NOODLES & CEREALS IN CHINA: A MARKET ANALYSIS

SUMMARY

This report covers the market for cereal products in the People' s Republic of China, with a particular focus on the instant noodles sector. Thereport covers the following sectors: Plain rice, Flavoured rice, Plain noodles, Instant noodles, Breakfast cereals and Pasta.

Executive Summary:

China is changing rapidly and so are its tastes. As a consumer society emerges, so new products are appearing with increasing regularity. Processedcereal products are among them.

Rising average annual incomes, greater ownership of fridges and freezers, increased exposure to western and international cuisines and a greaterarray of goods in the supermarket are all combining to increase the variety of cereal products available in China.

Historically, cereal products have been restricted to dried noodles and rice. Flavoured rice, pasta and breakfast cereals have only become commonin shops with the coming of western influences during the eighteenth, nineteenth and twentieth centuries.

The arrival of the fast-food chains, western-style supermarkets, greater awareness of cereal products and the emergence of a generation bothwilling and able to try new products has meant that the market for cereal products has made great strides in China.

TABLE OF CONTENTS

CHINA CONTACT I

CONTENTS II

INTRODUCTION 1

• Report Coverage 1
• Executive Summary 1
• Other Access Asia Reports of Possible Interest: 2
• Glossary 3
• Free Monthly Online Newsletters 4

1 INSTANT NOODLES & CEREAL PRODUCTS MARKET 5

1.1 Overview 5

1.2 China's Total Food Market 6

1.2.1 Total Food Market: Food and Non-food Sales 6

Table 1.1 TOTAL CURRENT VALUE RETAIL SALES BY FOOD AND NON-FOOD IN CHINA, 1996-2002 6

1.2.2 Total Food Market: Food/Non-food Sales Split 7

Table 1.2 PERCENTAGE BREAKDOWN OF SALES BY FOOD AND NON-FOOD IN CHINA 1996-2002 7

1.2.3 Total Food Market: Urban and Rural Split 7

Table 1.3 TOTAL CURRENT VALUE RETAIL SALES BY FOOD AND NON-FOOD IN CHINA, 1996-2002 7

1.2.4 Total Food Market: Total Value Trends 8

Table 1.4 CURRENT VALUE OF FOOD SALES BY MAJOR PRODUCT CATEGORY IN CHINA, 1996-2002 8

1.2.5 Total Food Market: Urban Value Trends 9

Table 1.5 URBAN FOOD SALES VALUE BY MAJOR PRODUCT CATEGORY IN CHINA, 1996-2002 9

1.2.6 Total Food Market: Rural Value Trends 10

Table 1.6 VALUE OF RURAL FOOD SALES BY MAJOR PRODUCT CATEGORY IN CHINA, 1996-2002 10

1.3 Instant Noodles & Cereal Products Market 11

1.3.1 Instant Noodles & Cereal Products Market: Total Market Size In Value Terms 11

Table 1.7 TOTAL RETAIL MARKET VALUE FOR INSTANT NOODLES & CEREAL PRODUCTS IN CHINA, 1996-2002 11

1.3.1 Instant Noodles & Cereal Products Market: Total Market Size In Volume Terms 11

Table 1.8 TOTAL RETAIL MARKET VOLUME FOR INSTANT NOODLES & CEREAL PRODUCTS IN CHINA, 1996-2002 11

1.3.2 Instant Noodles & Cereal Products Market: Food Market Significance 12

Table 1.9 INSTANT NOODLES & CEREAL PRODUCTS RETAIL MARKET AS A PROPORTION OF TOTAL FOOD RETAIL SALES IN CHINA, 1996-2002 12

1.3.3 Instant Noodles & Cereal Products Market: Provincial Breakdown 13

Table 1.10 THE INSTANT NOODLES & CEREAL PRODUCTS RETAIL MARKET VALUE BY PROVINCE IN CHINA, 1996-2002 13

1.3.4 Instant Noodles & Cereal Products Market: Provincial Per Capita Spend 14

Table 1.11 PER CAPITA RETAIL SPENDING ON INSTANT NOODLES & CEREAL PRODUCTS BY PROVINCE IN CHINA, 1996-2002 14

1.4 Sector Breakdown 15

1.4.1 Sector Breakdown: Sector Values & Volumes 15

Table 1.12 INSTANT NOODLES & CEREAL PRODUCTS RETAIL MARKET VALUE & VOLUME SALES BY SECTOR IN CHINA, 1996-2002 15

1.4.2 Sector Breakdown: Sector Shares 16

Table 1.13 PERCENTAGE BREAKDOWN OF INSTANT NOODLES & CEREAL PRODUCTS VALUE & VOLUME RETAIL SALES BY SECTOR IN CHINA, 1996-2002 16

1.4.3 Sector Breakdown: Growth Rates 17

Table 1.14 % ANNUAL GROWTH FOR INSTANT NOODLES & CEREAL PRODUCTS VALUE & VOLUME RETAIL SALES BY SECTOR IN CHINA, 1996-2002 17

1.5 National Market Shares 18

1.5.1 Market Shares: instant Noodle Company Shares 18

Table 1.15 LEADING COMPANY SHARES OF RETAIL NOODLE SALES IN CHINA 2002 18

1.5.2 Market Shares: Breakfast Cereal Sector Shares 19

Table 1.23 LEADING COMPANY SHARES OF RETAIL BREAKFAST CEREAL SALES IN CHINA 2002 19

1.6 Instant Noodle Market Shares by Major City 20

1.6.1 Market Shares: Beijing Noodle Sector Shares 20

Table 1.16 LEADING COMPANY SHARES OF RETAIL SALES OF INSTANT NOODLES IN BEIJING 2000-2002 20

1.6.2 Market Shares: Shanghai Noodle Sector Shares 20

Table 1.17 LEADING COMPANY SHARES OF RETAIL SALES OF INSTANT NOODLES IN SHANGHAI 2000-2002 20

1.6.3 Market Shares: Guangzhou Noodle Sector Shares 21

Table 1.18 LEADING COMPANY SHARES OF RETAIL SALES OF INSTANT NOODLES IN GUANGZHOU 2000-2002 21

1.6.4 Market Shares: Chengdu Noodle Sector Shares 21

Table 1.19 LEADING COMPANY SHARES OF RETAIL SALES OF INSTANT NOODLES IN CHENGDU 2000-2002 21

1.6.5 Market Shares: Wuhan Noodle Sector Shares 22

Table 1.20 LEADING COMPANY SHARES OF RETAIL SALES OF INSTANT NOODLES IN WUHAN 2000-2002 22

1.6.6 Market Shares: Xi'an Noodle Sector Shares 22

Table 1.21 LEADING COMPANY SHARES OF RETAIL SALES OF INSTANT NOODLES IN XI'AN 2000-2002 22

1.6.7 Market Shares: Shenyang Noodle Sector Shares 23

Table 1.22 LEADING COMPANY SHARES OF RETAIL SALES OF INSTANT NOODLES IN SHENYANG 2000-2002 23

1.7 Prices 24

1.7.1 Prices: Retail Price Indices 24

Table 1.24 RETAIL PRICE INDICES BY BROAD SECTOR IN CHINA, 1996-2002 25

1.7.2 Prices: Average Unit Values 26

Table 1.25 AVERAGE UNIT RETAIL PRICES ON INSTANT NOODLES & CEREAL PRODUCTS BY SECTOR IN CHINA, 1996-2002 26

Table 1.26 GROWTH OF AVERAGE UNIT RETAIL PRICES ON INSTANT NOODLES & CEREAL PRODUCTS BY SECTOR IN CHINA, 1996-2002 26

1.7.3 Prices: Selected Retail Prices 27

Table 1.27 RETAIL PRICES ON SELECTED BREAKFAST CEREAL PRODUCTS IN CHINA 2003 27

1.7.4 Prices: Selected Instant Noodle Retail Prices 27

Table 1.28 RETAIL PRICES ON SELECTED INSTANT NOODLE PRODUCTS IN CHINA 2003 27

1.8 Outlook 28

1.8.1 Outlook: Forecast Trends 28

1.8.2 Outlook: Total Market Size 28

Table 1.29 FORECAST TOTAL VALUE MARKET FOR INSTANT NOODLES & CEREAL PRODUCTS, 2003-2007 28

Table 1.30 FORECAST TOTAL VOLUME MARKET FOR INSTANT NOODLES & CEREAL PRODUCTS, 2003-2007 28

1.8.3 Outlook: Sector Values 29

Table 1.31 FORECAST VALUE & VOLUME SALES OF INSTANT NOODLES & CEREAL PRODUCTS BY SECTOR, 2003-2007 29

1.8.4 Outlook: Sector Breakdown 30

Table 1.32 FORECAST PERCENTAGE VALUE & VOLUME BREAKDOWN OF INSTANT NOODLES & CEREAL PRODUCTS BY SECTOR, 2003-2007 30

1.8.5 Outlook: Sector Growth 30

Table 1.33 FORECAST ANNUAL VALUE & VOLUME GROWTH OF INSTANT NOODLES & CEREAL PRODUCTS BY SECTOR, 2003-2007 30

1.9 Current Issues 31

1.9.1 Current Issues: Legislation 31

1.9.2 Current Issues: Food Safety 31

1.9.3 Current Issues: Organic Foods 32

2 MARKETING AND DISTRIBUTION 33

2.1 Marketing 33

2.1.1 Marketing: Trends 33

Table 2.1 MAJOR CONSUMER REASONS FOR PURCHASING INSTANT NOODLE BRANDS IN CHINA 2002 34

2.1.2 Marketing: Consumer Profile 34

Table 2.2 PURCHASING FREQUANCY OF INSTANT NOODLES IN CHINA 2002 34

2.2 Distribution 36

2.2.1 Distribution: Wholesale Distribution 36

2.2.2 Distribution: Retail Sales by Outlet 37

Table 2.3 PERCENTAGE BREAKDOWN OF CEREAL PRODUCT SALES BY OUTLET TYPE 2002 37

3 SOURCES OF SUPPLY 38

3.1 Manufacturing 38

3.1.1 Instant Noodles Manufacturing: Output Value 38

Table 3.1 OUTPUT VALUE OF INSTANT NOODLES 1995-1999 38

3.1.2 Instant Noodles Manufacturing: Output Volume 38

Table 3.2 OUTPUT VOLUME INSTANT NOODLES 1995-1999 38

3.2 Instant Noodles Imports 39

3.2.1 Instant Noodles Imports: Value 39

Table 3.3 IMPORT VALUE OF INSTANT NOODLES 1995-1999 39

3.2.2 Instant Noodles Imports: Volume 39

Table 3.4 IMPORT VOLUME OF INSTANT NOODLES 1995-1999 39

3.2.3 Instant Noodles Imports: Significance 40

Table 3.5 INSTANT NOODLES IMPORTS AS A % OF RETAIL SALES 1995-1999 40

3.3 Instant Noodles Exports 41

3.3.1 Instant Noodles Exports: Value 41

Table 3.6 EXPORT VALUE OF INSTANT NOODLES 1995-1999 41

3.3.2 Instant Noodles Exports: Volume 41

Table 3.7 EXPORT VOLUME OF INSTANT NOODLES 1995-1999 41

3.3.3 Instant Noodles Exports: Significance 42

Table 3.8 INSTANT NOODLES EXPORTS AS A % OF DOMESTIC OUTPUT 1995-1999 42

4 SWOT ANALYSIS 43

4.1 Strengths 43

4.2 Weaknesses 44

4.3 Opportunities 45

4.4 Threats 46

5 COMPANY PROFILES 47

5.1 Ajinomoto Company Inc 47

5.1.1 Ajinomoto: Company Details 47

5.1.2 Ajinomoto: Company Background 47

5.1.3 Ajinomoto: Financial Results 48

Table 5.1 AJINOMOTO: FINANCIAL RESULTS 2001/2002* 48

5.2 Asia Food & Properties Ltd. (AFP) 49

5.2.1 AFP: Company Details 49

5.2.2 AFP: Company Background 49

5.2.3 AFP: China Activities 49

Table 5.2 AFP: MANUFACTURING CAPACITY 50

5.2.4 AFP: Financial Results 50

Table 5.3 AFP: FINANCIAL RESULTS 1998/1999 51

5.2.5 AFP: Future Strategy 51

5.3 China (Tuhsu) Super Food Import & Export Corporation 52

5.4 Fukushima Foods Company Ltd 53

5.4.1 Fukushima: Company Details 53

5.4.2 Fukushima: Company Background 53

5.4.1 Fukushima: Financial Results 53

Table 5.4 FUKUSHIMA FOODS COMPANY: FINANCIAL RESULTS 1998/1999* 53

5.5 Kellogg Company 54

5.5.1 Kellogg's: Company Details 54

5.5.2 Kellogg's: Company Background 55

Table 5.5 KELLOGGS COMPANY: FINANCIAL RESULTS 2001/2002* 55

5.6 Nestle SA 56

5.11.1 Nestle: Company Details 56

5.11.2 Nestle: China Operations 56

Table 5.6 NESTLE: PRINCIPLE OPERATING COMPANIES IN CHINA 2003 57

5.11.3 Nestle: China Dairy Activities 57

5.11.4 Nestle: Financial Results 57

Table 5.7 NESTLE: FINANCIAL RESULTS 2001/2002* 58

5.11.5 Nestle: Future Strategy 58

5.7 Michi China Group 59

5.8 Nissin Food Products Company Ltd 60

5.8.1 Nissin Foods: Company Details 60

5.8.2 Nissin Foods: Company Background 60

5.8.3 Nissin Foods: China Activities 60

5.8.4 Nissin Foods: Financial Results 61

Table 5.10 NISSIN FOOD PRODUCTS: FINANCIAL RESULTS 1999/2000* 61

5.9 Qinhuangdao Chia Tai Company Ltd. 62

5.10 The Quaker Oats Company 63

5.10.1 Quaker Oats: Company Details 63

5.10.2 Quaker Oats: Company Background 63

5.11 Standard Food Taiwan 64

5.12 Sumitomo Corporation 65

5.13 Tingyi (Cayman Islands) Holdings Corporation 66

5.13.1 Tingyi: Company Details 66

5.13.2 Tingyi: Company Organisation 66

5.13.3 Tingyi: Noodles 66

Table 5.13 TINGYI: SALES OF MAJOR CEREAL PRODUCTS FIRST HALF 1998-1999* 67

5.13.4 Tingyi: Financial Results 67

Table 5.14 TINGYI: FINANCIAL RESULTS 1998/1999 67

5.13.5 Tingyi: Future Strategy 67

5.14 Toyo Suisan Kaisha Ltd 68

Table 5.15 TOYO SUISAN KAISHA: FINANCIAL RESULTS 1999/2000* 68

5.15 Uni-President Enterprises Corporation 69

5.15.1 Uni-President: Company Details 69

5.15.2 Uni-President: Company Background 69

5.15.2 Uni-President: China-based Noodle Activities 69

5.15.3 Uni-President: Financial Results 70

Table 5.16 UNI-PRESIDENT ENTERPRISES CORPORATION: FINANCIAL RESULTS 2000/2001* 70

6 CONTACTS 71

6.1 Trade Organisations 71

6.1.1 China National Cereals, Oils & Foodstuffs Import & Export Corporation 71

7.1.2 All-China Federation of Industry & Commerce 71

6.2 Government Departments 72

6.2.1 State Economic and Trade Commission - State Light Industry Bureau 72

6.2.2 Ministry of Agriculture 72

7 RELEVANT EXHIBITIONS & TRADE FAIRS 73

7.1 International Packing, Printing, Food Processing & Packaging & Plastic Machinery Fair (Hangzhou) 73

7.2 Tianjin Exhibition on Food Machinery & Packing 73

7.3 Trade Show of Machinery for Print, Packaging, Plastic Products & Food 73

7.4 Food Ingredients & Food Ingredients Asia 73

7.5 Agro-Foodtech 73

7.6 SIAL China 73

7.7 International Fast Food Products Exhibition 74

7.8 Zhengzhou Sugar, Alcoholic Drink & Food Trade Show 74

7.9 Guangzhou Exhibition on Machinery for Food, Packaging, Printing & Plastics 74

7.10 China Northeast International Exhibition on Food, subsidiary Material, Processing Technology & Equipment 74

7.11 International Exhibition For Food & Drink South China 74

7.12 International Exhibition For Hotel & Bakery South China 75

7.13 International Quick Frozen Food Exhibition 75

7.14 Beijing National Food & Food Processing Machine & Packaging Machinery Show 75

7.15 Food China 75

7.16 International Food, Packaging, Print, Plastic Products Exhibition 75

7.17 Zhejiang Food & Drink Summer Sales Show 75

7.18 Dalian International Food Manufacturing & Packaging Machine Exhibition/Dalian International Food, Raw Materials & Food AdditivesShow 76

7.19 Shanghai International Food Machine & Package Machine Expo 76

7.20 China International Fair For Food, Food Processing & Packaging 76

7.21 Shanghai International Supermarket Expo 76

7.22 Shanghai International Food Expo 76

7.23 Packtech & Foodtech 77

7.24 Liaoning Food Show 77

7.25 Food & Hotel South China 77

7.26 Chengdu International Food, Food Processing & Packaging Show 77

7.27 International Food Show 77

7.28 Interfood Shanghai 77

7.29 International Food Processing & Packaging Machinery Exhibition 78

7.30 China Food Industry Exhibition 78

APPENDIX 1 - CHINA MARKET BACKGROUND 79

A.1 Fast Facts 79

A.2 Regions of China 80

Map A.1 CHINA: PROVINCES AND MUNICIPALITIES 80

A.3 Demographics 82

A.3.1 Demographics: Total Population 82

Table 1.1 TOTAL POPULATION, 1996-2002 82

A.3.2 Demographics: Population by Location 82

Table A.2 POPULATION BY URBAN-RURAL DIVIDE, 1996-2002 83

A.3.3 Demographics: Population Breakdown by Location 83

Table A.3 POPULATION BREAKDOWN BY URBAN-RURAL DIVIDE, 1996-2002 83

A.3.4 Demographics: Population by Province 84

Table A.4 POPULATION BY PROVINCE, 1999-2002 84

A.3.5 Demographics: Population Density by Province 85

Table A.5 POPULATION DENSITY BY PROVINCE, 1999-2002 85

A.3.6 Demographics: Population Concentration 85

Map A.2 POPULATION CONCENTRATIONS BY PROVINCE, 2002 86

A.3.7 Demographics: Population by Gender 86

Table A.6 TOTAL POPULATION BREAKDOWN BY GENDER, 1996-2002 87

A.3.8 Demographics: Population by Age Group 87

Table A.7 POPULATION BY AGE GROUP, 1996-2000 87

Table A.8 POPULATION BY AGE GROUP (PERCENTAGE), 1996-2002 88

A.4 Consumer Attitudes 89

A.4.1 Consumer Attitudes: Overview 89

A.4.2 Consumer Attitudes: Response to Political Change 89

A.4.2 Consumer Attitudes: Response to Economic Change 90

A.4.3 Consumer Attitudes: Changes in Lifestyle 91

Livelihood 91

Individual loans 91

Housing 91

Possessions 92

Travel 93

Entertainment 93

Health and Fitness 94

Purchasing Influences 95

Taboos 96

A.5 Consumer Wealth 97

A.5.1 Consumer Wealth: GDP and Cost of Living 97

Dealing with WTO 97

Confident Shoppers 98

Table A.9 GDP AND COST OF LIVING INDEX, 1996-2002* 98

A.5.2 Consumer Wealth: Provincial Differences in GDP 99

Table A.10 GDP RANKED BY PROVINCE, 1996-2002* 100

A.5.3 Consumer Wealth: GDP Growth by Province 101

Table A.11 GDP GROWTH RANKED BY PROVINCE, 1996-2002* 101

A.5.4 Consumer Wealth: GDP Per Capita by Province 102

Table A.12 PER CAPITA GDP RANKED BY PROVINCE, 1999-2002 102

A.5.5 Consumer Wealth: Concentration of Wealth by Province 103

Map A.3 VALUE OF GDP PER CAPITA BY PROVINCE, 2002 103

A.5.6 Consumer Wealth: The Major Cities 103

Table A.13 LEADING CITIES KEY ECONOMIC INDICATORS, 2002 104

A.6 Households 105

A.6.1 Households: Overview of Household Conditions 105

A.6.2 Households: Total Households by Size 106

Table A.14 NUMBER OF HOUSEHOLDS BY SIZE, 1996-2002 106

A.6.3 Households: Total households by Urban/Rural Split 106

Table A.15 NUMBER AND SIZE OF HOUSEHOLDS BY LOCATION, 1996-2002 107

A.6.4 Households: Income Earners Per Household 107

Table A.16 AVERAGE NUMBER OF INCOME EARNERS PER HOUSEHOLD, 1996-2002 107

A.7 Employment 108

A.7.1 Employment: Number of Workers by Sector 108

Table A.17 NATIONAL EMPLOYMENT BY SECTOR, 1996-2002 108

A.7.2 Employment: Growth by Sector 109

Table A.18 GROWTH IN EMPLOYMENT BY SECTOR, 1996-2002 109

A.7.3 Employment: Number of Workers by Gender 110

Table A.19 TOTAL NATIONAL WORKFORCE BY GENDER, 1996-2002 110

A.7.3 Employment: Number of Workers by Habitation 110

Table A.20 NATIONAL WORKFORCE BY HABITATION, 1996-2002 111

A.7.4 Employment: Urban Unemployment 111

Table A.21 URBAN UNEMPLOYMENT RATES, 1996-2002 111

A.8 Consumer Income 112

A.8.1 Consumer Income: Average Incomes by Sector 112

Table A.22 AVERAGE INCOMES BY SECTOR, 1996-2002 112

A.8.2 Consumer Income: Growth by Sector 112

Table A.23 GROWTH IN AVERAGE INCOMES BY SECTOR, 1996-2002 113

A.8.3 Consumer Income: Average Incomes by Region 114

Table A.24 AVERAGE INCOMES BY REGION, 1998-2002 114

A.8.4 Consumer Income: Growth by Region 115

Table A.25 GROWTH IN AVERAGE INCOMES BY REGION, 1998-2002 115

A.9 Consumer Market 116

A.9.1 Consumer Market: Spending Trends 116

Table A.26 CONSUMER EXPENDITURE* BY BROAD SECTOR AT CURRENT PRICES, 1996-2002 116

A.9.2 Consumer Market: Per Capita Consumer Expenditure 117

Table A.27 PER CAPITA CONSUMER EXPENDITURE* BY BROAD SECTOR AT CURRENT PRICES, 1996-2002 117

A.9.3 Consumer Market: Retail Sales and Consumer Spending 117

Table A.28 RETAIL SALES AS A PROPORTION OF CONSUMER EXPENDITURE, 1996-2002 117

A.9.4 Consumer Market: Urban Income and Spending Compared 118

Table A.29 URBAN AVERAGE ANNUAL INCOME/EXPENDITURE, 1996-2002 118

A.9.5 Consumer Market: Average Urban Weekly Shopping Basket 119

Chart A.1 AVERAGE WEEKLY URBAN SHOPPING BASKET, 2002 119

A.9.6 Consumer Market: Average Rural Weekly Shopping Basket 120

Chart A.2 AVERAGE WEEKLY RURAL SHOPPING BASKET, 2002 120

A.9.7 Consumer Market: Average Urban & Rural Weekly Shopping Baskets Compared 121

Chart A.3 URBAN & RURAL SHOPPING BASKETS COMPARED, 2002 121

A.10 Exchange Rates 122

A.10.1 Exchange Rates: China 122

Table A.30 AVERAGE ANNUAL EXCHANGE RATES, 1997-2002 122

A.10.2 Exchange Rates: Hong Kong 122

Table A.31 AVERAGE ANNUAL EXCHANGE RATES, 1997-2002 122