Global food manufacturers find the Chinese market a tough nut to crack.

The U.S. government recently complained about China’s subsidies to enterprises including food manufacturers.

Last year, E-mart, Korea’s largest supermarket chain, pulled out of China after 17 years of operations there.

Despite such difficulties, the Chinese food market, with its 1.4 billion customers, is still enticing to exporters.
 
“We cannot miss out on the food export market,” said Lee Ju-myeung, director general of the Food Industry Policy Bureau of the Ministry of Agriculture, Food and Rural Affairs.

“The global food market reached $5.4 trillion in 2014, larger than the $1.7 trillion auto market and $3.5 trillion tech market combined. We need larger platforms to agricultural exports,” he said in a recent interview with The Korea Herald.

Lee, 49, stressed that Foodpolis, the world’s first government-backed food cluster, is a smart, indirect export channel to approach the Chinese market.

To be completed by 2016 in Iksan, North Jeolla Province, Foodpolis started parceling out building sites in the second half of 2014. The food cluster consists of six industrial zones, including five zones for local companies and an exclusive zone on lease for foreign-invested companies.

Foodpolis benchmarked Food Valley in the Netherlands, a food cluster where international food companies and research institutes are located close together. In Food Valley, about 15,000 professionals are engaged in developing futuristic, functional food.

Lee said Korea’s Foodpolis also brought together manufacturers from home and overseas; local suppliers and packaging firms; and research and development institutes from local colleges and private laboratories.

The three-pronged food cluster is designed to create an optimal cradle for exporters of high-end functional food and health supplements. Exporting foods that help prevent dementia, for example, is one of the cluster’s objectives.

The official pointed out that the Chinese market has three big hurdles for market entry: strong government regulation of employment, a complex retail structure with multiple middlemen and frequently changing quarantine inspection guidelines.

“Once the foreign players directly enter the Chinese market, they will want to cut costs by curbing many of the superfluous middle vendors. This will push up the unemployment rate, displeasing the Chinese government. It is also wary of the outflow of its national wealth in dividends to foreign shareholders” Lee explained.

“But with Foodpolis, Chinese companies can manufacture Chinese products on Korean soil, take advantage of Korea’s premium agricultural goods, and distribute the products in their native land, without hurting the Chinese market environment. It is a win-win strategy for both Korea and China.”

The government drive for food exports has received a huge boost from the Park Geun-hye administration, Lee said, adding that Korean ministries are joining forces to expand the Foodpolis operation as an export-intensive channel for Korean agricultural products.

On Feb. 10, Chinese fruit jelly-maker Qiaomama signed an agreement with the Korean Agriculture Ministry to move in to Foodpolis.

“Qiaomama means a great deal to Foodpolis, because it points to how we should approach the Chinese market,” Lee said. Qiaomama is the Korean food cluster’s second Chinese company and fifth foreign tenant.

The Chinese premium snack-maker champions “made in Korea” brand power ― safe, high-end and fresh ― as the primary reason to set up here. This goal is also met discretely with its bilingual product information labels, printed in Chinese and Korean.

“Foodpolis has a lot to offer foreign companies like Qiaomama, such as favorable lease rates, support in customs procedures in import and export, tax benefits and introduction to manpower if necessary,” Lee said.

Another strength of the food cluster, he said, is that the Agriculture Ministry can help the companies build up business networks with large Korean suppliers, such as the Korea Fruit Agricultural Federation, for stable supply of locally grown ingredients.

“China is beginning to import high-end food, and so is Japan, after undergoing the Fukushima nuclear incident in 2011. Now is the perfect time to push the food cluster,” Lee said.

By Chung Joo-won (joowonc@heraldcorp.com)