Half of the food enterprises in Beijing will be swept out of the market in the next decade, said a senior expert.
Li Shijing, deputy director of the Beijing Food Industry Association, said only 5,000 food companies in Beijing will be able to survive intensive competition from overseas food giants that will flock into the domestic market after China joins the World Trade Organization (WTO).
According to statistics, foreign food products occupy almost half of the Beijing market in terms of sales. Imports include milk, chewing gum, chocolate, flour and ice cream.
Of the top ten selling food products in Beijing, over three fourths have foreign names.
Compared with imported food products, Chinese-made food products are uncompetitive as a result of their poor quality, packaging and marketing, Li said.
"Our food companies are on relatively small scales and find it hard to compete with overseas giants,'' Li stressed.
China's food industry had a turnover of about US$80 billion in 1999, only one fourth of that of the US food industry, Li said.
With China's impending entry into the WTO, the restructuring of China's food industry is inevitable. Most small companies without specialized products will be eliminated from the market, Li predicted.
China has enormous potential in this sector as the strong purchasing power of its massive population still remains largely dormant. Big names like Wal-Mart, Pepsi and Nestle have entered China to tap into this huge market. Experts believed Beijing could double its food retail sales to 100 billion yuan (US$12.1 billion) by 2010.
The country's entry into the WTO will help the development of China's food industry. After China reduces its tariffs, foreign money, advanced technology and management mechanisms will flood in, which will greatly encourage China's food companies to change their ways and dive into the market economy, Li said.
Private food companies will play an increasingly important role in the food industry. At present some food companies have floated on the domestic stock market, which diversified their fund channels.
"The Beijing Municipal Government has decided not to establish any new state-owned food enterprises,'' Li said.
Conglomerations will emerge to compete with foreign giants. These companies will cover all aspects of the food industry from planting, food processing, production and marketing, will use advanced technology and have low costs.
"We should also pay a close attention to advanced technology, especially e-commerce,'' Li said.
Venture capital from overseas is reportedly ambitious to embark upon the online transaction of food products in China.
(China Daily 10/31/2000)
