Cashing in on health scares, China online food sales boom

CNBC ^ | 08/11/2013 | Reuters

[TexGrill]

Chinese consumers are responding to a powerful new marketing tactic that plays to a widespread fear of food contamination - the promise of safe groceries sold online.

Pledging produce direct from the farm, vendors have found food is becoming one of the fastest-growing segments of Internet retailing as they cash in on scares from cadmium-tainted rice to recycled cooking oil.

The trend is adding momentum to a Chinese online retail boom driven by a rapidly expanding middle class, with companies such as COFCO Ltd and Shunfeng Express betting that a decent slice of a 1.3 billion population will pay for the peace of mind they say their services offer.

"I think people are willing to pay a higher premium than in the West. In other markets, like the UK, food e-commerce is about convenience. Here, there's going to be a higher quality and safety premium," said Chen Yougang, a partner at consultancy McKinsey.

(Read more: Fearing Contamination, Chinese Pay More for Imported Infant Goods)

But convincing some skeptical Chinese consumers on food quality will remain a battle. Shanghai-based Zhang Lei expressed doubt on the credentials of some products being touted as organic.

"Everyone knows that in China organic is not the real thing," said the mother of one.

Nonetheless, total online sales of fresh produce in China could rocket to 40 billion yuan ($6.5 billion) in five years from about 11.5 billion yuan this year, said Zhou Wen Quan, a senior analyst at Beijing Orient Agribusiness Consulting.

[TexGrill]

Global business tip

[familyop]

Same marketing strategy more used in the U.S.A. now (foods, firearms, ammunition, gold, other markets). It’s the end of the world, you know. ;-)

[TexGrill]

Good marketing strategy. Take a look at the mega bucks conspiracy theorist Alex Jones earns for touting armageddon food storage.

[WilliamofCarmichael]

a decent slice of a 1.3 billion population will pay for the peace of mind they say their services offer.

If that slice is more than 400-500 million then those damn clowns in Washington are sending food stamps to Red China too.

Yet China remains a developing country and its market reforms are incomplete. In 2011, China’s gross national income per capita of $4,940 ranked 114th in the world; and over 170 million people still live below the $1.25-a-day international poverty line. With the second largest number of poor in the world after India, poverty reduction remains a fundamental challenge.