China consumer goods: Left on the shelf (FT, 5 Apr 2011)

Some interesting snippets from the above article, see here for full article.

“A cursory glance around any supermarket is enough to show China is shaping up to be the world’s biggest grocery market within just three years. The choice, even by western standards, is staggering. At a hangar-proportioned Carrefour outlet in suburban Shanghai, there are enough soft drink varieties to allow a customer to try something new every day for a year – and still not have exhausted the different herbal teas, flavoured milks, fruit and vegetable concoctions or slimming beverages on the shelves.

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PepsiCo’s Chinese farms supply roughly 40 per cent of the potatoes used in its Lay’s crisps. Nestlé counts 25,000 dairy farmers among its suppliers – all of whom the Swiss group deals with directly – and Associated British Foods’ Chinese operations are so focused on procuring sugar beet that Tony Cheung, managing director for the British Sugar unit, says he regards the farmer as his top priority. Poaching of suppliers is rampant as farmers jump ship for a bigger cheque.

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“Third- and fourth-tier cities are twice as big as the first- and second-tier ones in terms of population, and the growth rate [is] twice as fast. So that’s where the big opportunity is,” says Nielsen’s Mr Barns. “China is going to add more megacities in the central and western parts of the country and urbanise 200m more people.”