Chinese Consumers Demand Premium Foods
Fred
Gale and Kuo
Huang
Food expenditures in China are changing as
households experience income growth. At higher income
levels, consumers tend to diversify their food purchases
to include more poultry, fish, dairy, fruit, and
beverages, while purchases of rice, flour, and pork
remain about the same. This trend took hold soon
after China’s economy began expanding rapidly
during the 1980s. A more recent trend is the increasing
propensity of Chinese consumers to purchase higher
quality as well as greater quantities of food.
Modern food markets have given
Chinese consumers an expanded array of food choices—different
cuts of meat, tropical fruit, organic vegetables,
milk with special additives, instant noodles—and
consumers are spending more for each unit of food
purchased. Analysis of Chinese household surveys
shows that, as household income rises, per capita
expenditures on meat grow faster than per capita
quantity purchased. This trend happens if consumers
buy premium-priced items: better cuts of meat; branded,
packaged, or processed items; or meats that attain
rigorous safety certifications. Similarly, high-income
households in China tend to buy smaller volumes
of rice, flour, and other grain products than do
low-income households, but spend more on premium-priced
items like imported jasmine rice, branded domestic
rice, processed rice and wheat products, and western-style
breads.
The demand for “quality”
is an important component of food expenditure growth
for nearly all food categories studied using data
from the Chinese household survey for 2002-03. That
demand has driven China’s rapid growth in
supermarkets, convenience stores, and restaurants—outlets
that offer greater convenience and quality in food
purchases. The emerging Chinese demand for premium
foods has been a boon for U.S. farm products. For
example, U.S. apples and oranges have established
a significant high-end niche in China. U.S. exports
of fruit and fruit products to China grew to $106.5
million in 2006, more than triple the value in 2002,
despite selling at prices three to four times higher
than those of domestic fruit. The increase in discretionary
food spending also has triggered many investments
by U.S. food manufacturers, retailers, and foodservice
chains in China.
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