China Tomato Products

CURRENT SITUATION, CHALLENGES AND OUTLOOK OF

CHINESE PROCESSING TOMATO INDUSTRY

June 2012

I. CURRENT PRODUCTION & SALES SITUATION, CHALLENGES AND

OUTLOOK OF CHINESE PROCESSING TOMATO INDUSTRY

II. CURRENT CONSUMPTION SITUATION, CHALLENGES AND OUTLOOK OF

CHINESE TOMATO PRODUCTS

Establish GAP system

Control land and promote quality varieties

Promote scientific growing and management model

Bed growing double rowBed growing single row

4

Tray seedlingSelf-controlled land

Growing Situation of COFCO Tunhe

Integrated pest management(IPM)

Chemical residue control system

Traceability system with

agricultural Information IT

Management network

Standard growing brochure

Own 4 farms and control

land of over 100,000mu

Quality hybrid variety

application rate increased

from 46% in 2005 to 95% in

2011 (630,000mu)

4

I. GROWING SITUATION

It is being widely promoted to organize the neighboring growers to plan and grow together in order to materialize Ag mechanization and Ag-info management. And the whole industry is upgrading.

Promote single/double row

growing model with population

reduced from 3,000/mu to 2,000-

2,300/mu

In 2011, 520,000mu

transplanting area, accounting for

79% of total contracted acreage;

Irrigation area expanded to

380,000mu in 2011

Since 2005, COFCO Tunhe has strengthened the cooperation with.J Heinz to learn from California agriculture

practices. Up to now COFCO Tunhe has purchased over 1,000 sets of machinery. Mechanization has been

realized in part of self-controlled land for seedling cultivation, bed making, transplanting, field management and

harvesting. COFCO Tunhe has set an example to Chinese tomato processing industry, especially in the process

of industry upgrading .

6


It is being widely promoted to organize the neighboring growers to plan and grow together in order to materialize Ag mechanization and Ag-info management. And the whole industry is upgrading.

In 2012 , with the support of Unilever, COFCO Tunhe founded Farmers Field School, focusing on GAP

training in Changji (Northern Xinjiang)and Bohu(Southern Xinjiang) and promoting sustainable agriculture.

School organization chart Outdoor and indoor training

7


540 600 470 770 790 1580

1000

2300 2800

4500

3200

4300 4600

6410

8660

6210 6790

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Output of Chinese tomato processing industry over the years

Chinese processing tomato industry has been expanding since 2000 and 2009 saw the production hit the historical high. Currently the whole industry is in a stage of brewing changes and adjustment.

Unit1,000mt

SourceWPTC, Tomatoland

8

II. PRODUCTION SITUATION

Items Crop 2012

Fresh tomatoes (MT) 5,000,000

Tomato paste (MT) 676,000

Planting acreage (ha) 62,100

Average yield (MT/ha) 80.5

Raw tomatoes - RMB380/MT USD60/MT (Ex-field)

9

SourceTomatoland,,Industry Research


In 2012 it is hard to conclude contracts with growers due to the depressed market and low profitability. It is estimated produce 5.0 million metric tons of processing tomatoes.

Cofco Tunhe and Chalkis are the major processors in China. In 2011, the production of top 10 Chinese processors added up to 5.65 million metric tons, accounting for 83% of the total.

Ranking CompanyProcessed volume

in 2011 (10,000 mt)Volume share

1 Cofco Tunhe 231 34%

2 Chalkis 140 21%

3 Haohan 72 11%

4 Guannong 35 5%

5 Tianye 29 4%

6 Taishun 15 2%

7 Fuyuan 13 2%

8Changji Fruits &

Vegetables co., Ltd.12 2%

9 Bohua Lvxiang 9 1%

10Regiment 142 Tomato

Processing Factory9 1%

Total 565 83%

China 679 100%

SourceIndustry Research , WPTC, Tomatoland

10


Chinese export of tomato paste continues increasing. 2011 saw the export volume hit a historical high of 1.128 million MT.

602 632

850 818 806

1025 1128

2005 2006 2007 2008 2009 2010 2011

Unit1,000mt

11

SourceChina Customs

III. EXPORT SITUATION

Ranking CompanyExport volume in 2011(10,000MT)

Occupation ratio of total Chinese export volume

1 COFCO Tunhe 34.0 30%

2 Chalkis 19.9 18%

3 Haohan 8.8 8%

4 Guannong 3.5 3%

5 Sanhe 2.7 2%

6 Taishun 2.4 2%

7 Jintudi 1.9 2%

8 Hongbao 1.6 1%

9 Tianye 1.4 1%

10 Provence 0.6 1%

Total 76.7 68%

China 112.8 100%

COFCO Tunhe and Chalkis are the major exporters in China. Export volume of top ten exporters occupies 68% of the total.

SourceChina Customs14

III. EXPORT SITUATION

236261

420

2000 2005 2011

PRICE FOR RAW TOMATOES (RMB/MT

2035

120

2000 2005 2011

Labor CostRMB/Day

The price of raw material and labor cost keep going up and tomato paste cost increases accordingly.

15SourceIndustry Research, COFCO Tunhe

IV. CHALLENGES AND PROBLEMS

The RMB continues appreciating against the US dollar, and this has brought negative impact on the exportation of Chinese tomato paste.

RMB against US Dollar USD/CNY

16

IV. CHALLENGES AND PROBLEMS

SourceFinancial Times

Improve the efficiency of the whole industry

Establish and regulate a refined market competitive mechanism

Cut down output and control the price of raw material

Improve quality and diversify market channels;

Develop and cultivate domestic market for processed tomato products

Looking into the future, we should carry out the following points to sustain the long-term development of Chinese processing tomato industry:

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V. OUTLOOK

I. CURRENT PRODUCTION & SALES SITUATION, CHALLENGES AND

OUTLOOK OF CHINESE PROCESSING TOMATO INDUSTRY

II. CURRENT CONSUMPTION SITUATION, CHALLENGES AND OUTLOOK OF

CHINESE TOMATO PRODUCTS

Noodles in Tomato Sauce

Diced Tomatoes with sugar

Onions and Tomatoes in Sauce

Scrambled eggs with tomatoes

Diced Apple in Tomato Sauce

Beef Brisket Braised with diced Tomatoes

Tomato Soup

Traditional Chinese Cuisines with tomatoes/tomato products

There are four major types of cuisine with fresh tomatoes and processed tomato products: Instant Food, Soup, Cold Dishes and Hot Dishes.

Stewed Fish in Tomato Juice

Salad with Vegetables and Tomatoes

Hot Dishes

Cold Dishes

Instant Food

Soup

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I. CURRENT MARKET SITUATION

Tomato sauce, tomato paste and ketchup are the main categories, accounting for over 97% of the total.

ItemsConsumption10,000mt

Proportion

Tomato sauce

9.2 48%

Tomato paste

5.2 27%

Ketchup 4.2 22%

Diced tomatoes

0.2 1%

others 0.3 2%

Total 19.1 100%

Consumption Volume of Processed Tomato Products in China

22

I. CURRENT MARKET SITUATION

SourceIndustry Research

Market Share of Tomato Products

Tomato

Sauce

48%Tomato

Paste

27%

Ketchup

22%

Diced

Tomatoes

1%

Pizza

Sauce

etc. 2%

25

Tomato Cooking Contests

Newspaper Magazines Websites

In order to guide and influence the choice and preference of consumers, Chinese companies are engaged in market promotion through tomato cooking contests, newspaper, magazines and websites.

Promote the tomatoproducts on newspaper.

Published Chinese TomatoMagazine from 2011.

Organize the Tomato Cooking Contest in 2010 with support from WPTC and CCFIA, new dishes with tomatoes have been presented

Promote through SOHU, SINA, and other domestic well-known website.

Example: Market Promotion by COFCO Tunhe

25

I. CURRENT MARKET SITUATION: MARKET PROMOTION

Chinese companies are actively participating in various food exhibitions so as to familiarize the consumers with tomato products.

Sha

ngha

i Wor

ld E

xpo

Bei

jing

Con

dim

ents

Exp

o

Zhen

gzho

u Fo

od E

xpo

Example: COFCO Tunhe participation in a lot of domestic food exhibitions

26

Xia

n In

vest

men

t &

Trad

e Fa

ir


27

Chinese companies are using vivid advertisements to attract consumers.

Example: Advertisement by Yong Yi Food Co., Ltd


Example: Advertisement by Heinz Qingdao

28


Chinese companies are using vivid advertisements to attract consumers.

Chinese condiment enterprises are divided into local and foreign companies. In the top seven companies, foreign companies such as Heinz, McCormick occupy 40% market share while local companies like Phoenix & Earth and COFCO Tunhe occupy 30%.

29 SourceIndustry Research

40%

30%

30%Ratio of Foreign

Companies Among Top-7

Ratio of Local Companies

Among Top-7

Others

Market Share of Top 7 and Other Companies

I. CURRENT MARKET SITUATION: BRAND ENTERPRISES

Yong Yi Food Co., Ltd was established in 1995, and it is the biggest tomato condiment manufacturer in China. The products include tomato ketchup, tomato sauce, abalone sauce, chicken powder, oil and etc.

The tomato ketchup and sauce are mainly sold to restaurants through traditional wholesalers and super markets. In 2011, its total sales volume of tomato products is around 45,000 tons.

It has three major brands:Hong Xi, Phoenix & Earth and Wei Shun. which are quite famous. It is featured with competitive cost, mature marketing model, and sales network.

. MAJOR BRANDS: YONG YI

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Heinz (Qingdao) was established in 1999, and their products include frozen food, condiment and baby food, and it is the main tomato sauce supplier of KFC China. In 2011, its total sales volume of tomato products is around 40,000 tons.

Its 3kg package of 22-24% hot break tomato paste is for high-end western food restaurants and hotels, 10g tomato sauce for KFC, and glass bottles of ketchup for households.

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. MAJOR BRANDS: HEINZ (QINGDAO)

McCormick was founded in 1889, its the worlds first spicemanufacturer, marketer and distributor that serves the entire foodindustry. The customers of McCormick include retailers, catering andfood processing factories. Since 1989, McCormick has set up twofactories in Shanghai and Guangzhou. Main products include tomatocondiment, spice and many other hundreds of varieties. McCormik issuperior in brand and marketing network. In 2011, its total salesvolume of tomato products is around 25,000 tons.

32

. MAJOR BRANDS: McCORMIK

33

As a leading producer and supplier of fruit and vegetable products in China, COFCO Tunhe is one of the world's largest tomato and apricot puree concentrate processors. The main products include tomato seeds, tomato paste, ketchup, tomato sauce, tomato juice, lycopene, and etc.

COFCO Tunhe seeks to become an enterprise with fully integrated value chains to cover all links of the food industry, i.e. from origination to consumption. And this includes seed research and development, planting, harvesting & delivery, processing, logistics, brand promotion and food sales.

. MAJOR BRANDS: COFCO TUNHE

Knorr is the most famous condiment brand under Unilever. The main processing tomato product in China is Knorr Tomato Sauce.

Knorr has invited professional chefs involved in product development and research, so that the products absorb the essence of local professional cooking skills and meet the needs of local consumers.

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. MAJOR BRANDS: UNILEVER(KNORR)

Shanghai Maling Aquarius Co., Ltd is a subsidiary company of Bright Food (Group) Co., Ltd. It is also a listed company since June 1997. The products include tomato sauce, chili oil, canned meat, vegetables, fruits and so on. The Bright Food Group has two Chinese Well-known Trademark as Guan Sheng Yuan and White Rabbits, and Shanghai famous trademark as Malin, Hua Tuo, SF and so on. The barnd Maling is shared with COFCO Corporate.

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. MAJOR BRANDS: MALING

In China, there are Qin Xing, Hunts, Xiao Chu, Shing Kee and other brand of ketchup. With the increase of domestic tomato products consumption, the number of brands and manufacturers will increase as well.

36

. MAJOR BRANDS: OTHERS

1

20 24 20

7

12

China EU-15 U.S.A.

Tomato Product Fresh Tomato

21

27

36

. CHINESE CONSUMPTION OUTLOOK

Due to traditional food preference of Chinese people, compared with the consumption of fresh tomato in China and that of tomato products in developed countries, the consumption of processed tomato products in China is still low, but its development presents huge potentials.

37Source: WPTC

ProsNaturally matured, safe and healthy; the consumption capacity of catering market is huge and has lots of potential to further grow; high acceptance of tomato products

ConsStereotype on tomato products: expensive, containing food addictives; few choices

ProsFresh, bright in color; traditional vegetable and easy to be accepted by Chinese.

ConsOff-season fresh tomatoes are likely to have high content of ethylene, which is harmful to health; expensive (off-season tomatoes);taste not so good.

Processed tomato products are produced through standardized process, and featured with

good quality and relatively low cost, therefore, highly welcomed by catering business.

With the rapid development of catering market in China, the consumption of processed

tomato products will be increased rapidly.

39

Processed

Tomato

Products


Fresh

Tomato


According to the growth in recent years, if we take 15% as the average annual growth rate as, the Chinese tomato products consumption will be nearly 442,000 tons in 2017, and the sales revenue will be RMB 4.25 billion yuan. The market is very promising.

40Source: Industry Research

Forecast of Tomato Product at Domestic Market

CAGR 15%

191220

253290

334

384

442

184 211

243 280

321

370

425

0

50

100

150

200

250

300

350

400

450

500

2011 2012(F) 2013(F) 2014(F) 2015(F) 2016(F) 2017(F)

Volume1,000 MT RevenueMillion RMB

The sustainable development of Chinese processing tomato industry in a long-term largely relies on the further expansion of the domestic market.

The healthy development of the world processing tomato industry will be further triggered by the sound development of Chinese processing tomato industry

Both domestic and overseas counterparts should work together to develop the Chinese domestic market!

. Conclusion

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THANK YOU

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Documents

China Tomato Products