China’s beef market presents great potential over the next decade, with the development of sales channels rather than the size of the investment the key factor for making a positive investment return, according to a new report by Rabobank.
The report, What Role Will China Play in the Global Beef Market, by Rabobank’s Food & Agribusiness Research and Advisory team, forecasts an additional 2.2 million tonnes of beef consumption each year in China, bringing demand to 10.2 million tonnes per year by 2025.
Although not a big beef-consuming country, the Chinese beef market has seen impressive growth, recording a compounded annual growth rate (CAGR) of 4.8 percent from 1996 to 2014 (an estimated value of about $60 billion each year), compared to the 3.5 percent CAGR for pork and 3.4 percent CAGR for poultry over the same period.
While the wider market remains focused on supply issues, Rabobank believes the appearance of “niche” markets and channels provides more value-creation opportunities. Some beef companies have already made investments in processing facilities, which are mainly used to process imported beef. But the report says “such investment tends to be small and serves multiple purposes for both the retail market and foodservice clients with marinated beef or ready-to-cook beef products.”
Rabobank says the biggest challenge for foreign companies is accessing new retail channels. They therefore suggest foreign companies – with their overseas sourcing capacity and more advanced processing technology – look to partner with local Chinese players who have access to these sales channels.
While the growth of China’s domestic beef market means opportunities abound for foreign companies, it is also prompting Chinese players to look globally, with more outbound investment expected in the coming decade, according to the report. Domestic production, however, is expected to remain low.