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Adding value to spanish exports


China, the 'promised land' for Spanish food

Gema Boiza. Journalist @GemaBoiza

Economic growth, the rise of its middle class and their desire for Western products has made China a leading destination for international food and beverage brands. These companies see the Asian giant as a new El Dorado for their exports, which have not only been accepted but welcomed by Chinese consumers, distributors and the HoReCa channel. Against this backdrop, Spain faces both an opportunity and a challenge: to maintain every last bit of the foothold it's able to gain in its "promised land".

Unstoppable. That describes the pace of development of China's distribution sector. Since the global financial crisis began in 2008, the sector has expanded considerably, increasing its value by more than 15% in the last five years. This success is attributable to Chinese distributors, which are allowing an increasing number of foods and beverages “Made in Europe” (including Spain) into the country to respond to requests by, and demand from, their consumers.

As a result, the value of Chinese imports in the food industry has increased five-fold in a decade, from 8 billion euros in 2004 to 43 billion in 2014, according to data from InterChina, a strategy consulting firm which advises on specialized investments in China.

A country whose consumers have seen their purchasing power increase, and with it their desire to try native flavors and aromas from the West. The products most in demand by Chinese consumers in recent years fall into the following six categories, according to InterChina: snacks (cookies, nuts…), children's products, dairy (especially liquid milk), alcohol (spirits, beer and wine), fresh products (meat and fish in particular) and Mediterranean products (with ham and olive oil leading the way). Of those six categories, Spain is a participant in the last four.

Options for Spain

The elimination of milk quotas in the European Union in March has put many cattle farms in a tough position. However, the possibility of selling their dairy products in China—if the numbers make sense logistically—could alleviate some of those concerns. This is especially true considering that demand has skyrocketed since 2009 (especially for milk packaged in small formats), and that Russia (another important player on the dairy market scene) hasn't been accepting EU exports for more than a year.

The same is true for Spanish meat producers, whose exports previously headed primarily to Russia. Now, several quarters following the Kremlin's decision not to allow the entry of EU products (with a few exceptions), China is viewed not only as an option, but also as an emergency exit, and if the opportunity is not leveraged, the result could be disastrous.

The beverage industry, especially beer and wine, is in a better situation. Beer has a good business opportunity in China, and the Spanish brand Mahou-San Miguel is one of the brands being imported at this time.

Spanish wines are also well-positioned in China. According to 1Q 2015 data from the Spanish Wine Market Observatory, China increased wine imports by more than 20%, due in large part to packaging development, which accounted for 79% in terms of volume and 93% of the total value purchased.

Our secret weapon

One product for which Spain has considerable room for improvement is olive oil. Our "liquid gold" was very well-positioned in China, with a steady increase in consumption over the years, until 2014, when the Chinese government launched a campaign that encouraged citizens to reduce spending.

In the HoReCa channel, demand for Western products is so great that restaurants and catering businesses are seeking out foods and beverages from this side of the world. That demand is heavily supported by the construction of new towns.

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