China's economic growth has created new food safety and quality challenges for corporations and policy makers. Supply and production chains are growing in size and complexity, rising incomes are driving consumer demand for more variety, and social media has increased public awareness of food safety issues.
The industry has made great progress with investment, new technologies and a proliferation of ISO certifications, but we continue to see food safety scandals that fuel public anxiety. Most incidents are caused by human factors like inadequate training, lack of knowledge around techniques and standards, or economically motivated fraud and non-compliance. The challenge for executives and regulators lies in the highly fragmented nature of the industry - small farms and businesses account for the vast majority of China’s producers, processors, distributors and traders.
Building trust in food is a difficult and complex problem, but it is also an opportunity. With so much information available via the internet, China’s consumers are increasingly concerned about the health of their families. They are learning about the ingredients and origins of the food they purchase. More people than ever are willing to pay higher prices for better quality; and customers are loyal to brands that they trust.
The government recognises the importance of trust in the food sector, and has shifted the focus of its food policy from self-sufficiency to safety. China’s new national food safety law will impose significant new safety requirements on producers, distributors, retailers and even online marketplaces. The law will increase fines for violations and require the establishment of a food tracking system.
At the same time, China’s market is among the most fiercely competitive in the world. Margins are squeezed at every stage of production and distribution, and the environment is still dominated by companies and consumers who focus on price. Making investments to build trust while competing in China's current market is one of the biggest challenges faced by food industry executives anywhere in the world.
Growing incomes and changes in middle class preferences will drive drastic changes in China's food sector, and the names of today’s market leaders may be forgotten ten years from now. Who will capture market share by earning consumers’ trust? Who will lead the next wave of industry consolidation? Who will win the confidence of investors?
Companies that invest in building trust today will be the champions of tomorrow. To accomplish this, they must foster a food safety culture and ensure visibility and control in complex production and supply chains. Those who fail to do this will put the health of consumers at risk and destroy their brand. Those who succeed will improve both quality and efficiency, earn the trust of loyal customers, and grow their bottom line.