The Faux Food Phenomenon: European imports saving Chinese Consumerism
Let’s take a trip back to the year 2007. The iPhone was just announced in January, Tesla is still developing into the automobile giant it is today, and there’s an epidemic taking place in China: fake food fraud. During a 6-month period in 2007, more than 60,000 fake food cases were reported, with over 15,500 tons of substandard food being confiscated and 180 food manufacturers identified as producing sub-standard food or using inedible ingredients in food manufacturing. The following year in 2008, the Sanlu melamine poisoning incident in infant formula causes 6 infant deaths, 54,000 hospitalizations and 300,000 cases of illnesses. This economically highlighted the inadequacy of safety food standards in China and politically crippled the reputation of China’s export market.
Now let’s fast forward to the current day predicament. This epidemic from over a decade ago continues to influence consumers actions which has had a direct impact on the Chinese market. Food fraud is still a hazard concern in China and middle-class and upper-middle class consumers are constantly worried about food produced in mainland China more than anywhere else. More and more Chinese people are climbing up the rungs into the middle-class and upper-middle class (middle class median income $24,000 - $36,000, upper-middle class $36,000 - $60,000 per year mean salary). This growing number is forecasted to double to 100 million by 2020 and will account for more than 30% of households compared to the 17% in 2016 and 7% in 2010 according to BCG data. This affluence is spreading across China and Chinese citizens under the age of 35 and tech savvy make up most of the middle class - which means more online shopping and more spending. Food safety incidents like this can transform an entire industry for the sake of survivability in the world market – no food safety improvements equals no business from middle class and upper-class consumers, which make up the majority of the consumer market. Whenever public health is taken into consideration, consumers take risks to themselves very seriously and will adjust attitude and behavioral tendencies to avoid hazardous food.
Research was conducted by the European Union that examined the relationship of Chinese consumers and food fraud [www.doi.org]. In a panel of 7 focus groups compromised of 42 middle-class Chinese consumers, several themes emerged after conducting interviews on Chinese citizens in 3 major cities (Beijing, Guangzhou, Chengdu) about specific products (Infant milk formula, olive oil, and scotch whisky). The main goal of the research was to establish a better understanding of how consumers react and subsequently act when buying food and the following themes were consistent among all three cities: 1) Food Fraud as a food hazard concern, 2) Perceived risk, 3) Structural Trust, 4) Authenticity cues, and 5) Perceived benefits of demonstrating authenticity.
What resulted from the research revealed the following: the cognitive link between historical scandals of food fraud (fake food, sub-standard food, most notable melamine milk scandal) and the direct association of fraudulent practices in the food chain associated with potential risk to consumer health changed consumers entirely in China. People in China simply did not trust and continue to not trust in food that is domestically manufactured; imported European goods are seen as more safe and reliable due to more strict food safety laws. A lack of trust between producers, foodchain stakeholders and mechanisms governing food safety in China was observed across all focus groups. However even if it is from a more trusted European source, Chinese consumers demand more information about origin, traceability, and authenticity of products.
What emerged as a result is what I've coined the “cautious Chinese consumer.” In absence of this structural trust, food fraud consumers developed “’risk-relieving’” strategies as a direct consequence of these rampant cases of inauthentic or fraudulent food in the Chinese mainland market.” In the absence of trust in the domestic market, pre- and post-purchase consumption strategies were formed out of necessity to ensure the food being purchased is as safe as possible. Chinese consumers actively seek out information before purchasing information, carefully select acquisition sources (including traveling to neighboring states and informal import networks through friends and family living abroad, use of tangible iconic and indexical cues (PDO, country of origin labels, ISO standards, Hazard Free, Green Food) provided by manufacturers as a means of communicating the authenticity of products and an array of domestically situated practices. Authenticity cues affected all the consumers in the three Chinese cities tested, and consumers all relied upon indexical and iconic cues of authenticity. I've found that generally the further inland a city is in China, the less trusting they are of these cues, which is a direct association with the distance products must travel to reach the consumer. For instance, in Beijing and Chengdu people are less trusting of these authenticity cues because they’re easily falsifiable, while Guangzhou’s geographic location allows for the ease of travel to neighboring states for imported goods which directly correlates to the greater confidence in these authenticity cues. In addition to this, Chinese consumers consult their social networks and as formative sources of information regarding the authenticity of products, retailers, and foods.
Meanwhile this distrust was only shown inside of mainland China and did not extend its reach to foreign markets. These same focus groups unanimously showed that they believe imported products are associated with food safety and integrity. This research and information can be used to predict the attitude and behavioral reactions Chinese consumers will have when entering the Chinese mainland market for any imported goods, especially from Europe and North America. Products from Europe and North America are required to go through a multi-step process which requires registration with the Aministration of Quality Spervision, Inspection and Quarantine department, obtaining an Automatic Import License (dairy, milk) and Agricultural Products Import Tariff Quotas Certificate (wheat, corn, rice, sugar). After this, products undergo a CIQ food sanitary inspection and customs clearance screening process which ensures only safe food is delivered within China.
Whenever European food manufacturers operate in the Chinese market, scrutiny and consideration should be paid to these additional mechanisms developed by consumers to support this way of identifying and confirming authenticity, including which country, the exact country of origin,and how the products are sourced. Transparency and trust is what Chinese consumers want and is of vital importance in the domestic food supply chain.
Read more about fake products and the way blockchain can help here.