In an ever more competitive feed industry, feed manufacturers and suppliers may imagine that North America and Europe are over-saturated markets. As a result, they may be tempted to look East for expansion, and attractive business opportunities.
For example, Reuters reported in June 2017 that, “People here [in China] will eat about 74 million tonnes of pork, beef and poultry this year, around twice as much as the United States, according to U.S. agriculture department estimates.” Adding that, “China is currently the world’s largest consumer of animal feed, representing 21% of global consumption.”
Chinese feed markets represent 21% of global consumption
Such a large market with improving standards of living, and increasingly Westernised lifestyles seemingly presents a fresh market for feed and feed additives.
However, feed suppliers hoping for quick and easy profits will be sadly disappointed, as the Chinese market for animal feed is far from an easy nut to crack. It poses many problems that feed processors or feed additive traders should be aware of. Before success, it is necessary to know the top 5 challenges in the Chinese feed and feed additive market.
They are as follows;
1. Chinese Feed Producers are Major Players.
Despite a growing number of international feed firms, the market is still dominated by locally-produced feed and domestic feed additive companies.
2. Chinese Feed Industry Bureaucracy is Expensive.
As health concerns become more apparent and standards continue to rise, inspections on feed imports and feed additive ingredients are becoming more and more strict.
Some of the most severe laws limiting feed and feed additive imports into China are governed by AQSIQ (the Administration of Quality Supervision, Inspection and Quarantine) which issues Ministry of Agriculture (MOA) import registration licenses for specific feed additives.
The issuing of a licence requires an audit of the products’ manufacturing facilities and thorough testing of the product. Most documents for the application must be completed in Chinese.
Chinese feed import registration can be slow and expensive
As the Feedinfo News Service notes, “The import registration is viewed as a pre-approval step before market access. It was introduced in order for the Chinese authorities to have control and supervision over products entering China, especially concerning feed quality and safety. China has noted that this registration process is for quarantine, product safety and trace back reasons. The registration involves extensive submissions of information to the MOA.”
The application process can often take as long as 2 years. To date it has awarded licences to only 51 countries.
Significantly, the Feedinfo News Service advises that, “The cost of registration depends on the complexity of the product and application, but it is estimated that the whole process totals at between $100,000 and $1 million or more.”
3. Chinese Feed Industry Bureaucracy is Slow.
China places a lot of focus on maintaining a ‘positive feed additive’ list which includes all feed products approved for export to China. Companies hoping to include their feed products on the list must face difficult bureaucracy, long waiting times, and novel product testing methodologies.
Registering new feed products or feed additives for import to China can take 5 or more years
As Raymond Ng, a feed industry expert at REACH24H, a Chinese agrochemical consultancy firm explains: “A feed additive which is not on the positive list is considered a ‘new’ feed additive requiring New Feed Additive Registration. This can be a very lengthy procedure since efficacy, tolerance and stability studies have to be conducted by designated entities in China. However, international studies and research can be used as reference. The testing methods and guidance have to be designed according to Chinese standards, even though the foundation of such standards is derived from EFSA and FDA and other entities.”
Some estimates are that it can take as long as five years or more (depending on the product and the target animal) to have an additive included on the list. In fact, it is unlikely that the wait time will be less than a year.
4. The Chinese Feed Market is Mature and Competitive.
The market is no longer new, as the central government has been focusing on the expansion of domestic feed supply since early 1978.
As Ng explains, “[The Chinese feed industry is] a very competitive market for imported feed additives and in order to compete, focus must shift to quality and innovative feed additives as price pressures are eroding margins. China continues to grow and the acknowledgement to tackle reliance on antibiotics requires innovative feed additives to partly fill the gap.”
5. Meat consumption growth is slowing down.
Alongside adopting more Western-style diets, Chinese people in more metropolitan areas are taking greater care over what they eat, including trying to reduce their meat consumption. As Reuters notes, “…pork demand has hit a ceiling, well ahead of most official forecasts. Sales of pork have now fallen for the past three years, according to data from research firm Euromonitor. Last year they hit three-year lows of 40.85 million tonnes from 42.49 million tonnes in 2014, and Euromonitor predicts they will also fall slightly in 2017.” Adding that, “Chinese hog prices are down around 25 percent since January, even though official numbers suggest supply is lower compared with last year.”
Sales of pork in China have fallen for the last three years
While rural China may still offer the prospect of increased meat consumption, this could be the start of a healthier-eating trend that is arriving into China much quicker than was previously thought, limiting livestock and poultry industry growth.
Naturally, this list is not exhaustive, and instead incorporates only the highlights of the problems facing feed importers to China.
Most evident of these problems is the level of bureaucracy that must be overcome. Especially as there is a sense that Chinese legislators implement policies to suit their own regional needs, or that laws are applied in a way that an individual official may see it.
For example, the Feedinfo News Service reports that, “Clearance procedure for entry ports in China can differ from one port to another. The first time that an overseas company uses an entry port, it is considered a first timer, regardless of any successful history using other ports. For example, importers have reported receiving different treatment when shipping to Shanghai or Tianjin.”
Strong competition means that there are no ‘low hanging fruit’. Instead, feed manufacturers or feed additive suppliers must take great consideration before taking on the challenges of the Chinese feed industry. As Ng concludes, “It is very important to understand the regulatory obligations and to understand what options you have regarding market access and to strategically weigh up the costs and benefits before seeking to enter the Chinese feed market”.
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