Changing with China

With Chinese consumption on the rise, imported food is in high demand. To illustrate this trend, a northern Chinese fruit importer and a New Zealand meat and dairy exporter have seen volumes climb sharply.

World Financial
Shanghai World Financial Center. A general view shows the Shanghai World Financial Center and the skyline of the Lujiazui Financial District Pudong, seen from the 109th floor of the Shanghai Tower (still under construction). Photo: Johannes Eisele, AFP, Scanpix
China

Maersk in China at a glance
Since its first vessel called at Shanghai in 1924, Maersk has supported the shifting trade patterns of this changing society. Today Maersk is helping Chinese companies to go global and Chinese importers to capitalise on a growing domestic demand for food.

  • First vessel call 1924
  • First representative office 1984
  • Employees 14,400
  • Locations 40
  • Offices 124
  • Invested capital
  • USD 1,300 million
  • Ships built in China for Maersk 118
  • Procurement in 2013 USD 2,240 million

“In the beginning my wife and I did everything by ourselves. Now we manage and supervise the supply chain, from imports of bananas to distribution to markets,” says Nickey Xue, CEO at Ruihua Everfresh, a North China-based importer of fresh fruit from around the world.

Ruihua Everfresh is a success story of a family-owned business in the city of Dalian. Working alongside his wife, cousins and father and assisted by Maersk Line, Nickey Xue has built a business that imports a whopping 150 containers (FFE) of bananas a week, corresponding to a market share in North China of 30%.

The success of Ruihua Everfresh reflects the growing trend: a Chinese appetite for foreign foods. With Chinese consumption on the rise, imported food is in high demand.

At Maersk Line, Frederick Chan, Head of the Import Sales Team in North China, welcomes this trend. He looks forward to increased cooperation with the Chinese importer.

Since 2005, meat volumes have grown by 500%, while in the dairy segment the growth is close to 800%. China is now one of New Zealand’s biggest trading partners – second only to Australia.

GERARD MORRISON, MANAGING DIRECTOR OF MAERSK LINE NEW ZEALAND

Counting sheep to China

New Zealand, despite its distance from world markets, is tapping into the rapidly growing demand for high-protein foods in China, thanks to supply chain efficiencies and reefer technology.

“We are in this with the objective of forming a long-term business partnership over the coming years. Ruihua Everfresh has the potential to grow and we want to be a part of that journey,” he says.

Rising consumption
The shift to an economy driven more by consumption has gained traction in recent years. Based on the statistics, Professor Shou Jianmin of Shanghai Maritime University points out that the average annual growth rate of imported food has exceeded 20% for the past five years.

“In the past few years, the increase of China’s imported food is not limited to fresh fruit and bananas. In fact, the main growth of imported food is reflected in the rising volumes of beef and lamb,” he says.

With New Zealand lamb breeders poised to plug China’s growing demand for protein from red meat, Maersk Line is prepared to link supply and demand. Already the company is heavily involved in supplying lamb cuts for Chinese dinner tables.

“Since 2005, meat volumes have grown by 500%, while in the dairy segment the growth is close to 800%. China is now one of New Zealand’s biggest trading partners – second only to Australia,” says Gerard Morrison, Managing Director of Maersk Line New Zealand.

To feed the Chinese demand for frozen food, Maersk Line New Zealand has two different business partners: a ten-year agreement between Maersk Line New Zealand and New Zealand’s leading freight and logistic company, Kotahi; and an agreement between Maersk Line and the Alliance Group, a farmer-owned cooperative and one of New Zealand’s leading meat exporters.

According to Morrison, the Kotahi partnership also has growth potential in China:

“Similar to the trend that we see in the meat segment, we also expect to see an increase in higher-value dairy products such as cream, cheese and infant formula. The potential for Maersk Line to grow with this trade in the next decade is enormous,” Morrison says.

Driving the trend
Imports into China are driven by a number of factors, according to Professor Shou Jianmin of Shanghai Maritime University.

  • First, the demand for quality food is outstripping domestic supply.
  • Second, Chinese consumers are concerned with the quality and safety of food produced in China.
  • Third, some products made in China have lost competitiveness in terms of price.
  • Fourth, with a shift of policies, China has opened to accept greater food imports.

“This trend will continue for a while, but the local food companies in China are not standing by passively. They are trying hard to improve product quality,” Professor Shou Jianmin says.

Poster image
Watch the film about Ruihua Everfresh. 2:42

We are in this with the objective of forming a long-term business partnership over the coming years.

FREDERICK CHAN, HEAD OF THE IMPORT, SALES TEAM IN NORTH CHINA

Driving the trend

  1. The demand for quality food is outstripping domestic supply.
  2. Chinese consumers are concerned with the quality and safety of food produced in China.
  3. Some products made in China have lost competitiveness in terms of price.
  4. With a shift of policies, China has opened to accept greater food imports.

Back in Dalian, CFO Celine Zhang of Ruihua Everfresh and wife of Nickey Xue also expects the trend to continue.

“The quality of the imported bananas is very high, and since Chinese living standards are growing a lot, people want quality bananas. Especially bananas from Ecuador that are better than the local bananas, so people prefer to buy them,” she says.

When starting to import bananas from Ecuador to China in July 2011, it was easier to find the local demand than it was to kick off something completely new.

Together with her husband, Celine Zhang did some detailed research. They made several visits to suppliers in Ecuador to ensure the right quality, and they spoke to shipping companies including Maersk Line to explore vessel availability and transit times that would ship the fruit to China in good condition.

China Ruihua CFO
Celine Zhang, CFO Ruihua Everfresh.

Chinese brands go global

While China has been the world’s largest exporter for years, the contents of the containers departing from the People’s Republic are now undergoing a subtle yet significant change. From producing goods for foreign brands, Chinese manufacturers are now increasingly producing for their own and taking them global.

After a month, the first shipment was completed with success. Bananas have arrived from Ecuador on a weekly basis ever since, and the company trusts Maersk Line with their safe delivery.

“We depend on trust in our partnerships. We need reliable carriers that can take full responsibility for our perishable goods during the entire chain of transportation. This is why we see Maersk Line as a strategic business partner,” CEO Nickey Xue says.

“When we have a problem, either in the morning or evening, we call the staff at Maersk Line and they solve it for us. This trust is not something that stems from a short relationship; it has been developed over many years,” Celine Zhang adds.

Meeting the demand
For Frederick Chan, opening doors for imported products to the Chinese market is becoming a common exercise.

“We talk to a lot of customers about new import opportunities, and we are looking at origins all over the world, especially in Latin America and Africa. And being the biggest carrier in the world, Maersk Line has the flexibility and opportunities to grow in these markets, helping our customers meet the local demand,” he says.