Voluntary Report - public distribution

**Date:** 10/8/2004

**GAIN Report Number:** CH4616

CH6611

**China, Peoples Republic of**

**Market Development Reports**

**Yide Lu Market: Emerging South China Powerhouse**

**2004**

**Approved by:**

![](media/image1.wmf)Keith Schneller

**Prepared by:**

Joshua Emmanuel Lagos

**Report Highlights:**

This report is the first in a series of reports on wholesale food
markets located in South China. The Yide Lu Wholesale Market in
Guangzhou has grown immensely since China opened its economy to the
world, providing a distributional base for dry commodities, processed
foods, and canned goods to almost every province in the mainland.
Because of a growing demand for imported products, this market will
become more significant for exporters wishing to become major players in
China's economy.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Guangzhou \[CH3\]

\[CH\]

# History of Yide Lu

#  ![](media/image2.png){width="4.0in" height="1.9430555555555555in"}

# 

# Yide Lu Firms

Many wholesalers have been conducting business in Yide Lu for 5-10
years. In general, three types of firms exist: 1) importers/first-tier
distributors; 2) first-tier distributors; and 3) second-tier
distributors. Many of those businesses that are not importers have
exclusive partnerships with importers in Hong Kong. First-tier and
second-tier distributors sell directly to retailers; however, many of
these firms have discontinued working with supermarkets due to tough
payment terms and market service. According to Yide Lu wholesalers, it
can take between 60-90 days to receive payment from Western style
retailers, and if a certain product does not sell, it is returned to the
wholesaler without compensation. Most first-tier wholesalers deal
directly with second-tier distributors, who service "mom and pop" shops
and traditional wet markets. In this environment, payment is expected
within 20-30 days; otherwise, the transaction involves an electronic
transfer or cash at the time of purchase.

Location is critical for success. Many Yide Lu firms have moved from
different sites within the past several years in order to attract more
business, often vying for locations that face the main street since
these usually catch the attention of customers. Once an area is rented,
its lease can last as long as 40 years.

# Marketed Products

![](media/image3.png){width="2.854861111111111in"
height="2.1347222222222224in"}

Regarding canned and processed foods, firms range from selling a lot of
US products to almost none at all. Some identified items include: Kraft
(parmesan cheese), Heinz tomato sauce and ketchup, Hershey's chocolate
syrup, Oregon blue berries, and Del Monte canned vegetables and fruits.
Only one US wine, a red Carlo Rossi, was offered and came in two
different sizes: 1.5 and 4 liter bottles. Many US branded products
including candies such as Snickers are either produced locally or
imported from joint ventures in Southeast Asia.

# Commodity Promotion

Yide Lu distributors do not conduct any special promotions to sell
imported products because they claim Chinese buyers understand the
quality differences between local and foreign goods. Nonetheless,
certain wholesalers stock specific commodities to meet buyers' demands
in order to differentiate themselves from their competitors. For
instance, one wholesaler carries a larger quantity of Del Monte sweet
corn and canned pineapple mixed in heavy syrup, and claims that he has
been able to attract more clientele within this niche market than his
business rivals. In addition, repeat customers can receive special
deals, such as lower prices if they buy in bulk.

# Gray Channel Items

![](media/image4.png){width="2.936111111111111in"
height="2.198611111111111in"}

There are many food safety concerns in the China market at the present
time, so many consumers are willing to pay more for well known, Western
brands. However, Chinese officials have also been cracking down on
illegal smuggling of food products into China to ensure food safety and
to better collect tax revenues. Many exporters and importers utilize
stickers to meet the Chinese labeling requirements, but it is highly
recommended that US companies invest in actual Chinese labels on their
food exports to China. In the coming weeks, we will prepare a report
describing the foreign food registration process and current labeling
requirements for processed foods.

# Exporters and Business Relationships 

Exporters do not necessarily conduct all of their business in Hong Kong,
and often travel to Guangzhou to meet the mainland distributors and to
learn more details about the market. In addition, Yide Lu wholesalers
are very interested in meeting US exporters to not only discuss market
issues and future purchases, but to strengthen their business
relationship in order to ensure continued partnership. This has it
advantages since Yide Lu firms influence what their partners in Hong
Kong are willing to import. Many of these distributors praise US
products for their high quality and are willing to stock more items to
sell to high-end users. Several of the wholesalers also have import
licenses and are eager to do more business directly, thereby, bypassing
Hong Kong middlemen.

# Chinese Buyers

![](media/image5.png){width="2.748611111111111in"
height="2.061111111111111in"}

would be interested in acquiring more legal imports, but was afraid that
his competitors, who primarily imported gray channel items, would take
away his business. As a result, relationships are important, but price
has a heavy influence.

Western style supermarkets including foreign retailers such as Wal-Mart,
Carrefour, Metro, and Park\'nShop are very demanding of their food
suppliers. They not only require the lowest prices and most favorable
payment terms, but also demand proper invoices and documentation.
Therefore, many wholesalers have a strong preference to deal with wet
markets that are not concerned about documentation issues, deal in cash
transactions, and require very little after-sales support. Although it
appears wet markets will continue to serve lower income consumers for
the next few years, more and more Chinese are turning to Western style
supermarkets that provide better quality products, higher hygienic
standards, and more transparent prices. As the authorities continue to
crack down on gray channel trade, there will be more direct imports of
high quality food products with proper documentation and labeling
providing more opportunities for US products.

###### Yide Lu Map

<table>
<colgroup>
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 3%" />
<col style="width: 6%" />
<col style="width: 2%" />
<col style="width: 6%" />
<col style="width: 2%" />
<col style="width: 4%" />
<col style="width: 1%" />
<col style="width: 2%" />
<col style="width: 3%" />
<col style="width: 4%" />
<col style="width: 2%" />
<col style="width: 2%" />
<col style="width: 2%" />
<col style="width: 1%" />
<col style="width: 0%" />
<col style="width: 3%" />
<col style="width: 1%" />
<col style="width: 0%" />
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<col style="width: 1%" />
<col style="width: 3%" />
<col style="width: 0%" />
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<col style="width: 2%" />
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<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 6%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td rowspan="2"><h5 id="renmin-nanlu">Renmin Nanlu</h5></td>
<td colspan="2"></td>
<td rowspan="2"><h2 id="renji-lu">Renji Lu</h2></td>
<td></td>
<td rowspan="2"><h3 id="huijuan-jie">Huijuan Jie</h3></td>
<td colspan="2"></td>
<td rowspan="2"><h4 id="tiancheng-lu">Tiancheng Lu</h4></td>
<td colspan="2"></td>
<td rowspan="2"><h4 id="haizhu-nanlu">Haizhu NanLu</h4></td>
<td colspan="11"></td>
<td rowspan="2"><h3 id="laodong-lu">Laodong Lu</h3></td>
<td colspan="6"></td>
<td colspan="2"><h1 id="jiefang-nanlu">Jiefang Nanlu</h1></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">3/4</td>
<td>4</td>
<td colspan="2">3/4</td>
<td colspan="2">3/5</td>
<td colspan="3">6/7</td>
<td colspan="3">6</td>
<td colspan="5">6/7</td>
<td colspan="3">7/8</td>
<td colspan="3">3/5/8</td>
<td colspan="3"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="33"><h5 id="yide-lu">Yide Lu</h5></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td rowspan="7"><blockquote>
<p><strong>Renmin Nanlu</strong></p>
</blockquote></td>
<td>1</td>
<td>2</td>
<td rowspan="7"><blockquote>
<p><em><strong>Renji Lu</strong></em></p>
</blockquote></td>
<td>3</td>
<td rowspan="7"><blockquote>
<p><em><strong>Huijuan Jie</strong></em></p>
</blockquote></td>
<td>3</td>
<td colspan="2">5</td>
<td>3</td>
<td>3/5</td>
<td rowspan="7"><em><strong>Haizhu NanLu</strong></em></td>
<td colspan="2">6</td>
<td rowspan="4"></td>
<td colspan="2"><blockquote>
<p>6</p>
</blockquote>
<p>6</p></td>
<td colspan="2" rowspan="7"></td>
<td><blockquote>
<p>6</p>
</blockquote>
<p>6/7</p></td>
<td rowspan="7"></td>
<td><blockquote>
<p>6/7</p>
</blockquote></td>
<td colspan="2"><blockquote>
<p>7/8</p>
</blockquote></td>
<td><blockquote>
<p>7/8/9</p>
</blockquote></td>
<td rowspan="7"><blockquote>
<p><em><strong>Guacai Zhijie</strong></em></p>
</blockquote></td>
<td colspan="2"><blockquote>
<p>7/8/9</p>
</blockquote></td>
<td rowspan="7"><blockquote>
<p><em><strong>Jinghai Lu</strong></em></p>
</blockquote></td>
<td colspan="2"><blockquote>
<p>3/5</p>
</blockquote></td>
<td rowspan="7"><blockquote>
<p><strong>Jiefang Nanlu</strong></p>
</blockquote></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2" rowspan="6"></td>
<td rowspan="6"></td>
<td colspan="4" rowspan="6"></td>
<td>6</td>
<td>6</td>
<td rowspan="2"></td>
<td colspan="2" rowspan="3"></td>
<td rowspan="6"></td>
<td colspan="4" rowspan="6"></td>
<td colspan="2" rowspan="6"></td>
<td colspan="2" rowspan="6"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td rowspan="4">6</td>
<td></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">6</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="4"><p><em><strong>Yangting</strong></em></p>
<p><em><strong>Danjie</strong></em></p></td>
<td></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">6</td>
<td rowspan="2"></td>
<td colspan="2" rowspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
</tr>
</tbody>
</table>

**[Legend]{.underline}**

1.  Amusement Park

2.  Under Construction

3.  Bags, Plastics, Party Supplies

4.  Hardware, Cooking-ware

5.  Toys, Jewelry

6.  Dry Goods: Shark Fins, Octopus, Squid, Shrimp, Mussels, Nuts (i.e.
    Pistachios), Mushrooms, Legumes

7.  Processed Foods, Canned Goods

8.  Confectionary

9.  Wine/Liquor