Opinion / Economy

Structural changes in Chinese meat chains

By Marcos Fava Neves (chinadaily.com.cn) Updated: 2012-06-29 14:44

The objective of this analysis is to share with China Daily readers a recent workshop that I had the opportunity to coordinate in Shanghai, on 12th of June, during the events to launch my new Chinese book "The World on the Tongue", by Central Compilation and Translation Press.

In this event, around 15 of the largest pork and poultry producers and processors operating in China stood for around 5 hours debating the future of the industry. Very interesting debate done with nice and enthusiastic people about a brilliant future.

This article summarizes the good news and opportunities, mostly related to the worldwide growth of food markets and also raises the major challenges for the industries operating in the meat markets in China.

First, there are several opportunities open for growth in the Chinese meat markets. Projections show that internal markets in 2030 will be of around 1,5 billion consumers and urbanization will be around 70%, bringing incredible changes in consumption patters. In the next 20 years, income will grow in an average of 5 to 8% per year, so with this, GDP per capita in China will raise from US$ 5,500 to US$ 15,000 in 2030. The major impact of this fact is that there will be and increase of almost 15 kg in the per-capita consumption of meat by 2030, lifting from 57,3 to almost 70kg per person. It is an incredible development of markets, bringing a lot of opportunities and also challenges.

In order to face this growth and accomplish new macro-environmental changes several challenges were raised by these executives and will be summarized below.

a) Human resources management, both in availability of trained employees and to face the cost increase of labor, due to higher salaries and benefits, estimated in more than 30%;

b) Adaptation to new Governmental regulations toward food security in China will increase production costs even regulations regarding feeding the animals may reduce the amount of products used as feed;

c) Government policies towards improvement of small and medium size companies will also change the industry in the near future, since some of these are low scale and have low productivity;

d) Government policies towards the usage of land in China will challenge the growth of this industry mostly because of the growth of municipalities and Chinese companies will need to expand internationally to secure supply chains;

e) Diseases spreading due to the density of production bringing risks of severe epidemics and frequent outbreaks;

f) Cross regional development of logistics towards inlands of China, where there is also a growing market and production;

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