China pork retailer nears deal with Metro

Metro’s retail sales in China have grown at an average of 10% a year in the past decade

Retail giant Metro and pork retailer Yutu are nearing a deal that would enable China-based Yutu to boost distribution across Asia through stores operated by Germany-based Metro.

Based in China’s populous east coast, Nantong Yutu Foodstuffs is seeking to tap expanding demand for its convenience-oriented and packaged pork products. Yutu is currently going through the final stages of approval following lengthy talks with Metro.

The company’s strategy is to expand its distribution through major retailers around China according to general manager, Huang Hai Bo. He projects demand for “safe, quality” products to grow as the meat and retail industries consolidate.

Yutu already sells through Chinese outlets of WalMart, Carrefour, Century Mart and Beijing Hualian supermarket outlets. It has distribution as far west as the large city of Urumqi – over 2,000km from its east coast base in Nantong and also sells in Tibet.

Leisure and gift markets

Yutu, according to Huang, is seeking to tap into what he sees as growing “leisure” and “gift” markets in online and traditional retail formats. Current big Yutu sellers include the ‘high temperature ham’ snack range at RMB18.10 per 400g pack, sold online and in stores. The firm also sells a ‘low temperature cooked’ series of products such as brine cured salami style slices and a ‘leisure series’ of canned and dried meats for the snack market. A gift series features lavishly wrapped assortment of company products at RMB189 per 1.8kg box with premium-style red packaging.
 
Inking a deal with Metro gets Yutu reach into other high-growth markets in Asia. While it has a relatively low store count in China, Metro has stores in Japan while two of its biggest growth markets are India and Vietnam. Part of the German-based Metro AG group, Metro Cash & Carry operates as a B2C retail chain like Walmart and Carrefour, but also serves professional customers based around self-service and bulk buying for registered customers only.

Metro’s retail sales in China have grown at an average 10% per year in the past decade. The country now ranks as the world’s biggest grocery market according to grocery research firm IGD. The company predicts China’s grocery sales will increase by a third between 2015 and 2020 when sales will total USD1.5 trillion.

'Jade rabbit'

Set up in 1996 as a subsidiary of a major state owned industrial conglomerate, Yutu is located in one of China’s most prosperous east coast regions but faces intense competition. With a name that translates from Mandarin as ‘jade rabbit’ (and a logo to match), the company publishes a glossy monthly magazine for customers featuring updates on company products and tips on how to match heat treated sausage with noodles for snacks on the go.
 
Chinese meat companies have sought to cash in on urbanisation and the roll out of convenience and modern retail. Even as the country’s GDP growth has slowed in recent years Chinese retail sales growth remains strong, along with catering revenues, as income growth and urbanisation continue to drive consumption. Catering and retail sales growth both topped 10% in 2016 even though GDP growth slowed to 6.9%.
 
Firms like Yutu have been keen to develop products that target younger consumers who are likely to be freer-spending than more conservative older consumers. China’s millennial consumers spend more than average on foodstuffs, according to Jason Yu, head of China research at Kantar World Panel, a market research agency. They are drawn by key factors: flavour, packaging, indulgence and advertising, he explains.

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