The case of Chinese food retailers - Essay Example

Analyzing the Characteristics and Trend of the Chinese Food Sector The dairy products comprise milk powder, condensed milk, butter, cheese and casein. Moreover, there is liquid milk consists of long life milk, yogurt, pasteurized milk and ultra-high-temperature (UHT) (Chen, 2004). There are diverse types of milk that are traded in the Chinese market include like milk and sheep milk. The Chinese dairy industry has experience rapid development and has got various achievements lately. Some of the notable developments include construction of milk plants and enhanced technical equipments.

The achievements include increased output of milk products, consumer markets, production scale and product quality (Chen, 2004). According to Li (2002), the sales volumes of dairy product in the Chinese market have increased steadily since 1998 with an annual growth rate of 32.42 percent annually. The output from the dairy in 1998 was 11,800 million Yuan and this has risen from 47.8 billion Yuan in 2003. The dairy sector plays a great role in the national economy with the gross total output from the sector being at 50.

9 billion Yuan and this had increased from 42.2 percent in 2002 (Chen, 2004). The assets in the industry have being increasing continuously with the total assets in the industry raising from 43.7 billion Yuan in 2003 from a value of 14.9 billion Yuan five years previously. This translates to an annual mean growth rate of 24.54 percent. Dairy sector continues to be a major employer industry with a total number of 157761 employees in 2003 which was an increase of 36.05 percent from the number in 2002.

According to Cao (2002), the enterprises in the dairy industry showed a negative growth between 1999 and 2000, there have being relative growth (Tian, et al., 2004). The number of enterprises that experienced losses within the dairy industry in 2003 was 154 firms which accounted for 27.45 percent of total enterprises in the industry. This is a demonstration that dairy industry in China is at developing stage and new firms are getting into the industry. In addition, increased losses are an indicator that competition in the industry is getting stiff (Geng and Zi, 2002).

To reduce losses and to gain competitive advantage; enterprises are adopting mergers and acquisitions to make the scale of the enterprises larger. Compared to other industries in the food industry in China, the dairy industry is one of the fastest growing sectors. This is indicated by the fact that the total output from the industry compared to the total output in the food industry was 1.61 back in 1997 but this had doubled in 2001. Moreover, the number of employees in the dairy industry is increasing rapidly with the industry accounting for 2.

34 percent of the total employees in the food sector which was a 100 percent from the 1997 value (Tian et al., 2004). Chinese dairy enterprises are mainly of three kinds; that is, large nationwide brand, regional brands and local brands. National enterprises devote their efforts in creating national brands and compete with regional brands. The enterprises are either domestically owned or foreign based investments. The distribution of dairy products is divided into various sectors although this is determined by the source of milk.

However, it generally starts with the milk stations which are located in streets in residential areas and households can purchase milk (Wu, 2004). The stations enhance the ability of consumers to assess the