Australia’s Potential To Be A Supplier of High Quality Food in China

Australia may not likely become the ‘food bowl’ of the region like the government claims, but it could snare a small but profitable niche in China.
Australia’s Potential To Be A Supplier of High Quality Food in China
April 23, 2014

With new laws on food safety coming into effect in China this month, and Australian Prime Minister Tony Abbott keen to seal a free trade agreement 
between Australia and China, Australia is touted to become the ‘food bowl’ of Asia.

Australia may not likely become the ‘food bowl’ of the region like the government claims, but it could snare a small but profitable niche in China - the high-end food market - should the proposal succeed.

What Do We Know About the Chinese Market?

China’s population is about sixty times bigger than Australia’s, with a boisterous appetite and overflowing demand that will see China consume 20 times more in 2050 than they do now.

China is Australia's largest trading partner, but we have some aggressive competition with the 120 or more other economies who trade with China — many of which are competing for food trade.

Chinese investors are interested in high quality, semi-processed food exports to meet the increased discretionary spending of its 300 million middle income families. This figure is projected to grow to 630 million people by 2022.

What Can Australia Supply?

How does the recent attempt by the Chinese government to push their food industry into producing and selling safe food, line up with Australian Prime Minister Tony Abbot’s plan to forge links with Asia to cater to the Asian growing middle class?

First, we need to recognise our limitations. Australia only has the capacity to feed 60 million people, while China feeds 1.2 billion people.

According to Dale Park, President of Western Australian Farmers Federation (WAFarmers), we are never going to match China for quantity, but we can provide food that is safe and of high quality to tap into China’s premium food markets.

What Opportunities Exist For Australian Food Industries?

With increasing incomes and greater standards of living, Chinese consumers have more choice than ever in their supermarkets and are more concerned about the quality and safety of their food. Studies suggest that the Chinese prefer foreign produced and imported processed food, due to low levels of trust in local foods.

So what does this mean for Australian producers? In short, we must play to our strengths. Beef, dairy, wine, vegetables and processed, branded goods offer the highest potential for Australian producers hoping to penetrate the Chinese market. To capitalise on these widening gaps, Aussie food producers and processors must welcome Chinese investment, which will bolster our economy, create jobs, and make us more attractive to the Chinese marketplace.

Who Is Locked Out of This Exchange?

According to some, the chicken, pork and grain markets are impenetrable because we simply can’t compete with China’s economies of scale. Currently, China produces enough to fill its own lamb and mutton demand, but Aussie farmers are eager to fill the gap as China’s population continues to increase.

How Can Australia Compete Amid Fierce Competition?

Australia is not the only one with a watchful eye on China. In 2013, the US outdistanced Australia as the top investor in China. To build its competitive edge, Australia must preserve its reputation for high standards with ‘clean and green’ food.

More broadly, we can’t assume our proximity to China will help us. To carve out our niche in the Asian food bowl, Australian food producers - both manufacturers and marketers - will need to foster long-term relationships with Chinese importers and emphasise why Chinese consumers should pay high prices for our foods.

This involves demonstrating why our freedom from disease, lack of chemical contamination, food hygiene, high animal welfare standards, environmentally sustainable production and higher worker safety mark our produce as superior.