Singapore imports around 90 percent of the foodstuffs required to feed its population of 5.3 million inhabitants and 15 million annual visitors, and lacks productive land in any significant quantity to be able to meet its needs in this respect, now or in the future. This makes it atypical in the ASEAN context (with the exception of Brunei).
The notion of food “sustainability” in Singapore is inextricably linked to reliability of supply, safety and quality, with affordability also a factor. Aspects such as distance from market and environmentally-friendly production (in New Zealand’s case, trading on the “clean, green” image) are material to the extent that they support the primary attributes of reliability. Assumed brand integrity associated with Western products, including those from New Zealand and Australia, may be enough for some Singaporean consumers to draw positive conclusions about quality without further considering other factors such as production methods and sustainability.
Notions and understanding of sustainability in its broader sense are roughly five years behind those of European consumers, though maturing in the same direction. No Western retailers other than Marks & Spencer (who have a very small presence in Singapore), or restaurants which feature niche products on their menus, have a high profile in promoting sustainability in Singapore although there are smaller-scale initiatives from businesses such as Starbucks (coffee) and Unilever (tea) who consider a fair trade dimension. The two main local supermarket chains, FairPrice and Cold Storage, encourage “green” behaviour from their customers through recycling shopping bags.
There are clear opportunities in Singapore for agriculture-based exporting economies with high production and safety standards such as New Zealand, in terms of raw product but also research and technology. However Singapore’s open market philosophy and reluctance to rely on unique sources of food supply create significant competition in the marketplace. New Zealand has tempered this reality by engaging in the development of free trade architecture with Singapore, starting with the bilateral CEP and now encompassing the plurilateral FTAs P4 and AANZFTA. Ongoing TPP and RCEP negotiations have the potential to deliver further benefits to New Zealand exporters. Meanwhile Singapore’s own network of FTAs has reached 20 (including with the US, Japan, Korea, Australia, and an agreement with the EU initialled), indicative of its desire to maintain rules-based ties to numerous potential sources of supply.
The Agri-Food and Veterinary Authority (AVA) has the lead responsibility for food sustainability and related issues in Singapore, and enjoys a very high degree of public confidence in its standards. AVA’s remit, which includes “ensuring a resilient supply of safe food”, also covers helping the small number of local farms to optimise their production by assisting them to employ intensive farming systems and safe food production practices. AVA's website also states that its food diversification strategy “gives [Singapore] increased flexibility and adaptability when supply from a particular source falls short. Coupled with Singapore's open market, source diversification has helped to maintain stability in the prices of our food”.
The Singapore Government supports initiatives designed to help local suppliers meet the following self-sufficiency production targets:
- 10 percent of green-leaf vegetables (usually grown in low cost, sustainably powered high-rise hydroponic structures, with simple technology to maintain a degree of price competitiveness with imported greens)
- 15 percent of fish, from farms in coastal waters
- 30 percent of eggs
AVA also administers the Food Fund which is designed “to strengthen our strategies of food source diversification and local farming to ensure a resilient supply of food for Singapore” and applies to fish farms and cultivation of leafy vegetables only. This incentive scheme supports three broad categories: Farm Capability Upgrading, Food Diversification and Research & Development (R&D). The Ministry of National Development (MND) plays a support role in the achievement of these objectives through its remit to manage national land use, planning and development.
Both AVA and MND were involved in organizing the Urban Sustainability Research & Development Congress in 2011 which carried a “Food Track”, abstracts of which can be found here. This provides a useful summary of some of Singapore’s main preoccupations on food sustainability and some of the proposals which aim to address these.
Food is central to Singaporean culture and social life with consumers very open to international trends, particularly where they have the discretionary income to try new products or food and beverage experiences. Traditional foods remain important too, although outlets are under siege from high rentals and changing aspirations which inhibit the continuation of family businesses. For raw ingredients and manufactured foods, one industry contact noted that “factory-made” (with connotations of production line surveillance, traceability and pristine “bling” packaging) was still more appealing than the “artisan/organic” products which have caught so much middle-class attention in Western markets in recent years. It might take as long as ten years for Singapore to catch up to where New Zealand is now in regard to the appeal of organic products. There is one “farmer’s market” operating in Singapore, plus the Kranji Countryside Association of farmers which promotes “local agriculture and food production, eco-tourism, education, recreation and conservation”.
Singaporean consumers are increasingly sophisticated and discerning, expecting high standards of food safety and quality in their purchases. However the market is already very mature, evolved and saturated with international brands, many of which have well-established followings.
Around 50 percent of New Zealand’s current exports to Singapore are items for the food service industry as well as retail distribution, manufacturing and trans-shipment. New Zealand products such as Anchor and Zespri enjoy brand recognition with Singaporean consumers. Other brands are starting to register as they become established in-market. New Zealand businesses generally feel comfortable operating in Singapore, but so too do our competitors. In terms of food safety, Singapore is a bellwether market for the region in its response to food safety incidents (led by AVA through media engagement including its website and Facebook page) closely observed by neighbouring countries.
Korean consumers’ focus on sustainability is not strong at present and it will likely remain that way for the next decade. The previous President’s promise of Korea’s economic future hinging on “green growth” has already been replaced by the new Administration’s “creative economy” catch-cry. But when Korean consumers link the clean environment in which animals are raised or produce grown with their health and wellness, then it has significant influence on their purchasing decision. This mind-set gives New Zealand-branded produce an edge in the Korean market. Outlined below are some specific developments related to sustainability that may be of interest to the food and beverage exporters to Korea.
Eco-labelling/low carbon certification
In 2009, eco-labelling system came into effect for over 100 products. Under the system, manufacturers can gain accreditation to indicate on its label the amount of carbon dioxide produced by the product. The participation by the food industry was significant, accounting for almost 50 percent of the total accreditations. The food products participating eco-labelling include infant formula, cocoa cola, tofu, potato chips and soy bean milk.In 2012, the Korean government started certifying agricultural, livestock products for low carbon foot prints. According to the government, Korea was the first country in the world to start the low carbon certification scheme. By the end of 2013, 34 Korean producers were certified. The government plans to support the low carbon certified farmers with sales channels and marketing. As for processed products, Lotte Childing Beverage has recently had its drinks certified as low carbon products, the first food/beverage company to do so. In making packaging more environment-friendly, Lotte has started using on their PET bottles caps that are shorter and lighter by 30-40 percent than regular caps.
At the 2nd Seoul International Food & Beverage Forum, the Agriculture Minister spoke of the government’s plan to boost the consumption of local and slow foods by implementing better communications with consumers. A Korea Herald article reported on growing popularity of local foods.
Organic food represents 10 percent of Korea’s total agricultural products market and is expected to double from its current value to reach US$6 billion by 2020. The processed organic products market has been growing by around 25 percent year-on-year and is attracting many of Korea’s major manufacturers. Korea’s health and wellness trends, sensitivity to food safety issues, and rising income levels are key drivers for this expected growth.
Some consumers are willing to pay premium prices for health and wellness products such as organic food and beverages. This is particularly true when they are purchasing it for children or infants. For example, mothers in Korea have created a strong demand for premium organic baby food. Despite the stagnation of the overall Korean dairy market, premium milk products (which consist of 7 percent of the total milk market) have been growing at a rate of 25 percent each year with organic milk products expanding at a rate of 65 percent. Korea‘s organic dairy market is expected to reach approximately US$420 million by 2017.
From 1 January 2014, all raw and processed products (except honey and a list of 67 ingredients) labeled as organic in the Korean market have to be certified according to a Korean standard as outlined in the Act on the Management and Support for the Promotion of Eco-friendly Agriculture/Fisheries and Organic Foods. Just 13 certification bodies have been accredited by Korea’s Ministry of Agriculture, Food and Rural Affairs (MAFRA) to certify both domestic and imported products.
Given the financial and administrative cost involved in this process, at the request of the Organic Exporters Association of New Zealand the Ministry for Primary Industries has lodged a request with the Korean authorities to negotiate an equivalence agreement which would allow New Zealand’s organic requirements to be accepted in the Korean market.
Consumer focus on sustainability is of growing importance to Indian consumers, who are becoming increasingly aware of food safety issues and their health implications (including among the estimated 40 percent of Indians who are vegetarian). The government’s initiatives to strengthen the food and beverage (F&B) sector are seen as export-centric and have not weakened the demand for high-quality imports by the growing number of affluent Indians. A shift in consumer preference and consumption trends towards organics, fresh fruits, quality cheese and hygienic, safe meat products offer significant opportunity for New Zealand F&B exporters. The Government’s regulatory control of the domestic food industry suffers from poor implementation and monitoring, and importers similarly struggle with poor infrastructure, regulatory barriers and stretched officials.
India is an unusual food and beverage market in that:
- Levels of vegetarianism are high (around 40 percent of Indians claim never to eat meat);
- Meat consumption even amongst non-vegetarians is low (the WHO estimates that Indians eat less meat on average than any other country);
- The eating of meat is itself a political issue (the slaughter of cows, considered holy by Hindus, is prohibited in most Indian states).
During the ongoing current Indian election campaign, BJP leader Narendra Modi, who is the clear favourite to become India’s next Prime Minister, has criticised the current Indian Government for presiding over a “Pink Revolution” by allowing India to become one of the largest exporters of meat in the world. This led to Modi’s critics to claim that BJP was being hypocritical because many of its leaders are themselves non-vegetarians.
As a result of the political and religious sensitivity around meat-eating (and especially beef-eating), formal government rules around food labelling are stricter on the issue of vegetarianism than in most other countries. All food products must be labelled with either a green dot (meaning vegetarian) or a brown dot (meaning non-vegetarian). The Hindu definition of vegetarianism – which includes a prohibition on consumption of egg products – is applied.
In India, widespread use of pesticides, toxic colours, ripening and storage agents in food and beverage production has led to a growing concern from consumers about health implications and environmental impact. Consumer awareness has seen a growing demand for cleaner, safer, green food. This is especially visible among wealthier Indians whose diets have become more diverse due to greater disposable incomes. The awareness may be attributed to a rising middle class, higher literacy levels, clearer food packaging, modernising retail (supermarkets), media campaigns, advertisements on nutrition and the work of civil society.
Many NGOs and advocacy groups such as Centre for Science and Environment and Toxics Link have become credible voices in areas of health and nutrition, food safety and sustainability issues. This in turn is also pushing Indian regulatory agencies and businesses to integrate sustainability into their operations and work towards better food safety standards.
Examples of consumer awareness affecting change include the Delhi government’s decision in 2012 to ban the use of plastic bags in Delhi after a prolonged demand by environmental groups. Similarly, Coca-Cola, after being mired in controversy over its bottling operation in Southern India for causing environmental damage and severe depletion of underground water, adopted sustainability as the basis of its business activities. The company’s ongoing efforts to replenish more ground water than it uses has gone some way to restoring consumer confidence in Coca-Cola’s business operations in India.
Nevertheless, informal/traditional supply networks continue to carry everything from grains to milk and control more than half of the market share. While exposure of urban populations to various cultures across the world is increasing demand for foreign products and seeing a shift to a supermarket culture, the bulk of the population still purchases their food products from informal food chains.
Food safety in India is regulated by the Food Safety and Standards Act 2006. The Indian Ministry of Health and Family Welfare is responsible for its implementation through the Food Safety and Standards Authority of India (FSSAI). FSSAI has gone some way to streamlining regulatory requirements in India as it replaces the previous multi-level control to a single line of command on food safety. This is not without its challenges, however, as FSSAI continues to struggle with resourcing and implementation. FSSAI has done substantial work on food safety and standards regulations and is working to upgrade its laboratories.
India’s lack of infrastructure and efficient supply chains pose significant challenges in terms of quality of produce, wastage and productivity. Supply chains are still fragmented and marked by the presence of multiple intermediaries. Cold storage facilities are a particular challenge. In January 2014, FSSAI released a report revealing that grains, fruits and vegetables go through chemical applications (calcium carbide) in the absence of adequate cold storage facilities. The lack of cold storage affects both food safety and food quality.
India is taking steps to project a more positive image internationally with respect to food safety and production. There have been a number of broader efforts to harmonise domestic food safety standards and practices with international ones. This has included efforts by FSSAI to step up licensing and registration of food businesses under 2011 Regulations to ensure better domestic compliance. At March 2013, 600,000 registrations had been issued by the state governments under this scheme.
FSSAI has made multiple amendments to food safety, labelling and packaging regulations and is working to better harmonise domestic standards and regulations with international ones. However, implementation remains a significant challenge due to a shortage of inspectors: only 2000 food safety inspectors are employed nationwide to oversee domestic food compliance.
Challenges remain for exporters to India when, following food safety scares (such as the milk contamination in China, radioactive contamination fear from Japan and the eColi bacteria scare in Europe, and indeed botulism scares in New Zealand), FSSAI implements testing and sampling requirements which are onerous and inconsistent with internationally accepted best practice. This has resulted in instances of goods being sent back or re-exported.
In recent years, the Indian Government has undertaken several initiatives to develop product standards focused on quality and science. The Bureau of Indian Standards, which is responsible for product quality certification, consumer affairs and development of technical standards, has worked to harmonise national standards for packaging material with those of international standards. Another example of the government’s efforts to improve food safety standards include the National Productivity Council launching a nationwide, annual food safety and hygiene audit of dairy production plants.
The Ministry of Food Processing Industries (MoFPI) has formulated a “Vision 2015 Action Plan” that aims to treble the size of the food processing industry in India, raising the level of processing of perishables from 6 percent to 20 percent and enhancing India’s share in global food trade from 1.5 percent to 3 percent.
Foreign exporters and Indian importers of food and beverages face challenges as a result of a lack of adequate infrastructure at all relevant stages of food chain (including roads and cold storage) and an uncertain regulatory environment. If these are not improved, the regulatory environment risks further damaging exporter confidence. In recognition of this, Vision 2015 Action Plan looks to promote modern technology to achieve or maintain international quality standards and support and strengthen value-added exports that will enhance India's share in global trade. This includes improving cold storage technology and improving processing infrastructure so as to reduce wastage, enhance value add and increase shelf life.
Government policies have also been aimed at attracting investment into the food and beverage sector. Two examples include:
- Mega Food Parks (MPFs): The Indian Government plans to set up 30 parks to develop clusters that provide the necessary infrastructure for food processing industries (from farm to market) and meet environmental, safety and social standards. The first to be approved are in Assam, West Bengal, Tripura, Andhra Pradesh and Karnataka.
- Agri-Export Zones (AEZs): The government has established 60 fully equipped agri-export zones around India to promote food processing exports. The Agricultural and Processed Food Products Export Development Authority’s (APEDA) role is to bring all necessary services to AEZs including harvest operations, plant protection, processing, packaging, storage and related research and development
The government has also looked to improve consumer awareness of their rights and expectations as consumers. One of the most visible, effective consumer awareness campaigns has been the recent “Jago Grahak Jago (Wake up, consumer, wake up)” campaign which aims to highlight the rights of consumers and available mechanisms for redress.
There are also private sector examples of efforts to improve product quality and safety. For example, the Tea Board of India collaborated with the Rainforest Alliance to establish a common sustainability code at an investment of US$18 million, aimed to boost the quality and value of its output and enhance exports.
Implications for New Zealand exporters
Opportunities for New Zealand food and beverage exporters lie in the increasing demand for chemical free, healthy and safe food. Specific opportunities for New Zealand exporters may include the demand (in urban areas) for organics and green, sustainable foods and the greater importance being placed on quality, traceability and sustainability by regulatory agencies and consumers.
New Zealand food and beverage products are at an advantage with the ‘clean, green’ image our New Zealand brand carries, as well as our high-value, high-quality products. The challenge for New Zealand will be navigating the informal supply chains and the sometimes uncertain regulatory environment. Challenges for New Zealand companies will also include protecting our reputation for food safety and quality.
India’s food industry is currently worth around US$182 billion. The Economist Intelligence Unit and consumer market research firm Mintel, report that consumer spending in India will see growth of over 13 percent between 2013 and 2016, providing significant growth opportunities for Fast Moving Consumer Goods (FMCG) businesses. They also report that India ranks 18th in the world in business travel and will be among the top five this decade – leading to a greater demand for quality, high-end food.
Notwithstanding high rates of vegetarianism, meat eating in India is increasing. Between 2000 and 2010, the contribution of cereals and pulses in per capita food expenditure reduced from 40 percent to 28 percent while that of animal based products, fruits and vegetables rose from 36 to 42 percent. Despite this increasing demand for meat products, the majority of slaughter houses have poor facility standards which lack drainage, clean water and hygiene. Consumer awareness of these standards is driving wealthy consumers to high-end restaurants and five star hotels which often offer imported meat products (such as New Zealand lamb). The slow growth of the meat industry in India is due to cultural and religious sensitivities, poor product safety (due to poor standards of slaughterhouse facilities) and an unorganised sector (land parcels, which are often family-owned, being too small for large-scale, efficient production).
Technopak (an Indian management consulting firm) has estimated that the Indian gourmet food industry was worth US$1.3 billion, projecting it to grow annually at a rate of 20 percent. Technopak expects the industry to reach US$2.8 billion in value by 2015. They highlight that olive oil consumption, imported processed meats and sales of imported cheese in India are expected to grow.
The Indian organic food market is in its nascent stage but expected to grow at a fast rate, driven by environmental concerns and health implications. FMCG firm, Organic India, expects the industry to grow to a value of US$33 million by 2015. Over 4.5 million hectares of farm land are currently under organic cultivation. While consumers are more aware of the health benefits of organics and gluten-free foods, the relatively high prices of health-friendly organics are at this stage only affordable to wealthy Indians.
GM products have been a contentious issue in India. Recently, however, India’s Environment and Agriculture Ministries have approved scientific field trials of different varieties of GM crops.
There is significant media coverage of water contamination, pollution of water sources and water-borne diseases. A growing fear of water quality among consumers has led to an increase in demand for bottled water. The industry is expected to grow at 19 percent in the next three years on the back of urban demand. Servicing this growing demand is not without its challenges, however, and any small domestic operators do not have bottling facilities approved by BIS and have been known to produce water that is contaminated and treated with heavy metals. The government faces the ongoing issue of ensuring drinking water is safe to drink.
Urban consumers are finding new ways to adjust to lifestyle changes. Demand for ready-to-eats (ready-made meals) is rapidly rising with a growing middle class that have greater exposure to global markets and increasingly have both parents working.
Allergy labelling: The Taiwan Food and Drug Administration (TFDA) announced that from 1 July 2015, food producers have to highlight on the packaging if food products contain any of the six most common ingredients that trigger food allergy: shrimp, crabs, mango, peanuts, milk, and eggs. Products should be labelled on the packaging with wording clearly stating “This product contains X substance which might cause an allergic reaction”.
New GMP system: A new Good Manufacturing Practice (GMP) certification process has taken effect from 1 April to ensure the quality of finished food products.
Mandatory registry of food additive to begin in January: The voluntary registry system for companies dealing with food additives will become mandatory. Any companies manufacturing, producing, packaging, selling or using food additives will be required to register their names and the additives in a specialised government database beginning in January 2015. By 1 May 2014, food additive manufacturers, processers and importers must complete their registration with health authorities.
Taiwan has been through several food scares in recent years. Between 2011 to 2013 incidents included illegal use of plasticizer (clouding agent), tainted cooking oil, and modified starch (industrial level food additive), which heightened Taiwanese consumer concerns around food safety. Consumers and consumer protection groups have urged the authorities to raise the penalties for food safety violators. In June 2013 Taiwan amended the Food Sanitation Act and increased fines for food manufacturers which produced food products with illegal food additives or false labelling. In February 2014 the Ministry of Health and Welfare revised the Food Sanitation Law again and renamed it as the Food Safety and Health Management Law. The new act stipulates higher fines up to NT$50 million for food safety companies and producers and added prison terms of up to five years in some instances. A food safety protection fund is also included in the new act, to provide consumers with compensation and financial assistance to file lawsuits against food producers, and to provide human health assessments on specific foods where there are safety concerns. The funding will come from administrative fines levied on food manufacturers that violate the law.
There is still some public concern that food products are being regulated by several different government agencies. For example, different government agencies are responsible for the regulations of upstream and downstream food product manufacturing. The Ministry of Health regulates the final food products and labelling; the Council of Agriculture regulates the usage of pesticide and veterinary drugs; while the Industrial Development Bureau of the Ministry of Economic Affairs is responsible for the registration of industrial additives which some companies use as food-level additives. There have been strong calls from academics that the government should set up a one line management system covering products from farm to table, and also address the long term issue of the shortage of manpower in market surveillance and investigation. But this kind of large scale governmental system change does not appear feasible in near future. Currently a food safety reporting mechanism across different ministries which reports to the Executive Yuan (the Cabinet) is considered sufficient to incorporate information from different agencies tackling food safety concerns in the event of an issue arising.
After the incidents of plasticizer and modified starch usage in food products in 2011, the reputation of local Taiwan cuisine among international travellers was severely hit. Companies in Singapore, Indonesia, Malaysia, and the US requested importers to recall Taiwanese products. After the tainted cooking oil incident in 2013, wholesalers in China filed a lawsuit against Taiwanese manufacturers for NT$52.6 billion for operational losses and reputational damage. According to a survey by the government, 300,000 tourists from Singapore, Malaysia, Hong Kong and Macau cancelled their visits to Taiwan.
Consumer confidence in food safety
Consumers also lack confidence in government enforcement and certification. Taiwan has two food safety certification systems: GMP (Good Manufacturing Practice), and CAS (Certified Agriculture System). But recent food safety scares have involved products that had obtained food safety certification. It is doubtful that these food safety certification schemes are functioning effectively as guides to consumers regarding safe food products. A survey done by a thinktank last November indicated that more than 90 percent of consumers worry about food safety in Taiwan and more than 80 percent of Taiwanese lack confidence in the government’s handling of food safety information.
LOHAS (Lifestyle of Health and Sustainability) is a concept developed by American academic Paul Ray, who defined it as a new form of lifestyle in which a group of people take into consideration their health, the health of their families and environmental responsibilities when making consumption-related decisions. They attach importance to natural qualities and consider protection of the earth a priority. The concept has been introduced in Taiwan which now has its own variant. Taiwan’s Tourism Bureau promotes visiting Taiwan for a LOHAS life style experience including hot springs, Qigong, spas, massage and a relaxing tea experience. Taiwanese people view LOHAS as a trendy, modern way of healthy living. It connects to a healthier lifestyle including having a balanced diet, enough sleep, appropriate exercise and the right balance between work and leisure. Increasingly companies are developing and marketing products with reference to the LOHAS concept.
Health food demand
With the increase in health awareness and a trend towards consumer focus on balanced diet, nutrition supplements and health maintenance, the market for health food products has been increasing significantly in recent years. A recent survey conducted on Taiwanese aged from 12 to 70 showed that female, elderly and urban residents favour health food consumption.
According to the survey, 60 percent of the health food consumers are women and elderly consumers, aged 50 or more, accounts for 30 percent of health food consumption. Most consumers prefer health supplements in tablet form. But male consumers in particular prefer health food in liquid form. The analysis is suggested that there were potential to market health foods in liquid form. Over 60 percent of consumers take health food products at least daily.
The trend seen in some other countries towards sustainable food and beverage (F&B) consumption and production has only emerged to a limited extent in Vietnam to date. The key considerations in Vietnam with regard to sustainability are around food safety and health. However, alongside developments in customs and practices, and improvements in economic capacity, there have been recent signs that awareness of sustainability and environmental concerns is growing. But, for now, the emergence of a high level of awareness around food safety presents great opportunities for food producing economies that have a reputation for high quality and safe food products, like New Zealand.
Food safety is front and centre for consumers. In recent years, non-permitted food colours and preservatives, and unsafe levels of pesticide residues, heavy metals and other toxic chemicals have been found in many F&B products in Vietnam, including in vegetables, animal products, tomato sauce, noodles and food wrappings. As a result, food safety has become a point of focus not only for consumers, but also for suppliers, retailers and the Vietnamese government.
This has led to changes in consumer behaviours. These food safety scandals, along with increasing knowledge and availability of alternatives and increasing disposable incomes, have driven changes in Vietnamese consumer habits.
One example of changes in consumer behaviour is in changes in the way that Vietnamese consumers purchase food products. The use of wet markets, the traditional avenue for purchasing fresh produce, is declining, particularly amongst the middle-class in urban areas. While wet markets continue to dominate Viet Nam’s retail food market, the perspective that supermarkets have better standards of food hygiene/safety and supply chain integrity is contributing to an increasing use of supermarkets by Vietnamese consumers, despite higher overall food prices. According to the Get Green Vietnam Study Report, the rate of shopping at the supermarkets and commercial centers of Vietnam has increased to an average of 5.2 percent per year.
However, supermarkets in Vietnam have also been caught up in recent food safety scandals, calling into question for some their claims regarding food safety. This has left Vietnamese consumers in a real dilemma about where to turn and opening up a gap for producers and suppliers with a demonstrable reputation for sustainability and a verifiable supply chain.
Another example of a change in Vietnamese consumer behaviour as a result of increasing concerns over food safety is the preference for imported food products, particularly in respect of infant and health products. Imported products are preferred because their foreign certification is viewed as providing a higher level of assurance of safety, trustworthiness, and quality compared to domestically produced goods.
Changes in consumer behaviour reflect a desire to find supply chains where the authenticity as well as the quality of a product can be guaranteed. New Zealand products are generally well-trusted but the WPC incident in August 2013 was big news in Vietnam, on both traditional and social media, and lead to brand New Zealand’s credentials taking a big hit.
The development of consumer preference for imported products, together with short supply and lack of consumer confidence in labels (cases where products in supermarkets are labelled to be from other countries or Vietnam but have actually come from China are commonly seen) has led to an informal (and unregulated) trade in goods brought abroad and transported directly by hand as personal luggage. The intended aim is then onward sale rather than personal consumption. Examples of NZ F&B products popularly traded in these markets include GoodHealth Colostrum, nutritional products, baby formula milk, and Manuka honey. This is referred to as ‘carry on trade’ and is a recent enterprising response to the demand for high quality and safe international products.
As this is an informal and unregulated trade in goods, no one can assure the quality, sustainability, and origin of these products. For example, some experts have noted the difficulty recognising forged baby formula products. Those who trade in forged baby formula products might buy used milk containers, labelled to have originated from one country, and fill those containers with milk powder of a different origin.
Retailer and Government Response
Recognising changes in consumer behaviour and an increasing awareness of sustainability and food safety considerations, large domestic retailers and the Vietnamese government have intervened to provide reassurance to consumers that products do meet the standards demanded by them.
The Vietnamese government in particular is paying increasing attention to sustainability, and has developed the following strategies and plans to support sustainability throughout Vietnam:
- VietGap: The Ministry of Agriculture and Rural Development released the VietGap (Vietnamese Good Agricultural Practices) system in Jan 2008. It includes standards of good agricultural practices for food safety, environmental management, worker health, safety and welfare, and produce quality, and labelling for complying products. There are currently VietGap green labels for safe chicken, pork, vegetables and fruit.
- Strategic Orientation for Sustainable Development: In 2009 the Strategic Orientation for Sustainable Development was approved. It specified five priority areas of sustainable development, including sustainable production and consumption towards reduction of environmental impacts. Following that, the Vietnam Sustainable Development Strategy 2011 – 2020 was also developed, which includes gradual implementation of eco-labelling and green shopping, development of an eco-product market, and community-based initiatives for sustainable production and consumption.
- National Green Growth Strategy 2011-2020: In September 2012 the National Green Growth Strategy 2011-2020 with vision towards 2050 was approved. The strategy aims to promote green growth as a means to achieve a low carbon economy, and to enrich natural capital with the aim of making it a dominant trend in sustainable economic development. The strategy focuses on promoting eco-labels and other certification schemes. The National Action Plan for Green Growth for the 2014-2020 which implements the above Strategy was approved in 2014. The plan focuses on four areas: institutional building and local-level green growth plan, reduction of greenhouse gas emission and promotion of clean and recycled energies, green production, and green lifestyle and sustainable consumption.
Large retailers have also taken steps to promote sustainability and develop their brand around sustainable, safe and high quality food products. For example:
- Collaborative projects to develop sustainability: Metro Cash & Carry Vietnam, a large wholesale distributor, in collaboration with Ministry of Agriculture and Rural Development, Fresh Studio Company (Netherlands), Cargill Vietnam (US), and Vietnam Challenge Fund launched a project in 2011 to build a sustainable high-quality seafood supply chain for the domestic market. This is just one of a number of interventions by Metro aimed at addressing concerns around sustainability and developing markets for sustainable products. In 2012 the Green Consumption Campaign was launched, in coordination with Ho Chi Minh City Department of Industry and Trade, Saigon Coopmart and Sai Gon Giai Phong newspaper. The campaign was also sponsored by businesses including Vinamilk and Friesland Campina Vietnam. It aims to create sustainable consumption habits and consumption of products produced by enterprises that have a high sense of environmental protection.
- Product boycotts: In 2008 two major modern retailers, Saigon Coop Mart and Big C, boycotted Taiwanese-owned monosodium glutamate (MSG) maker Vedan Vietnam, when it was discovered that Vedan discharged untreated waste water into one of the largest rivers in the South of Viet Nam.
Other trends: genetically modified products (GM products)
Vietnamese consumers currently have a very limited awareness and understanding of GM products. Their concerns tend to be greater in the context where they cannot distinguish between GM and non-GM products. The Ministry of Agriculture and Rural Development’s Circular on processes and procedures for the grant and withdrawal of certificates of genetically modified plants eligible to be used as food and livestock feed shows that the Vietnamese Government is trying to tighten up compliance with labelling laws in this area. The Vietnamese Government has recently allowed small-scale trials of GM maize in 2014 and large scale GMO crops on a production from 2015.
In recent years, the popularity of organic foods has grown because of public concerns about food safety. In addition to organic foods that are domestically produced such as vegetables, rice and eggs, many other foods labelled ‘organic’, such as milk, meat and fruits, are imported from foreign countries.
Many organic farming projects in Vietnam are implemented on a trial basis, while others supply small quantities to urban Vietnamese consumers, or produce small orders for foreign buyers. Vietnam’s organic PGS system (Participatory guarantee system) was developed in 2006 through a project supported by ADDA (a Danish NGO) and the Vietnamese Farmers’ Union. Unfortunately, regulation and certification of organic products is still weak and PGS is the only organic certification for organic products in Viet Nam. Organic food and organic farming is just in its initial phase of development in Viet Nam and there is no officially recognized quality control system in that area.
According to the Get Green Vietnam Study, while the exact size of the domestic organic food market is unclear, it remains small. However, signs for growth in this market are positive as research suggests that if supply increased large numbers of Vietnamese consumers would be willing to pay a premium for safe, organic food products.
Implications for New Zealand exporters
The emerging trends mentioned above present both opportunities and challenges for New Zealand F&B exporters. Health awareness is prompting a shift in the Vietnamese people’s consumption habits towards safe, healthy products and functional food. There has been strong consumer demand for these products over the past few years and it is predicted that demand will strengthen further, particularly among the new emerging class of higher-income, younger and more westernized consumers. For example, anecdotal evidence suggests that in Ho Chi Minh City, demand for VietGap products (see above) in supermarket chains and convenience stores is estimated to outstrip supply by a factor of two. Clearly there is a demand for safe products in Viet Nam, particularly in urban centres, although supply remains an issue.
Opportunities for NZ F&B exporters are predicted to develop around high-quality, safe, healthy and nutritional food. In addition to modern retail markets, online shops are becoming a more popular shopping avenue for Vietnamese consumers, leading to a change in consumer consumption habits and preferences, and providing a new distribution avenue for NZ exporters to exploit. NZ F&B products are generally well-placed to take advantage of changing consumer preferences in Viet Nam, and the opportunities that this presents, through leveraging New Zealand’s clean and green production environment, world-class food quality and safety standards and non-GM food.
Challenges facing NZ exporters seeking to take advantage of these opportunities, from a sustainability perspective, include the need to protect their intellectual property, avoid incidents that may damage the reputation of their products and stay up-to-date with Viet Nam’s changing regulatory regime. Key to dealing with some of these challenges will be ensuring adequate protection of the supply chain for NZ F&B products, and active policing of counterfeit products.
Hong Kong and Macao
With greater China developing at a rapid pace, Hong Kong are attractive business markets for New Zealand exporters, as their thriving tourism industries with surging numbers of visitor arrivals (55 million to Hong Kong in 2013) from mainland China provide access to one of the world's most lucrative consumer markets.
Food safety continues to be the dominant concern for hospitality business and individual consumers. Food sustainability and animal welfare concerns fall a distant second, but there is growing interest in the organic market, possibly due to the link to safe food, as well as the demands of the sizeable expatriate community. Consumer trends in Hong Kong are largely driven by hotels and restaurants, with supermarket promotions also playing a role.
The perception of a 'clean and green' production environment, high food safety standards and non-GM food is a source of potential competitive advantage in Hong Kong for New Zealand exporters.
Import regulations and standards, food labelling, and organic certification are relatively lenient in Hong Kong, particularly with the principle of a free economy and policy of zero tariffs on almost all food product imports.
Some 96.8% of fresh food Hong Kong consumes is imported from mainland China and overseas. The small amount of domestically produced food is geared to complement major market suppliers, and domestic production focuses on high-value fresh foods and home grown pre-packaged products, mostly serving traditional local Chinese tastes. Hong Kong consumers are becoming more concerned about the quality of food, especially vegetables. Recent food safety crises in Hong Kong have led to growing concerns of food safety and hygiene, particularly with imports from China. These concerns have led to an increase in demand for organic food in Hong Kong, as well as stricter import quarantine regulations and standards.
Fruit and vegetables - Organic produce (fruit and vegetables) is growing in popularity, although from a very small base. ParknShop, one of the two largest supermarket chains in Hong Kong, responded to the new popularity by setting up an organic corner in their Fusion outlet in the affluent suburb of Sai Kung in December 2013. The corner featured only organic and natural products. New Zealand was one of the target suppliers for the promotion.
Bio-dynamic wine - Hong Kong is an important market for New Zealand wine, and also a hub for wine sales in the region. In March 2014 NZTE hosted a New Zealand bio-dynamic wine dinner at the Ritz Carlton Hotel, featuring Master of Wine Bob Campbell. Ten selected New Zealand biodynamic wines were presented to hospitality industry insiders, helping promote New Zealand biodynamic wines in the market.
As a follow on from the event, Tosca Restaurant in the Ritz-Carleton offered a biodynamic Saturday set lunch, initially through February 2014, but extended it for several months by popular demand. Feedback from the restaurant manager was that the market is becoming more sensitive to environmental concerns, such that they now deem it necessary to have sustainable, organic or biodynamic items on their menu. Sales of biodynamic and sustainable wines in their restaurant increased 10 percent compared to a year ago.
Sustainable seafood - Hong Kong remains one of the world’s largest per capita consumers of seafood, with the average resident consuming four times more fish than the world average. However, with the decline of habitat in the neighbouring waters, local consumers are paying more attention to sustainable fishing issues, and restaurants have begun to introduce sustainable cuisine.
World Wildlife Fund Hong Kong's Seafood Choice Initiative uses a seafood consumer guide as the primary tool to engage the public and to work with the seafood trade to switch to "sustainably harvested" products.
Feedback from major seafood importers also indicates that demand for organic and sustainable seafood is increasing. Luxury hotels such as Mandarin Oriental, Peninsula Hotel, Inter-Continental Hotel have requested that the products they purchase are sustainably fished or farmed.
Individual consmers however, are more likely to purchase their fish through the local open air markets, so-called “wet markets”. A research report (available in Chinese only) on the sales of organic fish in local wet markets was released in March 2014 by the Hong Kong Organic Resource Centre. The research covered 371 seafood stalls in 89 wet markets across 18 districts of Hong Kong. The findings indicated that organic seafood was not very popular in the market. There were only two out of the 371 stalls, 0.54 percent of the sample size, selling certified organic fish. However, there were 18 stalls claimed that their fish was organic without any proof. For the rest 351 stalls or 94.6 percent of the sample size did not offer organic products. As suggested by the researchers, more educational work has to be done to both retailers and consumers to improve their understanding of organic products in the markets.
In order to demonstrate leadership in this regard, the Hong Kong Government has also pledged to adopt sustainability-conscious food consumption during official entertainment functions, which includes no consumption of shark fin, bluefin tuna and black moss. The list will be updated periodically.
Sustainable packaging/recycling - Very few products in the Hong Kong market are marketed to local consumers as environmentally friendly products with sustainable packaging. Recently, efforts to educate the public on the need for sustainable packaging have been made mainly by NGOs and community groups, often without much corporate endorsement.
Organic certification for imported food products - There is no legislative control on organic labelling or claims in Hong Kong. However, Hong Kong's first-ever pesticide residue regulation will be implemented in August 2014. Its framework is largely built on Codex standards.
The Hong Kong Organic Center (HKOC) provides independent organic certification for locally grown produce as well as imported organic products for the local market. For imported producers, its brand new "Product Acceptance Programme" has just been launched. Under this programme, importers of overseas products which are certified by IFOAM-accredited certifiers such as BioGro New Zealand and AsureQuality Limited can apply for the ORC-Cert Organic Seals on their packaging. These seals have been registered at the Intellectual Property of Hong Kong as trademarks.
A recent Hong Kong Consumer Survey conducted by ORC-Cert found that 16.1 percent of respondents recalled to have seen while five percet were able to recognise the UDSA organic logo from the USA, whereas the ORC-Cert local organic seal was the most recognised organic logo, with 63.8 percent of the respondents stating that they have seen the seal.
Genetically modified organisms and food - Currently, under Hong Kong law, any food item with five percent or more GMOs in the ingredients should be labelled as “genetically modified”, according to the "Guidelines on voluntary labelling of genetically modified food".
Negative labelling is not recommended for food of which no GM varieties have been used. The Hong Kong authorities encourage industry to use the “GM Food Database” online to check which foods have GM counterparts. Furthermore, the use of absolute terms such as “GM free” and similar labels is not recommended under the Guidelines.
The Hong Kong Government has not indicated any plan to introduce mandatory labelling for GM food products. However, the administration considers regulating GM food by introducing a Mandatory Pre-market Safety Assessment Scheme (PMSAS). Under the scheme, a GM food developer who intends to introduce a GM food in the local market would be required to submit an application. The Government is consulting the public on the proposed scheme in the second half of 2014.
Carbon footprint - Hong Kong’s consumption requires more than 250 times the biological capacity of its land and sea area and space to locate waste is quickly running out. Hong Kong has made only early preparations to enhance energy efficiency, use clean fuels, and promote an economy based on low energy consumption and low pollution. The Government’s annual policy address in 2008, in which it sets out major policy initiatives, highlighted plans to promote a low carbon economy, but it has not yet introduced a comprehensive low carbon energy strategy.
Macao is also almost fully dependent on imported goods. Macao is also seen as a booming market for premium food exports with its rapidly growing gaming and tourism industry. However, Macao is a relatively small market for New Zealand in comparison to Hong Kong. Demand for quality food products from Macao's hotels and high-end restaurants is expected to increase with the booming tourism sector. However, Macao's food requirements are limited, and local importers mostly rely on re-exports from Hong Kong.
Macao does not develop its own standards but adopts international or overseas standards. The Civic and Municipal Affairs Bureau is in the process of establishing a Centre for Food Safety to implement the new Food Safety Law, which took effect last October.
The Food Safety Law focuses on the domestic food safety control with particular reference to food surveillance and testing program, and does not introduce any changes of food import regulations. It is therefore unlikely to impact on the exports of New Zealand food products to Macao.