Challenges of Organic Retailing in China

Organic market in China, mainly focused in big cities like Beijing and Shanghai, has started to gain ground since the first organic store opened in Shanghai in the year 2005 and in Beijing 2006, but it is still a tiny percentage among overall food sales. Many factors have contributed to the situation, such as organic is still not a well understood concept as the Chinese words youji are directly translated from English, which is as awkward as manshi, the direct Chinese translation for slow food; organic equals to luxury; certification and trust have been reasons of concern etc. Moreover, lack of appropriate and effective retailing and other alternatives have been a bottleneck in the development of the organic sector in China.

As of the situation in Beijing, the capital city of China, where at least more than 17 million people live currently, the first organic chain store Lohao City was opened in the second half of 2006. Now it boasts twelve shops across the city, mostly located in the east part of the city where affluent communities are and most expatriates live. Stepping into any of its shops now, what strikes people most is the fact that nearly all dried food items such as all grains, seeds and nuts, dried fungi, imported dried fruits and nuts, are all packaged under its own labels stacking most of the shelves, while similar products from local (nationwide) growers and producers are rare to find. This implies that it is almost impossible for small producers in the organic sector in China to enter the market and they have to stay on the bottom line of the supply chain particularly in the absence of coordinated organic farmer’s markets. (Picture to the left: One of the Lohao City outlets in Shanghai, picture to the right: One of the Lohao City outlets in Beijing)

For example, Lohao used to sell a producer’s own brand organic shiitake mushroom (Zhejiang Qingyuan Xinzhou Organic Edible Fungus Products Co., Ltd., but now Lohao does not sell anymore this supplier’s own brand mushroom in its stores, instead the same product is re-packaged in small bags and sold under Lohao’s brand. Practically it is not possible for such a producer to enter the mainstream conventional supermarkets, so where does the mushroom producer have an arena to market its own brand? (Picture: Vegetables at City Shop, a supermarket chain, in Shanghai )
 

Promoting almost exclusively one’s own brands is understandably a marketing strategy, but it would be ethically incorrect and unhealthy to try to dominate the domestic organic market by just few. Organic supermarkets are supposed to be the right windows for all organic producers, big or small. Without an open and proper platform for small organic producers, there would be no way for organic consumers to even have a chance to know who are behind the food they buy and eat everyday and how they are being produced, thus undermining the build-up of trust and confidence in organic products. Such trust and confidence are most valuable in China due to the ever increasing food scandals in recent years. (Picture: Shanghai Organic Farm near Shanghai supplies supermarkets in the city) 
 

Another player in the organic retailing market in Beijing is Organic Farm which is becoming the biggest organic vegetable producer for domestic market with its products being supplied to big supermarket chains (e.g. Carrefour) both in Beijing and other cities. It opened its first store in Beijing in January 2009 in an area full of high-end properties. However, its business has not been striving. At the very beginning, most of imported goods were priced at ridiculous prices without any consideration of affordability. For examples Sodasan laundry powder was sold for 248 yuan (28 €) per 22 washes (the price was later lowered to 162 yuan /18 € till today) and one type of organic spaghetti was 128 yuan (14 €) per 500g! (Picture to the left: Organic Farm shop, picture to the right: Organic Farm representatives at BioFach in Nuremberg) 

In addition, most imported products were not in English with a sticker in Chinese on top of the packages, so expatriates don’t have a clue as what many products are unless they read German or Dutch or French. Locals rarely consume such products even if they can read the Chinese labels! And there have been little educational programmes from Organic Farm on good products such as Moltex, Sodasan, Logona and many others that they deal with. Furthermore, its own labeled fresh produce and products are very expensive too. for instance, its own labelled organic eggs cost 18 yuan per half a dozen and 30 yuan for ten while organic eggs from small organic farms sell between 13 yuan to 18 yuan per dozen, and the prices for organic veggies from small organic farms are 6 yuan or 10 yuan per kilo while veggies from Organic Farm can cost four to six times more.  Who would expect such a shop to attract organic consumers?
(Picture: Organic import products at City Shop in Shanghai)

For the general public of Beijing, supermarket chains are where they normally shop and have their first contacts with products labeled organic. There are four or five organic growers providing organically certified veggies to all the big supermarket chains in the city and irregular suppliers for some organic fruits. As they are several times more expensive than conventional products. Irregularities were found in some of these farms and were exposed in the media, people are increasingly suspicious and tend to challenge the authenticity of the organic products in the supermarkets.
Picture: Lohao City vegatables presantation, not completely organic)

But frankly speaking, if people have to do shopping in the supermarkets, it is still better to buy organically labeled products since supply of fresh organic produce is bigger than demand and there is no need for these farms to fake organic produces. Comparing to non-organic produces, organic ones are safer in terms of residues regardless of the irregularities which will only become less frequent as the market matures. (Pictures: Organic vegetables at Carrefour in Bejing)
 

Consumer owned organic food coops are not on the horizon yet in Beijing even though there were people talking about the possibility of opening such a store. On the other hand internet shopping for organic food has been available in Beijing in the last few years but few are doing well since many such companies don’t have their own farms and people are becoming suspicious of practices such as contract farming and re-packaging, let alone the high price. However, changes are observed recently in some internet shopping business: some started to rent their own farms due to consumers demanding authentic farm own organic produces as production and quality can be better controlled this way. An example is Tootoo Company , owned by a big property group and entered the organic market in 2009. At the beginning, it claimed it had its own organic vegetable farm but its veggies were actually from a well-known big organic vegetable producer in Beijing, now it adjusts its operation from organic products to mixed ones and is getting its own farm providing some of its organic veggies. (Picture: Xia Xi Yang Farm: Box schemes system in Shanghai)
 

There have been several organic and natural farmers around Beijing struggling hard to maintain community supported agriculture models through home delivery service. A couple of them have been farming organically as long as ten years and they have been driven by their belief in organic agriculture other than profit. God’s Grace Garden is one of them, and the lady behind the farm started from scratch ten years ago with her farm running on bio-dynamic principles. While the Little Donkey Farm (www.littledonkeyfarm.com) is a CSA model supported by the government involving one of the prestigious universities in Beijing and has received much attention from the public due to wide coverage by the national media, and it seems to do well. (Picture: First Organic Farmer´s Market in Beijing)

There is a small community of struggling but determined individuals at the forefront of China’s grassroots of organic food movement. Most of them participated in the first organic farmers’ market in Beijing on the 22nd of May this year which received much attention and was well supported by many organic consumers. There have been demands from both farmers/producers and consumers for more such markets being organized regularly in the city, however due to a lack of coordinated organization and support from local authority, it is still a question if organic farmers’ markets will be able to go ahead on a regular basis. (Picture: First  Organic Farmer´s market organised by Yinghui Zhang-Carraro) 
 
Without strong and varied marketing channels, it is difficult for many organic farmers and producers to reach the potential consumers and vice versa organic consumers find it difficult to get authentic organic products and almost impossible to support small organic farmers and producers. To realize the potential of the Chinese domestic organic market, much more needs to be done to nurture a healthy market mechanism where all domestic organic players, big, medium or small can have access. For this regard, a non-bias, non-profit, and non-government independent platform is needed for the education of both consumers and farmers/producers on broader issues such as sustainable agriculture, community development, fair trade, ethical issues, and greener living. (Picture: Small Farmer´s Market at BioFach China 2007)
 
Author: Yinghui Zhang-Carraro is a freelancer on organic products and greener living in Beijing and the organizer of the First Organic Farmers’ Market in Beijing. She participated in the 2009 and 2010 BioFach Shanghai, also in this year’s BioFach Nuremberg. She also is busy with an investigation (two-years and still on-going) into the organic sector in Beijing, by visiting farms, producers and organic stores.