Automation in
China’s Food Industry
The manufacturing environment of China has been long known as labor intensive
and is shifting quickly to capital intensive. According to the International Federation
of Robotics (IFR), factories tripled the number of ordered machines in 2012 and is
expected to triple again in 2017. However, in contrast to the increasing automation,
China’s food industry is still heavily dependent on human labor. Western companies
are encountering difficulties in marketing their products in China. What difficulties are companies faced with, why do they arise and how can Western companies
overcome them?
Article by
Valérie Hoeks
Valérie studied Sinology and
co-founded China Inroads. She
has been active in China since
2000. Valérie creates a bridge
between customer requirements and the implementation
of their plans in China.
China Inroads supports innovative companies in their
expansion to the Chinese
market. “China belongs to the
Chinese.” This philosophy is
the guidance for how we match
companies with the right parties and markets in China, to
create a successful and effective venture.
The Development of Automation
China’s modernization, higher consumer standards, a growing labor shortage,
wages going up and government focus on food safety are some of the most notable
factors which pushed China to increasingly develop their automation process.
Erik de Wild, managing director of Concept Engineers (CE), an international company which develops innovative tailor-made optical sorting machines and active
on the Chinese market since 2005, also addresses these factors and emphasizes
the importance of food safety: ‘The amount of Chinese manual laborers is declining while wages are rising at the same time. Not only are machines becoming more
efficient, they are also cheaper in the long term. Moreover machines improve food
safety, since they are more hygienic than hands.’
These factors are also addressed by Oscar Salet, of the Netherlands Agro, Food and
Technology Centre (NAFTC) in China: ‘These developments are taking big steps, all
parts of the industry chain are under high pressure to modernize. This pressure is
caused by the increased demand for quality products from the Chinese consumers
and the government, but also because of demographic developments such as the
aging of population, urbanization and the increase of wealth.’
“Chinese companies
do not feel the need for
adjustments, still with
the government pushing
towards better food
quality, they will have to.”
China’s Food Industry is Still Heavily Dependent
on Manual Labor
Research by China Inroads has shown that the
food industry is still very reliant on physical
work and Chinese companies are hesitant to buy
machines to replace them. Main reason for this
is a different way of thinking when it comes to production, the Chinese don’t see the necessity of change.
De Wild explains: ‘China is a socialist market economy and therefore the usage of energy is not considered
as cost, let alone environmental pollution. Chinese companies do not feel the need for adjustments, still
with the government pushing towards better food quality, they will have to.’ De Wild compares the attitude
of CE’s Chinese clients with the Thai: ‘Our clients from Thailand have more private owned companies and
therefore see the advantages machines have for more efficient and low-cost production. Our Chinese clients however still need more encouragement, because they are partly funded by the government.’ Energy
cost for example, is paid by the government, therefore factories have little incentive to modernize equipment for higher production efficiency.
Salet explains how segmentation forms another obstacle for automation in the food industry: ‘There are
only a few big Chinese companies with strong brands such as Wahaha, Yili, Yurun, Jiaduobao and Unipresident. These companies use modern technologies for their food processing. Medium-sized companies with
less well-known brand names have automated processes to a certain degree, using locally manufactured
machines. Investing in the highest technologies is simply too expensive for them.’
“The market is full of opportunities and there is lots of
room for Western companies here.”
Opportunities for Western Companies
Even though investment limitations arise in this industry, there are opportunities for Western companies.
The Chinese government is actively promoting the use of new technologies because of new food safety
policies. Machines could be the solution to better food hygiene.
De Wild explains: ‘Since there have been quite some food scandals in China these past years, the CCP
has set food quality as the highest priority. Because it is difficult to guarantee consistent quality in case
of manual labor, investing in machinery will be much more interesting for Chinese companies and will
eventually lead to higher efficiency. In practice, it is almost impossible to continue with manual labor since
the risks of contamination are very high. So I believe the market is full of opportunities and there is lots of
room for Western companies here.’ Salet agrees and mentions the opportunities are also due to the growing awareness among Chinese food companies that their products need to be of top quality. ‘The Chinese
consumer is becoming more critical towards food quality.’
De Wild sees a bright future: ‘Automation in the Chinese food industry is inevitable. Technologies like CE’s are not present in China yet. In the long run, using machines instead of hand labor will decrease production cost.’ Salet shares de Wilds view: ‘This sector will be dominated by
large companies that, because of automation of processes, will increase their production scale.
They are the ones that will survive.’
A Strong Foothold on the Food Industry Market
It may be clear that for Western companies especially the large Chinese factories are interesting potential clients. De Wild encourages companies to be open-minded when entering China.
‘You should be open towards your potential client or partner. It is impossible to protect everything, if that is your biggest fear, you will not get very far in China.’
De Wild also stresses the importance of establishing a local Chinese company because of cultural differences. ‘The Chinese will never say they do not understand, nor will they say ‘no’. They
will always say ‘yes’. It is necessary to have your local foothold in China, to have people who
understand both the Western and the Chinese way of thinking.’
How China Inroads Can Increase Your Chances of Success in China
From our offices in Amsterdam, Beijing and Shanghai, China Inroads supports innovative companies in their expansion to the Chinese market. We represent your company in China, creating
a strong foothold on the Chinese market. We assist you in setting up a sound strategy and are
– from start to finish – deeply involved in your China activities. Our services consist of a detailed
market research; searching long-term reliable business partners; maintaining relations with
local partners and clients; and providing the necessary follow-up on daily activities. China Inroads is locally present at all times, providing you with the needed insights to successfully build
your business.
You are welcome to visit us for a consultation at one of our offices.
China Inroads supports innovative companies in their expansion to the Chinese market. “China belongs to the Chinese.” This philosophy is the
guidance for how we match companies with the right parties and markets in China, to create a successful and effective venture. We believe that
companies doing business with Chinese, making use of local resources, will be the most successful and effective. Based in Amsterdam, Beijing and
Shanghai, we have our local Chinese team ready for you.
We think proactively and offer (un)solicited advice on various issues that companies encounter before, during and after entry to the Chinese market.
China Inroads believes in a local, long-term relationship. We like to act as your important local strategic partner. You are welcome to visit us for a
free consultation at one of our offices. We are of course happy to visit your office as well.