SHANGHAI, March 6, 2012 /PRNewswire/ -- US renowned growth consulting company Frost & Sullivan issued a research report in February, 2012, believing that China's beef market has a fairly bright future. Although currently China's beef market is still in the primary development stage, it is likely to get more growth opportunities with the support from government policies, which is expected to guarantee an adequate supply of cattle sources from the upstream area to meet growing downstream demand.
Introduction of China's Beef Industry
The beef industry refers to the complete value chain including breeding, feeding, fattening, slaughtering, processing and sales. At present, China has formed four cattle breeding areas, which is the Northeast, Northwest, Central Plains and Southwest bases. The main cattle breeds include the local "five cattle" (Qinchuan cattle, Nanyang cattle, Luxi cattle, Yanbian cattle, Jinnan cattle) and imported cattle breeds including Limousine and Charolaise cattle.
In regard of beef production, currently, individual farmer breeding is still the main business model in China. As cattle breeding requires large amount of investment, and has a rather long earning cycle, many farmers reduced their cattle amount due to worries on potential risks, thus, end-year stock of cattle is declining. Leading enterprises in the beef industry tries to reduce the risk by combining company, production bases and farmers together.
In terms of beef consumption, recent years have witnessed a new trend in beef consumption structure, with high-end beef consumption spreading from large cities to medium-sized cities, expanding from high-income groups to low-and middle-income groups. With the improvement of living standards and the developments of the supermarket chains and refrigerated logistics, all kinds of cooling meat, small package of meat, Western-style cooked meat products are growing rapidly.
Market Status Quo and Future Projections
In 2010, the United States can be regarded as the largest beef producer and consumer in the world. In recent years, the development of the global beef industry is generally stable, with a slight decrease in the beef production and consumption. According to the forecast from USDA, compared with 2010, global beef production and consumption declined slightly in 2011, which is about 5,684.8 million and 5,583.4 million tons, respectively. In China, beef production is likely to reach 700 million tons in 2015 with compound annual growth rate of 1.4% during "12th Five-Year" period. Frost & Sullivan predicts that beef consumption will continue to grow during this period.
In 2010, China is the third biggest beef producer and consumer in the world. However, it is expected that beef production and consumption is likely to decline slightly in 2011, with the amount of 6.387 million tons and 6.403 million tons, respectively. Despite that the overall beef consumption level is relatively high, beef consumption per capita is merely 4.1 kg per person in china. Such figure is much lower than developed countries which consume averagely 50 kg per person and is even lower than the world's average annual consumption 10 kg per person.
In 2010, China becomes a net beef importer for the first time, which imported 23,700 tons of beef and exported 22,100 tons of beef. It is expected that China would continue the rising trend of beef import with amount of 33,900 tons in 2011, while the exporting of beef is forecast to decline to 17,700 tons in 2011.
Outdoor consumption of beef is the major area of beef consumption in China. In 2010, the outdoor consumption, household consumption and industrial consumption accounted for 60.0%, 32.0% and 8.0% of the total beef consumption (6.53 million tons), respectively.
China's beef price kept increasing since 2006. As of December 2011, the national average beef price has reached 39.78 RMB per kg, which has more than doubled as that of in January 2006.
The improvement of living standard stimulates the growth of beef markets.
Traditionally, Chinese people eat pork and chicken to satisfy their desire for meat. This is largely due to the much higher price of beef which goes beyond normal people's affordable level. With the improvement of living standards, Chinese people have begun the upgrade of their consumption of meat, and began to eat more beef.
Chinese people's dietary structure becomes more diversified and reasonable, bringing larger amount of beef consumption.
At present, Chinese people are changing their diet patterns to higher and richer nutrition. From nutritional perspective, beef not only contains high unsaturated fatty acids and high protein, it also has low fat and lots of nutrition, which makes it perfect for the healthy diet. Thus, in the future, beef is expected to replace some parts of the market shares in pork, chicken and other meat consumption.
Further regulation of China's beef industry is likely to ensure sufficient supply of cattles and promote the development of the beef industry
The supporting policies from Chinese government is expected to ensure adequate supply of cattle sources from the upstream area and improve the quality and taste of beef products. Therefore, consumers are likely to get safer and healthier beef products and beef consumption is expected to move to a higher development level in China in the next five years.
Low quality beef and inappropriate product structure.
Compared with developed countries, China's beef industry is lagging far behind in the aspects of varieties, production performance and feeding model. As there are few existing excellent species of cattles, plus Chinese cattle breeding lacks scale management. All of these lead to long period and low efficiency of fattening, easy breakout of disease and the residual hormones on beef. These low quality beef could not meet the exporting standards in many developed countries. Because China's beef industry is still dominated by primary processing which has single product portfolio and lacks of different tastes, Chinese beef product cannot meet the consumer satisfaction
The cattle supply is insufficient and private slaughtering is very common.
In recent years, national cattle breeding is declining, leading to insufficient supply of cattles. This not only leads to squeezing profits of farmers but also surplus in processing capacity of cattle slaughter and processing enterprises. In addition, individual slaughters have occupied a large proportion in the primary processing. even some large-scale meat processing companies in China are without the complete cold chain and can hardly meet international health standards. At present, factory system accounted for only 1% of China beef production, which is the lowest ratio among meat production. Such low level of modernization is a larger barrier in the development of beef market in China.
Beef classifying system, standards,testing and monitoring system lags behind.
China has not established a beef quality grading systems and standards and has large gap with developed countries in terms of slaughtering and processing sectors, as well as environmental requirements. Domestic beef cannot reach the international quality and hygiene standards due to the lack of beef detection and monitoring system
Market Competitive Landscape
The profits of the beef industry are mainly concentrated in the slaughtering, processing and sales chains. At present, China's beef industry is lack of leading enterprises with scale more than RMB1 billion. In the future, industry consolidation opportunities will appear in cattle providing and beef processing industry. Changchun Haoyue, Inner Mongolia Kerqin, Dalian Snow Dragon, Fu-Cheng Ng Fung and The Dayuan cattle are the most competitive enterprises in China's beef industry.
Changchun Haoyue is the largest manufacturer in China in the beef industry. Its annual slaughter of cattle reaches 500,000 units, production of feed reaches 300,000 tons, while leather processing mounts to 500 000 standard sheets and all kinds of halal delicatessen products reach 100,000 tons
The Horqin cattle has fattened 12000 cattles. At present, the company could slaughter about 100,000 beef cattles annually. Its production of chilled and frozen meat reaches 20,000 tons. In September 2010, Horqin cattle industry has become China's first organic beef producer, and is capable to farm and produce organic beef products domestically.
Dalian Snow Dragon
Dalian Snow Dragon is the largest manufacturer of high-end beef slaughtering, with the brand "Snow Dragon". There are 30 000 Snow Dragon Black Bulls for slaughtering per year, with annual output of more than 1,000 tons high-grade, deep-processing beef.
Fortune Ng Fung (600 965) is the only listed company of China's beef industry. It has 100,000 slaughter of cattle annually, produces 9,000 tons of meat products, 20,000 tons of feed, 30,000 tons of organic fertilizer. In 2010, Fortune Ng Fung sales income reached RMB 500 million. More than half of the income came from beef sales including all kinds of fresh and frozen beef (including cattle by-products) and all kinds of cooked food.
Great Yuan cattle
In November 2010, the Great Yuan cattle, successful acquired Heilongjiang Great Northern Wilderness, and held 80% of its equity. The acquisition is the first case of Chinese cattle industry's mergers and acquisitions. Since then, Great Yuan Cattle can build its own cattle base with the combination of its brand and Northern wilderness's cattle source.
In order to effectively control the cattle source and improve beef production and quality to meet consumers' demand, leading enterprises who integrate both upstream and downstream beef products are urgently needed in China's beef industry. In addition, by scientific fattening, they can increase living cattles' weight and greatly increase the amount of slaughtering of live cattle.
Chinese beef industry can learn from abroad, and implement the effective combination of company, production base, and the farmers, which is expected to integrate farming, processing and sales. Leading integrated slaughter companies is definitely going to drive up the number of small and medium-sized enterprises, which is forecast to enhance the competitiveness of beef producing enterprises.
Diversification of sales channels
Traditional sales channels such as farmers' market are likely to co-exist with other channels, such as special stores, chain stores and the Internet sales. Direct transaction is expected to happen between cattle owners, beef processors and final consumers which can reduce the circulation and distribution costs. In addition, a variety of sales channels can effectively reduce the waste of resources, and improve the core competitiveness of the beef industry as a whole.
Leading enterprises, such as Dalian Snow Dragon and the Horqin, are working together to establish their own distribution and direct sales models, which can enhance the penetration of the super channels and marketing capabilities
More segmented terminal products
With the increasing demand for beef, the beef market has taken on the trend of industry segmentation from high-grade beef to the ordinary beef and from different brands to different packaging market segments. All kinds of cooling meat cuts, beef products, small packaging meat, and western cooked meat rush into different sales channels to meet the unique needs of different consumers.
For beef production enterprises, more detailed carcass in the production process and more sophisticated beef processing technology can help to obtain higher value-add in domestic and international markets.
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SOURCE Frost & Sullivan