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Retail

China Becomes World’s Largest Food Market

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By Douglas A. McIntyre Published
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China has become the world’s largest food market, passing the U.S. in yet another measure, according to UK research firm IGD. The group offered three reasons for this: rapid economic growth, an increase in population and food price inflation. One missing reason is the rise of the Chinese middle class, as well as the fact that most of these people have moved from rural areas to cities.

The numbers from the report are impressive:

The Chinese grocery sector was worth £607bn at the end of 2011, while the US market came in at £572bn over the same period — the second largest in the world. By 2015, the Chinese market is forecast to be worth £918bn compared to a US value of £675bn.

Inflation is a reasonable measure for sales growth of companies that market groceries in China. It is not a reasonable measure for Chinese food consumption compared to that of other nations. China’s food price inflation has been in the double digits in most recent months. By contrast, the number has been lower than 2% in the United States. Because of this, actual food consumption in China may be rising hardly at all.

Not many years ago, most of China’s population was rural. Grocery sales do not capture the food consumption of farm dwellers or the inflation level of prices they must pay for food. That cuts two ways when consumption in China is measured. The urban population has grown quickly and will continue to. Grocery numbers include most of these people. On the other hand, the total count is low because hundreds of millions of Chinese have not left farms. Taken together, rural consumption and grocery sales in cities are well above the IGD figures. China’s food consumption is therefore much larger than it is in the U.S.

Despite a slowing in Chinese manufacturing and PMI activity, the cities of the People’s Republic will continue to grow. Grocery sales — already a good business — will swell, perhaps more rapidly than IGD believes because of the rise of China’s large urban middle class.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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