USMEF Strategic Market Profile

Greater China

• Per capita pork consumption in China is high relative to the level of economic development. Recent growth in consumption is being driven by increased demand in rural China.
• Research indicates that urban pork consumption in China has leveled off.    
• Pork production costs are gradually rising in China, due to inflation, increased regulatory costs, higher feed demand, increasing labor costs and industry consolidation.
• Although total pork consumption may level off, imports may increase as the currency appreciates, food safety concerns increase and economic growth gives rise to new opportunities for niche products.
• China is increasing its processing of pork, although by world standards it is still low.
• Hong Kong pork consumption has leveled off, although there is a growth in demand for processed products, and when the economy is strong, for niche and higher end foodservice items.

• U.S. pork muscle cuts, delivered to Chinese or Hong Kong ports, are generally not price competitive with product from South America; however U.S. offal is price competitive with that from both South America and Europe, depending on the item. In Hong Kong, the price-sensitive market is dominated by Brazilian and Chinese product.
• U.S. pork competitiveness is increasing as Chinese production costs increase and the currency appreciates.
• To increase market penetration/market share, awareness of U.S. quality attributes must increase.  
• There is relatively high awareness of U.S. processed meat brands in Hong Kong, although the U.S. is not price-competitive for low-end items such as chopped and form ham, and low cost foodservice bacon.

• There is modest growth in U.S. pork muscle cut exports to Hong Kong and China.   In Hong Kong, main users include the higher end foodservice sector, that has a demand for consistently high quality loins and rib items. In China, there is growing foodservice usage of U.S. pork butts, loins and specialty cuts among foodservice operators in major cities.
• Distribution of U.S. offal has penetrated the Chinese wholesale market, and U.S. suppliers’ products and specifications are well known to buyers within China’s wholesale pork trade. However, imported offal loses its country-of-origin identity at the level of the final consumer.
• U.S. processed meat brands enjoy modest sales among top Hong Kong retail outlets, but with few exceptions, are not utilized by buyers in the foodservice sector. 
• U.S. pork products have generally not been utilized by China’s processing sector, but their competitiveness is growing.

Product/Industry Image

• U.S. pork enjoys a high quality and safe image among all sectors of the trade in both Hong Kong and China.  
• Traders claim that U.S. specifications have moved closer in recent years to those demanded in the marketplace (e.g. offal in China).
• Press reports during 2007 concerning residues of feed additives in U.S. pork have not created anxiety among consumers in China or Hong Kong.
• There is growing concern within China about the safety of domestic pork. This could increase demand for and interest in imports. 
• There are still challenges to convincing the trade and end users of the consistently superior attributes of U.S. pork that warrant continued premium pricing.

Operating/Marketing Environment and Trade/Distribution Issues

• Integrated distribution channels to end-users for imported pork are largely non-existent in China, especially for pork muscle cuts. The offal distribution network is widespread throughout China, though it has problems in terms of the integrity of the cold chain.
• Despite distribution issues, there is a high degree of awareness among traders and wholesalers of U.S. brand specifications from specific U.S. plants, especially for offal.
• China’s import permit process for pork and pork variety meats is opaque and unpredictable, and inspection protocols can vary. This creates challenges for seamless importation and distribution of imported products. 
• The cold chain for chilled meat imports – especially full container loads – is weak, even in urban areas.
• Marketing costs (advertising, PR, wages, services) in China are increasing at nearly double-digit rates per annum.

Access Conditions

• All FSIS inspected plants and cold stores are eligible to ship to Hong Kong.
• U.S. pork has enjoyed relatively smooth access since China’s accession to the WTO. However, challenges increased in 2006 and 2007 due to greater enforcement of the PRC’s zero tolerance for certain residues and pathogens, a standard that when selectively enforced has resulted in plant de-listings and export warnings.
• As of this writing, direct U.S. pork and pork variety meat exports to China have slowed to a trickle because of strict inspections for ractopamine, a substance banned in China.  
• The degree of enforcement of Chinese standards and regulations with regard to imports is inconsistent, with the overall bilateral political atmosphere being a major factor.

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 in this Market:

• Expand distribution of U.S. pork by encouraging importers/distributors to carry U.S. pork lines, increase sales through widened coverage/product range, and support distributors with improved trade servicing, education and other partnership programs which highlight the profitability of U.S. pork products.
• Conduct chef education by communicating and demonstrating the quality attributes of U.S. pork including taste, tenderness and water-holding capacity to key influencers in the foodservice industry to develop solid performers for U.S. pork in China and Hong Kong.
• Promote the introduction of new lines of processed meats and niche pork (e.g. Kurobuta or breed-specific pork) in both Hong Kong and China. For China, focus on the introduction of high-end items (e.g., sausages) for affluent retail consumers. In Hong Kong, continue to promote the high quality image of U.S. processed meat brands both at retail and food service.
• Develop relationships with key Chinese officials, influencers and pork industry partners in order to minimize the impact of regulatory and policy issues and build confidence in the safety of U.S. pork.

USMEF Export Forecasts: