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The Dining Boom

Milk, beef, wheat and wine are Australia’s new iron ore. Welcome to the Dining Boom.

More of the middle

We hear about the rising middle class all of the time. But what does it mean for Australia?

In 2000, just 4 per cent of urban Chinese households were considered middle class. It’s projected that this will become 75 percent by 2022.
Source: Mapping China’s Middle Class, McKinsey & Company, June 2013.

Exports of high-quality Australian food and fibre products to China were worth $8.7bn last year - that’s more than twice those to the next largest destination, Japan.

Fake food, real distrust

What do you get when you cross a rapidly burgeoning economy with an underdeveloped food regulation system? The chance to counterfeit and profit. Much of Australia’s export opportunity to China is being driven by the serious health risks arising from food fraud:

  • In 2008 melamine was detected in China’s milk and infant formula. At least eleven infants died from kidney failure and more than 300,000 victims were reported in total. The long-term impact on their health is yet to be determined.
  • Counterfeit meat doesn’t exactly have an appetising ring to it. In the Shaanxi province, 20,000kg of “halal beef” was confiscated. It was in fact pork treated with paraffin wax and industrial salts.
  • Given the texture and relative delicacy of your typical egg, there is something admirable about their forgeries. According to known bootleggers, it’s all in the shell. By moulding calcium carbonate and wax around a mixture of starch, coagulants and resin it turns out you can make a pretty convincing fake egg.

On the menu

Australia has plenty to gain from the unease and distrust around China’s supply chains. To Asia more generally our soil, sun, air and water produce some of the cleanest and most nutritious produce in the world.

Red wine is one of our most popular exports to China. In fact, last year when China became Australia’s most valuable export country for wine by value (a cool $474 million), 93 per cent of those exports were red. Shiraz and its ilk share an astounding reputation, in large part because red is the colour of luck and fortune. Source: China Export Report 2016, Wine Australia.

It might not be surprising that there’s a real appetite for Australian beef in China. Live exports began recently, marking a new age for beef exports and the value supply chain. But more remarkable are the ‘Australian-style’ butchers in Chengdu, China’s fifth largest city. With exclusive rights to Coles-branded beef (yes, the supermarket Coles) the Sichuan Yutai company imports 100 tonnes a month to their four butchers and wholesale business.
Source: Australian beef gaining popularity in China's fifth-largest city, ABC News.

Protecting Brand Australia

The word daigou came to prominence in the Australian media after shelves of organic infant formula were being stripped bare in supermarkets across the country. Daigou translates to ‘buying on behalf of’’ and describes entrepreneurs who operate between Western retail channels and increasingly wealthy Chinese residents. They are essentially a channel for global grey imports, often referred through friends and family – or in some cases through buying agencies.

The danger is that after a supply chain has been interfered with, people will look further afield for authenticity. If something went wrong, it stands to reason that our cherished ‘made in Australia’ brand would be tarnished.

Fortunately, we now have the technological means to resolve this issue. PwC has made moves in this area; we recently signed on to deliver services and advice to help Alibaba reduce food fraud using blockchain technology. It’s a welcome step, but much more needs to be done. In order to secure our prosperity and reputation as a trusted source of high quality food, we will need to take steps to fortify its integrity. Our government, regulators, retailers, and producers all have a role to play. If food safety is our revocable license to play the game, protecting the promise of our food must be the most important tactic in how we play.

Contact us

Greg Quinn

Greg Quinn

Partner, PwC Australia

Tel: +61 425 326 833

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