How China is positioned to leapfrog America when it comes to quality food systems

The food system in China was broken.  I should know, as I lived in Hong Kong from 2011 to 2014.  Our family moved to Hong Kong from a small town in Oregon where we didn’t fear the food we consumed.  But moving to Hong Kong provided a rude awakening to food safety issues.  Food scandals often headlined the news.

Tackling food safety in China

You might recall the infant milk formula tragedy where infants throughout China were sickened and some died from milk powder that was tainted with a toxic industrial compound.  In my few short years in Hong Kong, other scandals were uncovered, such as formaldehyde drenched cabbage, rat meat passed as lamb, dead pigs being sold to slaughterhouses and expired meat sold to global brands.  The chance of being affected by one of these scandals was real whether shopping in local wet markets, grocery stores or eating in restaurants.

So it’s heartening to read about technology start-ups in China working to cut out the middleman and directly connect farmers with buyers such as restaurants and consumers.  Disintermediation leads to increased transparency and reduces the chances of immoral players trying to make a buck, say, by passing rat as lamb.  And farmers make more money when they sell direct, increasing farm viability and revitalizing rural communities. What’s truly flooring however, is the amount of capital flowing into China’s start-ups.

Not a mere few million dollars, but hundreds of millions of dollars are going toward efficiently connecting farmers with local buyers.  Take for example the Chinese company Meicai.  Meicai translates to beautiful vegetable.  Meicai directly connects farmers with restaurants and consumers through an ecommerce platform.  Buyers place an order of vegetables directly from local farms through a smart phone or computer.  According to Bloomberg, Meicai raised $800 million in 2018 alone, and is seeking another $500 million, aiming for a valuation of $10 – $12 billion. Comparatively, a few short years ago Elon Musk’s start up Space X, which focuses on building and launching reusable rockets into space, was valued at about $12 billion.  In no other country has a local food start up been in the same stratosphere as rockets.  Something comparable must be happening in the United States, home to Silicon Valley and technology innovation, right? Well, not really.

What’s happening in the US

The closest US comparison to Meicai is Good Eggs.  And truly, these two companies are not in the same orbit.  Founded in 2011 and based in San Francisco, Good Eggs had a strikingly similar objective to Meicai – directly connecting farmers to restaurants and consumers.  Good Eggs raised a total of $65 million dollars over the course of about seven years.  They invested in building out an ecommerce platform as well as physical distribution necessary to move product from farm to buyer.  But Good Eggs experienced significant hiccups along the way.  San Francisco is their first and last remaining operations after opening and closing operations Los Angles, New York and New Orleans.

It is also true that other US based local food focused start-ups have raised a few million or a few thousand dollars.  But nothing in the US compares to the disruption that is happening in China’s food distribution system.  The question is, why?

The US has its work cut out, but some trends are in the right direction

My opinion is based on living and eating in Hong Kong and China.  But also as a US based entrepreneur aiming to create technology to help connect farmers with local buyers, I’m in the trenches working to overcome market forces inhibiting local food supply chains.

I believe three challenges underpin the resistance to changing the US’s modern industrialized food supply system:

  1. Eating seasonally isn’t first nature to many in the United States. Culturally, quality ingredients and fresh, seasonal food are central to China’s way of life.  I recall in Hong Kong placing an order for spring chicken in early summer.  The wait person looked at me apologetically and said “the chicken is not spring chicken.” In the States, chicken is chicken and we rarely differentiate between grades.  But seasonality is important to eaters in Asia, even for chicken. I made the mistake of ordering spring chicken in early summer when spring chickens are no longer available. However, Americans are waking up to local and seasonal foods. Consumers are demanding local food at restaurants, as evidenced by according to the National Restaurant Association.  From 2011 – 2015, the number one and number two dining trends were locally sourced seafood/meat, and locally sourced produce (National Restaurant Association 2015).  And local food is a sizable and growing market segment in the US.  Local food is on track to grow to $20 Billion by 2020 (Silverman 2015).  Tastes are changing, which is positive for local producers.
  2. Americans seem to emphasize cost over quality when it comes to food purchases. As a percent of income, Americans spend the least in the world.  Only 4% of US household income is spent on food consumed at home.  That is the lowest percent of developed nations.  Countries such as Japan and France, which place a high value on fresh, seasonal eating, spend more than double what American spend per household on food: 13.5% and 13.6% respectively.   And our hesitation to spend on food is possibly reflected in obesity rates between the nations, with Japan reporting the lowest obesity rate in the world at 3.7%.  France is in the lower quartile with 15.3%.  China comes in at 7% of the population categorized at obese.  The US weighs in at highest levels of obesity, with 38.2% of the population reported as obese.  We spend the least on food but have the largest waistlines.  Obesity is a complex problem, but the connection between food expenditure and obesity rates is intriguing.  Possibly the desire for cheap food is reflected in the quality of calories purchased.  One could argue that spending less on food is a smart strategy.  But with waistlines and healthcare costs continuing to expand in the US, it seems we get what we pay for.

Source: OECD 2017

  1. Regional food systems lack the logistics to move food from producer to buyer efficiently. In the US we are good at moving high volumes of food long distances.  However we are challenged to move smaller quantities from dispersed growers to local grocery stores or institutions such as hospitals and schools, where a majority of people purchase or consume food.  For those who have the time and ability, buying direct from farmers at the farmers market can be rewarding.  But it will always be a niche market.  Scaling local and regional food systems requires infrastructure investments to efficiently move food.  Which is exactly what Meicai in China is doing.  And the capital to make these investments is coming from the private sector.  Investors see the possibilities of revolutionizing the food system.

The good news is that consumer tastes are changing.  But the US needs investment in regional food systems in order to reap the health, taste and economic rewards for both producers and the consumers. Buying direct from local farmers is not rocket science, or is it?