A Shanghai marketing director who thinks of himself as a typical Chinese consumer boasted to a group of Madison business people that he loves to follow the lead of millions of Americans and spend his weekends at home watching TV and eating pizza.
The pizza business is booming in China, partly because of that country’s burgeoning love affair with imported dairy products like cheese, said Roger Zhang, who was part of a delegation of Chinese food buyers and marketers that toured Wisconsin last month looking at its agricultural industry.
The delegation was extremely impressed, Zhang said, at a luncheon hosted by the Madison International Trade Association. He mentioned the quality of Wisconsin dairy products, particularly cheese, and added, “this is good timing to access the (Chinese) market. They will get a certain market share in the near future.”
John Umhoefer, Wisconsin Cheese Makers Association executive director, agreed. After data from the state Department of Agriculture, Trade and Consumer Protection showed that cheese sales to China for the first six months of this year jumped 179 percent compared to the first six months of 2013, Umhoefer said, “The cheese side of the dairy industry is in its infancy in China, but it has promise.”
China was the No. 2 export market for state agricultural products in 2013 after sales there jumped 63 percent in one year to $298 million, according to DATCP statistics. But only $14.7 million came from the dairy industry and 91 percent of that total came from whey, which is a by-product of cheese manufacturing that is used to make everything from infant baby formula and nutritional supplements to animal feed and beauty products.
Although state cheese sales to China made a big jump over the first six months of this year, it barely cut into whey’s dominance because sales amounted to just $615,000, or 1.8 percent of the state’s dairy exports to China. Umhoefer believes distributors are finally figuring out how to get their products there. “It used to be a logistics problem. Now it’s more of a supply chain challenge,” he said. “It’s really a question of connecting all the dots to get it to the retail store in China.”
Cheesemakers don’t know China
Most state cheesemakers sell their products to a distributor or supplier that handles the export documentation that includes complicated clearance procedures and strict requirements regarding labeling before it can pass inspection in China. For instance, each product label must include the name and brand, an ingredients list, net contents and drained weight, a nutrition fact, the name and address of the manufacturer and distributor, the production date and/or best sold-before date plus shelf life, special storage conditions if needed and warnings in relation to consumption or storage if needed.
“We don’t understand those markets. We don’t understand what the returns are going to be. It’s literally a foreign language for us,” said Jim Natzke, operations manager for Maple Leaf Cheese Co-op in Monroe. “So (the distributor/supplier) takes title of it and sells it. Where it ends up, I’m not exactly sure.”
Maple Leaf Cheese, which makes cheddars, jacks, flavored jacks and gouda, is making more cheese for international distribution, Natzke said. “It’s not a huge percentage of what we do,” he added, “but it’s an interesting side business.”
Masters Gallery Foods, a major cheese distributor based in Plymouth, is just starting to move into the China market because of its potential for growth in sales, according to Jeff Giffin, president and CEO. Cheesemakers sell mainstream shredded cheese, cheese sticks and bars to Masters Gallery. Some of them sell most of their entire production lines, which Masters Gallery often sells under a private brand or label.
“It just looks like there’s going to be a pretty heavy demand in China over time,” Giffin said. “As more products are delivered over there and consumers get used to it in their diet, there will be steady growth.”
A taste for Western cuisine
Cheese is not a traditional food for older generations of Chinese, but the younger generations have a taste for Western culture and foods and have gravitated toward cheese, Zhang said. The Chinese also believe that imported cheeses are safer to eat, partly because of recent scandals in the ag industry there, he added.
Besides pizza joints and bakeries, higher-scale restaurants that are often the best sources to introduce new foreign foods in China are seeking cheese for their menu items, Zhang said. “That creates huge opportunities,” he added.
Plenty of opportunities exist for specialty cheeses, which have become the signature item of the Wisconsin cheese industry. Zhang said cheeses like feta, gouda and asiago have a place among China’s growing segment of higher-scale gourmet stores and e-commerce businesses that cater to online shoppers as well as its supermarkets.
It all fits Chinese consumers’ desire for higher reputation foods, a value for their money and ease of shopping, Zhang said. He added that Chinese importers also prefer to buy from the United States than from European Union countries because U.S. prices are more reasonable and U.S. companies are more flexible, communicate better and understand Chinese expectations better than their EU counterparts.
Plenty of challenges remain
There are potential hiccups, such as free trade agreements that offer advantages to other countries, Zhang said. He added that packaging and the taste of products from the United States don’t always cater to the preferences of the Chinese consumers.
Masters Gallery’s Giffin was aware of China’s interest in packaging. That is good news for his company because packaging plays an important role in its success, and it will make the necessary changes to adapt to what China wants, Giffin said. “We have heard resoundingly that American marketing on packaging tells quite a story to the Chinese,” he added.
Some cheesemakers, like Denver-based Leprino Foods, have opened technology centers in China so it can tailor their products for the various markets in China. “It’s cutting edge,” said Umhoefer. “Companies are taking their R&D (research and development) to the market instead of keeping it here in the States. They know it can’t be about just delivering what you make but to make exactly what they want.”
But Wisconsin is the biggest selling point of Wisconsin dairy products when dealing with China, according to Jen Pino-Gallagher, the bureau director of DATCP’s agricultural market development group. “It’s so vitally important to have these buyers step on Wisconsin soil,” she said. “When they see the green fields, the clear water and clean air, it sets a thought in their mind that products from Wisconsin are wholesome and high quality.”
A love for cranberries
The Chinese delegation that toured the state in August had a positive reaction to the cranberry industry, partly because of how it was introduced to the group starting with the producers in the bogs and ending in retail settings where everyone could see the various types of products made from cranberries for sale. Zhang promised attendees at the MITA luncheon in Madison that Chinese consumers would soon learn about the many benefits of cranberries.
What most impressed the delegation was how the cranberry producers cared about the quality of the water and soil and controlled pesticide use, said Jennifer Lu, an economic development consultant for DATCP who specializes in Asian countries. They got the same feeling of care from the cheesemakers, too, she added.
“They believe exported cheese has the most rigorous safety demands” because sites like Wisconsin demand a high level of sanitation, Lu said.
It’s OK for some companies to try to Americanize the Chinese in some settings, Zhang said. That’s most important for Zhang’s weekends at his Shanghai home that are spent watching TV and eating pizza from Pizza Hut. Wearing a big smile, he said, “I’m so happy that they are doing home delivery already.”
Source: Wisconsin State Journal