Food safety and cold chain logistics in China
The Chinese food safety crisis illuminates huge gaps in what should be an iron-clad guarantee: that a free-market exchange will enrich both parties, not threaten their health or even their lives. But the country's infrastructure has not kept pace with the rapid explosion of Chinese markets, especially for food. A modern infrastructure is essential for improving the health of the Chinese population and the safety of exported Chinese-made goods. A.T. Kearney's research explains the challenge and suggests steps for a solution.
Food Safety in China: What it means for global companies
Although China has made great strides economically, it still needs a reliable food safety and distribution system to serve its growing market.
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A Call to Action: Ensuring Food Safety in China
While food scares in China garner the headlines, an A.T. Kearney study finds that fixing the problem can be boiled down to four steps: standards, enforcement, supply chains and private-sector investment. The potential of the Chinese market is well worth the effort.
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China Product Safety: Whose Battle Is This, Anyway?
China's product safety is just part of the story. Mike Moriarty raises awareness about the global social costs of the products and services we consume or provide.
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A.T. Kearney's presentation for CIES 51st World Food Business Summit
Jim Morehouse and an A.T. Kearney team presented research findings and insights at the CIES 51st World Food Business Summit: Mapping the New Silk Road, on June 22 in Shanghai. The World Food Business Summit provides knowledge and thought leadership for retailer and supplier executives.
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Executive Summary
Below is a summary of the main points of this issue, which is important for everyone doing business in China:
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- The Chinese middle class of approximately 500 million will spend more than $650 billion on food by 2017. About 75% of that market is in second and third tier cities. To reach them will require an efficient nationwide distribution network that does not exist today and that no one company can build
- More than 95% of Chinese consumers rank food safety as a “very important” criteria for their purchase behavior. As a result, food safety is driving shoppers to modern retail formats and away from the traditional wet markets. Most middle class consumers are also willing to pay premium prices to ensure safe food
- However, the food safety process in China is broken. The supply chain is badly fragmented. There are no consistent standards for food quality and safety. There is inadequate inspection and ineffective enforcement. The logistics process for cold chain is in its infancy with wide spread failures that ruin quality and pose a health risk to most consumers. When failure occurs, retailer and manufacturer brands are highly vulnerable to consumer backlash
- Fixing the food safety process in China will not be done by any one company, but can be accomplished with a cooperative effort among all the major manufacturers, retailers, restaurants and distributors. These groups need to agree on common standards with government support, ensuring enforcement and attract private sector investment to build a national end-to-end supply chain for China. It will cost about $100 billion over ten years
- The annualized benefits by 2017 should be up to $160 billion per year and allow companies to economically reach the entire middle class market in China with assured food safety and attractive costs
Slideshow
Video on food safety in China(1:40)
View long version (5:03)
Press Release
Media highlights
Will China food law cut out bad stuff?
1 June 2009 — Marketplace
Bing Zhang comments on China'snew food safety law and food-related exports.
 Tainted milk renews safety concerns
25 September 2008 — American Public Media — Marketplace
Jim Morehouse, A.T. Kearney partner, comments on the safety of diary product imports from China.
China Hurdle: Lack of Refrigeration
The Wall Street Journal—30 August 2007
To serve China's growing middle class with effective safety levels, China would need 365,000 refrigerated trucks and five billion cubic feet of cold storage by 2017.
Audio of Jim Morehouse and Bing Zhang interviewed on NPR's Morning Edition
 An estimated $100 billion over the next ten years is needed to develop the Chinese food infrastructure, according to A.T. Kearney’s study.
Other media coverage
Companies protect their stake in China’s food chain
Modern Materials Handling—6 September 2007
China's food distribution networks are broken. It may take a disaster of Olympic scale to inspire materials handlers to fix the problem.
Supply Chain Control Key to Product Safety
South China Morning Post—3 September 2007
A.T. Kearney believes that fixing the food safety process can only be accomplished by co-operation among manufacturers, retailers and distributors on common standards. Government also needs to ensure enforcement to build a national supply chain.
Call For Food Labeling After Scares
The Epoch Times—21 August 2007
Citing A.T. Kearney statistics for China's cold food chain, New Zealand moves toward consumer-driven country of origin labeling.
Poisoning the Trade Waters
The Journal of Commerce—30 July 2007
Plans are underway to bring to China top food safety experts from around the world to help with the steep training needs.
Are Chinese Export Products Unsafe?
The Wall Street Journal—14 July 2007
From list of key facts supplied by A.T. Kearney: China has two refrigerated trucks per 10,000 middle-class residents, compared with nine trucks per capita in the U.S.
Food-Safety Crackdown in China
The New York Times—28 June 2007
China’s food supply chain has no common, world-class standard for preventing spoilage, as much as 20 percent, or maintaining safety.
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Michael Moriarty is a partner in A.T. Kearney's Chicago office and leads the consumer industries and retail practice for North America. 
