Chinese Meat product Market in the Consumption Upgrading

In 2008, Chinese meat product production amounted toBesides the chain supermarkets, the meat product
over 70 million tons. In recent 20 years, the annualindustry also tends to establish the direct sales
compound growth rate of Chinese meat productchannels through fresh chilled meat franchise stores.
production maintains over 5%. The high-speed growthGenerally, chain franchise stores are developed
of Chinese meat production and sales volume benefitsthrough regional agents. The common mode for chain
from transformation of the meat product consumptionfranchise stores is: there is no or little franchise charge;
structure and the increasing demand owing to thethe equipments and store decoration are invested by
improvement of Chinese income per capita. Thefranchisees; the store decoration is uniformly designed
consumption upgrading consists of the upgrading ofby the enterprise; products are collectively distributed
the total consumption quantity, the consumptionby meat product enterprises. The investment in a fresh
structure and the consumption pattern. As to thechilled meat franchise store in a second-tier city of
consumption characteristics of the meat productCentral China is about RMB 30,000-40,000. The low
industry, because it belongs to the daily consumerinvestment significantly increases the number of
goods, the consumer demand growth is hardlyfranchise stores and accelerates the expansion speed
influenced by policies but greatly affected by theof the number.
revenue increase. In China, the significant increase of 
the meat product demand will be of low speed and aTheoretically, the profit rate of fresh chilled meat
long term.franchise stores should be higher than that of
 supermarkets because they directly focus on the
An important aspect of the meat product consumptionterminal consumption market. However, the reality
upgrading in China is that the meat productgoes against the expectation owing to the intensified
consumption channels are transferring from traditionalcompetition. The three giants – Shineway, Yurun
farmer’s markets to large supermarkets andand Jinluo have set up numerous stores in Northeast
community supermarkets. Supermarkets of USAChina, North China and Central China, etc, intensifying
occupy 85% shares of agricultural product marketsthe competition to reduce the profit. As franchisees
while it is 65% and 60% for European and Latinhave no pricing right and there is little difference in the
American supermarkets separately. In 2008, the salesbrands and qualities of fresh chilled meat products, their
of raw and fresh products of Chinese Top 100 fastprofit mainly comes from the difference of the
moving consumer goods enterprises only accountedpurchase costs. In recent years, considering the high
for 12.44% of the total sales. Among them, the meatpork price and purchase cost, some franchisees begin
product sales took up the highest proportion of 41.25%.to purchase products from local upstream suppliers
According to statistics, the meat product sales volumewith the lowest price instead of original upstream
in supermarkets in central cities of Central China hasproducers. Moreover, there is loose relationship
taken up 29% of the total sales volume while it shouldbetween meat product producers and franchisees,
be over 30% in Chinese first-tier cities such as Beijingmany fresh chilled meat franchise stores even suffer
and Shanghai. Since the implementation of the Foodlosses, not to mention the profits. The products of
Safety Law of the People's Republic of China on Junefranchise stores are supplied by local distributors.
1st, 2009, the meat product sales proportion inHowever, the profit of franchise stores can be cut
supermarkets and hypermarkets sees continuousdown due to the interest contradiction between
growth.distributors and franchisees, leading to the profit
 reduction of meat product producers.
The increase in the meat product sales proportion in 
supermarkets and hypermarkets is caused by thePresently, Chinese meat product processing volume
growth in the quantity of supermarket andonly accounts for 15% of the meat product production,
hypermarket stores to share with traditionalmuch lower than the proportion 30%-40% in countries
farmer’s markets. In 2007, the number of storeswith developed meat product production and
possessed by leading enterprises in Chinese Top 100consumption. This is mainly because that Chinese
chain enterprises exceeded 18,000. In 2008, the retailtraditional eating habit requires fresh food raw
sales of Chinese Top 100 chain enterprises took upmaterials. However, the concept is being transformed.
11% of the total social retail sales. The chain industryIt is forecast that the meat product consumption
has expanded its channels into communities togrowth of Chinese urban residents will focus on
subdivide regional consumption markets. As to thehigh-end meat product such as fresh chilled meat and
product structure, the consumption upgrading of thelow temperature meat products. The meat product
meat product industry is concentrated on the salesconsumption demand of Chinese rural markets still
proportion rise of the fresh chilled meat and lowmaintains a high-speed growth. As the cold chain
temperature meat products. These two meatsystem cannot completely cover Chinese rural
products must be shelved in freezers and mainly soldconsumption markets at present, there is great space
in supermarkets and hypermarkets.for high temperature meat product on Chinese rural
 markets.