The changing face of China's food retail sector

In what is proving to be a difficult period for exporters, the international dairy sector is currently awaiting a revival in China's commodity purchasing and at the same time reeling from the impact of the Russian trade ban. How long lasting each will prove is open to question of course, but a resumption in "normal" trade patterns will be high on processors' wish lists.

However, these issues may work out, consideration of such factors should not distract consumer marketers from what has proven an interesting few months for China's food retail sector.

Market updates

Walmart has announced a major upping of its spend on food safety in the country - an increase of US$16 million over the next two years. Dairy Farm took a 20% stake in Yonghui, which operates close to 300 hypermarkets and supermarkets across 17 provinces.

More notably, the local Monopolies and Mergers Commission has approved the 80:20 split JV between China Resources Enterprise (CRE), which is China's number two grocery retailer behind Sun Art, and UK grocery giant Tesco. The deal gives CRE a strong presence in Shanghai and in online retail. How beneficial it will prove for Tesco must be more open to question - will its name disappear locally?

Timing is key

These changes need watching for anyone looking to build a dairy brand in China, but - apart from how essential it is to have deep pockets - perhaps the wider lesson is the importance of timing and being an early mover.

Tesco turned up late to the party in China, opening its first store in 2004 whereas Walmart entered China in 1996. One can imagine that many exporters to China of infant formulae and more recently UHT milk must be wishing that they had moved earlier on the market opportunities that so many have been rushing to exploit in the last two years.

Certainly marketers need a better grasp on timelines than a certain Mr Mao, who was once reported as saying in economics discussions that a change would occur "in 200 years time, or perhaps 40"!

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