AS a major supplier of high-protein wheat, barley and wines and potentially more beef and lamb exports into China, Western Australia needs to work on its branding.
“Australia (on the label) is not enough, you need to find the right channel,” was the advice from head of the Australian arm of COFCO, China’s biggest vertically integrated food producer, processor and importer charged with sourcing sufficient food for the nation’s 1.4 billion people.
While there was wide consumer recognition of the Australia “brand” in China and its products were generally perceived as safe, quality and “green”, there is massive potential to develop a WA branding, according to Yebin (Bruce) Li, chief executive of COFCO International Australia/New Zealand.
The benefits of developing local branding will vary from commodity to commodity and product to product, Mr Li told more than 200 people at the 2018 Grain Industry Association of WA (GIWA) forum at Optus Stadium last week.
Known to the grains industry as ‘The Barley Guy’ because of his involvement with COFCO’s international commodities purchasing and milling before his appointment to head the local arm last year, Mr Li was keynote speaker on the topic China and Western Australia: Grain Agribusiness and Food Futures.
Growth of its agricultural exports into China had been a “very good story for Australia”, but there had also been some “bad stories” where lessons needed to be learned from the experiences, he said.
WA producers, Mr Li said, needed to concentrate on trying to achieve “consistent quality” to satisfy China’s food processors and a growing, younger and more discerning “millenniums” middle-class that is “prepared to pay a premium price for quality”.
“You (WA producers) need to find a good partner (in China) and work with them – work together,” he told forum guests who included agri-industry representatives from across Australia.
“Because of poor soils, climate or whatever, we cannot feed our population on domestic production – we have too many people to feed.
“So we rely on the West to help feed our people, so China is investing in the food chain,” he said.
With 400 million Chinese with disposable income in the “middle-class” and about 600m across Asia, traditional rice-based diets are changing to include more protein.
“Millennials are eating more beef, eggs and dairy products,” Mr Li said, supported by China National Bureau of Statistics data showing year-on-year growth of almost 10 per cent for wheat in 2010-11, and increases of more than 10pc for milk powder in 2013-14 and eggs in 2014-15.
Dairy consumption per capita in China has increased by 250pc, he said.
China’s beverage consumption has also changed with soft drink consumption – the major portion of the beverage market – increasing in volume by 25pc since 2010.
Soft drink consumption is now about three times the combined total consumption of alcohol, juice and carbonated drinks, figures he presented showed.
Mr Li said growth in wine production and consumption was eating into market share of other alcoholic beverages, with wine imports growing 15pc year-on-year and Australian wines, particularly from the Margaret River region, trailing only French wines on import volumes into China.
But with the change to a Western diet has come a focus on health concerns, he said.
“People are more concerned with health, there is more demand for a better quality, greener product.”
Examples, Mr Li said, were a forecast 8pc growth trend over the next five years for non-genetically modified cooking oils and “huge potential” in high quality packaged drinking water sales.
Changing diets has led to a current beef production shortfall in China of about 2m tonnes and this is expected to double to 5mt by 2025, he said.
Beef consumption was 9.1mt in 2017 and expected to be 9.62mt by 2020 with about 20pc coming from imports.
“In 2016 per capita beef consumption was 5.8 kilogram, so there is massive potential,” Mr Li said.
But exporting beef into China was “easy to talk, difficult to do”, he acknowledged, and compared to Argentina and Brazil, Australia was a high cost producer even though it was recognised for a quality product.
COFCO imports lamb from Australia – it started about four years ago – and there is scope for expansion there, Mr Li said, but wheat and barley remain the dominant agricultural commodities imported from Australia.
China relies on imported high protein wheat, but wheat supply into China is currently “finely balanced” between domestic production, imports and consumption, he said.
Chinese government statistics and COFCO research figures he presented showed Chinese wheat production trending at 130 million tonnes a year and imports, mainly milling wheat, running at a similar level, with stockpiles being drawn down to accommodate growing consumption.
A better story for WA was barley, particularly feed barley “for our pigs”, Mr Li said.
Growth in large-scale commercial pork production has fuelled a focus switch from malt to feed barley from Australia and other sources, with the barley import program more volatile since 2014 as a result, he said.
Figures he presented showed significant increases in feed barley imports in 2015 and 2017 and with feed barley running at just over half of the barley imports this year.
Australia is a major source, currently providing 4mt, compared to 6.5mt from other countries, or roughly 66pc of China’s barley imports.
This is in comparison to wheat where Australia provides about 1m tonnes of a 4mt total import market and has to compete against Canada, the Black Sea region and the United States of America, Mr Li pointed out.
He said much of China’s barley imports were sourced from WA and Kwinana with its panamax class bulk shipping capability, along with Albany and Esperance ports, shipped almost double the wheat and barley tonnage combined of any other Australian port.
Oats was another potential “good story” for WA growers in terms of export potential into China.
Oats were seen by Chinese Millennials as a health food, he said.
Mr Li’s views on the potential of WA barley and oats exports were supported by CBH Group’s general manager marketing and trading Jason Craig who joined him, Plum Grove chairman and managing director Andrew Young and Anthony Wilkes from Burch Family Wines for a forum panel discussion.
“Marketing of barley into China still looks good, we have good projections for growth (and) oats has been our shining light,” Mr Craig said.
He said CBH Group, which was major sponsor of the GIWA forum, had not “seen any significant benefits yet” from the tariff trade war between China and the US.