BioFach China and domestic market development

The fifth annual organic trade fair BioFach China - the country’s counterpart to BioFach Nuremberg - was held on 26-28 May 2011 in Shanghai. 342 exhibitors presented their products. BioFach China is the only purely organic exhibition in China, since all other so-called organic and green fairs in China have a mixture of exhibitors who may have one of the three certificates that characterize the agricultural products in China: organic, green food and hazards-free. Therefore, this Shanghai exhibition is a great platform for foreign organic producers to get to know the Chinese organic sector and also to present themselves to Chinese trade visitors and organic consumers. In fact, the fair is not limited to trade visitors in China and anyone interested in organic products can visit the exhibition. (Picture: opening ceremony of BioFach China 2011)
Having also been present at the two previous BioFach China exhibitions as a freelancer, I can see with my own eyes how the organic sector in China is developing. My first look tells me that progress seems positive: exhibitors and visitors have increased gradually and continuously over the last three years. The number of domestic and international exhibitors increased after 2009, were there have been 238 from twelve different countries to 313 from 16 different countries in 2010, among which 50 exhibitors were from abroad. This year, there were 342 exhibitors and 13 % were from abroad. For the first time, an Italian pavilion consisting of eight enterprises from Italy presented typical Italian organic products, such as pasta, flour and pasta sauces. (Picture: China made organic clothing)
 
Nonetheless, a closer and careful look beneath the surface would reveal how far the Chinese organic market has come in recent years and what opportunities and challenges await foreign organic players. The questions to be asked: what organic/natural products from Europe are suitable for and helpful to the Chinese organic markets? What is the market situation for these products at the moment?

In 2009, there was a German Pavilion at BioFach China, last year an Australian one, and this year an Italian Pavilion. Two simple questions: why did the cluster of organic producers from one country not show themselves again the following year and how many of these foreign producers have actually entered the Chinese organic market in the years following the exhibition? In the last three years only a small number of foreign organic producers presented themselves at all three fairs, one being Sabo-Oil from Switzerland and another Brilliant Tea from Germany. Sabo has still not entered the Chinese market, while Brilliant Tea came into the market this year. (Picture: One of the two organic soy sauce producers in China)

As reflected in two articles titled ‘Comments on Biofach Shanghai May 2009’ and ‘Reflections on Biofach and the Chinese Organic Sector’, certain products are not suitable for the Chinese organic market due to the different food culture and characteristics of the agricultural products market in China. Take tea as an example. China is a big tea producer with a strong tea drinking culture and, despite the food scandals in recent years, Chinese people have always been rather conscious of the health benefits of the things they eat or drink. In addition to green and black teas, the Chinese herbal teas, such as chrysanthemum flower tea and mixed medical herbal teas, have long been popular. European herbal teas are different from the local ones and it would take a great effort to introduce and market organic herbal teas such as chamomile, peppermint, and fennel to Chinese organic consumers for both nutritional and taste reasons. (Picture: a small natural food store opened inside a community
in Shanghai last year)

Most foreign organic exhibitors might know that overall the Chinese domestic organic market has been booming in the last few years and they might also have visited organic chain stores such as Lohao City in Beijing and Haikele in Shanghai, which on the surface look like organic supermarkets in Europe. Lohao City now has seven stores of its own and one franchisee, plus six counters inside supermarkets in Beijing, but it closed the two stores previously opened in Shanghai. Haikele has 14 stores across Shanghai at the moment and did not fulfil its plan to open 20 stores by the end of 2008. Beyond Organic Foods Co. Ltd. in Beijing was the first to launch online organic shopping and has been in the business since the end of 2005, while Shanghai-based Helekang started in 2008 and claims to be the biggest online organic retailer in China. China’s domestic organic market only came into being in 2005 when the first organic supermarket, Ostore, based on the model in the developed organic markets abroad, opened in Shanghai but closed within two years. In 2006 Lohao City opened its first store in Beijing, while Haikele opened its first store in Shanghai in 2007. (Picture: one domestic exhibitor)

Comment: Bottleneck retail As John Paull pointed out in his paper China’s Organic Revolution (2007), the difference between European and Chinese organic agriculture is that China’s organic sector in general, and big enterprises in particular, have been premium driven and there has been little ideology behind their operations, including organic chain stores. The people in the organic sector in China often found it hard to get the message across, because they themselves hardly live their lives organically or naturally and consequently they have little to share and communicate that covers all aspects of life. There has certainly been increasing demand for organic products in China, primarily because of the increasing food scandals. However, the same fundamental cause behind food scams – lack of morality in the whole society from top to bottom - also poses great challenges for the organic sector, since consumers have their suspicions about the authenticity of organic products produced and sold in China. To gain the trust of consumers, ideology-driven organic farms and retailers are needed. In fact, a small number of such farms and retailers have emerged from the grassroots in the last couple of years. The Mega cities Beijing and Shanghai have been the main organic markets in China as people become more aware of health and environment-related issues and are more exposed to the outside world. However, in these two cities there have been too few of the small natural food stores found in European countries like Germany and England that followed the path of the organic movement and gradually educated and built up the number of consumers over the years, thus paving the way for an overall mature market. Although organic retailing has been the bottleneck in the development of the Chinese organic sector, weak retailing at the same time also leaves room for foreign participation if organic stores from abroad grasp the whole picture of the Chinese organic sector, understand Chinese mentalities and mindsets and the local food culture and, most importantly, find coherent, competent and responsible locals who are knowledgeable about the Chinese organic sector. In due course, such involvement of foreign expertise in running organic stores may help the growth of organic retailing in China and the whole Chinese organic sector.