Voluntary Report - Public distribution

**Date:** 8/28/2008

**GAIN Report Number:** CH8812

CH8812

**China, Peoples Republic of**

**Agricultural Situation**

**Hefei: An Emerging City Market in Central China**

**2008**

**Approved by:**

![](media/image1.wmf)Wayne Batwin

ATO Shanghai

**Prepared by:**

Wendy Zhou

**Report Highlights:**

As a key city in the government\'s proposed expansion plan of the
Yangtze River Delta Economic Region, Hefei is well-positioned to capture
the industrial shift from coastal areas into China\'s interior. In 2007,
Hefei\'s GDP reached US\$19 billion, an increase of nearly 20% from the
previous year. Driven by its strong economy, consumer demand is
noticeably rising. ATO Shanghai conducted interviews with managers from
the HRI, retail and wholesale sectors, and discovered that current sales
of imported foods are comparatively limited. Nevertheless, the major
retailing giants like Metro, Wal-Mart, and Carrefour have already
entered this market and increasingly, local high-end restaurants are
also using imported products, all factors which will promote the
distribution of imported foods and increase familiarity of Western
ingredients and condiments among end consumers. This indicates a
considerable upside potential for market expansion and development for
U.S. agricultural products.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Shanghai ATO \[CH2\]

\[CH\]

Table of Contents

I.  **Hefei-Anhui Provincial Capital
    City..........................................................................3**

A Hefei at a glance (2007) Chart
1.......................................................................................................4

B. Transportation- One of the Key Hubs in
China...............................................................................4

a\.
Airport...............................................................................................................................................4

b\.
Port.....................................................................................................................................................4

c\.
Railway..............................................................................................................................................5

d\. Highway
..........................................................................................................................................5

C.
HETDA.....................................................................................................................................................6

D. Binhu- Lakeside New City
District................................................................................\....................6

I.  **Sector Analysis.
    ......................................................................................................7**

A. Hefei's Local Agricultural
...................................................................................................................7

B. Food
Processing....................................................................................................................................7

C. HRI &
Cuisine........................................................................................................................................8

Chart 2. Hefei Hotels & High-end
Restaurants............................................................................8

D. Food Wholesale & Retail
Sector.......................................................................................................10

Chart 3. Retailing Format in
Hefei...........................................................................................10

a\. Metro Cash &
Carry.......................................................................................................................10

b\. Zhougudui Wholesale
Market.....................................................................................................11

Chart 4. Hefei Major Food
Retailers..........................................................................................11

c\.
Carrefour.........................................................................................................................................
12

d\.
Wal-Mart..........................................................................................................................................12

.

II. **Prospects U.S. Product Prospects in Hefei
    ..........................................................13**

U.S. Agricultural Products Future Prospects (Chart
5.).................................................................13

III. **ATO Marketing
     Activity..........................................................................................15**

IV. **Contact Information and Useful
    Websites.............................................................15**

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I.  **Hefei\--Anhui Provincial Capital City**

Hefei, the capital of Anhui Province, is located in the central region
of China between the Yangtze and Huaihe Rivers and adjacent to Chaohu
Lake, which is one of the five great freshwater lakes in China. There
are four urban districts under the city's jurisdiction: Yaohai, Luyang,
Shushan and Baohe Districts; three counties: Feidong, Feixi and
Changfeng Counties; three development zones: *Hefei State New & High
Technology Industrial Development Zone*, *Hefei Economic and
Technological Development Area* (HETDA) and *Hefei New Railway Station
Comprehensive Development Experimental Zone*. With nearly 40 per cent of
its total area in greenery, Hefei is regarded as one of the "National
Garden Cities\" in
China. ![](media/image2.jpeg){width="2.703472222222222in"
height="1.575in"}

As an important base for science and education in China, Hefei plays an
important role in scientific research. It has three national
laboratories, second only to Beijing: the National Synchrotron Radiation
Laboratory under the [University of Science and Technology of
China](http://www.answers.com/topic/university-of-science-and-technology-of-china-1),
the Hefei National Laboratory for Physical Sciences and the National
Laboratory for Nuclear Fusion Research both of which are under the Hefei
Institute of Physical Sciences, Institute of Plasma Physics, which
itself is under the [Chinese Academy of
Sciences](http://www.answers.com/topic/chinese-academy-of-sciences). The
world-renowned *University of Science and Technology of China* (USTC)
and the Hefei Branch of the *Chinese Academy of Sciences* (CAS) are also
both in the city.

Hefei is the center of Anhui province\'s politics, economy, science,
education, culture and transportation, a rapidly growing industrial city
with textile mills, ironworks and steelworks, chemical and food
processing plants and a variety of other manufacturers. Fortune 500
companies located in Hefei include Coca-Cola, ABB, Unilever, Hitachi,
Sanyo, Metro, and Carrefour. Famous Chinese domestic companies including
JAC, Haier, Midea, Changhe, Changhong, Gree, Yili, etc. have also made
investments in Hefei.

As a key city in the government's proposed expansion plan of the Yangtze
River Delta (YRD) Economic region, Hefei is well-positioned to capture
the industrial shift from China's coastal areas into the interior. Its
GDP reached US\$19 billion in 2007, an increase of nearly 20% from the
previous year. The yearly import and export volume totaled US\$6.25
billion, increased by 28.2%，of which export volume was US\$4.3 billion
with an increase of 26.3%, import volume was US\$1.95 billion with an
increase of 32.6%. The services sector represented about 45% of Hefei's
GDP. This sector includes finance and insurance, transportation and
communication, wholesale and retail sales and catering.

**A. Hefei at a glance (2007)**

  ---------------------------- ------------------------------------------
  1\. Hefei City Area          7,029 square kilometers

  2\. Urban Area               820 square kilometers

  3\. Population               4.8 million

  4.Urban Population           2.6 million

  5: GDP                       US\$19.0 billion

  6.GDP Growth Rate (2007)     19 %

  7\. Per Capita GDP           US\$4,005

  8\. Urban household          42.6% on Food
  Expenditure                  

  9\. Major Industries         Automotive; machinery; household
                               electronics and products; manufacturing;
                               food processing; chemicals, tires; IT and
                               software; biotechnology

  10.Academic and Intellectual 30 universities and more than 190
  Resources                    scientific research institutions

  11 Star-rated Hotels         4 five-star, 9 four-star and 19 three-star

  12\. Major Food Retailers    Metro, Joy-Mart, Carrefour, Wal-Mart,
                               Lotus

  13\. Key Agricultural        freshwater fish/ lobsters , cotton, pork,
  Products                     dairy, poultry, vegetables
  ---------------------------- ------------------------------------------

Chart 1. Source: Hefei Investment Promotion Bureau

**B. Transportation -- One of the Key Hubs in China**

Hefei possesses a strategically important location easily accessible
from all directions of the country; it is a comprehensive transportation
hub in central China.

**a. Airport:** There are more than 30 domestic and international air
routes connecting the city with the outside, the new 4E-level
international airport is expected to be completed at the end of 2008; by
then, Hefei will have airlines connections to more major cities
worldwide.

**b. Ports:** Hefei Port is about 430km from Shanghai Port, 150km from
Nanjing Port and 140km from Wuhu Port. Through the Fei River and Chaohu
Lake, with a capability of handling 500-1,000 MT cargo barges, Hefei is
a link to port cities along the Yangtze River. After the completion of a
canal connecting the Yangtze and Huaihe rivers, Hefei will become an
important water transportation hub. Now that Hefei Customs has joined
Yangtze River Delta in realizing a regional Customs clearance operation,
enterprises in Hefei's Economic and Technological Development Area can
now ship through the three ports efficiently.

Photo 2. Transportation map of Hefei (left);

Photo 3. Economic Area within a Radius of 500 km of Hefei (right).

![](media/image3.jpeg){width="5.604166666666667in"
height="2.4479166666666665in"}

Source: The Administration Commission of Hefei Economic and
Technological Development Area

**c. Railway:** The Hefei-Jiujiang and Beijing-Kowloon railways as well
as the Nanjing--Xi'an and Shanghai-Chengdu railways intersect in Hefei,
which makes it an important link in the railway network in the country.
An express railway, which was completed in 2007, reduced the travel time
to Shanghai from 7 hours to 2.5 hours, and the time to Nanjing to only
45 minutes. The Hefei-Bengbu section of the Beijing-Shanghai express
railway is under construction, and is expected to be completed in three
to five years and will cut travel time to four hours from Hefei to
Beijing.

**d. Highway:** A network of expressways connects the major cities in
east China, including Nanjing, Shanghai, Wuxi, Changzhou, Hangzhou,
Wuhan, Xuzhou, etc. which makes Hefei not only the transportation hub in
Anhui province, but also a highway transportation center in the country.

**C. HETDA**

HETDA (Hefei Economic & Technological Development Area) is an important
component of the local economy. Since 2002, it has accounted for over
one-third of the Hefei's total industrial output. By the end of 2007,
2024 international enterprises had settled in Hefei, HETDA had utilized
a total of US\$1.76 billion in foreign direct investment (FDI).

There are six special parks/zones in HETDA, the Micro-Electronic
Engineering Zone (MEEZ), the Sinotrans Logistic Park (SLP), the Italian
Industry Zone (IIZ) and the Housing Industrialization Base (HIB) are
currently operating; the Life Science Zone (LSZ) and the Nanyan Lake
High-Tech Zone (NLHTZ) are still under construction.

With a full catalog of industries and supporting facilities, HETDA is a
new thriving industrial base; eight key industries have taken shape,
comprising auto-making, equipment manufacturing, house-hold appliance,
chemical industry and tires, IT and software, new materials,
biotechnology and new medicines and food processing. Coca-Cola,
Uni-President, Huatai and Chia Tai are among the many food processing
companies located in this area.

**D. Binhu---Lakeside New City District**

The Binhu (lakeside) new area covering more than 824 acres, features a
unique "lakeside" culture; it will function as a new administrative,
commercial, exhibition center and will contain a comprehensive and
expansive residential area. All the projects in this new area are to be
completed by 2010, including new schools, hospitals, banks, government
institutional buildings, shopping malls, star-rated hotels, etc.
Following are two examples:

-   Covering an area of 16 acres and a total investment of RMB350
    million, the Anhui Agricultural Service Center includes the Quality
    Safety Supervision and Test Center for farm products under the
    Ministry of Agriculture, the Anhui Agricultural Technology
    Department Center, the Anhui Agricultural Exhibition Hall and the
    Anhui Agricultural Technology Center, all projects to be completed
    by 2010.

-   Binhu Century Town, an extremely large real estate project with a
    total investment exceeding RMB 12billion, will combine residential
    and commercial projects, a 5-star hotel and a shopping mall. This
    project is partially completed.

**II. Sector Analysis**

A.  **Hefei's local Agriculture**

In 2007, the total annual grain output was 1.95 million tons, an
increase of 8.4% over the previous year. For crops, cotton output
increased by 17.1%, to 21,000 tons, and oil-bearing crops sank 8.6% to
293,000 tons, while the yield of vegetables amounted to 939,000 tons,
showing an increase of 19%. Animal husbandry and aquaculture sector saw
stable growth. Aggregated annual meat production reached 395,000 tons,
an increase of 7.9% over the previous year. Egg production increased by
6.1% while the aquatic output increased by 8.2% amounting to 143,000
tons.

Livestock is an important part of Anhui's agricultural sector; Chun Ran
is the largest swine farm in Hefei with an annual output of over 100,000
head. The farm is a pork supplier for local consumers as well as for the
Shanghai market. Yili Group in Hefei provides management support for cow
breeders, its reach covering about 30,000 small farms.

Lobster: Hefei's aggregated annual production of lobster reached 26,000
tons last year, farmed over an area of 62,000 acres. Hefei is recognized
as China's fresh water lobster breeding capital. Thirty-nine new farms,
each with an area of over 200 acres were built with the support of the
local government. Hefei hosts an annual lobster festival with features
art performances and trade exhibitions.

**B. Food Processing**

Focusing on processing poultry, tea, dairy and grain products, during
the last few years, Hefei's food processing industry has seen a rapid
development. Yili Group, Huatai Group and Unilever are the most
well-known local food processing enterprises. Inner Mongolia Yili
Industrial Group Co., Ltd. is a leading enterprise in China's dairy
industry. In 2007, Yili Group's primary revenue reached 20 billion RMB
and total profits increased by 27% compared with the same period during
the previous year. Some of the company's high-tech and value-added
products include milk powder and ice-cream. These, among the company's
more profitable products are manufactured in a subsidiary company
located in Hefei, and result in a high demand for U.S. whey in the area.

QiaQia brand roasted seeds are produced by the Anhui Provincial Qiaqia
Co., Ltd, a company with five production bases, 60 branches and offices.
The company's headquarters is located in Hefei and is the largest
roasted seed and nuts enterprise in China. Hefei hosts the largest
national annual roasted snack fair as well.

Hefei is also famous for its Feixi chicken. According to the Hefei
Livestock Breeding Bureau, the Anhui Hewei Group has invested in a
large-scale chicken meat processing center in Hefei, By the time this
project is completed, it could be the biggest chicken/ by-products
processing factory in the world, with a capacity to process 650,000
chickens per day, or about 240 million per year and an estimated yearly
revenue of RMB 6 billion.

**C. HRI & Cuisine**

Hefei is the northern gateway to the renowned Yellow Mountains, and its
surrounding area abounds with tourist attractions. There are many famous
sites known nation-wide within 300 kilometers of the city, including the
Yellow Mountains, Mt. Jiuhua, Taiping Lake, Mt. Tianzhu, Mt.
Tiantangzhai, Mt. Langya as well as the ancient town of Shouxian and a
Ming Dynasty Imperial Mausoleum. With over 30 regional tourist
attractions, Hefei is an ideal mid-way destination for tourists from
northern China who are headed towards tourist attractions in the south
and east of the country.

Hefei was awarded the title of "China's Top Tourist City." In recent
years, the scale of the city's tourist industry has steadily expanded,
its tourist infrastructure has continuously improved, and the
construction of tourist attractions has accelerated, which has greatly
enriched the content of Hefei tourism. According to the Hefei
Development and Reform Commission, together with the city's already
existing four 5-star, nine 4-star and nineteen 3-star hotels in Hefei
city, 95 travel services and 8 international travel services, several
international recognized brand hotels have recently decided to start
operations in the city.

Chart 2. Hefei Hotels & High-end Restaurants

+----------------------+-----------------------------------------------+
| **Hotels**           | ***Notes***                                   |
+----------------------+-----------------------------------------------+
| 1\. Hilton Hefei     | *Features the Phoenix, Sens, Happy Panda and  |
|                      | Indigo restaurants, as well as the coffee &   |
| (5 star)             | snack bar Café Cino which combines Western &  |
|                      | Eastern cuisine*                              |
+----------------------+-----------------------------------------------+
| 2\. Holiday Inn      | *29^th^ floor Western restaurant with a       |
| Hefei                | capacity for 400 guests*                      |
|                      |                                               |
| (5 star)             |                                               |
+----------------------+-----------------------------------------------+
| 3\. Sofitel Grand    | *Brazilian style restaurant and Western style |
| Park Hefei(5 star)   | garden Café*                                  |
+----------------------+-----------------------------------------------+
| 4\. Grand Hotel      | *Includes a Chinese restaurant, Western       |
| Oversea Traders      | restaurant, lobby bar, and an executive floor |
| Club(5 star)         | bar*                                          |
+----------------------+-----------------------------------------------+
| 5\. Hefei            | *Cantonese, Huaiyang, Anhui and Chao cuisines |
| International Peace  | and Brazilian BBQ restaurants*                |
| Hotel (4 star)       |                                               |
+----------------------+-----------------------------------------------+
| 6\. New Wencai       | *Chinese cuisine, tea house, Japanese         |
| International Hotel  | cuisine*                                      |
|                      |                                               |
| (4 star)             |                                               |
+----------------------+-----------------------------------------------+
| 7\. Anhui Hotel (4   | *Features Anhui, Huaiyang, Cantonese and      |
| star)                | Western cuisine*                              |
+----------------------+-----------------------------------------------+
| *8. Novotel Hefei*   | *Two restaurants and one European style bar*  |
|                      |                                               |
| *(4 star)*           |                                               |
+----------------------+-----------------------------------------------+

Source: Hefei Commercial Bureau

Western cuisine restaurants/bars located in high-end hotels are the
major consumers of imported food ingredients and condiments;
high-quality imported food and beverages are available at luxurious
restaurants and bars such as the Phoenix, Sens, Happy Panda and Indigo,
venues which provide a combination of Western and Eastern cuisine. Wines
are mainly imported from France and Australia. Very few California wines
appear in the market, the main reason being that local chefs are unaware
of American products, and an undeveloped distributional channel which
relies heavily on Shanghai-based distributors. One executive chef from a
hotel in Hefei admitted that U.S. beef products are used at the hotel,
obtained through gray distribution channels. U.S. frozen potato products
are widely used in these restaurants and bars, as well as Western style
fast-food chains; frozen gold crisp onion rings, sweet corn and frozen
mixed vegetables are becoming increasingly popular. American tabasco
sauce and tomato catsup products are already present in the local
supermarkets, and are generally purchased by hotels and restaurants.

Local cuisine is called Hui cuisine, and it is one of the famous eight
Chinese cuisines, with an emphasis on strong color and flavor; meat or
fish dishes are often prepared using special steam or stew cooking
methods with generous use of sauces and oil. Shu Wang Group and Jing Man
Lou Group are the local top local restaurant chains. According to the
Commercial Bureau of Hefei, in 2007, there were five local restaurant
chains with yearly sales reaching 20 million RMB. Hefei people are
usually willing to try new flavors, and Hui cuisine itself developed
though incorporating elements from China's other seven regional
cuisines. Furthermore, local chefs like to innovative and frequently use
imported ingredients and condiments to enrich their menus and stand out
from the competition.

![](media/image4.wmf){width="3.125in" height="2.75in"}**D. Food
Wholesale & Retail Sector**

Major provincial consumer markets are located in Hefei. In 2007, retails
sales of consumer goods rose by 22% to RMB 46.9 billion. There are about
46,000 commercial retail outlets in the city, including 33 large-scale
markets, whose shopping floors cover over 5,000 square meters. Retailing
giants like Metro, Wal-Mart and Carrefour already operate shopping malls
and supermarkets in Hefei city. The biggest local retailer is Store
Group, and one of its subsidiaries Joy-Mart supermarkets has a
successful local operation in the area. Tesco is the latest to enter
this market, and will open the first of a planned five stores in Hefei
by the end of 2008. These enterprises overall are optimistic about the
future of the Anhui markets, especially in the capital city of Hefei.

*a. Metro Cash & Carry*

Metro, the world's leading self-service wholesale business, opened its
first store in Hefei on November 2007, becoming the 35^th^ Cash & Carry
market in China. The new store covers 6,155 square meters of business
space with over 23,000 food and non-food items. The Metro store in Hefei
stocks 1,723 imported food products and approximately 200 SKUs
originally from the U.S., accounting for 12.3% of retailed goods; among
them, fruits and vegetables account for 24.3%, seafood 5.2%, frozen food
products 19%, wine 6.6%, beers & other beverages 17%, and dairy products
5%. The store's target customers are categorized into three
groups-HoReCa (hotels, restaurants and caterers); traders and
complementary business units. The store recruited over 80,000 registered
professional customers before the store even opened for
business**.**![](media/image5.jpeg){width="2.3715277777777777in"
height="1.75625in"}

*b. Zhougudui Wholesale Market*

As one of the subsidiaries of Hefei Department Store Group, Zhougudui
agricultural products wholesale market was originally built as a fruit
market. Backed by the Hefei Zhougudui Wholesale Market Ltd., it
originally covered an area of 10 acres in 1992. After ten years, it
developed into a large-scale agricultural products distribution center,
with an area of 280 acres. Besides a fruit and vegetable section, the
market includes aquatic products, meat, poultry and egg products, as
well as condiments and a cooking oil section. Last year, the market had
a total turnover of over RMB 7 billion with a sales volume over 2.2
million tons. The Zhougudui management team is making a great effort to
advance their existing services and increase their competitive
capabilities. Zhougudui has expanded into a multi-functional market,
combining agricultural exhibitions, food safety controls, and an
international-standard agricultural product logistic and food processing
center. Its development has been facilitated by its adaption of an
E-balance system to monitor and control its business transactions.

Chart4. **Hefei Major Food Retailers**

  ------------------------------ ------------------ ----------------------
  **Name**                       **Format**         ***Number of outlet***

  Metro Cash & Carry             Hypermarket        *1*

  Carrefour                      Hypermarket        *3*

  Wal-Mart                       Hypermarket        *1*

  Lotus                          Hypermarket        *1*

  Parkson                        Supermarket        *1*

  Hefei Department Stores (CBD)  Department Store   *1*

  Trust-Mart                     Supermarket        *2*

  Suguo                          Supermarket        *6*

  Beijing Hualian                Supermarket        *3*

  Joy-Mart                       Supermarket        *17*

  Shanghai Lianhua               Supermarket        *2*

                                 C-store            *Over 100*
  ------------------------------ ------------------ ----------------------

Source: Hefei Commercial Bureau 2007

*c. Carrefour*

Carrefour, which has opened five stores in Anhui since April, 2006,
including three in Hefei, has enjoyed sales far beyond original
expectations. According to the manager of one branch in Hefei, the
outlet sells more than 20,000 imported items. The manager emphasized
that the snack food category is especially popular among young people
and students, and that sales have increased dramatically in three
successive years, partially due to increased purchasing power in this
niche market, together with intensive on-site marketing activities.
Sales of imported snack food sector SKUs have increased by more than
200% each year. Carrefour's Changjiang Rd. store is the most profitable
and popular imported food shop among all foreign retailers. Its purchase
manager stated that in-store promotions have been very effective in this
market, and added that South Korean snack foods were successfully
promoted last year.![](media/image6.jpeg){width="2.5375in"
height="1.7513888888888889in"}

*d. Wal-Mart*

The first Wal-Mart in Hefei opened in May 2008. The store is located in
the city's commercial center, next to the famous Hilton Hotel. The
majority of the store's goods are sourced domestically, with imported
food accounting for about 5% of its total SKUs, comparatively less than
the percentage found in other foreign operated retail
stores.![](media/image7.jpeg){width="2.5375in"
height="1.8756944444444446in"}

During a store tour, we saw that U.S. food products were limited to only
a few items: frozen potatoes, apples, oranges and dried fruits and nuts.
A number of U.S. fruits such as Washington apples, California oranges,
and grape are sold here, together with several condiments such as Heinz
sauces and Tabasco brand pepper sauces, A few U.S. wines were included
on the imported wine shelf. Since the shop is rather new, it is
difficult to predict sales for specific items. Hefei's strong economy
and increasing consumer demand makes Wal-Mart confident about its
long-term position in the market, and Wal-Mart's second store in Hefei
is planned to open soon.

II. **U.S. Product Prospects in Hefei**

ATO Shanghai conducted interviews with officers and executives from
government institutions, HRI and retail and wholesale sectors. Overall,
these sources revealed that current sales of imported foods are
comparatively limited and that the local market is price sensitive.
Nevertheless, retail giants like Metro, Wal-Mart, Carrefour, Lotus and
Tesco have already entered this market and local high-end restaurants
increasingly are using imported products, developments which should add
to local familiarity with Western ingredients and condiments. These
factors suggest future growth in the distribution of imported foods, and
indicate a considerable potential for the development and market
expansion of U.S. agricultural products. U.S. food products which could
potentially grow in the Hefei market include the following:

  -------------------- ------------- -------------------------------------
  **Products**         **Markets**   ***Notes***

  1\. Potato products  HRI & Retail  *Increasingly popular and commonly
                                     used in fast-food and Western style
                                     restaurants and hotels; distribution
                                     is the primary obstacle; great
                                     potential for market expansion.*

  2\. Beef             HRI           *U.S. beef is using by some local
                                     restaurants, distributed through gray
                                     channels. Once the ban on imports is
                                     lifted, development potential will be
                                     high, though competition from
                                     Australian producers will remain
                                     significant.*

  3\. Table grapes     Retail        *Both U.S. red and black table grapes
                                     are visible in supermarkets. However,
                                     the market is price-sensitive, and
                                     distribution and logistics pose a
                                     major challenge.*

  4.Fresh fruits       HRI & Retail  *Sunkist oranges and Washington
                                     apples already present and enjoy a
                                     considerable market share, retail
                                     sales are particularly strong, and
                                     market expansion potential should be
                                     high during the Spring Festival.*

  5\. Poultry          HRI & Retail  *U.S. frozen chicken wings
                                     occasionally appear on retail
                                     shelves. The most popular items are
                                     wingtips and feet.*

  6\. Condiments       HRI & Retail  *Tabasco and Heinz products are
                                     already present in local
                                     supermarkets, generally purchased by
                                     hotels and restaurants, with a
                                     considerable market expansion
                                     potential. However, there is strong
                                     competition from Spanish
                                     counterparts, whose products are more
                                     suitable to local consumer tastes.*

  7\. Wine             Retail & HRI  *Local market is currently dominated
                                     by French wines, while wines from
                                     Chile and Australia are also selling
                                     well, as a consequence of active
                                     promotions. U.S. brands such as Carlo
                                     Rossi wines, and Jack Daniels whiskey
                                     are already present in the market,
                                     and hotel chefs and retailers
                                     indicate a high potential for
                                     California wines as gifts items in
                                     imported food shops. More education
                                     for consumers and purchase managers
                                     is needed.*

  8\. Frozen products  HRI & Retail  *Frozen U.S. gold crisp onion rings
                                     and sweet corn are well-liked, while
                                     frozen mixed vegetables sales are not
                                     so good; local customers prefer fresh
                                     vegetables.*

  9.Salmon             HRI & Retail  *Still a comparatively new product in
                                     this market, salmon is present on a
                                     seasonal basis, although most is
                                     imported from Norway at present, and
                                     salmon faces the same distribution
                                     problems as other seafood.*

  10\. Dairy products  HRI & Retail  *Popular and available here. Kraft
                                     Grated Parmesan cheese is a best
                                     selling item. U.S. dairy products are
                                     featured in Metro. Local retailers
                                     believe there is substantial demand
                                     for cheeses and butter, but
                                     competition from New Zealand and
                                     domestic products is strong.*

  *11. Dried fruits    *Retail*      *Already present in the market,
  and nuts*                          retail sales are particularly strong.
                                     The main competition appears to be
                                     the sweet almonds and raisins from
                                     western China, Eighty-percent of U.S
                                     pistachio sales occur during the
                                     Spring Festival and enjoy a very
                                     decent market share.*
  -------------------- ------------- -------------------------------------

III. **ATO Marketing Activity**

A chef training program and seminar for purchase managers would be
reasonable market activities to carry out in Hefei, according to high
ranking managers from foreign retailers. ATO Shanghai is considering
hosting a training program and seminar together with Metro which would
take place at Metro's headquarters in Shanghai. Their professional
kitchen facilities would be an ideal location to exhibit and showcase
U.S. products and to be used for chef training courses.

IV. **Contact Information and Useful Websites**

Agricultural Trade Office, Shanghai

Shanghai Center, Suite 331

1376 Nanjing West Road

Shanghai 200040, China

Phone: 86-21-6279-8622

Fax: 86-21-6279-8336

E-mail: <ATOShanghai@fas.usda.gov>

Website: [www.USDAChina.org](http://www.usdachina.org/)