Chinese consumers are highly skeptical, choosy about what they buy

It has been clear for some time that when it comes to buying food, product safety is Chinese consumers' No 1 concern. In thousands of interviews the China Market Research Group has conducted with primary household shoppers over the past four to five years, the overwhelming majority cite worries about toxic ingredients as their most influential factor when choosing food they buy for their families.

And why shouldn't it be? The list of scandals involving food products has grown far too long to enumerate completely, but plenty of examples are widely known and readily pop out of consumers' mouths when asked. Melamine and mercury in dairy products, street vendors and restaurants using oil salvaged from gutters, leather used in yoghurt and jelly, and cabbages sprayed with formaldehyde are just a few examples.

Worse, the tide of scandals is showing few signs of ebbing, despite numerous regulatory crackdowns and official pledges to solve food safety problems once and for all. The public is paying close attention. Throw it Out the Window, a website founded by a university graduate student cataloging new food safety scandals as they break, draws millions of hits a month, and China Survival Guide, an iPhone app providing a similar service, became an instant hit this summer, with hundreds of thousands of downloads in its first week from the iTunes App Store.

I've seen studies suggesting that Chinese consumers are becoming increasingly concerned about environmental issues when buying products, but I sometimes wonder how questions in studies like these are phrased, and what follow-up questions are asked. My suspicion is that food and product safety concerns are implied in many responses where respondents say environmental concerns affect their buying decisions.

I have similar questions whenever I read surveys claiming that Chinese care more than other nationalities about how socially responsible the brands they buy are. In our research we often find that consumers tend to closely associate companies' reputations for quality and safety with their perceived level of social responsibility.

When we ask consumers about how important it is to buy products for the home that are "environmentally friendly", the overwhelming majority say yes, of course, it's very important. However, in many consumers' minds the phrase huan bao (environmental protection) has a completely different meaning from that found in public service announcements about littering or creating greener cities.

I asked one 50-year-old woman in Shanghai what "environmental protection" meant to her when applied to a brand. In a response typical of most people across the country, she told me it meant "that there are no harmful ingredients in (their products) and that they are safe for my family". For her and for many others the word environment refers to the home environment rather than the natural environment. Safety remains the top priority, not green consumption per se.

Companies should not be ignoring issues such as pollution and social programs, of course. But when people buy food the decision to buy ultimately comes down to: How safe is the stuff you make? Can I trust you as a brand?

For Chinese brands, trust is at a very low point, especially for anything that is ingestible, used in the home, or that comes into contact with the skin. That goes double for any product for infants or small children.

Not knowing which brand to trust, many consumers have tried to hedge their bets by rotating their purchases frequently between a defined set of milk, detergent, or cooking oil brands as a way of hedging their bets. The thinking in these cases goes: "I might not know exactly which brands have problems, but if one or two brands out of the five or six choices I have are dangerous, at least I'm lowering my exposure to them."

However, as safety scandals continue to pile up, consumers are no longer sure that any of the normal brands they choose from can be trusted. They are increasingly choosing to buy more expensive products when possible, viewing cheaper products as more likely to be harmful.

For certain products, especially those used by babies and small children, where safety concerns are most acute, this means traveling outside the mainland when possible. By now shops in Hong Kong are used to mainlanders coming over to buy infant formula, but they are also buying imported disposable nappies as well.

When flying to Hong Kong or South Korea is not an option, consumers buy imported goods locally. When they cannot do that they buy products that are made domestically but by respected international brands, as they expect these companies to have more controls in place to avoid quality control mishaps, even if they too fall afoul of quality inspectors from time to time. In most product categories domestic brands come last in this order of preference.

To take the example of nappies again, Kimberly Clark's Huggies, Procter & Gamble's Pampers brand, and Japanese brands like Mamy Poko, GOO.N and Merries all sell high-priced imported products in China. Huggies and Pampers also offer more affordable made-in-China versions that are their bestsellers and are still priced at a significant premium to domestic brands.

For certain foods, consumers are starting to turn to organic products, but standards and certifications can be confusing, and here too there is risk, as when Wal-Mart supermarkets in Chongqing were discovered to have falsely labeled pork products as organic.

To address this, companies are highlighting safety and supply chain control as key selling points.

McDonald's most recent ad campaign is pushing this point, emphasizing the use of fresh ingredients such as lettuce, tomatoes, and "100 percent fresh beef". The supermarket chains Carrefour and Lotus stress that they provide seeds directly to the farmers from whom they source produce to ensure high quality.

This year Nestle has announced plans to open a milk supply center in Heilongjiang province that includes training farms to teach local entrepreneurs how to manage dairy farms and train them in modern industry technology. This ensures that they can have better control over their locally sourced milk and also helps entrench better practices among farm businesses in the market.

Chinese food companies are also making an effort to prove high safety standards and investing in improving their supply chains and production. The dairy giant Mengniu, based in Inner Mongolia, plans to set up a joint technological center with the Swedish-Danish company Arla Foods to help improve farming processes, milk quality and Mengniu's ability to trace its products up and downstream.

Consumers' expectations that the system will improve in any meaningful way are extremely - and understandably - low.

The overarching problem of food safety will not be solved until the food production system in China becomes more consolidated. In its current highly fragmented state it is nearly impossible to effectively enforce standards completely and account for the wide variation that occurs from one small farm to the next. For many farmers operating on small scales and with microscopic margins, the temptation to doctor produce to increase weight, protein count or other saleable attributes is simply too great.

Consolidation needs to happen, but it is a long-term project. In the meantime companies need to do what they can to earn the public's trust. That involves emphasizing safety in marketing and product labeling, but most importantly it means securing control over their own processes to prevent safety-related issues from occurring in the first place. If they mess up, that will not escape consumers' notice.

The author is a senior analyst at China Market Research Group, a strategic market intelligence firm based in Shanghai. The views do not necessarily reflect those of China Daily.

(China Daily 09/14/2012 page9)