Flavour firm Takasago uses China as hub
established a new division in Shanghai aimed at expanding its
manufacturing and retail presence in China as well cutting costs.
The division will be a wholly owned subsidiary of the Japanese company and will serve as a supply hub to export cheaper raw materials and products to the rest of the Takasago operations in Asia, Europe and the US.
Opportunities for global ingredients players have opened up in China on the back of a soaring Chinese food industry that has witnessed an explosion in sales. Valued at under 100 billion yuan in 1991, sales reached well over 400 billion yuan (€37 billion) just 10 years later.
Driving the market is the increased spending power and changing eating habits of China's 1.3 billion people who are transforming the country's food sector, both domestically and in foreign trade.
Foreign brands of soft drinks, yoghurt, sausage, crisps, breakfast cereals, jellies, wine, and other foods and beverages comprise about 5 per cent of products in Chinese supermarkets, but many of those products are also manufactured with local ingredients, claims the US department of agriculture.
Ingredients firms are finding they need to break into the local market in order to effectively compete. In 2003 Danish giant Danisco increased investment in the region, linking up with a Chinese xanthan firm.
And last year leading colours and cultures firm Chr Hansen cracked into the Chinese market constructing its first colour production facilities in the country.
The world's number two fragrance and flavours company, International Flavors and Fragrance, has also recently announced the expansion of its manufacturing capabilities in China. In November last year the company said that it was starting construction of a $29 million chemical aroma production facility in the Hangzhou Economic Development Area. The plant is expected to open at the end of 2006 and will reach full production capacity in 2008.
A recent report from the United Nations confirmed foreign direct investment (FDI) inflows to Asia and the Pacific rose by a massive 55 per cent in 2004 on the year before.
FDI flows hit €126 billion, up from €81 billion in 2003, largely due to an improved economic performance, a more favourable policy environment, higher corporate profitability and a rise in M&A activities in the region.
"However, flows to the region remain unevenly distributed, dominated by a few countries. North-East Asia - particularly China and Republic of Korea - still accounts for the lion's share," claims the UNCTAD report.
