chilean fruit on the rise (Contd)

China overtook the United States to become

Chile's largest trading partner in 2009. Bilateral

trade between the two countries increased in 2011

to USD 29 bio from USD 24.7 bio a year ago,

Chinese data showed. During the first half of the

year, trade between China and Chile increased

14.8% year-on-year to USD 14.7 bio, Chilean

customs data showed. (cd 13/9/2012)

China to scrutinize food safety at tourist attractions

China's food and drug watchdog and tourism

administration will jointly launch a food safety

inspection in restaurants located in tourist

attractions. The inspection, initiated by the State

Food and Drug Administration (SFDA) and the

National Tourism Administration, will be carried

out later this month ahead of the Mid-Autumn

Festival and National Day holidays, according to

a Friday statement from the SFDA.

Operators of tourist sites should ensure the safety

of catering services, ban unlicensed businesses

and give timely reports on the catering services'

business operations to local food safety and

tourism authorities, the statement said.

Authorities will check restaurants for unlicensed

operation and ensure that regulations concerning

restaurant workers' health management are strictly

observed, the statement said. Restaurants must

carefully check the sources of their ingredients

keep records of their purchases and refrain from

using unsafe ingredients, such as inedible herbs,

poisoned animals and expired food, the statement

said. Authorities will check to make sure food is

prepared hygienically and ensure the proper use

of food additives, the statement said. Six

inspection teams will be sent to the provinces of

Liaoning, Jiangsu, Zhejiang, Hainan, Sichuan and

Guizhou, respectively, the statement said.

(cd 14/9/2012) (Continued on next page)



Food Industry News

China to scrutinize food safety at tourist attractions (Contd)

Return of food inflation makes easing from China

even less likely. Despite having no inflationary

pressure in non-food items owing to massive

overcapacity, one can never say the same thing

for food prices in China. Food prices in China are

volatile, and they are the main drivers for the

overall headline inflation for most of the time. In

August CPI data, vegetables prices have increased

very sharply on bad weather. But for months

now, we have pointed to the possibility of an

increase in meat prices, in part due to the drought

in US, pushing up prices of commodities like

corn. While it still seems to us unlikely that pork

prices alone can drive the full-year CPI inflation

above the full-year target of 4% with only 4

months left for the year, which could kill off any

prospect of monetary easing at once, the rise of

pork prices in the coming months is quite certain

now. We have suggested for quite a while now,

the central government seems to be reluctant to

embark of massive stimulus, and a pick-up of

inflation at this moment is unfortunate. With

ECB and Fed both easing, there is even less

justification for China to ease monetary policy,

and quite possibly China does not need to ease for

the time being because ECB and Fed are helping.

(aslosprachanalyst 17/9/2012)

This analysis draws heavily on the following item

by Standard Chartered.

Want to grow a pig?

We are concerned about the recent landing and

imminent take-off of the pig cycle. Pork is the

largest single component in the food part of the

CPI basket, accounting for 9.4%, followed by

grain (about 8.7%). Pork prices rose by 1% m/m

in August, but this was the first rise since October

2011 (pork prices fell by an aggregate of 23%

from October 2011 to July 2012). We believe the

downtrend in pork prices is over. The pig-to-

feedstuff ratio, at 5.7 in August (Figure 6), is now

in loss-making territory (the key level is 6.0),

meaning that farmers will now be exiting the

sector. These things take a while to feed through,

but we suspect that strong pork price increases are

now being roasted into CPI for Q2-2013. In 2013,

CPI inflation will be driven by the pig cycle

(prices are now rising), easy money in the US and

Europe, and utility price reform… We think it

will breach 5% y/y in H2-2012 and that this will

trigger a new round of hikes from the PBoC. We

no longer look for another cut in 2012. Indeed, we

believe that the next move will be up, in late

2013, as official CPI inflation pushes above 5%

y/y. After one hike in Q4-2013, we look for four

more hikes in 2014… we now look for only one

more RRR cut in 2012 (versus three cuts

previously). We expect no RRR cuts in 2013.

(standardchartered 17/9/2012)



Food Industry News

Chinese restaurant chains face challenges

The need for quality control makes the recipe for

expansion very problematic. For a Chinese

restaurant, expanding across the country or even

outside the country can be much harder than

starting from zero. "I have five Chinese

restaurants in Beijing but I am finding it very

difficult to expand further because making sure

every dish at every restaurant is exactly the same

is problematic", said Liu Tao, general manager of

a Yunnan cuisine restaurant in Beijing. Take the

famous General Tso's chicken or Kung Pao

chicken as an example. Cooks have to mix the

chicken, salt and egg white before heating the

wok. Then dozens of seasonings are added to

enrich the flavor, such as pepper, garlic, soy

sauce, cooking wine, monosodium glutamate,

vinegar, starch, sesame oil, Chinese onions and

peanuts.

The dishes will taste very different if the cooks

add fewer or more seasonings or if it is cooked at

a different temperature. "In Chinese cuisine, one

dish can taste totally different if it is made by

different chefs", said Jia Guolong, board chairman

of Xibei Restaurant. Another Chinese fast food

chain, Xinshang Fast Food in Qingdao, also

struggled to satisfy customers while expanding

locally. "Ensuring customers at each store have

the same quality fast food is a major task", said

Zhang Hongji, board chairman of the chain.

"Many problems lie in the way of the fast

expansion of the Chinese catering industry", said

Su Qiucheng, president of the China Cuisine

Association. "These include the lack of

specifications in the supply of raw materials, the

lack of standards for kitchen jobs, and the lack of

logistics and distribution outlets, fragile

franchisee management and vague brand

development strategies, which Western fast food

giants have already established". Jia said one

effective way to expand and develop Chinese

restaurants is to learn from the experience of -


Chinese restaurant chains face challenges (Contd)

Western restaurant chains and to standardize the

whole cooking process. Zhang said Xinshang

learnt a lot from the success of the United States

fast food giant McDonald's Corp by strictly

controlling the food's standardization, including

the preparation of raw materials. McDonald's, the

world largest fast food chain, now has more than

33 000 outlets in 119 countries across the world.

They have their secrets to make sure every burger

in every restaurant is of the same quality, whether

it's in a small Chinese city or a big United States

metropolis.

"McDonald's burgers are made from 100% whole

cuts of beef from British and Irish farms, with

nothing added apart from a pinch of salt and

pepper after cooking. The meat is then minced,

shaped and frozen to make McDonald's beef

patties. All beef is checked for bone and gristle to

ensure that none finds its way into patties", said

Joy Clachan, Agricultural Assurance Manager at

McDonald's UK. After checking, the beef will be

minced and frozen. Then the patties are hand-

packed into boxes and a final quality check takes

place before they are dispatched. Inside a

McDonald's restaurant, a burger will be fully

cooked after being heated for more than 37

seconds. The buns are toasted and the meal is

finished off by adding onion and pickle, said the

company. Chen Jie, Kitchen Assistant General

Manager of Jindingxuan, a famous Guangdong-

style restaurant in Beijing, said: "standardizing

our cooking procedure can improve the efficiency

of professional chefs as well as cutting down

costs. Our customers will be happy because they

will spend less time waiting at their table".

McDonald's not only standardizes kitchen work

but also its food resources. They can trace beef

back to the farms where it was produced so the

company knows exactly how the animal was

reared. Industry experts said traceability benefits

the company's food management system.




Food Industry News

Chinese restaurant chains face challenges (Contd)

It is also essential because it ensures customer

confidence in the company's food safety

arrangements. "Each Chinese restaurant operator

should fully understand the importance of

transforming and upgrading the industry”, said

vice-minister of Commerce Jiang Zengwei.

"(They) should learn from the experience of

foreign counterparts to improve their own

conditions, including the processing and

distribution of food". Xibei Restaurant's Jia said

he will push forward the standardization of Xibei

before opening about 30 restaurants next year in

first tier cities in China, such as Beijing, Shanghai

and Guangzhou. "The future of the Chinese food

chain industry will be prosperous," said Su

Qiucheng, president of the China Cuisine

Association. "Look at Haidilao Hot Pot, XE

Flavor and the Quanjude (Group) Co: They have

all shown momentum in the rapid and sound

development of their Chinese restaurant chains

over the past years". Last year, revenues of the

Chinese catering industry topped RMB 2 trillion.

The figure is expected to reach RMB 3.7 trio by

the end of 2015, according to the Ministry of

Commerce. (cd 18/9/2012)

Pesticide puts crab food safety at issue

An expert suggesting people wash hairy crabs

with a sodium bicarbonate solution to avoid

pesticide residues has sparked a heated discussion

online concerning food safety, with the best

season for crabs just around the corner. Modern

Express, a Jiangsu-based newspaper, yesterday

reported hairy crabs are likely to contain sodium

pentachlorophenol, a pesticide "often" used in

aquaculture to kill leeches and oncomelania

snails. Liu Hualing, deputy director of the

physical and chemical inspection department of

the Jiangsu Provincial Centre for Disease

Prevention and Control, told the newspaper that

hairy crabs may have sodium pentachlorophenol

in their flesh. (Continued in next column)

Pesticide puts crab food safety at issue (Contd)

An easy and effective way to get rid of such

pesticide is to soak the crabs in a sodium

bicarbonate solution, Liu told the newspaper.

Local crab experts say that's "groundless" because

sodium pentachlorophenol has been banned from

agricultural use for many years. Fan Shoulin,

secretary to the Shanghai Fisheries Trade

Association, said the Ministry of Agriculture

issued a fishery pesticide use standard in July

2007 that banned fishery pesticides that are highly

poisonous or residual, or that cause cancer, birth

defects or other mutations. "Sodium

pentachlorophenol is on the banned list. It shall

not be used in fishery production," Fan told

Shanghai Daily yesterday. Once ingested or

touched, it can be a strong irritant for people's

skin, eyes and respiratory tract. Crab farmers on

Shanghai's Chongming Island said they never

used any pesticide to kill trash fish. Wang Wu, a

crab professional with Shanghai Ocean

University, said people should not panic about

rumors. "If sodium bicarbonate solutions can be

so effective, why did the country bother to require

farmers not to use the pesticide"? Wang said. He

said the rumor could hurt farmers and hairy crab

sales. (sd 18/9/2012)

China – Market Access

The Chinese Quarantine Inspection authority

(AQSIQ) has implemented Decree 55 under the

new Food Safety Laws. The measures require that

importers and exporters register with the AQSIQ

via an online form. The measures will come into

force on 1 October 2012 but the registration

process is open now. Only shipments from

registered companies and agents will be allowed

into China from this date.In order to ensure that

trade is not impeded, Australian exporters who

currently export to China and those who plan to

export to China in future should lodge an online

registration as a matter of priority.




Food Industry News

China – Market Access (Contd)

The online form is available in English and

Mandarin and can be found at this location -

http://ire.eciq.cn/ (see page two for an example).

Click ‘Login’ on the Exporter side and then

‘Initial Registration’. This is an administrative

listing for exporters and their agents. It is not a

listing of manufacturers or producers (although in

many cases the company responsible for

manufacturing will also be the exporter).

The AQSIQ will publish the list of registered

importers and exporters on their website.

Some important points:

- The name of the registered exporter will need to

match the information on any accompanying

export documentation. It is therefore critical that

export applications submitted to Wine Australia

match the information submitted on the Chinese

registration.

- If you export to multiple consignees, each one

must be listed on the registration.

- Consignee names and addresses must be entered

in Chinese characters. Exporters are advised to

contact their Chinese agents for assistance.

- Upon submitting the application you will obtain

a registration number and a query number

generated by the system. The two numbers can be

used to check the progress of the application or

modify any information as necessary. It is

important to keep a record of these numbers.

- The registration information must be maintained

and any change in an exporter’s circumstances

should be promptly updated in the system.

- The registration number will be needed by the

consignee when submitting their entry inspection

form. (wineaustralia 19/9/2012)

Green fingers and green houses

A growing number of people have taken to "urban

farming" in the wake of a series of food safety

scandals. And, as He Na reports from Beijing, it is

not just healthy, it is fun. Han Qunhui's home in

Changsha, Hunan province is situated in a large

community where most of the buildings look the

same. Even friends who've visited several times

before have been apt to get lost in the "maze" of

houses. But that's all changed recently. Now,

visitors can find Han's home quickly, even if they

still have no idea of her building and room

number. The change is due to Han's balcony: It

resembles a green tent hanging outside the fifth

floor, with towel gourd vines, rows of beans and

agaric vegetables overflowing the open balcony,

where large bowls of endive, lettuce and shallots

also grow. "My balcony is the best signpost”, said

the 28-year-old network designer. "I haven't been

to the market for vegetables for several days

because the ones that grow on my balcony are

enough for the daily needs of my husband and

me", said Han, proudly. "I often share some with

my neighbors, and they all like them."

It's hard to connect the fashionable-looking

woman with vegetable planting, which is often

seen as hard, dirty work. Han said she derives

great enjoyment from her vegetables, but that's

not the only reason she plants them. A couple of

overriding concerns led her to become an "urban

farmer". "First, I'm tired of the rapid rhythm of

work and often dream of getting back to the land.

Second - and this is more serious - food safety is a

big concern”, she said. In recent years, a number

of incidents concerning food safety have shaken

public confidence: Melamine-contaminated milk;

pork containing high amounts of illegally added

thin carnosine, a steroid that can make human

sick; fake salty duck eggs, where food colorants

have been added to produce red yolks; illegally

recycled cooking oils; and vegetables with levels

of pesticide residue well above legal limits. The

list goes on. "The cases really made me uneasy”,

said Han, who is planning to start a family very

soon. (Continued on next page)



Food Industry News

Green fingers and green houses (Contd)

He stressed that people must be sure that the food

they eat is safe. "The vegetables I grow are

genuinely organic and don't contain pesticides. I

spend a lot of time removing worms from the

pots", she joked. "The vegetables are really tender

and refreshing and taste better than those bought

at the market. My baby will be very healthy if she

or he grows up eating the vegetables I grow", she

said. Like Han, an increasing number of people

living in the cement-and-steel-made cities, young

and old, have started urban farming and have

become addicted to growing vegetables on their

balconies. According to Peng Kuo, the founder of

www.52caiyuan - one of China's largest platforms

for balcony vegetable growers - since the website

was established in June 2010, the number of

registered members has increased from roughly

100 to more than 40 000. "The idea for the

website came from those "vegetable-stealing"

games that are popular online. I began to plant

vegetables on the balcony in 2009 and often share

my experiences and consult with others in our

dedicated Internet group. To my surprise, many

people have the same hobby as me. I am a website

designer and it made sense to establish a larger

platform so friends across the country could

exchange views, experiences and improve our

gardening skills”, he said.

"New members register every day and I am fully

confident that the site can be developed into a

professional platform providing full service, from

seeds, tools, seedlings, cultivation tips, making

organic fertilizers, worm prevention, and

harvesting", he said. The popularity of urban

farming has led to a boom in sales of seeds, tools,

organic fertilizers and technical books, both

online and in brick-and-mortar stores. A search

for related topics on Taobao, one of China's

leading online retail portals, reveals 29 278 items

for sale, covering pretty much every requirement

for the enthusiastic balcony horticulturalist.



Yu Fei, a project manager of Beijing Zhongnong

Luyuan Engineering Technology Co in the

capital's Fengtai district, said the company

designed a range of equipment to help enthusiasts

and sales have risen sevenfold since it was

launched in 2010. "The devices and technology

promote cultivation via soil substitutes and

hydroponics, which are clean and easy to use. Our

sales keep increasing month by month. With the

increasing concerns about food safety and greater

attention on health, I am confident about the

company's future", she said.

In recognition of the market potential, agricultural

expert Feng Jie, director of the Beijing Green

Science Technology Centre, also plans to extend

cultivation spaces from balconies to rooftops and

benefit more communities and companies. She

highlighted the importance of choosing the right

type of soil and suggested using soil from the

suburbs or rural areas, which is less likely to have

been polluted by chemical waste from factories or

the overuse of pesticide and chemical fertilizers.

"Seventy-five% of our members’ plant vegetables

on balconies because of concerns over food

safety, especially families with elders and kids,"

Peng Kuo said. "If people are able to make

rational use of their space and choose the right

varieties of plants, the produce can satisfy part of

the daily vegetable requirement for small

families", Peng said. "Since our bureau began to

promote planting vegetables on balconies in 2007,

the number of people consulting our hotline has

increased greatly. Our nine operators receive an

average of around 40 phone calls a day. As

demand for consultations has grown, our team of

experts has also expanded and currently we have

150 providing instructions", said Lu Tiangang,

Deputy Director of the 12 316 agriculture service

hotline of the Beijing Agriculture Bureau. "Two

years ago we regularly took tools and samples to

communities for promotional purposes, but now,

we're invited to lots of communities to organize

activities", he said (Continued on next page)



Food Industry News


Planting in soil requires a high level of

technology, but the cost of the soilless cultivation

method is also on the high side, so we suggest that

residents plant bud seedlings, which only need

water. Not only is the cost low, but the skills

required are easy to acquire, he added. Lu Jinhua,

67, a retired media worker from Beijing's

Chaoyang district, is hooked on urban farming,

and planting bud seedlings on her balcony is now

her favorite hobby. "As soon as I wake in the

morning, the first thing I do is go to the balcony to

see how my vegetables have grown. I take photos

and write notes every day. It has made my retired

life more meaningful", she said. "After about a

week, the seedlings grow to a height of about 10

cm. If it is the right time to harvest them, I will

wash them and then add some salt and vinegar.

The taste is just like the vegetables I had many

years ago", she said. Lu admitted having great

concerns about food safety and said she doesn't

dare to eat vegetables and fruit bought in the

market without immersing them in water for a

long period and then washing them thoroughly.

"Many years ago, we didn't have so many

varieties of food, but at least it was safe.

However, nowadays, we have a greater choice,

but we dare not eat the food", she said. According

to Peng Kuo, urban farming has a number of

advantages, such as environmental protection and

improvement, plus a healthier diet.

The popularity of urban farming indicates that

people's awareness of health issues and food

safety has increased and the practice should be

encouraged, said Feng Jie. However, in some

senses, it is the choice of the helpless, but can also

be seen as silent protest against those who violate

food safety and as a complaint to the government,

Feng said. "Though urban farming has many

advantages, many people simply don't have the

right conditions to do so. Even if everybody

followed suit, it would still be impossible to grow

every variety of vegetable. (Continued in next

column)


Solving the problem of food safety will require a

greater effort from society as a whole, especially

the law enforcement departments", she said.

(cd 19/9/2012)

China overtakes US as largest crop importer

China passed the US last year for the first time to

become the biggest importer of agricultural

products, while also increasing its exports,

according to data by the World Trade

Organization. Imports, including food and

beverages, rose 34% to USD 144.7 bio in 2011

from USD 108.3 bio in 2010, according to

Bloomberg calculations based on data released by

the Geneva-based trade body.

Exports gained 25% to USD 64.6 bio, beating

Canada to become the sixth largest, the data show.

The country's rising population was highlighted as

the reason for growth demand from soybeans,

corn, feed livestock, powdered milk and sugar to

make beverages. Urbanization widened China's

water and land shortages, further fuelling a global

rally in crops amplified by drought-reduced

supply. (cd 21/9/2012)

More farmers sign up to food chains

More Chinese farmers are resorting to food chain

partnership projects to improve their agricultural

yields and raise the quality of their harvest, say

industry experts.




Food Industry News

More farmers sign up to food chains (Contd)

The projects, equipping farmers with technology

and instructions on agricultural practices, guide

them in reducing pesticides for safer and better

products and cuts costs by helping them to sell

directly to wholesalers. According to Chen

Jianmin, managing director of the Jubaowan

Agriculture Technology Co in East China's

Zhejiang province, which joined the food chain

partnership in 2010, the output of an eggplant

farm under the project, is 66% higher than those

under traditional cultivation.

The income of the eggplant field has also more

than doubled in two years. "Informing the public

of where the products are from and how they are

grown better guarantees the marketing and sale of

the fruit, especially as scandals of excessive

pesticide residue grab the headlines now and

then", he said. By scanning the traceability code

on the package of the products, customers will

know where they were produced, the farmer

responsible, how much and how often fertilizers

were used, where and how the goods were

transported and whether it is genetically modified

food, he said. Chen's farmland is one of the 16

food chain projects of Bayer CropScience China

in the country, according to Lu Yuanding, food

chain partnership manager of the company.

The partnership is involved in about 240 projects

in 30 countries, covering 40 different fruit and

vegetable crops. Recent years have witnessed a

clear increase. He added they will include more

Chinese farmers in the project over the next five

years after more showed an interest when they

saw some of the experimental projects helped to

increase yields. "It's estimated the number of food

chain projects in China will hit 100 in five years",

said Lu. "China is of the utmost importance

because a food safety issue, especially the

pesticide overuse by China’s individual farmers

has become a major concern in recent years".


More farmers sign up to food chains (Contd)

The food chain partnership will further expand in

the country within first- and second-tier cities in

the coming years, according to Rob Hulme,

country head of Bayer CropScience China. (cd

24/9/2012)

Seven lean years for instant noodles

Although China is a top producer of instant

noodles, production has not increased

significantly during the past 7 years. The industry

sold a total of RMB 48 bio packages in 2005,

while the sales volume of 2011 was a mere 50

bio. This means that the per capita consumption

of instant noodles has been decreasing in China.

Some industry experts ascribe this negative

development to a lack of innovation in the

industry, while others believe that Chinese

consumers currently have more types of

convenience food to choose from.

(tjkx 24/9/2012)

Vietnam becomes China's largest coffee supplier

Vietnam has become China's largest coffee

supplier as China has seen an increase in coffee

import in recent years, according to a Chinese

official at the ongoing ninth Expo of China and

the Association of Southeast Asian Nations on

Saturday. China mainly imports coffee from

ASEAN countries, especially from Vietnam and

Malaysia, said Wang Lei, deputy secretary-

general of the ASEAN Secretariat at the expo

which opened on Friday in Nanning, capital of

south China's Guangxi Zhuang autonomous

region. Customs data shows that China had

imported 137 000 t of coffee from 2007 to 2011,

totalling USD 365 mio. In 2011, China imported a

total of 43 000 t of coffee, a year-on-year increase

of 41.9%. (Continued on next page)



Food Industry News

Vietnam becomes China's largest coffee supplier (Contd)

China imported 103 900 t of coffee from Vietnam

from 2007 to 2011, which amounted for USD 195

mio, accounting for 90% of the total coffee

imports from ASEAN countries, Wang said.

China imported a total of 15 000 t of coffee from

Vietnam, amounting for USD 31.88 mio in the

first half of 2012, which accounted for 96.2% of

the total coffee imports from ASEAN countries,

Wang said. Moreover, statistics from China

Coffee Association shows that there are about

13 600 cafes and 2 200 coffee-related enterprises

in China with a total of 500 000 employee

involved in the industry. At present, China's

annual coffee consumption stands between 30 000

to 40 000 t with annual growth rate of 10% to

15%. It is estimated that China's coffee

consumption will continue to rise and reach

120 000 t in 2012, Wang said. (cd 24/9/2012)

China is UN's valuable partner for food security

Speaking ahead of a five-day trip to China, the

head of the United Nations Food and Agriculture

Organization said China is playing a key role in

the effort to reduce worldwide hunger, and called

on the country to play an equally important role in

helping to stabilize food prices. The two topics,

which FAO general director Jose Graziano da

Silva said are inextricably linked, are among the

central issues of focus for the Rome-based

organization under Graziano's leadership.

Graziano, who spoke to Xinhua in an exclusive

interview recently in his FAO office, will travel to

China end-September after attending UN

meetings in New York. He said the timing of the

China visit is important to him because FAO's

founding month was October, 67 years ago.

"October has always been an important month

here at FAO”, Graziano said. "It is significant that

October will start this year with the trip to China”.


China is UN's valuable partner for food security (Contd)

Graziano said the world was on its way to

reaching the Millennium Goal of reducing by half

the number of people in the world suffering from

hunger, thanks in no small part to steps taken in

China. Graziano said China had been able to

reduce the number of people suffering from

hunger by 40 percent and the number of under

nourished people by 50%. "Because China's

population is so big, progress made in China has a

big impact on the world", Graziano said. Now,

Graziano says he wants to ask China to help with

another problem that will help further reduce the

number of hungry people in the world --

stabilizing food prices and improving world food

security. "We have seen a growing contribution

from China in these areas and we would like to

see the contribution grow still further," he said. "I

think the issue of South-South cooperation is

essential in the world, and for it to work China

must play a big role". By "South-South”,

Graziano was referring to shorthand for countries

in the developing world to cooperate among them.

The 62-year-old agronomist is a native of Brazil,

another key South economy.

"We are moving from the old paradigm of donor

nations and nations that receive aid”, he said.

"Developing countries have a role to play in their

own efforts to move forward and no country has a

bigger role than China, which is already playing a

role elsewhere in Asia, in Africa, and in Latin

America. I would like to see that continue”.

Graziano called on countries to build up food

stocks to help smooth out periods where prices

might temporarily jump, and to work to curb

reactionary changes in import or export policy

that might have an impact on world markets.

"China has been very supportive of food security

issues, and we want China to do more", Graziano

said. "What we have learned is that you cannot

have food security in only one country. It is not a

national problem in any country. It's a regional

and international problem". (cd 28/9/2012)



Food Industry News

Jumbo shrimp on the block

Long Tujin is in an industry that many might not

take seriously. For one thing, its main product is

the humble prawn. At the same time, no

government agency been able to properly regulate

the market, making it notoriously complicated.

But the global operation that Long has created and

now controls shows just what a massive earner

prawns can be, and how efficiently the industry

can be run. Long's Xiashan Seafood Wholesale

Market is the largest prawn trading market in Asia

and provides 40% of the white leg shrimps sold in

the United States.

It currently accounts for two-thirds of China's and

one-third of the world's prawn produce. Similar to

how market conditions in the Netherlands

determine the price of tulips and in Japan the

price of tuna, Long's Xiashan Seafood Market is

the most accurate weather vane for the global

price of prawns, experts suggest.

So how can this one man, whose surname means

"dragon" in Chinese, manage to make himself the

dragon of the prawn market? His answer is

simple. He says that since he set up his company,

Zhanjiang Zhongxin Co Ltd, the one main thing

he has done is "remove the obstacles to a free

market". It was in the early 1990s that Long -

working as a mid-level manager at a local

construction company after failing to make any

real money as a crab dealer - turned his attention

to the prawn market, then a growing, but poorly

regulated, business. At the time, Long remembers,

it was a market being run without "rule of law,

nor rule of man".

Prawn dealers would spare no effort to con

farmers, forcing them to lower their prices to

unbearable levels by telling them that there was

an oversupply in the market, and their prawns

were not selling. The dealers, in turn, would tell

the buyers - many of whom had surprisingly little

knowledge of the market - that prawns were in

short supply, marking them up to unreasonable

highs. (Continued in next column)

Jumbo shrimp on the block (Contd)

Dealers at that time made money "just by taking

advantage of information asymmetry, and that

was their business model", says Long, the 49-

year-old farmer-turned-entrepreneur whose family

was too poor to send him to college after he

finished high school.. "When the interests of both

sellers and buyers are hurt, by either inflated or

deflated prices, trade volume is the victim”.

"Everyone will go looking for reasonable prices

elsewhere or just quit the business". Someone had

to stand up and redress the situation, and Long

took it on, launching his own market. For the first

few years, all he did, except for building the

market itself, was developing relationships. He

made friends with as many dealers and buyers as

possible: talking with them, offering them free

advice, and linking trustworthy dealers with out-

of-town buyers. Friendships and reputation

brought in business.

As he became someone known and liked, he built

a prawn-trading exchange where dealers, farmers

and buyers met face-to-face. Dealers received a

commission of RMB 0.4/kg, while Long collected

his dues from rentals. But most importantly, all

who came to his market had to go by his "Long

rules": no fraud, no fakes, strictly open and honest

business. His market was a game-changer. It

provided incentives for the dealers to process as

much volume as possible and no longer depended

on unreasonably high mark-ups. And since all the

transactions were openly negotiated in his

marketplace, involving huge volumes on a daily

basis, people did not have to work excessively

hard for a reasonable profit. His being

"reasonable" has had a formidable effect.

The Xiashan market's annual trading volume has

grown from RMB 3.5 bio in 2002 to about RMB

10 bio last year. Its turnover would hit RMB 30

bio, if other aquaculture products were counted.

Long's employees, he says, work hard to remain

"reasonable". (Continued on next page)



Food Industry News

Jumbo shrimp on the block (Contd)

They send mobile text messages, for instance, to

prawn farmers who have registered for his

service, feeding them information about the

industry and his market, and most importantly,

supply and demand around the world for shrimps.

"You are wrong if you think this marketplace is

only a trading centre," Long says. "It is also a

logistics and information centre and connects

numerous stakeholders in numerous ways".

Based on its huge and growing daily volumes, and

soaring credit standing, Long's market is now

offering financial plans to help its registered

buyers. Traditionally, prawns have been a strictly-

cash business, demanding huge cash payments

from purchasers. If they could not make the

payments, they sometimes resorted to private

lenders, usually at much higher interest rates to

regular bank loans. Seeing the problem, Long

successfully persuaded commercial banks to

extend their services to the market, equipping it

with a modern payment system. With the

agreement of the market, three to five registered

buyers can provide a group guarantee for one

small buyer's credit standing.

Of the 320 loans that have been extended so far,

not one single default has been reported. By May

2012, Industrial and Commercial Bank of China,

the country's largest bank by market value, had

issued RMB 1.13 bio in loans to Long's members.

Long is not the least bit worried about his

methods being imitated by others? Smoking

tobacco at his newly completed holiday home on

the coast, the short, dark, slim man speaks in a

heavy local accent. "They may try to copy my

methods in other industries. But in the prawn

industry, once a trading centre like this is

established, it would take a hell of a lot of effort

to replicate it”. (cd 28/9/2012)

China raises state purchasing price for wheat

China will lift the government purchasing price

for wheat in 2013 by about 10% from this year,

the country's top economic planner said Saturday.

The move is intended to stimulate grain

production, the National Development and

Reform Commission (NDRC) said in a statement.

The minimum purchase price for wheat in the

country's major wheat-producing areas will be

increased to RMB 112/50 kg, up RMB 10 from

the 2012 price, the NDRC said.

Most of China's 1.3 bio people are fed by

domestically produced grain, making wheat a

major crop in the country. The move will help

stabilize the domestic market amid a volatile

global market, analysts said, adding that

stabilizing food supplies will be crucial in

checking inflation, as food prices account for

about one-third of the prices used to calculate it.

China has set minimum purchasing prices for

grain, including wheat and rice, since 2004. Under

the scheme, the government buys grain from

farmers at the state-set price when the market

price drops below it. (cd 29/9/2012)

Food Packaging Fails Safety Tests Failed in China China is failing to meet national safety standards

for external packaging, according to new research

by the International Food Packaging Association

Dong Jinshi, executive vice-president of the

International Food Packaging Association, said its

tests found many paper cups for instant noodles

and milk tea have excessive fluorescent whitening

agent on their outside packaging. This agent is

also known as Optical Brightening Agent (OBA).

His conclusion was based on the association’s

three-month study, which ended this month. The

study looked at 84 well-known food products

purchased from local supermarkets and

convenience stores in (Continued on next page)



Food Industry News


Food Packaging Fails Safety Tests Failed in China (Contd)

Beijing and Shanghai, as well as Guangdong,

Zhejiang and Jiangsu provinces. It found that a

total of 24 food products, or 80% of the total

samples taken in Beijing, were found to have

excessive fluorescent whitening agent, according

to the study. Many popular products that have

been on supermarket shelves for many years were

listed as being substandard, it said. Fluorescent

whitening agent is a type of organic compound

used to make paper white, but it may cause cancer

after people ingest it over time. “Although the

inner packages of the samples were all right,

consumers still are at risk of absorbing the

chemical, when they touch the packages outside”,

he said. No food enterprises involved in the study

said they plan to pull their products off store

shelves. (haccpeuropa 29/9/2012)

Nutrition information obligatory

Food and beverage producers will be obliged to

indicate nutrition information on the packaging

starting January 1, 2013. (ncna 28/8/2012)

China allows cultivated ginseng in food

China's Ministry of Health has allowed cultivated

ginseng to be used in food products across the

nation, a move seen as a good opportunity for the

development of the country's ginseng industry.


China allows cultivated ginseng in food (Contd)

"Many ginseng growers are expected to benefit

from the new policy that will help China's ginseng

industry to develop further and enhance its

international competitiveness”, said Zhang

Lianxue, a ginseng expert at Jilin Agricultural

University (Changchun, Jilin) [1], on the

International Conference on Ginseng held

Wednesday in Changchun, capital of northeast

China's Jilin province. Dubbed the "king of

herbs”, ginseng is considered to be nutritious and

to have great medical value in traditional Chinese

medicine. It has been used as a tonic in TCM for

over 3 000 years. Ginseng is mainly grown in

eastern Asia. Historical records show that China

has a 1 660-year history of cultivating ginseng.

More than 98% of ginseng in Jilin is currently

cultivated, not grown in the wild.

Though China's health authority had previously

restricted the use of the plant to medicines only,

people used to use ginseng as an ingredient in

chicken, porridge and soup recipes or soaked it in

liquor. In 2009, the 32nd conference of the Codex

Alimentarius Commission approved the

international standard of ginseng-derived food

products and allowed planted ginseng to be put

into food.

The Ministry of Health chose Jilin as a pilot

location for adding cultivated ginseng to food

products in March 2011. It has been proven that

ginseng is less toxic than garlic, said Zhang Hui,

an official with the ginseng and antler office of

the Jilin provincial government, on the

conference. Wang Zhihong, president of the

Changchun University of Traditional Chinese

Medicine, said the policy recognizing ginseng as a

food would likely increase ginseng cultivation as

well as research and development on ginseng

products. More and more enterprises have sensed

business opportunities and started to invest in the

ginseng industry in Jilin since the province was

made the pilot location for adding ginseng to food

products’. (Continued on next page)




China allows cultivated ginseng in food (Contd)

Food products including cookies, jam, coffee

and candies made with ginseng can currently be

found in markets in Jilin. (cd 6/9/2012)

S. Korean ginseng producer to open Jilin plant

South Korea's largest ginseng company Korea

Tomorrow & Global will open its first

production plant in Yanji (Jilin) [2], in October,

to cash in on China's booming healthcare market.

Korea Tomorrow & Global, the parent company

of the well-known red ginseng producer, Cheong

Kwan Jang, is investing USD 800 mio in the

project.The plant will have a designed annual

production capacity of 4 000 t, and its output

will only supply the Chinese market, said Hong

Seong-pyo, a manager from the company who is

responsible for the plant's construction.

"China enjoys not only abundant raw materials

but also huge domestic market”, said Hong.

Ginseng is considered an all-round tonic in Asia

and is consumed as a health product worldwide.

It has been used in traditional Chinese medicine

for more than 3 000 years. Jilin province is the

area with the largest output of ginseng in Asia.

Ginseng production on Changbai Mountain in

Jilin accounts for 85% of China's output and

70% of the world's total output. Around 100 000

local residents have jobs related to the industry,

whose output was worth USD 2.1 bio last year.

Despite China's absolute advantages in ginseng

production, South Korean companies now take

the lion's share of the market. (Continued in next

column)

S. Korean ginseng producer to open Jilin plant (Contd)

According to Yonhap News Agency, Cheong

Kwan Jang plans to open more than 50 stores in

China in 2012. Data from Jilin bureau of quality

and technology supervision shows that the

province's annual ginseng exports are 20 times

that of South Korea but its sales revenue is 5% of

the latter. After years of lobbying, the Ministry of

Health allowed cultivated ginseng to be used in

food products across China early this month, a

move seen as a good opportunity for the

development of the country's ginseng industry.

Zheng Yinan, a professor at Jilin Agricultural

University, praised the new regulation and said

that local ginseng growers and companies would

benefit. "This will help China's ginseng industry

to enhance its international competitiveness”, he

said. The ministry had previously limited the use

of the plant to medicines. People could only use

ginseng as an ingredient in chicken, porridge and

soup recipes or soaked it in liquor. (cd 18/9/2012)

Key Amway health food plant for Guangdong

Direct-selling giant Amway China announced it

will build its largest overseas production base in

South China, aiming to serve the country's fast-

growing health food market. The new base will be

located in the Economic and Technology

Development District in Luogang, Guangzhou

(Guangdong) [3], which will be completed in

2016. The 78 000 sq mts facility will produce the

company's top selling Nutrilite products. "Amway

China will invest RMB 600 mio to build the

Guangzhou production base and a botanical

research centre in Wuxi”, said Audie Wong,

president of Amway China. (cd 6/9/2012)




Infant formulae no longer ‘good for brain’

The Ministry of Public Health has issued a

statement that it will be no longer allowed for

suppliers of infant formulae to advertise their

products as ‘good for the development of the

brain’. (hcfood 6/9/2012)

Nutritioneer: 3 bad food habits I encountered in China

Too much salt

Salt is habit-forming. New arrivals to China often

remark how salty the food is here, then after a few

weeks or days even of eating out regularly, the

complains trickle down and stop. The food is

suddenly not that salty anymore. Why? Simply

put, the taste buds have readjusted their threshold

for salt. The more salt one gets, the less salty the

food tastes. In other words, the more salt

(especially plain salt) you eat, the more you will

end up needing. I won’t go too much into why

here. Safe to say that when cutting back on salt

intake, it might make things taste bland for a

while, but the body the amazing at readjusting

when given a chance. How to avoid it? Eat home-

cooked food as much as possible and use salt very

sparingly at home. Eating out? Ask for no MSG

and less salt, please. You get strange looks,

mumblings about it being buhaochi, but it is your

heart and kidneys we need to take care of, yes?

Too Much Oil

Ok, some dishes really do not need the swimming

pool of oil at the bottom of the dish. Oils are

great. I am a big fan of oils and fats – of the

healthy kind. With restaurants here, they really do

like using a lot of oil. This is totally

understandable, of course. It makes the food look

good and carries flavor molecules to your nostrils

better. Now, with recycled gutter oil possibly

being used in your meal, it just ups the health risk

ante a little more in this country. What to do?

Again, eat at home during the week, bring

leftovers to work, and eat out only when you

really have to for work or social reasons.


Nutritioneer: 3 bad food habits I encountered in China (Contd)

Attributing Everything to Heat vs. Cold Theory

of Food

There is nothing wrong with viewing the link

between food and health through the Traditional

Chinese Medicine (TCM) lens. It does encourage

people to diversify food intake and the use of

whole foods rather than processed foods. What

gets my goat is that sometimes I get people

attributing clear-cut medical and scientific causes

of certain illnesses to the cold and heat of food.

For example: Food-borne diseases do indeed

typically cause symptoms of vomiting and

diarrhoea. However, some symptoms such as

weakness and sore throat can be caused by

specific types of food bacteria (or their resulting

toxins), too. Most people associate food poisoning

with dirty hands, meat, milk and eggs. However,

if cooked rice or pasta were to be left out for too

long, even if they were well-covered, they could

still get a nice colony of Bacillus Cereus growing

on them. Watch that innocent sore throat, too. It

may not be a case of shanghuo le (a TCM term

for excessive heat). What seems like a simple sore

throat could be an easy way to spread the

Streptococcus bacteria into food if the handler

does not practice good hygiene. Most cases of

food poisoning tend to resolve on their own, but

some types need a little extra medical help. Here

is more info on food poisoning and what to do.

(beijingkids 11/9/2012)

Haute herbs experience

It is a bold chef who dares to add unfamiliar

ingredients to a whole season's menu, but the

experiment seems to have brought the dining

experience up a notch. Fan Zhen and C.J.

Henderson look at Huang Ting's new herbal menu

from two perspectives. Great traditions never die.

Connoisseurs will always savor, harbor and

reinvent, just like Chef Xu Chiping of the

Peninsula Hotel in Beijing.(Continued on next

page)




Haute herbs experience (Contd)

In his autumn menu, the chef attempts to realize

his long-cherished dream of using Chinese

medicinal herbs in haute cuisine. On a cool

autumn night when we arrived at the restaurant,

we were greeted at the entrance by a vintage

Chinese medicine cabinet with colorful dried

herbs in its numerous drawers. That was our first

hint of what was to come. The six-course dinner

was delicately presented in bite-sized portions.

The herbs used in the dishes were not only shown

off in small saucers accompanying each course,

but also vividly illustrated in a handmade sepia-

toned menu. Herbs are mostly used as medicine in

the northern cities of China, whereas in the south,

we use them in dishes, drinks or even snacks. The

southern part of the country has a more humid

climate, and people believe that toxins accumulate

in the body because of the heat and damp. Herbs

are often used in mild doses in meals to cleanse

livers, enhance digestion and above all, maintain

the inner balance of our bodies.

As a young child, my grandmother never fed me

Western medicines because she thought they were

far too strong for me. Instead, she picked

yuxingcao (Herba houttuyniae) from our

backyard, and boiled the pulp. That was my cough

syrup. She also fed me the herbs, using them in a

salad with sweet peppers, seasoned with aged

vinegar and crushed garlic. My throat always felt

better immediately, and my appetite certainly

improved. The appetizer at Huang Ting set me off

on a journey of rediscovery. The flavor of the

Chinese red dates or jujubes was enhanced by a

slow-simmered sauce of heshouwu - a common

herb in the Chinese pharmacology, and osmanthus

flowers - the floral herald of autumn. Topped with

fresh lily bulbs, the dates took on delightfully

sweet notes from the two fragrant flowers. Along

the way, we were also treated to plump poached

scallops simmered in a broth of chuanxiong and

baizhi, steamed diced chicken in danggui sauce

accentuated by a vegetable "blossom", chewy

braised (Continued in next column)


Bean curd sticks which sang in chorus with

crisped huaishan and lotus seeds. Finally, a jelly

dessert dotted with orange wolfberries wrapped

up a night of indulgence. At the end of the meal,

we were definitely warmed by both the herbal

tonics and the cozy ambience. We would go away

with more lustrous hair, thanks to the heshouwu,

stronger kidneys thanks to the huaishan, and

better circulation and digestion, thanks to the

danggui.

The inspiration for the herbal dinner came to Chef

Xu a long time ago, when he was still a novice to

cooking. He became fascinated with the concept,

and was determined to refine and elevate herbal

dishes to haute cuisine, thereby broadening their

appeal. "I left Shanghai with my family for

America when I was a kid. But I was always

curious about Chinese traditions. The herbal meal

is one of the traditions that come with an

interesting history", he says.

More than 5000 years ago, the legendary Shen

Nong, the father of agriculture, was the first to

study the healing properties of plants. He also

established the theory of yin and yang, which

became the foundation of Chinese culture and

philosophy. These opposing, yet complimentary

forces make up the whole. So when illness occurs,

Chinese doctors believe there is an imbalance in

the body. Food can then play a role in correcting

and maintaining this balance.

"The herbs we use are very mild, not like 'real

medicine ", the chef says.”They don't have a

strong taste or unpleasant smell. Traditional

Chinese herbal cuisine is not only a science but an

art. It will definitely be the next culinary trend”.

These are not the sort of herbs we use to flavor

dishes in Western cooking. The familiar flavors

such as parsley, basil and thyme were all gone,

and there was not even the familiarity of chilli,

garlic and coriander. In their place were baizhi,

ginseng, and heshouwu. (Continued on next page)





This was one dining experience that was like

falling through the other side of the herbal world,

somewhere unfamiliar and strange, where my

taste buds were put through quite a challenge.

Trying to identify different flavors - flavors never

before encountered - really gave my palate a

workout. It was great to be able to taste an

entirely different culinary world. While I would

certainly eat here again, I think I'll stick to

parsley, sage, and rosemary in my own kitchen.

Huang Ting is artfully decorated in the style of

ancient hutong homes, with a specialized tea

counter, herbal storage, stone lions, original

marble and wooden fixtures, and private rooms

off the main dining room for entertaining parties

as large as 24.

We are welcomed with cups of babaocha (Eight

Treasures Tea) that were sweet, yet thick and

grounded and made from eight different

ingredients, we were told. Executive Chef Xu

Chiping explains he has used TCM to improve the

balance and nutrition of his menu. Any

nervousness we felt was assuaged when he said

there was no animal parts used, nor was this menu

some wild foray into food as medicine. The whole

atmosphere has a feel of authenticity coupled with

anticipation: What will these herbal dishes be

like? The setting brackets our thoughts on

traditional Chinese living and we imagine we are

in for something very different.

The six-course tasting menu begins with

marinated dates with heshouwu, an herb that is

meant to aid digestion. It is a clever way to begin,

preparing us for the feast ahead as the following

courses tantalize and intrigue our Western taste

buds.The steamed chicken is a textual feast,

incorporating crunchy danggui, tart ginseng,

cordyceps, soft brown mushrooms, sweet, plump

wolfberries (also known as goji berries, an

antioxidant-rich super food) and succulent

chicken thigh.



One bite of this colorful, multi-layered palate

teaser is in itself a completely new experience.

Sweet, salty, and both homey and unfamiliar, this

dish was a standout. Who knew steamed chicken

could be so transformed? Those on a low-fat diet

will rejoice. We hear so much about traditional

Chinese medicine in the West, but there is little

chance to experience it.

Having the opportunity to get to know their

flavors, see their shapes, learn where they come

from, and hear from Xu about his childhood days

of drinking the ghastly (but healthy) herbal soup

prepared by his grandmother, was the perfect

introduction to Chinese herbal cooking.

For Xu, this new autumn menu is a chance to

introduce TCM herbs to both Western and

Chinese diners in a holistic but natural way. We

don't get the feeling we are eating medicine -

instead, we feel energized, refreshed and satisfied

at the end of the meal. Huang Ting's new menu is

ambitious, but they have paid a lot of attention to

detail, which means their quest for perfection is

not an overreach. And I am not overreaching

when I say their mushroom parcels with black

truffle are a religious experience. Do not miss

them. (cd 24/9/2012)



Ingredient News

New ingredients approved

The Ministry of Health has approved 5 new food

ingredients: Trisodium monohydrogen

diphosphate, Nitrous Oxide, lactase, calcium

citrate trihydrate, and dextranase.

(jinghua 28/8/2012)

LycoRed's China premix plant gains full approval

LycoRed Ltd., Israel, announces today that its

new premix plant in Changzhou (Jiangsu) [1], one

of the largest premix factories in Asia is fully

approved. The new plant will serve processors of

infant formula, beverage, baby food and other

food products in Asia Pacific. This new site is

now fully operational. LycoRed will exhibit

innovative concepts of vitamin and mineral

premixes designed specifically for Asia-based

processors at Vitafoods Asia, September 5 to 7,

Booth No. 120. The LycoRed team will be on

hand to discuss nutrition trends and new

opportunities in premixes.

“We recently received our Halal MUI certificate

for our new vitamins D3, E and K1 formulations”,

adds Ilan Ron, vice president of sales and

marketing for LycoRed. “These vitamins are

made with a proprietary spray-drying process to

ensure completely solubility of vitamins. They

can be used in premixes for infant formula and

baby food, as well as in dry blends for beverages.

Our formulations are manufactured under the

most stringent specifications in the market for

delivering the safest premixes. We are proud to

have received all necessary certifications and can

ensure our customers will receive the highest

quality blends possible”. Concurrently, LycoRed

appointed Jason Foo sales and business

development manager. "Jason will handle all sales

and business development in Malaysia,

Singapore, Indonesia, Vietnam and the

Philippines”, notes Ron. (newhope 4/9/2012)

CP Kelco appoints Azelis as exclusive distributor for China

CP Kelco recently appointed Azelis as exclusive

distributor in the People’s Republic of China and

Hong Kong SAR, representing the entire product

portfolio into the for Food, Beverage, Consumer

and Industrial application segments. ”China is a

strategic growth market for CP Kelco’s nature-

based products. As the market matures, there has

been a distinct shift into high-quality and eco-

friendly manufacturing, generating a rapid

increase in demand for specialty ingredients—

particularly within the food, beverage and other

consumer sectors”, says Don Rubright, President

CP Kelco.

“With its specialty mindset, we are confident that

the Azelis’ team of experienced professionals in

China is well placed to capture this demand,

providing enhanced service, technical knowhow

and efficient logistic solutions to our existing and

growing base of customers”. Joris Coppye, CEO

of Azelis, adds, “This appointment marks a

significant milestone in Azelis’ expansion into the

major growth markets of Asia Pacific, as CP

Kelco’s product range has a perfect fit with the

key growth segments food and beverages,

personal care and coatings. It is a significant

addition to the successful strategic partnership

between both companies that dates back to 1996.

We will use our expertise, combined with in-

depth local knowledge and an intimate

understanding of distinct customer needs in

China, to deliver effective market penetration and

ongoing support for CP Kelco’s unique, advanced

product range”.

In addition to providing world-class service that

includes dedicated local technical and commercial

support, CP Kelco and Azelis expect to create

added value for customers by jointly developing

innovative solutions and formulations that meet

customer needs, anticipate market trends, improve

food safety and quality, and deliver superior end-

product performance. (Continued on next page)



Ingredient News

CP Kelco appoints Azelis as exclusive distributor for China (Contd)

Leveraging Azelis’ strong relationships with

prime chemicals manufacturers and geographical

reach, CP Kelco will continue supporting its key

accounts to meet their ambitious growth targets.

Azelis will work with CP Kelco incumbent

distributor partners to optimize existing

distribution channels. (fif 13/9/2012)

Firmenich opens R&D centre for fragrances, flavours and ingredients in Shanghai

Firmenich, a Swiss developer of fragrances,

flavours and ingredients, has inaugurated a state-

of-the art Research and Development (R&D)

facility in Shanghai, China. This new facility will

integrate laboratories cutting across the Group’s

leading scientific disciplines, including the

discovery and development of ingredients, as well

as technologies to improve fragrance and flavour

performance, perception and delivery. Its

scientists will be dedicated to expanding the

Group’s innovation pipeline to best meet demand

in China and the extended Asia Pacific region,

while also contributing to the Group’s global

innovation programmes. ‘Following the success

of our first R&D facility in China in 2006, we

decided to step up our innovation foothold here to

further accelerate and expand our development

pipeline’, said chief executive Patrick Firmenich.

‘Our teams here are dedicated to developing

cutting edge ingredients and technologies that are

fully aligned with the specific needs of our clients

in China and the Asia Pacific region’. He added:

‘By deepening our understanding of the

innovation needs in these markets, we are

committed to supporting our clients’ growth in

this dynamic region’. Dr Dong Fang Chen,

President China, Firmenich, added: ‘China has

over two thousand years of rich heritage in

flavours and fragrances. (Continued in next

column)

Firmenich opens R&D centre for fragrances, flavours and ingredients in Shanghai (Contd)

By expanding our R&D strength here, we are

committed to understanding the diverse tastes and

needs of Chinese consumers in order to design

and create products that will delight them’. The

R&D building in China is the company’s third

innovation hub worldwide, working closely with

other centres in Europe (Geneva, Switzerland)

and North America (Princeton, New Jersey). Its

scientists also collaborate extensively with

external partners, including start-ups and

academic institutions. (manchem 18/9/2012)

More stable chilli red

Researchers from the West China University

(Sichuan) [2] in cooperation with Zhongda

Biotech Co., Ltd. (Zhengzhou, Henan) [3] have

developed a production process for a more stable

type of red food color derived from chili. The

project has been approved by experts assigned by

the Science & Technology Department of Sichuan

Province. (hcfood 27/9/2012)

Top flour maker in trouble because of borax

China’s largest flour producer, Wudeli (Daming,

Hebei) [4], with a current market share of 9.36%

and an annual turnover of RMB 12.1 billion, has

made the news in a negative way. Traces of borax

have been found in during quality checks. In the

past, borax has been used as a whitener for flour,

but has been prohibited for health reasons.

(jinandaily 21/9/2012)



Ingredient News

Top flour maker in trouble because of borax (Contd)

Ingredients prices Two times a year China News collects reference

prices of common food ingredients for the

Ingredients section. We are doing so again in this

issue. As always the prices are provided as

RMB/kg and have been extracted from reliable

Antioxidant RMB/kg

Tea polyphenol 360

BHA 160

BHT 48

TBHQ 170

Sodium iso-ascorbate 68

Dodecyl gallate 240

Colorants RMB/kg

Tartrazine 17

B-carotene 60

Red koji 18

Chili red 45

Fruit green 35

Carmine 24


Ingredients prices (Contd)

Preservatives RMB/kg

Sodium benzoate 16

Benzoic acid 35

Nisin 645

Natamycin 1195

ethyl paraben 85

Propyl paraben 77

Methyl paraben 75

Sodium diacetate 12

Potassium sorbate 31

Lysozyme 2200

Sweeteners RMB/kg

Sucralose 1180

Lactose 15

Mannitol 28

Lactitol 165

Aspartame 160

D-xylose 14

Enzymes RMB/kg

Papaine 210

Pancreatine 406

Glucose isomerase 270

B-glucanase 1245

Lactase 150

Hemicellulase 550

Pepsin 455




Ingredient News


Thickeners/stabilisers RMB/kg

Konjak 82

Calcium stearate 26

Arabinogalactan 48

Sodium caseinate 120

PGA 126

Gellan 345

Potassium alginate 68

Agar 128

Sodium alginate 90

CMC 28

Carrageenan 38

Guar gum 35

Gum arabic 70

Xanthan 42

Sodium caseinate 80

Emulsifiers RMB/kg

Tween 80 22

PGFE 40

GMS 21

CSL-S 22

Span 80 22

Sucrose ester 15

Lecthin 40



Nutrients RMB/kg

Copper gluconate 80

Sodium gluconate 9

Zinc gluconate 40

Calcium gluconate 25

Vitamin A 340

Vitamin C 70

Vitamin E 360

L-carnitine 315

Serine 255

Glutamic acid 35

Histidine 270

Methionine 115

Arginine 315

Isoleucine 210

Leucine 150

Taurine 32

Theonine 35

Taste enhancers RMB/kg

HAP 28

Potassium chloride 9.5

Sodium succinate 35

Disodium inosine 160

Disodium 5’-ribonucleotide 160




Regional News

Company News

Ningxia

Helan emerging wine region

The Helan Mountain region of Ningxia is rapidly

developing as one of China’s most promising new

wine regions. The local government is actively

supporting this industry. The region is the home

of 27 wineries with a combined capacity of 995

000 hls of wine p.a. (tjkx 6/9/2012)

Wahaha runs to buy British snack brand KPU Wahaha Group (Hangzhou, Zhejiang) [1], China's

biggest beverage producer, is in pole position to

buy UK-based United Biscuits' 520-mio-GBP

snack business KP Snacks, according to a report

in the British newspaper The Sunday Telegraph.

If successful, it will be the second major

acquisition by a Chinese food and drink giant of

an overseas brand. Shanghai-based Bright Food

Group, also Wahaha's biggest rival in China, in

May purchased a controlling interest in Weetabix

Ltd, a major maker of breakfast cereals in the

United Kingdom, making it the Chinese industry's

biggest overseas acquisition so far.

Wahaha was unavailable for comment on

Monday. "No doubt, Wahaha has its advantages.

As it is a leader in the food and drink business in

China, and has successful experience of retailing

in China, the world's largest market”, said Zhang

Huiming, head of the Enterprise Research

Institute at Fudan University in Shanghai.


Wahaha runs to buy British snack brand KPU (Contd)

The Chinese market, with its huge consumption

potential, will strongly support Wahaha, he added.

But he added that it is not the proper time to go

into a deep analysis of Wahaha's advantages and

disadvantages, as it is still in competition with

other companies for the deal. Wahaha Chairman

Zong Qinghou, 66, listed as the richest man in

China by the Hurun Report this year, said earlier

that his company "has abundant cash", and is

willing to participate in sectors including oil

exploration and the dairy business in Australia.

The Sunday Telegraph said that KP Snacks,

which owns household brands in the UK such as

McCoy's, Hula Hoops, KP Nuts and Skips, is

being put up for sale by its private-equity owners,

Blackstone Group LP and PAI.

The pair, being advised by Credit Suisse, has sent

a four-page sales "teaser" to six potential buyers,

including Wahaha The teaser was also sent to

cereal maker Kellogg's, which recently paid USD

2.7 bio for crisp company Pringles; Kraft, where

KP's new chief executive formerly worked; and a

series of private-equity firms, including Permira.

The final information memorandum will be sent

out on September 3, the newspaper said. "The

international expansion of Chinese companies and

their brands is now one of the most influential

trends across the global business environment,

and the Chinese companies have revealed a huge

surge in confidence, ambition and determination

to conquer global markets”, said Mike Bastin, a

researcher at Nottingham University's School of

Contemporary Chinese Studies.

In 2010, Bright Foods was reported to be in talks

with United Biscuits over an acquisition deal

worth RMB 21.7 bio. But the company later

denied the reports. Zong is reported to have

invested RMB 1 bio to build a department store in

Hangzhou, Zhejiang province. This is the first

time the self-made billionaire has ventured

outside the food and beverage sector.




Company News

Wahaha runs to buy British snack brand KPU (Contd)

Zong has recently returned from a 10-day

European tour, during which the Hangzhou native

met a score of fashion suppliers from cities like

Paris, Milan, and Madrid, and invited them to join

his business empire, said Shan Qining, a

spokesman for Zong and Wahaha. WAOU Plaza,

the name of the store, meaning an exclamation of

surprise in Chinese, will be a shopping destination

offering exclusive European merchandise and

situated in the outskirts of Zhejiang. "What will

be sold at my place will be affordable, quality,

value-for-money products from Europe, nothing

like the RMB-1000-a-piece luxuries that Chinese

customers are familiar with”, said Zong, during

interviews with local newspapers in Hangzhou.

Zong called his entry into the retail sector "the

first step of the company's multi-element

operation" and "an important strategic decision

made after careful thinking".

Founded in 1987 from a small school-run

business, Wahaha Group now has more than 30

000 employees and assets of RMB 31.8 bio. In

2011, it achieved annual sales of RMB 67.9 bio

and a profit of RMB 12.3 bio, ranking it eighth

among the nation's non-State-owned enterprises.

(cd 21/8/2012)

Bright Food said to offer fees on Weetabix deal loan

Bright Food Group (Shanghai) is believed to be

changing the financing arrangements on its

planned acquisition of a majority stake in

Weetabix Ltd. According to industry sources, the

company now plans to pay fees on a loan backing

the acquisition plus a margin totalling about 230

basis points, the sources said. The company

originally offered to pay zero fees to potential

lenders and a margin of 230 basis points. Calls

made to confirm the new arrangement, to the

offices of Bright Food in Shanghai, went

unanswered. (Continued in next column)

Bright Food said to offer fees on Weetabix deal loan (Contd)

The Shanghai-based food manufacturer, which is

seeking about USD 800 mio in financing to back

the deal, is believed to be considering issuing a

USD 300 mio bond as part of the financing and

fund the remainder with bank loans.

(cd 21/9/2012)

Wuliangye invests in expansion

China’s top distiller Wuliangye (Yibin, Sichuan)

[2] is investing RMB 12 bio in a new expansion

project. The new plant will add 1 mio hls of

distilled liquor to the company’s capacity. (tjkx

21/8/2012)

New winery in Xinjiang

Wangzhong Winery (Xinjiang) and the

government of Yanqi County (same) [3] have

signed an agreement under which Wangzhong

will establish a winery in Yanqi with a capacity of

5 000 hls p.a. The project will involve an

investment of RMB 180 mio. (tjkx 5/9/2012)

Distell buys majority stake in Chinese liquor distributor

South African liquor company Distell is

expanding its presence in the East with the

acquisition of a 60% share in fast-growing liquor

distribution company CJ Wines & Spirits, for an

undisclosed amount. Privately owned CJ is based

in Zhongshan [4] (Continued on next page)



Company News

Distell buys majority stake in Chinese liquor distributor (Contd)

in the Pearl Valley Delta of Guandong province,

and has operations in Hong Kong, Macau and

Mainland China. Rody Wong, who previously ran

CJ Wines & Spirits, will head the new venture,

which is now trading as Distell China. Wong, a

former Apple and Seagram executive, who has

worked in the US and Asia, has established a

strong support base for Cognac brand Bisquit,

which Distell bought in 2009. Wong says that

Distell China’s focus would be on building the

presence of Bisquit in the southern part of the

country initially, which is referred to as the

country’s ‘cognac belt’.

According to French trade body Bureau National

Interprofessionel du Cognac (BNIC), cognac

exports to China are “surging”. The BNIC

reported that for the 12 months to June 2012,

year-on-year volume and value levels exceeded

all past records, with producers shipping the

equivalent of 168.5-mio bottles of cognac, worth

USD 2.8-bio. Demand in the Far East has

outpaced other regions, where volumes rose 9.9%

and value, by 21.4%. Asian countries imported

61.8-mio bottles of Cognac during the period,

with China’s consumption, in particular, surging.

The Far East is now the world's biggest importer

of Cognac, with turnover exceeding USD 1.25

bio. “CJ’s conversancy with the cognac market is

an important asset, and we plan to bring this

expertise in marketing to retail and on-

consumption channels to Amarula, which is

currently one of the fastest-growing spirits brands

worldwide”, Wong said.

According to Distell Group MD Jan Scannell, the

plan is to capitalise on the strong market potential

of South China and then address markets such as

Beijing, Shanghai and Chengdu. “The new

venture would carry spirits and wines from

around the world, and that obviously gives us the

scope to explore avenues for some of our other

brands”. (engineeringnews 3/9/2012)

Zhujiang Brewing profits

Zhujiang Brewing (Guangzhou, Guangdong) [5]

has filed a net profit of RMB 44 220 700 for the

first half of 2012, down 25.39% compared to the

same period of 2011. The turnover of that period

was RMB 1.464 bio up 0.65%. (tjkx 11/9/2012)

Zhujiang’s situation reflects the general trend in

the Chinese brewing industry at this moment.

Yanjing Brewing (Beijing) has announced an

extensive refinancing programme for 8 of its

subsidiaries through an additional emission of

shares. (tjkx 13/9/2012 and 17/9/2012)

Qingdao to start new plant in Jiangxi

The plan of Qingdao Brewing (Qingdao,

Shandong) [6] to build a new plant in Jiujiang

(Jiangxi) has been approved by the provincial

authorities. The new brewery will have a capacity

of 6 mio hls p.a. It is expected to be ready for

production in the first half of 2013.

(tjkx 13/9/2012)

From IT to distilled

IT giant Lenovo has acquired a 100% stake in the

Confucius Family (Kongfu) Distillery (Qufu,

Shandong) [7]. The transaction has a value of

RMB 400 mio. The distillery is one of China’s

more famous producers of traditional distilled

liquor. However, the company has been suffering

from financial problems for a number of years, in

spite of several attempts to reorganise. However,

the company’s brand carries a heavy cultural

value. Qufu is the birthplace of Confucius and the

home of the Kong Family graveyard (Confucius is

the Latinisation of Kong Fuzi, Master Kong =

Confucius). The local government was set to

continue this tradition and actively supported the

search for a buyer. This is how finally Lenovo

was found interested in acquiring this distillery.

(hcfood 17/9/2012)

It will be interesting to see, whether Lenovo will

be able to revive this fledgling company.



Company News

Lenovo acquires third distillery

IT giant Lenovo has acquired all shares of Wuling

Distillery (Changde, Hunan) [8]. This is the third

distillery acquired by Lenovo in a relatively short

period. The company manages this business

through a special subsidiary.

(tjkx 28/9/2012)

This move by Lenovo clearly indicates that

Chinese corporations have confidence in the

distilling business. However, the cartoon also

shows that the general public in China still has to

grow accustomed to such investments in non-core

business

Tontine Wines acquires Baiyanghe

Hong Kong based Tontine Wines Group has

acquired a 60% stake in Baiyanghe Winery

(Yantai, Shandong) [9]. The transaction involves

an amount of RMB 130 mio. Baiyanghe’s

products are mainly sold in the richer coastal

provinces of China. (tjkx 27/9/2012)

China’s first wine entrepreneur incubator

The Yantai Student Entrepreneur Park has joined

forces with the wine industry in Yantai

(Shandong) and the China branch of ISNAB

(Institut des Sciences de la Naturee t de l'Agroali

mentaire de Bordeaux) to establish a special

incubator facility for young entrepreneurs in the

wine business. (tjkx 28//9/2012)

ISNAB (China) Institute was established in China

Agricultural University (Yantai) on March 7,

2011. (Continued in next column)

China’s first wine entrepreneur incubator (Contd)

It is the first sommelier marketing training course

of China.

Maotai, the national liquor? Maotai (Zunyi, Guizhou) [10], Chinese most

famous distilled liquor after President Nixon’s

seminal visit to China, has stated that it should be

recognised as China’s ‘national liquor’. However,

that statement immediately drew violent

opposition from the other well known brands.

(hcfood 20/9/2012)

Bright’s Guo complains and needs to recant immediately

Shanghai Bright’s CEO, Mr. Guo Benheng, has

given a rather feisty interview with Beijing

Commerce recently. During the interview he

stated that technology and management of

Chinese dairy companies is probably not that

much worse that in major dairy countries like

New Zealand. He claimed that the main problem

in China was the raw milk.

There is still too little and the quality is still too

bad. He ended the interview by criticising the

number of quality inspections, stating that a

company like Bright was almost ‘inspected to

death’. This interview, and especially his final

statement, already created a stir in the media.




Company News

Bright’s Guo complains and needs to recant immediately (Contd)

The melamine scandal and other quality problems

in the Chinese dairy industry are still fresh in

people’s memories and putting all the blame on

the dairy production struck most people as

arrogant.Only some days later, a batch of spoiled

Bright milk was discovered, and both Bright and

Mr. Guo were attacked mercilessly. The favorite

slogan became: ‘Bright should be inspected to

death’. (Several sources September 2012)

This item is not only entered to reflect that the

problems in the Chinese dairy industry still are

far from having been solved. It also provides a

look at the cultural mechanisms behind the

problems. Mr Guo is the CEO of one of the

country’s top 3 dairy companies. In that capacity

he feels he is entitled to express himself as he did

during that infamous interview. It is ‘I’m too high

to be touched by anyone or anything’ kind of

attitude. It is like the hubris in ancient Greek

philosophy. It gets you up high in the air for a

while, but then it creates myopia and lets you

make fatal mistakes. The various parts in the

Chinese dairy chain, dairy farmers, milk

processors, government agencies, etc. have been

finger pointing for years, blaming the problems

on everybody but themselves. If this does not stop,

the problems will remain unsolved.

Mengniu to increase sourcing raw milk

Mengniu Dairy Co Ltd. (Huhhot, Inner Mongolia)

[10], the largest dairy products distributor in the

country, hopes to source 100% of its raw milk

supply from large-scale farms, up from the 85%

currently, as part of its efforts to ensure product

quality. The company also plans to spend around

RMB 4 bio on building wholly owned large

ranches in China to meet part of its raw milk

supply requirements.


Mengniu to increase sourcing raw milk (Contd)

Bai Ying, executive director at Mengniu, in

announcing the company's interim results at a

press conference in Hong Kong on Tuesday, said

large-scale ranches were already under

construction in Northeast China, North China and

Northwest China. "Currently, about 84 to 85% of

our raw milk (supply) is from large-scale farms”,

Bai said, adding that by the year 2015, the

proportion will be increased to 100%.

This is one of the company's moves to improve its

product quality and safety by working on the raw

milk supply sources, said Sun Yiping, chief

executive officer at Mengniu.

In December 2011, products from Mengniu's

Meishan plant were found to contain high levels

of cancer-causing Aflatoxin M1. "Following the

detection of M1, our sales volume plunged 30%”,

said Sun, adding that despite the company's

efforts in promotion and marketing, its sales

volume in the first half of this year still contracted

5% from the same period a year ago.

Sun said that since the incident's impact has been

gradually disappearing, Mengniu's sales volume

has recovered to the levels before the December

2011 incident.

Wu Jingshui, chief financial officer at Mengniu,

said that in order to protect its market share after

the scandal, Mengniu had launched a series of

promotions and discounts in the first half, causing

its gross profit margin to contract 0.3% age point

from a year ago to 25.7%. "There will be less

discounts and promotions in the second half,

which is good for the profit margin, but the cost

of raw milk is likely to increase”, said Wu, adding

that its gross profit margin in the second half may

stay flat or see a "slight decrease" from the first

half. (Continued on next page)



Company News

Mengniu to increase sourcing raw milk (Contd)

Jacqueline KO, analyst at Kim Eng Securities,

told China Daily that she is optimistic about

Mengniu's performance in the second half. "The

management team told us that their sales were

back to normal and as the company will reduce its

promotions in the second half. Its gross profit

margin will be increased from its first half level”,

said KO. KO also said she believes that the

company's commitment to constructing ranches in

China is a positive gesture, as food quality is a

major concern in the country, and the market will

be happy to see the company's efforts on

improving its quality control. She added the

company's valuation is cheap. (cd 29/8/2012)

Chinese eye Tasmanian dairy farms

Just as the hullaballoo surrounding the sale of the

giant cotton farm Cubbie Station starts to wither,

another big Chinese investment group is eyeing

off Australian farmland. The state-owned China

Investment Corp is considering investing in a

Tasmanian-based dairy company. It is an idea that

is split the local community. From Tasmania,

Martin Cuddihy reports.

MARTIN CUDDIHY: At this time of the year in

Tasmania's north-west you can't stray too far off

the bitumen before you get bogged. The rich red

soils and high rainfall are perfect for growing

vegetables, and grass. There are scores of dairy

farms turning that grass into milk.

The head of the Tasmanian Farmers and Graziers

Association is Jan Davis.

JAN DAVIS: Most of Tassie's looking pretty

good at the moment. We're coming into spring off

a fairly moderate winter. We've had a lot of rain

in some spots but so far, so good.

MARTIN CUDDIHY: Today, Tasmania's

Premier Lara Giddings revealed foreign investors

are again looking to capitalise on Australian

agriculture. (Continued in next column)

Chinese eye Tasmanian dairy farms (Contd)

Ms Giddings has just returned from a trade

mission to China. She's told ABC radio she met

with executives from the China Investment

Corporation.

LARA GIDDINGS: A corporation that I met with

the highest level of executives to discuss those

sorts of initiatives and areas that they could invest

in. And there's some keen interest in that.

MARTIN CUDDIHY: Given Tasmania's

struggling finances, she says this is an opportunity

that shouldn't be left begging.

LARA GIDDINGS: We want their investment

because we want to be able to expand our

industry. We want to be able to meet the demand

or some of the demand in China for dairy product,

particularly dried milk product.

MARTIN CUDDIHY: The wealth fund is

interested in the Van Diemen's Land Company. It

was founded by royal decree in 1825 when King

George IV granted 325 000 hectares of land.

Today Van Diemen's Land is almost wholly New

Zealand owned, operating more than 20 dairies

across north-western Tasmania and producing

almost six mio kg of milk products. It is in the

final stages of raising USD 180 mio to double its

milk production and earlier this month four

Chinese executives visited some of the properties.

The company's chief executive is Michael Guerin.

MICHAEL GUERIN: These equity-raising

processes can conclude very quickly when we get

our stage or it can take some time.

MARTIN CUDDIHY: Does the company have

any preference for where the money comes from?

Would you rather see it come locally or does

foreign investment not matter?




Company News


MICHAEL GUERIN: Any important thing for

organisations like ours is to attract the right sort of

equity.

MARTIN CUDDIHY: But you don't have any

preference, or you do?

MICHAEL GUERIN: Well our preference all the

way through and started with the IM is to bring in

capital that's interested in dairy farming in

Tasmania and indeed globally.

MARTIN CUDDIHY: A lot of these farms lie

within the Circular Head council based in

Tasmania's far north-west. Deputy Mayor John

Oldaker is a farmer, and a former chairman of the

Farmers and Graziers Dairy Council. He says this

issue has split the community.

JOHN OLDAKER: This is no different to what it

was in the late '90s when we've seen a whole lot

of country gets planted out to trees. It divides

communities. Now the community all took

different stands on that sort of thing and at the end

of the day it'll be the farmers that will make the

final decision.

MARTIN CUDDIHY: The current chief of the

Farmers and Graziers Association, Jan Davis says

foreign investment is always welcome in other

industries and there should not be another set of

rules for agriculture.

JAN DAVIS: We have strong foreign investment

in all our other industries - in mining, in

manufacturing. And nobody seems particularly

concerned about it.

MARTIN CUDDIHY: So do you think concern

about Chinese investment in Tasmanian dairies is

warranted?



JAN DAVIS: No I don't. Firstly, there is yet, I

certainly am not aware yet, of any single dollar

changing hands. We've got a lot of talk but

nobody's put their money down on the table yet.

ASHLEY HALL: Tasmanian Farmers and

Graziers chief Jan Davis ending that report by

Martin Cuddihy. (abc 24/9/2012)

Bright Dairy removes cheese with banned additive from shelves

A cheese product made by Bright Dairy

(Shanghai) for babies was pulled from shelves

nationwide after it was tested to contain a banned

additive, Beijing Times reported today. The

additive, milk mineral, was not allowed for babies

according to regulations issued by the Ministry of

Health in 2009 as it is a newly extracted

compound with unproven effects on babies.

The ingredient was printed on the package of the

cheese product designed for children aged one to

three. However, Shanghai-based Bright Dairy &

Food Co claimed the product is safe and has

passed all quality tests. It pulled the cheese from

shelves to avoid consumer misunderstanding. The

product will reach the market again in October

with a new package. Bright Dairy admitted the

ingredient has been added since 2009, before the

ministry adopted the new regulations. But it didn't

say whether it will be removed after package

redesign, the paper reported. (sd 18/9/2012)



Company News

Bright Dairy recalls baby product for banned additive in latest goof

Bright Dairy (Shanghai) has taken a cheese

product for babies off the shelves nationwide after

it was found to contain a banned additive, the

dairy giant said yesterday.

"Bright Dairy has recalled all of the products on

the market and apologizes over the misleading

packages”, it said in a statement. The additive,

milk mineral, is not allowed for babies according

to regulations issued by the Ministry of Health in

2009 as it is a newly extracted compound with

unproven effects on babies.

The ingredient was printed on the package of the

cheese product designed for children aged one to

three. Compared with adults, babies are more

vulnerable and sensitive to additives like

colostrums, which may have potential risks to

their health and development; therefore some

additives are banned from being used on dairy

products for babies in China, Cao Mingshi,

Deputy Secretary General of the Shanghai Dairy

Association, told Shanghai Daily.

Dietician Li Dongye said whether milk mineral is

safe or not, or will hinder children's development,

is unknown and different people may react

differently even if no adverse reaction had been

detected. Bright Dairy, however, insisted the

product is safe and has passed all quality tests.

"Milk mineral is a natural and safe source of

calcium”, it said in the statement. It said the

ingredient has been added since 2009, before the

ministry adopted the new regulations.

The formula of the cheese was made before 2009,

an official with Bright Dairy's quality division

surnamed Ju said. Bright Dairy said it pulled the

cheese off shelves nationwide in early September

to avoid consumer misunderstandings, and the

product will reach the market again in October

with a new package.


Bright Dairy recalls baby product for banned additive in latest goof (Contd)

However, some big chain supermarkets in the city

said they didn't know about the recall until

yesterday, when Beijing Times reported its

readers found the banned additive on the package

of the cheese product. The NGS supermarket

chain said all of its supermarkets were still selling

the products, one of original flavor and one of

coconut milk flavor, yesterday until its staff

members saw the Beijing Time report online. "We

did not receive any notification from Bright Dairy

and we called the company to ask about the

situation after we saw the report”, said Gan

Pingzhong, an official with NGS quality

monitoring division.

The Shanghai Industrial and Commercial

Administrative Bureau said it ordered all

supermarkets and convenience stores in the city to

remove the cheese products from shelves

yesterday. The time-honored dairy brand has been

entangled in a number of safety scandals recently.

Early this month, nearly 1 000 households in

Shanghai received sour milk produced by the

dairy giant. It blamed the quality problem on

transport tricycles. In June, its Ubest milk was

found to be contaminated with an alkaline

solution. An automatic valve didn't switch on at

one of Bright's factories. "There is no safe

domestic milk, but what can we do?” says a

consumer, Zhang Baojuan, at a supermarket as

she was picking up some yoghurt products.

(sd 19/9/2012)



Company News

Synutra to invest in French dairy project

Synutra (Qingdao, Shandong) [6] a leading infant

formula company in China and a producer,

marketer and seller of nutritional products for

infants, children and adults, today announced the

signing of a long-term industrial and commercial

partnership agreement with Sodiaal, the leading

dairy cooperative in France, and its subsidiary,

Euroserum, the world leader in demineralised

whey powders. Under this partnership agreement,

Synutra will build a new drying facility in

Carhaix, France (located in the Brittany region),

intended to manufacture powdered milk and fat-

enriched demineralised whey for the needs of the

Synutra group.

Located in the heart of the central Brittany milk-

collection basin, this new drying facility will meet

the strictest European quality and hygiene

standards and will be capable of producing

60 000 t of powder per year initially, with a

designed capacity of up to 100 000 t annually.

Synutra anticipates spending approximately 90

mio Euros to build and operate this drying facility

with the majority of funding for this project

expected to come from PRC bank loans.

The operational commissioning of the drying

facility is expected to take place by year-end 2014,

subject to full PRC government approval and,

once completed, is expected to employ

approximately 75-100 employees.

Upon commissioning of the drying facility,

Euroserum and Sodiaal will supply the facility

with demineralised liquid whey and milk. This

agreement and the construction of the drying

facility in Carhaix remains subject to the

approvals of the government of the People's

Republic of China, granted by (i) the National

Development and Reform Commission, (ii) the

Ministry of Commerce and (iii) the State

Administration of Foreign Exchange (SAFE).


Synutra to invest in French dairy project (Contd)

Mr. Liang Zhang, Chairman and CEO of Synutra

said, "We are very pleased with this industrial and

commercial partnership with Sodiaal and

Euroserum. This opportunity allows Synutra to

secure its long-term supply of high quality raw

materials and fuel Synutra's future growth while

maintaining the highest quality standard for our

products. We are confident this collaborative

effort can further increase consumer confidence

and trust in our premium nutritional products”.

Mr. Francois Iches, Chairman of Sodiaal said,

"We are delighted with this long term partnership

agreement with Synutra and its investment of a

new drying facility in the Brittany region. This

commitment is a strong signal for Sodiaal and our

farmers of the long-term commercial relationship

between the two groups”.

Synutra International, Inc. is a leading infant

formula company in China. It principally

produces markets and sells its products through its

operating subsidiaries under the "Shengyuan" or

"Synutra" name, together with other

complementary brands.

It focuses on selling premium infant formula

products, which are supplemented by more

affordable infant formulas targeting the mass

market as well as other nutritional products and

ingredients. It sells its products through an

extensive nationwide sales and distribution

network covering all provinces and provincial-

level municipalities in mainland China.

As of June 30, 2012, this network comprised over

650 independent distributors and over 800

independent sub-distributors who sell Synutra

products in over 66 000 retail outlets.

(msn 18/9/2012)



Company News

Darfield's first shipment off to China

The first 37 containers filled with 940 t of high

quality whole milk powder have left Fonterra’s

new manufacturing site at Darfield, headed for a

customer in China. Canterbury operations

manager Richard Gray says the site has

progressed from bare paddock to producing high-

quality milk powder in just over 18 months.

"Our first milk powder is off to China for use in

dairy beverages. It’s a proud moment for the

whole team”, says Mr Gray. "To date we’ve

produced over 6 000 t, and our quality tests have

come back 100% first time.”The first month of

operation is all about testing the plant under a

range of operating conditions and ensuring a

smooth transition between our contractors and the

operations team. We’re happy with the progress”,

he says. "At peak, our milk tankers deliver 2.2

mio litres of milk to Darfield Drier 1 every day.

This is turned into whole milk powder at a rate of

15 t per hour. "Once the milk is processed into

powder, it is packed into 25 kg bags, placed on

pallets by a robot arm and then in containers and

onto Lyttleton port”.

From the outset, the Darfield team has maintained

an exceptional standard of health and safety and

product quality, says Mr Gray. "About 1 500

people have been involved in construction. By

working together with a proactive approach to

health and safety, we’ve achieved a big step up on

our safety performance”, he says. The site’s

operation team continues to work with key

contractors to ensure all design requirements are

met as the season heads towards its peak in

October. (voxy 24/9/2012)

Chinese contract causes Arinco expansion in Denmark In June Arla entered a ten-year contract with

Chinese food company Biostime to produce up to

20 000 t of Danish milk powder for the infant

formula market p.a. (Continued in next column)

Chinese contract causes Arinco expansion in Denmark (Contd)

Consequently, Arla is now looking to expand its

milk powder facility Arinco in Denmark. In June,

Biostime International Holdings Limited, which

sells high-quality products for the infant formula

and baby care sector in China, chose Arla to

supply milk powder produced from Danish milk.

The order is for about 20 000 t a year for the next

ten years and involves an investment of about 165

mio DKK to expand Arla’s Arinco milk powder

facility in Denmark, of which Biostime will

finance half. Arla’s Board of Directors has now

approved the investment in Arinco, and expansion

will be under way from as early as October.

“We expect that this increased production for the

Chinese market will create about 30 new jobs at

our facility between now and 2014. The

investment also means that we can introduce more

automated processes and thus make production at

Arinco even more efficient. So we will produce

more, and in a more efficient manner”, says

Mogens Bøgh Pedersen, Arinco site director.

Arla already exports very refined milk powder

and infant nutrition products to China and the

high quality of the Scandinavian products was one

of the main reasons that Arla was chosen as

supplier. “We are proud to supply the Chinese

market with our high-quality Scandinavian

products, which have an excellent food safety

record.

The agreement rubber-stamps Arla’s outstanding

skills in producing dairy products, and the

agreement is a good one for us because these

products are at the more profitable end of our

product range”, says Senior Vice President Frede

Juulsen, who is responsible for Arla’s business in

China and globally responsible for milk powder in

Arla.




Company News

Chinese contract causes Arinco expansion in Denmark (Contd)

The contract with Biostime came in the wake of

Arla’s strategic agreement with the leading

Chinese food company, COFCO, on joint

ownership of China’s largest dairy company,

Mengniu Dairy Group. The agreements are

intended to strengthen Arla’s presence and long-

term profitability in the Chinese market, which is

defines as a strategic growth market in the Arla

Group strategy. (globaldairy 27/9/2012)

Yili launches breakfast cheese

Yili Dairy (Huhhot, Inner Mongolia) [10] has

launched a series of what it refers to as breakfast

cheese. The range includes: plain, high calcium,

cheddar and low fat. (hcfood 27/9/2012)

The original news item does not specify how

breakfast cheese differs from regular cheese. We

presume it is regular cheese, marketed as a

Western lifestyle product.

Wantwant becomes dairy company

The most recent profit and loss account of

Wantwant, which has long been known as one of

China’s top candy producers, shows that dairy

products now contribute to more than half of the

company’s profit: 52.1%.

This makes Wantwant de facto a dairy company.

However, Wantwant’s main dairy products are

flavored milk which is also heavily sweetened in

China. In this respect, Wantwant’s image of

confectionary company still stands.

(tjkx 29/9/2012)

Nestlé launches nationwide health education programme for elderly people

Elderly people across China will be able to

receive free heart checks and health consultations

as part of a new nationwide education programme

launched by Nestlé. The company is working with

China’s Organizing Committee of the National

Community Care Campaign to raise awareness

among senior and middle-aged citizens about

conditions such as cardiovascular disease and of

the importance of a healthy diet and lifestyle. The

‘Elderly Care - Health Project’ will be rolled out

in 10 cities including Beijing, Shanghai,

Guangzhou, Changsha, Chengdu, and Nanjing in

the first phase starting this month. It will provide

heart checks and professional health consultations

to people in urban communities, as well as

lectures addressing some of the most important

health concerns of the country’s ageing

population. More than one mio households with

elderly members will also receive health

education brochures within the first year. The

programme eventually aims to reach a total of ten

mio households. (Nestle 19/9/2012)

Nestlé sees 20% growth in China

Nestlé said China sales will probably grow about

20% this year because of rising wages and

government efforts to boost local consumption.

The slowing growth of Asia's biggest economy

hasn't affected the local operations of the Vevey,

Switzerland-based Company, which has seen

expansion in most of its businesses, including

dairy products and coffee, Roland Decorvet, its

chairman in China, said on Thursday. Nestlé’s

China sales increased by more than 20% last year

and will grow by at least 10% in 2013, he said.

"There are a lot of initiatives done by the

government to promote the local economy,

domestic economy and local consumption”, said

Decorvet, who was attending the World

Economic Forum in Tianjin. "Wage inflation

means more purchasing power”. (cd 14/9/2012)



Company News

Huiyuan reportedly in dire straits

After the Chinese government halted Coca Cola’s

acquisition of Huiyuan Fruit Juice (Beijing), the

company’s net profit has been decreasing and

recently it has even filed a loss. The Chinese fruit

juice industry in general is in a bad shape, with

fierce competition from multinational players.

However, insiders are also reporting management

problems within Huiyuan. (hcfood 4/9/2012)

Danone to be settled in Sichuan

On February 29th, Danone Asia-Pacific

Management Company and Qionglai People’s

Government (Qionglai, Sichuan) [11] signed an

agreement on the Qionglai investment project of

Danone Drink, which marks Danone Group, the

Europe’s third largest food group having many

international brands such as DANONE and

EVIAN as well as a Fortune Global 500

Company, has entered Qionglai.

It is reported that the project is located in the

Linqiong Industrial Park of Qionglai (Sichuan),

which will be engaged mainly in producing the

beverage Cube and potable water. The total

investment surpasses RMB 500 mio. The

construction will start in the first half of this year

with the first instalment of investment of RMB

215 mio, and be completed in 2013, and an annual

production capacity of 2.5 mio hls of beverage

will be formed then. (cei 11/9/2012)

PepsiCo funding 16 schools in 15 Chinese cities

Beverage and food giant PepsiCo Greater China

Region is financing Chinese schools in the

country's remote areas.

As of the end of 2011, PepsiCo had provided

funding for 16 schools in 15 Chinese cities,

including Beijing, Jinan, Chongqing, Nanchang,

Changchun, Shanghai, Guangzhou, Shenzhen,


PepsiCo funding 16 schools in 15 Chinese cities (Contd)

Tianjin, Xi'an, Nanjing, Heyuan, Wuhan,

Chengdu and Zhengzhou, benefiting 16 200

students in total, including 3500 PepsiCo Love

Scholarship beneficiaries.

Up to 2012, PepsiCo GCR had invested more than

RMB 4 mio in the aforementioned two education

programs, covering 26 schools of migrant

workers' children and rural schools in several

Chinese provinces and municipalities with

benefits shared by more than 20 000 primary and

secondary school students across the country. On

September 7, PepsiCo donated RMB 200 000 to

several outstanding students and teachers in

Beijing to help improve the educational

environment and boost the education development

of the local community. While providing

sustained funding for these education support

programs, PepsiCo Foundation and PepsiCo GCR

are also actively engaged in other public welfare

programs, including Mother Water Cellar, an 11-

year project aimed at providing safe drinking

water for regions suffering water shortages in

central and western China, charity campaigns

initiated by the associates of PepsiCo factories

and farms across the country that directly benefit

local communities and emergency assistance and

support offered by the company and associates in

the wake of natural disasters.

To date, public welfare donations made by

PepsiCo Foundation, PepsiCo GCR and PepsiCo

associates in China have already exceeded RMB

75 mio. PepsiCo Greater China Region built a

new library in Wulanhua town No 6 Primary

School in Siziwang Banner, Inner Mongolia,

which opened this month. It confirmed the

company's pledge to generate healthy financial

returns while giving back to the communities that

it serves. The new library, under the PepsiCo

Library program, gives the school access to

computers, book shelves, book cabinets, desks

and chairs and other learning facilities.




Company News


PepsiCo GCR has handed over more than 3 000

new books and its associates have donated more

than 1 000 to the library. The PepsiCo Library

program is part of PepsiCo's "Performance with

Purposes" strategy, which aims to profit from and

give back to communities.

Since its launch in 2007, the program has been

committed to building PepsiCo libraries for

schools in the countryside around PepsiCo farms,

donating books, desks, chairs and other library

facilities and offering scholarships for school

students.

To date, PepsiCo and its Greater China Region

associates have already invested nearly RMB 1.9

mio in this endeavor, building a total of 10

PepsiCo libraries in Inner Mongolia, Hebei,

Guangxi, Shandong, Guangdong, Hubei and

Gansu. More than 4 500 students have benefited.

"Siziwang Banner is a shining pearl on the Inner

Mongolia prairie with a time-honored history. I

feel deeply honored to be able to represent

PepsiCo here in declaring the inauguration of the

PepsiCo library and witnessing the small

contribution PepsiCo has made to the education

development on this Grand Prairie”, said Katty

Lam, president of PepsiCo GCR Foods OpCo.

Wulanhua town No 6 Primary School is the 10th

school sponsored by the PepsiCo Library

program. As the teachers and students began their

new semester, PepsiCo GCR specially organized

a volunteer campaign for its associates to get

personally involved in the public welfare

program.

During the volunteer campaign, PepsiCo

volunteers from across the country gathered at the

No 6 primary school to help with the set-up of the

library, joining reading games, holding "mini

Olympics" and other activities with the students

and teachers. (Continued in next column)


The active participation of PepsiCo associates has

broadened the school curriculum and injected new

impetus to the teaching activities.

"PepsiCo is one of the most successful consumer

goods companies in the world. Its products are

known and liked by hundreds of mio of Chinese

consumers. On behalf of the teachers and students

of the school, I want to thank PepsiCo for the

support and assistance offered to us as we enter

this new semester”, said Wu Ying, principal of the

school.

"I also want to thank PepsiCo volunteers for their

efforts in improving our teaching curriculum and

enriching the extracurricular activities of the

students. I am confident that under the motivation

of PepsiCo, our students will make more

dedicated efforts and study even harder for the

prosperity of their homeland on this Grand

Prairie”.

In addition to the PepsiCo Library, the maker of

Pepsi Cola and 7up is sponsoring another

education support program for the children of

migrant workers called PepsiCo Better

Tomorrow. Since the start of the program in 2008,

PepsiCo has followed a region-by-region and

step-by-step approach to improve the education

environment of migrant workers' children by

offering scholarships, building libraries and

providing sports equipment and other material

support for their schools. (CD 17/9/2012)

Chef Kong divests from Weiquan

Chef Kong Holding has sold its 11.61% stake in

seasoning producer Weiquan to the latter’s mother

company Tinghsin Group. This is the second time

that Chef Kong has sold part of its holdings in

Weiquan. (Continued on next page)



Company News

Chef Kong divests from Weiquan (Contd)

Observers believe that Chef Kong is concentrating

its efforts on instant noodles and soft drinks,

markets with a relatively high profit margin.

(bjc 5/9/2012)

It is interesting to see that a top producer of

instant noodles sheds its stake in a major player

in the seasoning business, which includes

seasoning packs for instant noodle.

Maclean's targets international growth Scottish family-owned bakery Maclean's has

secured new investment that will enable the firm

to expand its international business and add 15

new staff to its team of 130.

The GBP 3 mio turnover Forres-based business

will invest GBP 365k in new equipment,

marketing and other tools to support its global

ambitions. Maclean's, which makes oatcakes,

shortbread, and sweet biscuits, is focusing on the

investment in the Far East and is already active in

China.

The firm also takes orders from Australia and the

United States and recently diversified its offer to

include gift and premium bakery products.

The new machinery, brand development and trade

fair attendance is all part of our growth plan

which will allow the company to expand as new

opportunities arise.


Maclean's targets international growth (Contd)

"A key element of this is increasing our export

sales and developing new premium products”,

said Lewis Maclean' Maclean's managing

director. "This expansion in activity will put us in

a great position to explore further new markets as

well as introduce some new additions to our

range”. (ingredientsnetwork 30/8/2012)

DQY rules the roost in modern poultry industry

"If you enjoy eating an egg, why bother to find

the hen that laid it?" Such was the rejoinder

famously used by renowned Chinese writer Qian

Zhongshu to decline a journalist's interview. But

in the poultry business, it is not a superfluous

question. Domestic egg companies should have

inked codes on egg shells identifying farm and

production dates to guarantee quality and even

help trace an egg to its hen if need be, said Zhang

Xuan, marketing director of Beijing DQY

Agriculture Technology Co Ltd, the capital city's

leading organic egg producer.

Twelve years ago, when Chinese consumers were

still buying eggs in bulk without trademarks or

dates or standards, DQY became the first Chinese

company to produce and sell packaged, branded

eggs with expiry dates. "A product as small as a

screw has a standard, but for eggs, such an

important everyday food, there were no

production standards at that time”, Zhang said.

Things have only changed significantly following

DQY's pioneering efforts. In supermarkets across

the capital city, customers can easily find various

brands of packed eggs, but the ratio of such

products among all eggs in the market are still

less than 5%, Zhang said. "It is a 'blue ocean'

market”, said Zhang, referring to the open range

of opportunities available.




Company News

DQY rules the roost in modern poultry industry (Contd)

He joined DQY six years ago with firm

expectations for the promising prospects of the

fast-growing industry. "The proportion of high-

standard eggs is estimated to increase by 7 to 10%

by 2015 and before 2050, it will reach 95%”.

Urban residents with their changing lifestyle

increasingly want fresh agricultural products, he

said, citing growing demand for clean, packaged

vegetables that are ready to cook. DQY now runs

a farm in Yanqing county of Beijing where it has

3 mio chickens and produces 1.6 mio eggs every

day. Due to capacity constraints, the majority of

eggs - about 80% - supply the Beijing market,

Zhang said.

DQY's advanced way of converting chicken

manure into biogas for power generation also

makes it stand out in the poultry industry. The

company's plant near its Beijing farm can now

generate 14 mio kwh electricity from the biogas.

It is part of the company's vision of the farm of

the future, Zhang said. Producing quality foods

while protecting the environment, which can be

realized by operating both a farm and an energy

company simultaneously, he said. "In the US new

farm projects won't be approved if they don't have

wholesome solutions for waste, and China will

certainly walk this road," Zhang said.

DQY has also started to export its technology in

bio energy overseas. Earlier this year, the

company inked a deal with American meat

supplier Smithfield Foods to jointly set up biofuel

plants to use waste from more than 20 mio pigs on

Smithfield's farms to generate electricity.

"We are basically a company built on

technology”, Zhang said, adding that it benefited

greatly from the science tradition and research

strength at the Zhongguancun Haidian Science

Park.


DQY rules the roost in modern poultry industry (Contd)

As one of the enterprises in the park, DQY is

eligible for preferential human resource policies

that could make life easier for its backbone

employees. The company has also received strong

funding support from the park, Zhang said. He

added that DQY will go public in the next two to

three years and the park also offers consultancy in

related laws and policies to facilitate the process.

(CD 11/9/2012)

Origin Agritech inaugurates Xinjiang corn seed processing centre

Origin Agritech Limited ("Origin" or the

"Company"), a technology-focused supplier of

hybrid and genetically modified crop seeds in

China, today announced that Xinjiang Origin, a

subsidiary of Origin Agritech, held an opening

ceremony for its regional facility at Bole

(Xinjiang) [13] on September 9, 2012.

Dr. Gengchen Han, Chairman and Chief

Executive Officer and Dr. James Chen, Chief

Financial Officer of Origin hosted the ribbon-

cutting ceremony. Senior officials from the

Ministry of Agriculture as well as the Fifth

Agricultural Construction Division of Xinjiang

Production and Construction Corps attended the

event as honorary guests.

Established in June, 2011, Xinjiang Origin is a

joint venture seed company between Origin and

Xinjiang Jinbo Seed ("Jinbo"). Jinbo is a

prominent local seed company affiliated with the

Fifth Agricultural Construction Division of the

Xinjiang Production and Construction Corps.

Origin holds a 51% ownership stake of the

RMB100 mio registered capital investment and

retains the exclusive joint venture partnership

with Jinbo in Xinjiang.




Company News

Origin Agritech inaugurates Xinjiang corn seed processing centre (Contd) With a total investment of RMB170 mio, the

state-of-the-art facility will mainly produce,

process, package, and sell high-quality hybrid

corn seeds to the domestic Chinese market.

The joint venture will increase the Company's

total seed processing capacity and expand

marketing channels to distribute Origin's hybrid

products to the northwest region in China. The

Xinjiang Origin's facility, along with the seed

production land of the Fifth Agricultural

Construction Division, deploys modern

technologies and full mechanization throughout

the entire production process from land

preparation and seeding to product packaging.

The processing facility employs advanced corn

husker system, which is one of the largest corn

huskers in the world. The production base uses

modern drip irrigation systems and advanced

farming equipment for corn seed production.

Dr. Gengchen Han, Chairman and CEO of Origin,

commented, "Xinjiang Origin not only addresses

the increasing demand for our superior hybrid

seed products, but diversifies our cost structure

and production base, and expands our sales

channels into a new market. With our new

management team, leaner corporate structure and

the new facility, we are now poised for the next

stage of growth”.

"We are excited to work with Jinbo. By

integrating our local partner's advantages in

natural resources and operational experience with

our robust research capability, quality

management and services, Origin's strategic

vision to build a world-class modern seed

processing centre is in the making”, Dr. Han

concluded. (originseed 12/9/2012)

Cargill finds a sweet spot in China

Cargill implements Hazard Analysis Critical

Control Points systems in all plants across the

country to ensure food safety. Provided to China

Daily Diversified food demand keeps the growth

engine chugging for US Agribusiness Company

US agribusiness giant Cargill Inc is looking to

further expand its presence in China as the

country's demand for diversified food products

continues to be on the upswing. The multinational

company is looking to expand all lines of its

business in China, with particular emphases on

animal protein, animal nutrition, food ingredients

and health-promotion businesses.

The company is also building a new USD 67 mio

high fructose plant in Luohe, a city in Central

China's Henan province. Slated for completion by

June 2013, the new project will help Cargill

provide better services to its customers in China.

Cargill posted lower earnings of USD 1.17 bio

from its continuing operations across the globe

during fiscal 2012, which ended on May 31 this

year. In contrast, the company has posted record

earnings of USD 2.69 bio during the same period

in 2011. Though not in line with its expectations,

the fiscal 2012 performance was still one of its

better years for earnings and ninth in the

company's history. Revenues for the period were

USD 133.9 bio, up 12% from a year ago.

The food-ingredient business posted a third

consecutive year of record earnings in fiscal 2012.

The company invested over USD 4 bio to support

its customers and on global growth plans,

including acquisitions, joint ventures, and new or

expanded facilities.

Robert Aspell, president of Cargill Investment

(China) Ltd, says a significant amount of Cargill's

global capital expenditure was focused on China

as the nation had an integral role to play in the

company's overall growth plans.




Company News

Cargill finds a sweet spot in China (Contd)

"Rising incomes and accelerating urbanization in

China are driving demand for more diversified

and convenient diets.

Higher income has also increased the

consumption of meat proteins and vegetable oils.

Cargill still sees the upside on the daily caloric

intake of consumers in China, especially on

proteins”, Aspell says. "Packaged foods and

beverage companies are also expected to reap

robust returns from China”.

To feed a population of more than a 1.3 bio, more

agricultural products are now produced and sold

in China than anywhere else, and this has boosted

the overall food consumption in China during the

past 10 years. China, India and Brazil have all

become fast growing markets for international

agricultural product marketers and producers from

the US and Europe.

In 2011, China imported USD 95 billion worth of

agricultural products, compared with just USD 12

bio in 2001. The 2011 figures also represented a

30% year-on-year growth, according to the

Agriculture Ministry.

Ding Shengjun, a food supply and security

researcher at the Academy of State

Administration of Grain, says processed foods

such as canned foods, especially those related

with cooking and restaurants, have grown fast in

China. "The demand for juices, soft drinks, yogurt

and milk will provide all sorts of opportunities for

the food and ingredient business. The sector has

been showing excellent potential”, Ding says.

According to the National Bureau of Statistics, in

recent years the average person in China has been

consuming 5% more meat, 10% more milk, and

8% more cooking oil than five years ago.



Affected by the global economic environment,

extreme climate and unstable international food

prices, Cargill saw lower margins from its

oilseed-processing and beef-processing businesses

in fiscal 2012. Aspell says that Cargill views the

current economic slowdown in China as "a bump

on the road".

"Cargill believes that China will continue to be a

sweet spot for investment. During our interactions

with food, feed and meat companies, our main

customers, we realized that all of them anticipate

explosive growth in China.

We plan to grow side by side with them”. At the

same time, Aspell says this is also good news

from a consumer perspective as it means

"responsible companies making serious

investments to produce affordable and safe food

in China".

Cargill entered China in 1972, and has since

ventured into different products ranging from

animal proteins and grains to oilseeds. Cargill

(China) currently has more than 7 000 employees

and 52 plants across the country.

The company has partnered with the World

Wildlife Fund to train 25 000 corn farmers in

China by the end of 2014. Its goal is to improve

yields by 20%, reduce waste by 10 to 15%,

conserve water and reduce its overall

environmental impact, including its carbon

footprint, through fertilizer optimization. Ten

demonstrations farms are currently underway in

Northeast China's Jilin province. For new growth

drivers, Aspell says the most obvious is the

modernization of livestock and the food supply

chain, which is a big area in which there are lots

of investments.




Company News


Cargill has also made significant long-term

investments in China's agriculture supply chain

such as oilseeds processing, animal feeds, refined

oil, fully integrated poultry business, starch and

sweetener business, food specialty and health

promotion products. In 2011, Cargill launched a

fully integrated project covering each part of the

poultry supply chain in East China's Anhui

province to minimize food disruption, from feed

production, chicken breeding, raising, hatching,

slaughtering and processing.

Aspell says the company will continue to

introduce new technologies in food safety, poultry

rising, animal nutrition, disease prevention,

environmental protection and energy savings. The

total investment in the project is expected to be

around USD 200 mio.

According to Aspell, China has more or less

progressed in the right direction when it comes to

improving agricultural production capacity and

quality. On the grain production side, the county's

overall output has grown substantially since 2005.

Corn production alone has seen a 40% increase

since 2005. The better yields have led to higher

rural incomes and stable food production.

"At Cargill, we believe that to meet the growing

global food needs, one of the key essentials is an

open global market where countries grow what

they are really good at, export their surpluses and

buy what others can produce more efficiently”, he

says. "China's entrance into the WTO was a

critical step that ensured that China could use the

global food system efficiently to fill in the gaps in

its overall supply”.

"We would like to see responsible investments in

terms of investing in the right parts of the supply

chain.



Too often we see too much money move into

parts of the supply chain that already have more

than sufficient capacity. We see this in many

industries in China”. In addition to agricultural

investments, Cargill is also working with its key

customers to deliver innovation in areas like

nutrition, new menu item, and risk-management

solutions. These innovations will help to bring

increased menu and product diversity, while

ensuring a sustainable source of food at a fair

value. Food consumption is normally a good

indicator of the economy and the population size.

In China, food consumption is rising and so are

the types of food that people are eating. Foods

have become more sophisticated and people now

look more for convenience, Aspell says.

Ding from the Academy of State Administration

of Grain says foreign food traders and their

investment in China's agriculture business can

help the nation ease the pressure on natural

resources and ensure the country's food supplies,

because they are proficient in the international

food trade, green agricultural technologies and

producing food with better quality.

"The participation of foreign food companies and

growing demand for agricultural products in

China have brought more choices to consumers,

as they have better and more options to pick

products that they think are cheaper, safer and

better in taste”, Ding says. (cd 14/9/2012)

Kellogg Company and Wilmar International announce China joint venture

Kellogg Company (K) and Wilmar International

Limited (SGX:WIL) today announced a 50:50

joint venture between Kellogg and Wilmar for the

manufacture, sale and distribution of cereal,

wholesome snacks and savory snacks in China.




Company News

Kellogg Company and Wilmar International announce China joint venture (Contd)

Wilmar's wholly-owned subsidiary in China,

Yihai Kerry Investments Co., Ltd, will participate

in the joint venture. Wilmar will contribute

infrastructure, supply chain scale, an extensive

sales and distribution network in China, as well as

local China market expertise to the joint venture.

Kellogg will contribute a portfolio of globally

recognized brands and products, along with deep

cereal and snacks category expertise. The Joint

Venture will use the Kellogg's® and Pringles®

brands. Together, Kellogg and Wilmar will

leverage this complementary expertise to

maximize marketing and manufacturing

synergies.

China is expected to become the largest food and

beverage market globally within the next five

years, driven both by the growth of a middle class

consumer base in large cities and an increased

desire for a wide range of packaged and branded

foods. Cereal consumption is currently being

driven by rapid growth in milk consumption,

along with consumers' desire for healthy and

convenient breakfast foods. Snack foods also

represent a very large growth opportunity.

"China's snack-food market alone is expected to

reach an estimated USD 12 bio by year-end, up 44

% from 2008”, said John Bryant, Kellogg

Company's president and chief executive officer.

"To capture this growth, we will leverage the key

strengths Kellogg and Wilmar bring to the

partnership – the globally recognized Kellogg's®

and Pringles® brands and deep category

knowledge; scale and local market experience;

and our mutual commitment to consumer-focused

innovation”.

"This joint venture positions our China business

for growth and fundamentally changes our game

in China. Our organizations have developed a

strong working relationship and trust.


I am pleased to be working together with Kuok

Khoon Hong and his talented team, and have

every confidence that our partnership will be a

long-term success”, concluded Bryant.

Kellogg Company and Wilmar International announce China joint venture (Contd)

I am pleased to be working together with Kuok

Khoon Hong and his talented team, and have

every confidence that our partnership will be a

long-term success”, concluded Bryant.

Wilmar's Chairman and Chief Executive Officer,

Kuok Khoon Hong, added, "This joint venture

with Kellogg will complement our existing

Consumer Product business and leverage on our

extensive distribution network and support

infrastructure in China. With our joint strength

and shared vision, I am confident that we will be

able to develop a leading cereal and snacks

business together”. The joint venture company

will be headquartered in Shanghai, China.

Launch of the joint venture is subject to

customary conditions, including regulatory

approvals by the Chinese government and anti-

trust approvals. (yahoofinance 24/9/2012)

KFC vows to pursue expansion in smaller markets KFC Corp, the largest foreign fast-food chain in

China, said it will accelerate its expansion in

smaller cities despite the global economic

slowdown. "KFC will open more than 500

restaurants each year in the future, compared with

400 annually over the past two years”, said Mark

Chu, president and chief operating officer of Yum

Brands' China Division. "In addition to the first-

and second-tier cities, there is broader room for

development in the fourth- and fifth-tier cities”.

Earlier this year, KFC's parent company, Yum

Brands, signed an agreement with Suning

Appliance Co Ltd in which Yum agreed to open

150 restaurants, including KFCs and Pizza Huts,

in Suning stores over the next five years.




Company News

Traditional News

KFC vows to pursue expansion in smaller markets (Contd)

KFC entered the Chinese mainland market in

1987. It had 400 restaurants in 2000. Four years

later, the figure had jumped to 1 000, and it went

to 3 000 restaurants in 2010. It now has 4 000

restaurants across the mainland.

"KFC's system and management model have

provided the best possible way to ensure each

KFC restaurant has the same quality. Even

though the economic environment has brought

considerable pressure, KFC has maintained

growth momentum”, Chu said.

KFC's biggest rival, McDonald's Corp, the

world's biggest restaurant chain, said it plans to

open 225 to 250 outlets in China this year, after

promising last year to increase its investment by

50%. McDonald's, which entered the Chinese

mainland in 1990, has more than 1 500 stores on

the Chinese mainland. It aims to expand its China

network to more than 2 000 outlets by 2013.

According to Euromonitor International, Yum led

the market with a 40% share, compared with 16%

for McDonald's. "Many problems lie in the way

of the fast expansion of the catering industry”,

said Su Qiucheng, president of the China Cuisine

Association.

"These include the lack of specifications in the

supply of raw materials, the lack of standards for

kitchen jobs, the lack of logistics and distribution

outlets, fragile franchisee management, and vague

brand development strategies, which Western

fast-food giants have already established”, Su

said.

Guo Geping, president of the China Chain Store

and Franchise Association, added: "After putting

every aspect under good control, such as talent,

supply chain and quality control, chain-store

enterprises can see an explosive growth.


KFC vows to pursue expansion in smaller markets (Contd)

Since the foundation has been set up, each store is

a training base for the enterprise. So, the bigger

the store numbers, the faster it develops”.

(cd 27/9/2012)

Top soy sauce producers 2012

According to the China Top Brands Net, the top

soy sauce producers of this moment are:

Rank Brand Region

1 Haitian Guangdong

2 Jiajia Hunan

3 Lee Kum Kee Guangdong

4 Chubang Guangdong

5 Pearl River Bridge Guangdong

6 Jinshi Beijing

7 Zhenji Hebei

8 Xifu Shandong

9 Xinhe Shandong

10 Donggu Guangdong

This list is not simply compiled on the basis of

one particular indicator like turnover or volume,

but on a mix of traits, including brand awareness.

(ctc 26/9/2012)




Traditional News

Top soy sauce producers 2012 (Contd)

Soy sauce production

According to insiders, China produced 4.41 mio t

of soy sauce, up 5.96% compared to the same

period of 2011. Guangdong remains the top

region with a volume of 1.892 mio t, or 42.9% of

the national volume. Guangdong’s growth also

exceeded the national figure: 16.32%.

(cti29/9/2012)

Over 30% of Chinese consume too much aluminium Over 30% of Chinese have too much aluminium

in their diets, according to a Friday report in

Health News, a newspaper run by the Ministry of

Health. Chen Junshi, a researcher with the

National Expert Committee for Food Safety Risk

Assessment, was quoted as saying that 32.5% of

Chinese consume an amount of aluminium that

exceeds the PTWI (provisional tolerable weekly

intake) level. Chen said Thursday at an

international food safety risk assessment

symposium that aluminium-containing additives

are the major cause of the problem, as many

Chinese staple foods, such as noodles and

steamed buns, are made with additives that

contain aluminium. Chen said northern Chinese,

who tend eat noodles as a main dish for most

meals, have an average aluminium intake of

5.1 mg/kg of body weight, 2.6 times the amount

recommended by the World Health Organization.


Over 30% of Chinese consume too much aluminium (Contd)

High aluminium intake is believed to be harmful

to the central nervous system. It is known to have

an effect on the development of children's nervous

systems, which can affect their mental

development. Chen said curbing the use of

containing-containing additives is the key to

solving the problem. (cd 28/9/2012)

Alum is still often used in producing such

traditional products as fried dough sticks

(youtiao). The reason why this is now emerging as

a problem is that while such products used to be

prepared and consumed at home, Chinese city

dwellers now prefer to buy from street vendors.

These use additives like alum to speed up the

process, while preserving the texture the

consumers are used to.

Delicacy is no longer a piece of cake

It is no longer a case of the longer the shelf life the

higher the price. That was true of moon cakes

until last year. Rules have changed, so have

perceptions. The norm this year is, the shorter the

shelf life the higher the price. Some supermarkets

are even promoting their products through slogans

such as "our moon cakes go off soon”.

The new Food Additives Usage Standards

implemented last year banned 27 food additives.

The new rules allow the use of only 10 kinds of

milder additives in moon cakes. More importantly,

they stipulate the ceilings for the use of additives.




Traditional News

Delicacy is no longer a piece of cake (Contd)

As a result, the shelf life of moon cakes,

representative of Mid-Autumn Festival, has been

reduced from 120 to 60 days this year.

Moon cakes with a shorter shelf life should be

good news for consumers. A woman in

Chongqing, for example, reportedly found a dust-

covered packet of moon cakes in her storeroom

last year. Their tender crust and fillings looked no

different from the fresh ones. The only difference

was they were made in 2003, which means moon

cakes with stronger additives can actually be

stored and sold a year or two later with consumers

tasting little or no difference.

But consumers have reason to believe that even

the new regulation cannot ensure all moon cakes

are safe to eat, especially the ones with longer

shelf lives. Now it is up to the food safety

authorities to explain to consumers how harmful

an additive is to people's health so as to raise their

awareness.

This is important because food producers give the

scientific names of the additives they use and

people have no idea how harmful they are. In

previous years, the shelf lives of moon cakes

depended on the amount of additives used. There

is no specific regulation on quality guarantee

periods for moon cakes with different fillings. For

example, many moon cakes with fruit fillings -

from coconut to lotus seeds - are actually stuffed

with pureed wax gourd with additives of different

fruit flavors, because bakeries have found that

wax gourd is not only cheap and easy to preserve,

but also mixes well with different food additives.

Such fraudulent practices, a by-product of

outdated standards and slack supervision, have

continued for long. So despite the list of additives

and limits of their use, the shelf lives of some

moon cakes can be long enough to harm people's

health. (Continued in next column)


Until now, the authorities have relied on random

checks to supervise moon cake makers and ensure

that they abide by the new standards. But that is not

enough to solve the problem.

Some bakeries and dealers recycle the moon cakes

that were made years ago. These moon cakes taste

no different from the fresh ones, because of their

sugar and fat content. Eating such moon cakes with

high doses of food additives may not cause

immediate discomfort. Yet they can be toxic.

About 280 000 t of moon cakes were produced in

China last year. Hence, food safety authorities

should take stronger measures to protect

consumers' health and regulate the moon cake

industry. They must chalk out and enforce more

detailed and well-targeted rules for the use of food

additives, and carry out more frequent and

intensive checks.

Since moon cakes are made in several stages and

require many ingredients that are bought from

different sources, the food safety inspections

should not be limited to only bakeries.

Companies and individuals that supply the fillings

and other ingredients should also come under the

purview of food safety checks. In fact, each link in

the production chain has to be monitored and

supervised.

The new standards have brought about some

positive changes. But the moon cake sector's

problems have developed over the years and cannot

be solved overnight. If effective supervision is

carried out, the new rules could cause a real change

in the moon cake sector. And the change would be

conducive to promoting a healthy market and

weeding out unscrupulous moon cake makers,

which will benefit consumers and enterprises both.

(cd 28/9/2012) (Continued on next page)



Traditional News

Focus Topic


Shocking trials

A piece of shocking news released during the

period covered by this issue. However, although it

attracted intense media attention for a short

period, it also disappeared from the media very

quickly.

As people in China lost their job, it seems that the

accusations were more or less true, but

apparently it was regarded as so embarrassing,

that the government preferred to handle it soon

and then close the door. We have collated a few

items from sources in and outside China for our

readers to compare.

Chinese children used in US-backed GE food trial

How would you feel if I told you that a group of

scientists had come to the United States, and fed a

group of 24 children aged between six and eight

years of age a potentially dangerous product that

had yet to be tested on animals?


Shocking trials (Contd)

What if I told you that state authorities had come

out publically with clear directives against this very

experiment, and yet the experiment had continued

regardless? You'd be pretty outraged, right?

Well, this is what we believe is happening, except

that it is happening on Chinese soil and on Chinese

children (and I hope you've managed to maintain

that outrage). We discovered this in The American

Journal of Clinical Nutrition that published a study

backed by the US Department of Agriculture

(USDA) and that involved feeding genetically

engineered (GE) Golden Rice to a group of 24 boys

and girls in Hunan province, China, aged between

six and eight years old. It was actually back in

2008 that we first heard of this experiment and

immediately informed the Chinese Ministry of

Agriculture. The Ministry came back and assured

us no Golden Rice had been imported and the trial

had been stopped – something that unfortunately

appears not to be the case.

Gambling with the health of these 24 children isn't

the only travesty here. From the bigger picture

we're also seeing a huge amount of time, energy

and talent being wasted on what is essentially yet

another example of big business hustling in of one

the world's most sacred things: our food supply.

The study hopes to propose that this genetically

engineered rice is a solution to vitamin A

deficiency among malnourished child populations.

Fact is, we don't need this "silver bullet" rice,

because: (1) we have a solution – it is called

overcoming poverty and accessing a more diverse

diet; and (2) like so many silver bullets it is going

to cause more trouble and potential harm than

existing solutions.

Here are some of the big "cons" behind this so-

called magic rice, according to our food and

agriculture team:




Focus Topic

Shocking trials (Contd)

By promoting GE rice you encourage a diet based

on one staple rather than an increase in access to

the many vitamin-rich food plants. These plants

would address a wide variety of micronutrient

deficiencies, not just vitamin A deficiency

(VAD). We simply do not know if GE crops,

including GE rice, are safe for human or animal

consumption. GE crops certainly have the

potential to cause allergenic reactions. The majori

ty of patents for genetically engineered plants are

held by a few large multinational companies. So it

is in their financial interest – and not ours, the

public – to get us hooked on their seed.

After 20 years of development, this not so-Golden

Rice is still just a shadowy research project with

no applications for commercialization anywhere

in the world. Tens of mio of dollars have been

spent on what is a smoke and mirrors product, and

that could have been better spent on programs that

have actually proven to make a lasting and

meaningful difference: programs that combine

supplementation with home gardening in order to

give the poverty-stricken access to a more diverse

diet (something that has been successful in

Bangladesh). The battle to keep GE rice out of

China has been a long, seven year struggle, and

clearly it is not over yet. (Greenpeace 31/8/2012)

Hunan denies kids used in GM food test

Authorities in Hunan province on Saturday denied

that children in a rural school were guinea pigs in

a US research project on the effects of genetically

modified rice. A research paper involving 68

Chinese primary-school children in the province

was published by the American Journal of

Clinical Nutrition on August 1, with Guangwen

Tang at Tufts University in the US named as the

lead author.


Hunan denies kids used in GM food test (Contd)

The unapproved experimental GM rice, widely

referred to as "golden rice" and genetically

engineered to produce provitamin A, was created

by Ingo Potrykus at the Institute of Plant Sciences

in the Swiss Federal Institute of Technology and

Peter Beyer at the University of Freiburg more than

10 years ago.

Chen Peihou, deputy director of the Hunan Centre

for Disease Control and Prevention, confirmed that

the second author of the paper, listed as Hu

Yuming, is a researcher for the centre. "I was

aware of the project in Hengyang in 2008, which

involved children and was mainly testing for beta-

carotene bioavailability and bioconversion to

retinol”, or vitamin A, Chen said Sunday. "But as

far as I know, no GM rice was used, and all the

food involved was locally produced”. He also said

that Hu was not asked by the journal to sign the

paper before its publication.

"In the project, we just provided the site and

assistance to the Chinese Centre for Disease

Control and Prevention, and we have not dealt with

any US institution”, he added.

According to Chen, Yin Shi'an, listed in the paper

as the third author, is with the China CDC. Wang

Lin, information director of the China CDC,

declined to comment. Chen said his centre will

continue its investigation and contact the journal

about the issue.

Andrea Grossman, a public-relations officer for

Tufts University's Human Nutrition Research

Centre on Aging, however, was quoted by Beijing

Youth Daily on Saturday as saying that the month

long research on golden rice was approved by

authorities in both countries after an examination

by ethics committees.




Focus Topic


Feeding trials with human adults in China have

also been carried out to measure the effect of fat

in the diet, on bioconversion and bioavailability,

according to the Golden Rice Project website, the

official golden-rice homepage supported by the

Rockefeller Foundation. On Thursday,

Greenpeace, the international environmental

campaign group, reported the study, backed by

the US Department of Agriculture, which

involved feeding golden rice to 6- to 8-year-old

children in Hunan.

The study, assigned to the Hunan CDC by the

China CDC in 2008, selected 68 primary-school

children in a school in Hankou township of

Hengyang city. According to the Hunan CDC, the

study was listed as on the Program of National

Natural Science Foundation of China. After the

discovery was posted on Sina Weibo, a Chinese

micro-blogging website, the news received

massive attention online.

After an investigation, the publicity department of

Hengyang said on Saturday that there had been no

such research project on golden rice. It said on its

micro blog there was instead a study on the

transformation of carotene in vegetables to

vitamin A in children's bodies.

According to Chen Peihou, all results were

submitted to the China CDC immediately after the

experiment ended, and no paper on that has been

published within the country. Worldwide, debates

on long-term safety for GM food continue.

In China, the Ministry of Agriculture in 2009

issued biosafety certificates to two strains of pest-

resistant genetically modified rice and corn in

what was considered a major development in

promoting the research and planting of GM crops.



The strains still need registration and production

trial - which will take three to five years - before

commercial planting could begin, according to the

ministry. The certificates triggered concern among

the public and professionals since there is still no

consensus on whether GM food is harmful to

humans. As early as 2001, the State Council

introduced a regulation to ensure the safety of GM

food, with strict provisions of its research, testing,

production and marketing.

At present, the only three kinds of GM food crops

that have been approved for commercial planting in

China are sweet peppers, tomatoes and papayas,

Shi Yanquan, an official at the ministry, was

quoted as saying by china.com.cn during an online

interview in April.

Also, the country has imported other GM crops,

including soybean, corn and rape, from overseas

market to satisfy domestic need. For instance,

China imported more than 50 mio t of GM

soybeans in 2011, most of which were processed to

edible oil, he said. "The country has launched strict

transgenic safety and quality assessment system to

ensure GM food in the market is as safe as

conventional food”, he added. Yang Xiaoguang, a

researcher at China CDC, was quoted in April as

saying: "So far, we have received no report to show

any GM food on the market is harmful to human

health. GM food that consumers purchase from the

market is safe to eat”. (cd 9/3/2012)

Scientists decry rice experiment on children

US scientists have denounced a 2008 nutrition

research project that allegedly fed genetically

modified rice to a group of Chinese primary school

students. (Continued on next page)



Focus Topic

Scientists decry rice experiment on children (Contd)

The study involving 68 Chinese children aged 6

to 8 has generated public anxiety about potential

harm to the children and controversy over ethics

and rules. The study's lead author Tang

Guangwen of Tufts University in Boston,

Massachusetts, published a report on August 1 in

the American Journal of Clinical Nutrition

showing that 100-150 g of so-called golden rice

could provide 60% of the daily intake of

Vitamin A.

However, the three listed authors from the

university's Chinese partners, Hu Yuming, Yin

Shi'an and Wang Yin, all denied the use of

golden rice in the study in Hengyang, Hunan

province. Dave R. Schubert, professor and

laboratory head of the Salk Institute for

Biological Studies in San Diego, California, said

the test was done among Chinese children "most

likely because they could not pass the review

process required for doing this type of clinical

trial in the US".

Schubert was among the 22 scientists from all

over the world who wrote an open letter to

caution Tufts' research on golden rice in 2009.

He said this kind of experiment "should not have

been done unless there was extensive safety

testing of the rice". According to a report

commissioned by non-profit organization

Foodwatch in Germany, a sample of the golden

rice grains was sent to Germany in 2001 for a

feeding trial with mice. But when the grains

were tested for carotenoid content, the scientists

were "surprised to find it contained less than 1%

of the amount expected". After the rice was

cooked, this was reduced another 50%, so the

trial was abandoned. Schubert also said there

was clearly "potential for harm in the children"

when feeding them the rice. "Since there has

been no animal or human safety testing of the

golden rice, I believe that it was exceptionally

foolish to feed this golden rice to children”.



"Their brains are still developing and it is well

known that molecules related to those made by

golden rice can be harmful”, Schubert said. "There

should have been some good safety testing before

doing the experiment, but as far as I know, there

was not”, he added.

The 2009 letter also expressed concerns that such

testing is against the Nuremberg Code a set of

research ethics for human experimentation set as a

result of the Subsequent Nuremberg Trials at the

end of World War II. The code states that children

under 10 are not legally capable of giving consent

to participate in experiments.

Marion Nestle, professor of nutrition, food studies

and public health at New York University, thinks

getting beta carotene from the rice is

"unnecessary". "Plenty of sources of beta carotene

are available in fruits and vegetables without

having to go to genetically modified rice”, Nestle

said.

Nestle added that research rules in the US require

human subjects to give informed consent to being

experimented on. Neither Tang nor a spokesperson

from Tufts University could be reached for

comments. Last week, Greenpeace issued a

statement in response to the report's findings.

Fang Lifeng, sustainable agriculture campaigner at

Greenpeace East Asia, said it is "incredibly

disturbing to think that an American research body

used Chinese children as guinea pigs for

genetically engineered food, despite a clear

directive against this very experiment issued by

Chinese authorities in 2008”.

Greenpeace East Asia first heard of this experiment

in 2008 and immediately informed the Chinese

Ministry of Agriculture.




Focus Topic


"Research and development of a new generation

of GM crops like golden rice, which can function

to improve consumers' nutrition, is now a global

trend in agriculture”, said Huang Dafang, a

member of the biosafety committee in charge of

agricultural GM organisms, which is affiliated

with the Ministry of Agriculture. But he also

expressed confusion about regulations and

procedures of such a trial in Hengyang if it indeed

involved GM golden rice. It might be a regulatory

loophole for such GM crops to enter the nation in

the name of a scientific research, he said.

(cd 6/9/2012)

GM rice test researcher suspended from work A Chinese researcher involved in the

controversial testing of genetically modified

(GM) rice has been suspended from his work and

put under investigation, the Chinese Centre for

Disease Control and Prevention (China CDC)

reported on Monday evening.

China CDC, under orders from the Ministry of

Health, is investigating whether dozens of

children in central China's Hunan province were

used in 2008 as test subjects in a US-China joint

research project that included GM food Golden

Rice.

Greenpeace broke the news on the controversial

test in late August, saying that the joint research

involved feeding Golden Rice, which is

genetically modified to be rich in beta carotene, to

24 children aged between six and eight years old

in Hunan.

It cited a paper published in the August edition of

The American Journal of Clinical Nutrition. The

paper claimed that Golden Rice is effective in

providing vitamin A to kids.


GM rice test researcher suspended from work (Contd)

China CDC reported the latest progress of the

investigation, saying its fellow researcher Yin

Shi'an, the third author of the paper, was

inconsistent in his accounts during the

investigation. As a result, China CDC has

suspended his work and put him under further

investigation.

Also according to China CDC, none of its affiliate

institutes had ever approved or participated in the

research of Golden Rice. The paper has not been

submitted to the Ministry of Health for ethic

examination or approval.

Its lead author, Tang Guangwen, director of the

Carotenoid and Health Laboratory of Tufts

University in the United States, insisted that the

study had been conducted with all regulatory

approval required by each country.

China CDC stated that its scientific review

committee had asked Tang to provide supporting

materials and a detailed report of the research, and

also asked Tufts University to investigate the

matter and offer a detailed report. GM food is

controversial, as there is still no consensus on

whether or not it is harmful to the human body.

According to the Greenpeace website, it is simply

not known whether genetically engineered crops

are safe for human or animal consumption.

Independent scientific studies on the matter are

severely lacking, it said. (cd 11/9/2012)



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& Spirits Trade Fair

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Trade Fair

2012 China (Guangzhou) Int’l Food Processing

& Packaging Equipment Exhibition.

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Location: Canton Fair Bazhou Hall

Dates: Nov. 1 - 3

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