Chinese Pay Double for Organic Kale After Food Scandals

March 14, 2014 04:55 AM

March 14 (Bloomberg) -- Shanghai housewife Yang Huaixin began buying organic food from farms on the outskirts of the metropolis not long after a relative had a brush with cancer.

"It’s an investment in one’s health," said Yang, 36, who uses organically farmed vegetables and meat in soups and steamed buns for her husband and 8-year-old son. "I can’t change my overall environment, but I can control what’s around me."

Demand for organic food is surging in China as food-safety scandals and rising nutritional awareness drive health-conscious consumers to search out safer options. Like their counterparts in the U.S. and Europe, Chinese increasingly are prepared to pay a premium for organic food. Looking to meet the demand, farmers are ditching pesticides, while markets and stores devoted to naturally raised food are opening in cities across the country. Wal-Mart Stores Inc. and other global grocers are selling more organic merchandise.

"This is the first market I’ve worked in where food safety is a more important consideration than price," Rob Chester, chief compliance officer at Wal-Mart in China, said in an interview.

Food and drug safety was voted as the third-biggest concern for ordinary Chinese this year, up from seventh place in 2013, according to an annual online poll of 3.26 million people by the state-run People’s Daily last month.

A series of scandals from melamine-laced baby formula and rat meat sold as mutton have stoked food-safety fears in China. Thousands of dead pigs found in a Shanghai river, the city’s water source, raised concerns about water contamination.

China’s State Council announced a plan last month to enhance food quality and prioritize development of organic and pollutant-free agriculture over the next six years.

Sales Jump

Though the definition for organic varies by country, it typically means foods produced with no pesticides or fertilizers, or with only natural ones such as manure instead of synthetic fertilizers. The number of certifications issued to organic products more than doubled in four years to the end of 2013, according to data from a government department.

Sales of those items reached 80 billion yuan ($13 billion) at the end of 2012, the most recent year for such figures. Sales of packaged organic foods such as honey and cereals jumped 46 percent in China last year to 5.94 billion yuan, after rising 40 percent in 2012, according to Euromonitor International.

The Beijing LohaoCity food chain, whose name stands for "lifestyle of health and organic," has 27 outlets in the city selling organic produce and boosted sales 40 percent last year to a record, said Nancy Song, a spokeswoman for the chain.

Xinjiang Red Dates

Organic farming is turning into a booming business for farmer Chen Xinrong. Though he charges about twice the price of other regular farms, his business has tripled in four years. Each week, he sends off hundreds of boxes of squash and kale depending on the season, mostly to people living in nearby Shanghai.

"People are starting to invest in health," said the 59- year-old, as he plucked snails from rows of vegetables grown in the city’s suburban district of Chongming Island and crushed them with his boot.

The demand for more natural foods has led to regular organic farmers’ markets outside Beijing. Stores selling products from Yunnan organic rice to Xinjiang organic red dates are sprouting in cities across the country. Some farmers are offering to rent urban residents plots of land to grow their own vegetables.

Safety Debate

Consumers in most countries generally believe that organic food is safer, though there is still debate over whether it truly is, said Peter Ben Embarek, a food safety scientist at the World Health Organization in Geneva and a former food safety officer with the WHO in Shanghai. Traditional farming can leave pesticides or chemical fertilizers on foods that people ingest. Organic farming can fail to exclude harmful pollutants in food if dirty water is used, he said.

International retailers such as Wal-Mart are tapping Chinese consumers’ needs for safer food by offering imported food products. Arla Foods amba, the Danish partner of China Mengniu Dairy Co., sells organic milk in China and expects its imports to the country to rise by 60 percent this year, said Frede Juulsen, senior vice president.

Fraud Cases

While China’s organic standards are good, convincing control mechanisms for implementation and supervision also need to be in place, said the WHO’s Ben Embarek.

The country has its own certification standards, which include not using pesticides, chemical fertilizer or growth stimulants in the growing and manufacturing process. A government agency interviews farmers and tests the products before validating the goods.

"Trusting organic foods means trusting that the requirements for organic production have been met," he said.

In 2012, fraud cases including fake organic eggs in Beijing and an organic vegetable producer using pesticides in Shandong province led China to tighten the certification standards.

Some organic producers in China have taken the extra step of getting certified by overseas agencies such as the U.S. Department of Agriculture. Certification labels or paperwork are displayed on the products and on online shopping sites.

Beijing retailer Lohao also uses a third-party inspector to examine suppliers’ farms, factories and products. It also makes them sign a contract agreeing to pay a 500,000-yuan fine if quality problems arise.

Yang, the Shanghai housewife, was so convinced about the importance of au-naturel that she started an online group buying club. Members buy organic products in bulk to lower the high costs.

"To the older generation, food was only about filling your tummy," she said. "Younger buyers like us know better.

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