A comparative study of organic food markets in Great Britain and China
Organic foods are now becoming more and more popular in most developed and developing countries. Though the reasons for this growth in popularity are quite similar, still there are differences in the ways organic food is promoted and sold in different countries.
We at Sunshine Communications have conducted an in-depth study on the organic food markets in Great Britain and China. Sunshine Communications believes that the following factors are of important consideration for selling organic foods in China.
Main factors to be considered for selling Organic Foods in China
Domestic Market Conditions: The domestic market for organic food lacks penetration in China. Organic food is mostly sold in supermarkets in big cities like Beijing, Shanghai, Shenzhen, Guangzhou and in some parts of South China mainly the Guangdong province which is among the wealthiest regions in China. Consumption of organic food in smaller towns and other regions of China is very less. This is also because the standard of living of people in smaller towns and villages is lower then those living in big cities.
Main Customer Segment: The majority of people buying organic food in China happen to be in the age group 20-40 years. Most of them reside in big cities, have more spending power, and prefer greater convenience and shop at supermarkets. These customers also have more concerns of health and fashion. People in older age groups however still prefer to buy traditional foods from nearby small retailers and have higher concerns of price.
Reasons for Buying/Not Buying Organic Food
The reason why people buy organic food in China seems to be more personal and has less to do with environmental concerns. People go for organic foods because they believe it to be good for their health and find it tastier. Consumers with high spending power often buy organic food to reflect on their awareness and status. The main reason for not buying organic foods is due to price concerns. Organic foods in China can cost up to ten times higher then the normal substitutes.
Structure of Distribution Channels: The multi-layered distribution channel for food products in China has been a challenge for exporters. This results in greater costs as the products have to be distributed to small localised retailers in different regions. Large supermarkets and organic food stores in China are mostly found in big cities. Direct sales by way of home delivery and box schemes are also not very popular and people in general prefer to buy food products from nearby retail outlets. However positive developments have started to take place and now more supermarkets and large retail outlets are expanding to different cities enabling greater penetration and regional distribution of organic food products.
Level of Organic Food Exports and Imports: In china organic farming is done mostly for exporting organic foods and very little organic food is sold in the local domestic markets. Organic tea and organic honey are mainly the products that are marketed and sold domestically. The import of food and agricultural products is very low and comprises only around 4% of China’s total imports. Mostly the imports comprises of intermediate products like soybeans, edible oils and rubber. However the new policies are now favouring greater imports. The Import licensing requirements are expected to be removed in 2005. Also the restrictions on foreign retailers will be eliminated by 2007 as part of China’s WTO commitments (Bean, Ralph - Peoples Republic of China Retail Food Sector Report 2003).
Government and Legislation: The future for organic food in China seems promising and the government has been promoting organic food and organic farming for the last 10 years. There are now less import licensing requirements and the domestic wholesale and retail markets are more liberalised. China has also considerably reduced tariffs on food products from an average of around 33.5% in 1996 to as low as 15% in 2004 (Bean, Ralph - Peoples Republic of China Retail Food Sector Report 2003). This has contributed to the growth of domestic market for organic food in China and even though the majority of produce is exported to Europe and Japan, supermarkets in main cities of China are now being able to sell organic food successfully even though it is often quite expensive then the conventional foods.
Differences in the way Organic Food is promoted in Great Britain and China
Apart from the main factors mentioned above, it is also important to bear in mind the following key differences in the way organic food is promoted in Britain and China. Unlike Britain, where large supermarkets and organic food stores exist even in small towns, in China these can be found only in big cities like Beijing and Shanghai. Thus organic food is mainly promoted and sold in big cities in China whereas the presence of supermarket chain stores like Tesco, ASDA, Sainsbury’s, Marks & Spencer, Iceland etc. has greatly helped in promoting organic food among shoppers in every part of Britain.
The last two decades has seen the growth of one-stop shopping trend in Great Britain. People prefer more to shop at big grocery stores which can meet their requirements of most products at reasonable prices. In contrast most people in China prefer to shop at small retail outlets and often buy different products from different shops. Therefore companies have to face a greater challenge in marketing and promoting organic foods in China.
Farm shops in Great Britain also play a significant role in promoting organic food by direct sales. Consumers simply have to pay for the weekly or monthly delivery of boxes at their homes. In comparison in China most farm shops provide goods for exports and very little is promoted and sold in the domestic market.
The growth of internet use in Great Britain is another factor that has lead to the increasing awareness of organic food in consumers. Big retailers now carry on a significant amount of business over the web and consumers can shop for food online in the comfort of their homes. On the other hand in China, the use of internet for promoting and selling of organic food is very less and limited to cities like Beijing and Shanghai.
In conclusion, Sunshine Communications believes that there are good prospects of promoting and selling organic food in China. The consumption of organic foods in the domestic market has started to pick up and people in big cities are becoming more aware of the benefits offered by organic foods. The Chinese economy is also becoming more liberalised and there are now few restrictions and low licensing fees for foreign companies. Therefore it is a good time now for a company to enter into the Chinese market. The recommended move will be to enter and establish the company in one of the big cities like Shanghai and Beijing and then try to expand to other parts of the country. Also innovative promotional methods and a high degree of cultural sensitivity will be required to successfully operate in the Chinese domestic market.
Tags: Beijing, China, consumers, developing countries, distribution, export, import, organic food, UK
