USMEF Strategic Market Profile

Greater China

• Beef consumption is increasing at a rate faster than pork or chicken; much of the increase is driven by the relatively more affluent urban population.
• The method of beef consumption is evolving from one dominated by stewing and wet cooking methods to a more diverse mix, including grilling, pan-frying and roasting.
• Grain-fed “marbled” beef is increasing in demand as the foodservice sector expands in range of offerings, including beef-dominated Korean restaurants and steakhouses.
• Double-digit GNP growth and currency appreciation is increasing total beef demand and imports.
• Strong economic growth in Hong Kong has helped foodservice receipts and boosted demand for high-end beef.   Investment in gaming has increased beef demand by Macau’s foodservice sector.

• Imported beef competitiveness will increase over time due to the appreciation of the currency.
• The absence of U.S. beef from the China market since the end of 2003 has assisted the development of more grain-fed beef programs in China.
• Australia has taken advantage of the absence of U.S. beef to make market share gains, especially in the hotel and retail sectors.
• U.S. frozen “Asian” cuts remain price competitive with locally produced grain-fed beef and Australian beef.
• Domestic grain-fed beef programs are in their infancy and still suffer from supply reliability and consistency problems.
• In Hong Kong, Australian and Japanese Wagyu now dominate the super premium beef category.
• U.S. beef competitiveness in Hong Kong increased throughout 2007 as more U.S. plants began to ship products to the territory.

• Asian-style beef cuts from the rib and chuck enjoy the strongest demand in China and Hong Kong.
• Most U.S. beef is utilized by the foodservice sectors. 
• Once access is re-established in China, there is good potential for re-starting U.S. beef retail programs, and to increase the volume of U.S. beef used by hotels.  
• Although U.S. offal is banned in both China and Hong Kong, demand for these items, especially omassum, is strong and trade should resume quickly once access is re-established.
• U.S. beef sales in Hong Kong retail stores consist of limited higher grade middle meat, and seasonal slicing items.

Product/Industry Image

• Due to its predominant market share pre-BSE, U.S. beef has a strong image among Chinese consumers.
• U.S. beef’s reputation in Hong Kong as the highest quality beef available has been diminished by the presence of grain-fed Canadian product in Hong Kong, and at the higher end, by Australian Wagyu and long-fed beef.
• BSE has not caused traders to question the safety of U.S. beef, but there has been some diversification of sourcing due to the reliability of supply issue.
• As of the end of fall of 2007, there was little anxiety about the safety of U.S. beef among consumers in China or Hong Kong.

Operating/Marketing Environment and Trade/Distribution Issues

• Beef import and distribution in China is still in the early stages of development compared with that which exists in other more developed Asian countries. Few companies have extensive distribution throughout China for imported products.
• Imported beef distribution in China is controlled by a series of wholesalers who largely move product between urban wholesale markets. The inter-provincial chilled cold chain for beef is weak.
• Beef distributors in China are aware of U.S. packer brands and establishment numbers.
• Major U.S. beef packers maintain sales offices in China and/or Hong Kong.
• Hong Kong has a well developed but fragmented and highly competitive beef import and distribution sector. Unlike in China, importers often distribute to the end-users, controlling product throughout the marketing chain.

Access Conditions

• Current conditions allow U.S. boneless beef under thirty months of age to be exported to Hong Kong.
• Some frozen U.S. beef and offal is entering into China through “gray” channels.
• Macau accepts boneless U.S. beef under thirty months from all U.S. establishments, although this condition is not recognized by the U.S. government. 
• Hong Kong and Macau inspectors are presumed to be meticulous in their inspection of U.S. beef. 
• Hong Kong has made indications that it will expand access for U.S. beef based on the U.S. attainment of controlled risk status under OIE guidelines.  
• Importers of beef must obtain a permit from AQSIQ/Beijing, the national inspection and quarantine agency. There are ostensibly no quotas or other conditions attached to importation.

Import and market share data is based on reported exports to China and Hong Kong (from GTA), and U.S. export data is from the U.S. Department of Commerce, Trade Census Bureau.

Long-term Strategy:

• Reestablish supply links between U.S. suppliers and traders, HRI operators and retailers in Greater China by focusing on the quality attributes, profitability and versatility of U.S. beef to differentiate it from the competition.
• Promote U.S. beef in Hong Kong by focusing on raising country of origin awareness of U.S. beef in retail and foodservice outlets. Retail promotions will focus on chilled beef cuts, while foodservice promotions will focus on a range of cuts, from middle meats to Asian cuts, such as items from the rib and chuck.
• Develop direct-to-consumer messages that position U.S. beef as the highest quality and safest beef product in the market, and promote the nutritional and health aspects of beef consumption.
• Develop relationships with key Chinese officials, influencers and beef industry partners in order to minimize the impact of regulatory and policy issues and build confidence in the safety of U.S. beef.

USMEF Export Forecasts: