In recent years, China's catering industry has developed rapidly. With people's consumption upgrading and changes in dietary preferences, beef products have become increasingly popular. China's meat consumption pattern has witnessed Chinese consumers replacing pork with beef in the past few years. The per capita beef consumption has grown the fastest among other meat categories (such as common pork and chicken), accounting for an increasingly high proportion.
Influenced by the new generation of healthy living concepts, consumers are beginning to pursue healthier lifestyles and diets. As people's enthusiasm for high-protein, low-fat foods continues to rise, the Chinese beef consumption market has great potential for future growth.
Introduction to China's Meat Consumption Market
In recent years, with the improvement of China's per capita income level and urbanization rate, meat consumption has been continuously growing. Despite the certain impact of the COVID-19 pandemic and African swine fever on the market, there are no signs that the demand from China's consumer side for overall meat has slowed down. With the increase in disposable income, it is expected that the momentum of meat consumption will continue.
According to a study by Frost & Sullivan, China's total beef consumption in 2020 ranked second in the world, closely followed by the EU, Brazil, and India, accounting for 14.9% of the total beef consumption. However, in terms of per capita beef consumption, China is still far behind developed countries.
Influenced by the new generation of healthy living concepts, consumers have begun to pay more attention to dietary health. The share of high-protein and low-fat meats such as beef in Chinese cuisine has significantly increased. Under the backdrop of healthy fundamentals and the upgrading of residents' consumption, it is predicted that China's per capita beef consumption will likely grow in the future.
Analysis of supply and demand relationship
(1) China's beef production
In terms of supply, China's beef production steadily increased from 6.2 million tons in 2016 to 7 million tons in 2021, with a compound annual growth rate of 2.5%. Driven by government policies and strong demand from downstream consumers, leading beef cattle breeding companies have significantly expanded their scale. It is expected that by 2026, China's beef production will increase to 8.3 million tons, with a compound annual growth rate of 3.5% compared to 2021.
In recent years, the demand for beef consumption in China's downstream market has exceeded supply. Currently, the beef production gap continues to widen, with an estimated shortfall of about 3.5 million tons by 2026. However, the annual growth rate gap between supply and demand during the forecast period is gradually narrowing.
Source: Compiled by Frost & Sullivan
(2) China's beef demand
China's per capita beef consumption increased by a compound annual rate of 7.5% from 2016 to 2021, reaching 6.6 kilograms in 2021. Currently, China's per capita beef consumption mainly relies on domestic beef, accounting for 74.2% of the total per capita beef consumption in 2021. It is expected that by 2025, per capita beef consumption will reach 8.6 kilograms, with a compound annual growth rate of 6.4%.
The main reasons for the rapid growth in beef consumption include the upgrading and driving force of consumption habits, as well as the downstream market's demand for healthy and high-protein meats. Over the past few years, beef retail sales have increased significantly from 443.4 billion yuan in 2016 to 845.1 billion yuan in 2021, with a compound annual growth rate of 13.8%. It is estimated that by 2026, beef retail sales will reach 1.1928 trillion yuan, with a compound annual growth rate of 7.1% from 2021 to 2026. Chinese consumers' willingness to purchase healthy proteins is increasing day by day, continuously expanding the retail value of beef products.
Source: Compiled by Frost & Sullivan
Cattle breeding industry industrial chain
The upstream of the beef cattle breeding industry chain includes beef cattle raw material suppliers, feed suppliers, and health service providers. Through beef cattle breeding suppliers, beef cattle breeding companies and individual farmers are provided to beef cattle breeders. During these periods, beef cattle are usually fattened intensively before slaughter. The midstream mainly includes slaughter enterprises and beef product processing enterprises. In the beef cattle industry, the main businesses of industry peers involve fattening, slaughtering, processing, sales, and distribution. Beef cattle breeding companies mainly obtain income from processing beef products. The downstream of the industry is the end consumer and the catering industry.
Industry-related policies
The Ministry of Agriculture and Rural Affairs issued the 'Five-Year Action Plan for Promoting the Production and Development of Beef, Mutton and Sheep' in April 2021. According to the plan, efforts should be made to expand the space for increasing beef production, increase beef supply through multiple channels, maintain a self-sufficiency rate of beef at around 85% by 2025, stabilize beef output at about 6.8 million tons, and reach a scale-up breeding ratio of beef cattle of 30%.
Benefiting from government support policies, strong demand from downstream consumers, and the efforts of leading beef cattle breeding enterprises to expand their scale, it is expected that per capita beef consumption in China will continue to increase in the future.
Source: Official website of the Ministry of Agriculture and Rural Affairs of China
The impact of the COVID-19 pandemic on prices
The average wholesale price of beef cattle in China is mainly driven by rigid demand for beef and rising local beef production costs. From 2016 to 2018, the average wholesale prices of beef cattle and beef in China steadily increased. Due to the continuous increase in consumer demand for beef in China, coupled with a slowdown in beef production growth relative to consumption, wholesale prices of beef cattle and beef in China have risen significantly since 2019.
Affected by the COVID-19 pandemic, the average wholesale prices of beef cattle and beef in China have temporarily declined due to import restrictions and delivery delays. Thanks to the government's effective control of the epidemic, prices have quickly recovered and are on the positive side. Due to the continuous rise in upstream feed prices, as well as the increasing demand for various beef products downstream, consumers' health awareness has improved, and there is a rigid demand for healthy proteins such as beef. It is expected that the average prices of beef cattle and beef will steadily rise in the future.
Industry drivers
1) Increase in disposable income and per capita beef consumption
In recent years, with the continuous growth of China's economic level and urbanization rate, the average income of Chinese families has been steadily increasing. From 2016 to 2021, the compound annual growth rate of per capita disposable income was 8.1%. The increase in per capita disposable income has had a positive impact on the purchasing power of Chinese people, which is conducive to the growth of beef consumption in China. At the same time, driven by the basic health needs and the upgrading of consumer spending, the demand for beef products has been steadily growing. In recent years, major players have been committed to developing various beef products with different flavors to meet the diversity of consumer preferences among different groups, which is expected to drive the growth of beef consumption.
2) Changes in eating habits drive changes in the beef product market
Driven by the changing dietary habits of the new generation of consumers, the consumer group has put forward higher demands for health and food taste. The Z generation is gradually becoming the mainstream of consumption, possessing a healthier lifestyle and dietary habits than the traditional generation. This has made beef, a healthy food rich in high-quality protein, vitamins, and minerals, perfectly cater to their preferences. In the future, the new generation of consumers will inject new momentum into the beef market.
(3) Restaurants and brands focusing on beef have emerged
In recent years, the catering industry in China has developed rapidly, including steak houses, barbecue restaurants, and hot pot restaurants (such as Chaoshan beef hot pot). Restaurants are increasingly promoting beef as one of their main ingredients. Under the influence of this market environment, it will further stimulate the market growth of restaurants and brands that focus on beef.
Future trends of the industry
1) The product categories of beef cattle products are more diversified
With the intensification of market competition and consumption upgrading, as well as the transformation of consumers' concepts, there has been an increasing emergence of high-quality or premium beef products, such as high-nutrition beef and organic beef, to meet consumers' differentiated needs.
In the future, with the development of breeding technology, continuous improvement in product quality, and in-depth education by enterprises on marketing to consumers, these diverse beef products will be even more popular among consumers.
2) Enterprises above designated size are gradually promoting an increase in market concentration
At the current stage, in terms of annual beef cattle production, farms with less than 10 cattle account for more than 50%, while those with over 100 cattle account for less than 20%. This indicates that the beef cattle breeding market in China is highly fragmented. With the promotion of relevant policies and the subsequent impact of rising labor costs, the economic gap and output efficiency between individual farmers and large beef cattle breeding enterprises will gradually widen in the future.
In the future, enterprises above designated size are expected to rapidly and continuously expand their market share at relatively low costs and with advanced technology, thus becoming the industry's leaders “bulls”.
3) Higher food safety ensures high-quality beef products
Food safety and quality are important factors for Chinese consumers in determining the quality of food. Beef, as a high-quality source of protein, can provide an ideal dietary experience. The demand for beef is rapidly growing in the country, and its safety and quality are crucial factors for consumers in deciding whether to purchase. Therefore, the development and application of food safety technology will promote the emergence of safer products in the beef industry and enable enterprises to gain a good reputation and develop sustainably.
In the future, upstream breeding enterprises will actively adopt advanced technologies and more effective safety management methods to promote food safety standards. For example, using traceable ear tags allows consumers to understand the entire life cycle of beef cattle, better ensuring that the beef they purchase has a certain quality.
