China has now become a big condiment producer, as well as a big market. Today we can see all the major international brands in the Chinese food seasoning market, and they are fiercely competing with local Chinese brands. As the Chinese capital market is opening up and improving, many traditional industries, such as manufacturing and process, are being revitalized and strengthened by private capital investments. So in this renewed and competitive market environment, how can the fragmented Chinese condiment companies break the barriers and become prominent?

Industry numbers

There are about 32,000 food flavoring product companies in China, which has created a fragmented market structure. In 2003, the whole sector in China registered sales revenue of $5 billion and profit of $280 million, while in 2004 and 2006 consumption value reached $8 billion and $13 billion respectively. On average, the condiment sector has been growing at 20% plus in recent years, being one of the fastest growing segments in the food industry in China. According to forecast from Ministry of Commerce, China’s restaurant industry is expected to reach $160 billion revenue in 2007.

According to the recently released China’s Restaurant Industry Operating Report 2007 by China Cuisine Association and Chinese Academy of Social Sciences, the restaurant industry achieved HULT PRIVATE CAPITAL  retail sales of $138 billion, 5.7 percentage points higher than China’s GDP growth rate, and maintaining double digit growth for 16 consecutive years. Figures from China Condiments Industry Association also showed that condiment production in China has an annual output value of $6.7 billion.

In China, condiment products are mainly used in household cooking, restaurant industry and food processing industry. Based on anecdotal evidence from the restaurant industry in China, condiment consumption is now approaching the 10% threshold of restaurant consumption value. This means for every $10 spent in restaurants, $1 goes to condiment spending.

Many condiments are end products for consumption, as well as ingredients for food processing. Such characteristics are particularly evident in two segments, one is instant noodles, whose taste greatly depend on condiments. And the other is the explosive growth of condiment exports from China.

Regional brands

Chinese condiment market has a large variety of taste preference, so has the condiment product types. The combination between traditional ingredients and derivative forms is almost endless. Major production areas for condiment include Beijing, Tianjing, Shanxi Province, Hebei Province, Sichuan Province, Guangdong Province, Shandong Province and the Jiangsu-Zhejiang region. Other provinces such as Liaoning, Henan, Hubei, Anhui and Jiangxi haven’t had their own local condiment brands. Overall, most condiment brands in China are still regional brands, and truly national brands are rare.

There are a number of reasons for the above situation. First, China is a geographically large country with a large population, which have lead to the diversity in taste preference since history. For example, there are more than 9 major vinegar types used in different regions in China. The second reason is that the condiment industry in China is still a low-tech and commodity industry, which has deterred brand establishment historically. Therefore, how to establish brands in such an industry structure is always a goal for many Chinese condiment companies to pursue.