January 04, 2012
SHANGHAI - Danone has just closed its Shanghai yogurt plant, Nestlé says it's going to shut down its local ice cream factory and Pepsico has sold off 24 bottling plants in China. What is shaking up foreign food and beverage giants inside the world's No. 2 economy?
Danone, the French dairy giant, says it wants to concentrate on developing its Bio brand, where margins are high. But after the failure of its Chinese joint ventures, the company is operating alone, and its sales and marketing channels are far behind the competition. In the Guangzhou yogurt market, for example, Danone has a 12% share, but is forced to ship in products from faraway factories in Shanghai or Beijing. To arrive from the factory to the supermarket can take nearly one week, which is already half of processed yogurt's typical shelf-life.
Just two days after Danone ceased production in Shanghai, Nestlé, an even larger food industry rival, confirmed that it would stop selling ice cream in eastern China, and shut down its Shanghai factory. The company didn't give a specific reason for the closure, but industry analyst Liang Mingxuan of CI Consulting said the Swiss firm was struggling to compete with local peers.
"In the past few years both Nestlé"s ice cream business and Danone's yogurt business have been squeezed by dairy giants Yili and Mengnui," he said.
The Chinese spent 31 billion yuan ($4.9 billion) on ice cream in 2011, according to consultancy Euromonitor, but Nestlé"s share of the market was around 3%, less than half of Unilever's, and far behind Yili and Mengniu, which have 17% and 15% respectively.
With Nestlé"s market share flat, the company has struggled to match its rivals' economies of scale, a problem aggravated by the location of its factories – one up north in Tianjin and the other down south in Guangzhou.
The Shanghai problem
It's significant that, when they chose to make cutbacks in China, Nestlé and Danone both singled out their Shanghai operations.
"There's almost no suitable land", said Gao Jianfeng, a management consultant with BOGO Consultants, who recently advised a foreign client looking for a location to build a factory near Shanghai.
"A lot of the land seems like wasteland, but, when you make enquires, you find that it all belongs to someone," he added. Gao noted that the owners of the leaseholds (Note: businesses are not allowed to actually buy land in China; local governments only sell long-term leases) are often businesses from Zhejiang, Jiangsu and the Yangtze River Delta.
Gao says that the lack of land is the biggest problem for businesses in the area. Those determined to operate there must either settle for one of the tiny plots available or pay for land from another business that already owns the leasehold.
Another problem for businesses eyeing Shanghai is the operating costs, with labor, logistics and raw materials coming at a premium over the Pearl River Delta, central and western regions.
"The lack of land makes it hard for Nestle and Danone to build new plants and expand their production capacity," said Gao.
Many coastal cities, including Shanghai, had previously drawn foreign manufacturers with tax breaks, but changes to the taxation code have put an end to these incentives. "Shanghai is focused on developing the service, high-tech and advanced manufacturing industries," said Chen Yao, of the Chinese Academy of Social Sciences.
The government's fiscal policies are expected to reflect these new priorities, further marginalizing the city's food factories and prompting the owners to shift inland. "Shanghai is no longer suitable for traditional manufacturing," concludes Gao, the management consultant.
But that point of view isn't universally accepted, and market analyst Li Baojun, says that Shanghai factory owners have another option aside from moving inland. Li says that some firms are keeping their higher-cost operations in the east, but upgrading the products produced in those plants.
As an example, he cites Nestlé, which may have shed its ice cream business in Shanghai, but has just bought 60 percent of Xiamen-based food company Yinlu, and 60 percent of candymaker Hsu Fu Chi.
Along with their moves inland and upmarket, foreign food makers are paying much closer attention to their supply chains, in light of recent food scandals in China. "In the past, it was enough to have a lead in production and sales channels," said one investor. "Now they're also very concerned about whether a company has its own sourcing and production base … and whether it has a system to trace any quality problems."
Read more from E.O.
Photo - upton
The Economic Observer is a weekly Chinese-language newspaper founded in April 2001. It is one of the top business publications in China. The main editorial office is based in Beijing, China. Inspired by the Financial Times of Britain, the newspaper is printed on peach-colored paper.
Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
In San Diego, California, a researcher tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun.
October 20, 2021
SAN DIEGO — Everybody, it seems, welcomes the arrival of new restaurants, cafés, food trucks and farmers markets.
What could be the downside of fresh veggies, homemade empanadas and a pop-up restaurant specializing in banh mis?
But when they appear in unexpected places – think inner-city areas populated by immigrants – they're often the first salvo in a broader effort to rebrand and remake the community. As a result, these neighborhoods can quickly become unaffordable and unrecognizable to longtime residents.
An appetite for gentrification
I live in San Diego, where I teach courses on urban and food geographies and conduct research on the relationship between food and ethnicity in urban contexts.
In recent years, I started to notice a pattern playing out in the city's low-income neighborhoods that have traditionally lacked food options. More ethnic restaurants, street vendors, community gardens and farmers markets were cropping up. These, in turn, spurred growing numbers of white, affluent and college-educated people to venture into areas they had long avoided.
This observation inspired me to write a book, titled The $16 Taco, about how food – including what's seen as "ethnic," "authentic" or "alternative" – often serves as a spearhead for gentrification.
Take City Heights, a large multi-ethnic San Diego neighborhood where successive waves of refugees from places as far away as Vietnam and Somalia have resettled. In 2016, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice) to neighborhood residents, along with tourists and visitors from other parts of the city.
Informal street vendors are casualties.
A public-private partnership called the City Heights Community Development Corporation, together with several nonprofits, launched the initiative to increase "access to healthy and culturally appropriate food" and serve as "a business incubator for local micro-entrepreneurs," including immigrants and refugees who live in the neighborhood.
On paper, this all sounds great.
But just a few blocks outside the gates, informal street vendors – who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets – now face heightened harassment. They've become causalities in a citywide crackdown on sidewalk vending spurred by complaints from business owners and residents in more affluent areas.
This isn't just happening in San Diego. The same tensions have been playing out in rapidly gentrifying areas like Los Angeles' Boyle Heights neighborhood, Chicago's Pilsen neighborhood, New York's Queens borough and East Austin, Texas.
In all of these places, because "ethnic," "authentic" and "exotic" foods are seen as cultural assets, they've become magnets for development.
A call for food justice
Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation.
Food, it seems, has become the perfect lure.
It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies. Small food businesses, with their relatively low cost of entry, have been a cornerstone of ethnic entrepreneurship in American cities. And initiatives like farmers markets and street fairs don't require much in the way of public investment; instead, they rely on entrepreneurs and community-based organizations to do the heavy lifting.
In City Heights, the Community Development Corporation hosted its first annual City Heights Street Food Festival in 2019 to "get people together around table and food stalls to celebrate another year of community building." Other recent events have included African Restaurant Week, Dia de Los Muertos, New Year Lunar Festival, Soul Food Fest and Brazilian Carnival, all of which rely on food and drink to attract visitors and support local businesses.
Meanwhile, initiatives such as the New Roots Community Farm and the City Heights Farmers' Market have been launched by nonprofits with philanthropic support in the name of "food justice," with the goal of reducing racial disparities in access to healthy food and empowering residents – projects that are particularly appealing to highly educated people who value diversity and democracy.
Upending an existing foodscape
In media coverage of changing foodscapes in low-income neighborhoods like City Heights, you'll rarely find any complaints.
San Diego Magazine's neighborhood guide for City Heights, for example, emphasizes its "claim to authentic international eats, along with live music venues, craft beer, coffee, and outdoor fun." It recommends several ethnic restaurants and warns readers not to be fooled by appearances.
Longtime residents find themselves forced to compete against the "urban food machine"
But that doesn't mean objections don't exist.
Many longtime residents and small-business owners – mostly people of color and immigrants – have, for decades, lived, worked and struggled to feed their families in these neighborhoods. To do so, they've run convenience stores, opened ethnic restaurants, sold food in parks and alleys and created spaces to grow their own food.
All represent strategies to meet community needs in a place mostly ignored by mainstream retailers.
So what happens when new competitors come to town?
Starting at a disadvantage
As I document in my book, these ethnic food businesses, because of a lack of financial and technical support, often struggle to compete with new enterprises that feature fresh façades, celebrity chefs, flashy marketing, bogus claims of authenticity and disproportionate media attention. Furthermore, following the arrival of more-affluent residents, existing ones find it increasingly difficult to stay.
My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. The listings I studied from 2019 often enticed potential buyers with lines like "shop at the local farmers' market," "join food truck festivals" and "participate in community food drives!"
San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44.
When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.
Going up against the urban food machine
Longtime residents find themselves forced to compete against what I call the "urban food machine," a play on sociologist Harvey Molotch's "urban growth machine" – a term he coined more than 50 years ago to explain how cities were being shaped by a loose coalition of powerful elites who sought to profit off urban growth.
I argue that investors and developers use food as a tool for achieving the same ends.
When their work is done, what's left is a rather insipid and tasteless neighborhood, where foodscapes become more of a marketable mishmash of cultures than an ethnic enclave that's evolved organically to meet the needs of residents. The distinctions of time and place start to blur: An "ethnic food district" in San Diego looks no different than one in Chicago or Austin.
Meanwhile, the routines and rhythms of everyday life have changed so much that longtime residents no longer feel like they belong. Their stories and culture reduced to a selling point, they're forced to either recede to the shadows or leave altogether.
It's hard to see how that's a form of inclusion or empowerment.
From Your Site Articles
- The Perverse Effect Of Street Art On Neighborhood Gentrification ... ›
- Taiwan To Hong Kong To L.A., Birth Of Bubble Tea Culture ... ›
- How The Pandemic Is Helping Reinvent Food Production ... ›
- What's Chic Now In Paris Dining? African-American Soul Food ... ›
Related Articles Around the Web
Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!