China goes organic amid food scandals

Amid food scares, young Chinese turn to organic farming
Amid food scares, young Chinese turn to organic farming   

An organic food craze is emerging among China's urbanites as food safety scandals spur the younger generation toward alternative ways to buy fresh produce and meat.

So far, organic foods' penetration into China appears small, accounting for 1.01 percent of total food consumption, but that's nearly triple 2007's 0.36 percent, according to data from organic trade fair Biofach.

A series of high-profile food scandals over the past seven years has been a primary catalyst for growth in the organic food market. Biofach expects the segment's share of China's overall food market to hit 2 percent this year.

China was ranked as one of the world's worst safety-violation offenders by American food consulting firm Food Sentry this year. In 2013, 3,000 pig carcasses were seen floating in Shanghai's Huangpu river, one of the city's key sources of drinking water. A few months later, reports that a Beijing crime ring was selling rat and fox meat as lamb sparked international outrage, resulting in the arrest of more than 900 people.

The trouble continued in 2014, with the Chinese affiliate of U.S. meat supplier OSI Group accused of using expired meat. OSI caters to major fast-food chains such as McDonald's and Yum Group's KFC operating on the mainland. Wal-Mart was also dragged into the limelight this year following revelations that its donkey meat product contained fox meat. Most recently, Subway also came under scrutiny after Chinese media reported in late December that workers at a Beijing franchise changed expiry dates on meat and vegetables to extend their use.

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The rise of organic food is also expected to draw support from government officials prioritizing nutrition and environment to spur domestic consumption in a country where focus has traditionally always been on industrial growth.

An employee works with produce at a farm that practices organic farming techniques in Beijing.
Nelson Ching | Bloomberg | Getty Images
An employee works with produce at a farm that practices organic farming techniques in Beijing.

A business opportunity

Food scandals inspired Zhu Xun, CEO of Beijing-based farm Noah Organic, to start his own business. Speaking to CNBC, Zhu described how he and a friend began selling organic produce for up and coming Chinese concerned about safety. "My friend and I wanted to eat healthier. When we eat at restaurants, we don't know where the vegetables and the meat come from."

Now in its fourth year of business, the farm shuns fertilizers and pesticides to ensure maximum safety. Zhu relies on traditional methods instead, such as raising insects to eat other insects, to protect crops.

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However, these chemical-free products don't come cheap. A one-time delivery for 6 kilos of vegetables from Noah Organic will set customers back 199 yuan, or $32 – five times as much as a typical supermarket. Adding in 10 eggs and a bag of grains, the cost increases to 299 yuan ($48).

As the purchasing power of China's middle-class grows in light of higher wages and a subdued consumer inflation rate, more consumers are now able to focus on health and dietary concerns. To attract the mainland's brand-conscious and skeptical consumers, Zhu decided to use a system where customers can first visit the farm to see the meat and produce with their own eyes. So far, the farm has around 1,500 members, which helps the business just break even.

Beijing resident Wang Man never dreamed that she would be shunning the city's many convenient supermarkets; now, she's a regular at Noah Organic. "We were invited by the farm to take a look. I liked it very much and decided to order deliveries from there," the 30-year old graphic designer said.