Friday, May 23, 2014

(BN) China’s Taste for Norwegian Salmon Boosts Air Shipments: Freight

(Bloomberg ) China's burgeoning middle class is eating more Western food and drinking more imported wine than ever, boosting shippers of salmon from Norway and Beaujolais Nouveau from France.

Finnair Oyj (FIA1S), Finland's biggest airline, could double shipments of salmon to China and Japan to 600 tons a week by 2020, from 300 tons currently, Juha Jarvinen, managing director at the cargo division, said in an interview in Tokyo. The fish are trucked in from Norway, which doesn't have direct flights with Japan or China, and flown to Asia, he said.

China, poised to overtake the U.S. as the world's biggest economy on a purchasing power parity level as soon as this year, is consuming more Western food and produce as the country's per-capita income is poised to double by 2020. The growing middle class is eating more Kentucky Fried Chicken, McDonald's Corp. burgers, and snapping up everything from Beaujolais to Dutch flowers.

"Demand for European goods is growing in Asia and for some categories fast air cargo is the only viable option," Mikko Ervasti, an analyst at Evli Bank Oyj in Helsinki, said by e-mail on May 16. China "is where they have volume growth and inflation, so it is definitely important for Finnair's operations and finances."

Growing Affluence

In absolute terms, China already has the world's largest middle class, defined by the World Bank as consuming between $10 and $100 a day. About 11 percent of China's population falls in that category, which still lags well behind Brazil and South Korea at similar stages of economic development.

China's urban middle class is forecast to grow to more than 75 percent of the population by 2022, compared with 4 percent in 2000, according to a June 2013 report by McKinsey & Co. By that time urban consumers will earn between 60,000 yuan and 229,000 yuan ($9,600 to $37,000) a year, the report said.

That growing affluence is spurring more imports of Western brands to China, the world's biggest buyer of luxury goods in 2012, employing sommeliers in wine shops and prompting the opening of more Carrefour supermarkets.

China is also increasing imports of flowers. The country imported 6,581 tons of cut flowers last year, an increase of 17 percent from the year before, according to Geneva-based International Trade Centre data.

Shipments of cut flowers to China from the Netherlands, the world's biggest exporter, rose 56 percent to 238 tons as it shipped roses and orchids, while Thailand was the biggest supplier to the world's most populous nation.

Shortest Link

Finnair, offering the shortest flights between Europe and northeast Asia, has said it aims to double flights to Asia by 2020. The airline currently flies to four cities in mainland China -- Beijing, Chongqing, Shanghai and Xi'an -- as well as Hong Kong and three cities in Japan -- Tokyo, Osaka and Nagoya, according to its website.

Finnair posted a net loss of 28 million euros ($39 million) in the quarter ended March 31 amid high fuel costs and a weaker yen, it said this month.

"Salmon is our biggest growing cargo," Jarvinen said on March 18. "We could double that with the increase in the middle-class in China."

Salmon costs more than twice as much as pork in Wal-Mart Stores Inc. (WMT)'s Beijing store, according to a company website.

Finnair, based in Vantaa, Finland, rose 0.7 percent to 2.96 euros at the end of trading in Helsinki yesterday. The stock has gained 6.9 percent this year.

China's economy was 87 percent of the size of the U.S. in 2011 based on a purchasing power, according to a statement last month from the Washington-based International Comparison Program, which involves organizations including the World Bank and United Nations.

Beaujolais Nouveau

Projecting growth rates from 2011 onward suggests China's size when measured in PPP may surpass the U.S. in 2014, according to Arvind Subramanian, a senior fellow at the Washington-based Peterson Institute for International Economics.

While fish is also the biggest food export to China by Air France-KLM Group, France also ships crates of Beaujolais Nouveau annually to coincide with the release of the new vintage, Jean-Claude Raynaud, a spokesman for the company, said by e-mail on May 20.

China, the world's second-largest economy, bought more than 200,000 bottles of Beaujolais Nouveau in 2012, making it the world's sixth-biggest market, ahead of Switzerland, Italy and the U.K., according to figures from Ubifrance, based in Boulevard Saint-Jacques, France, the nation's export promotion agency.

The wine is flown to Asia from France ahead of the release date at midnight on the third Thursday of November, when shops and restaurants are allowed to start selling it.

'Brand Conscious'

Total consumption of wine has also jumped recently, increasing 59 percent between 2008 and 2011, according to figures from the Wine Institute, based in San Francisco, which is an advocacy association for California wineries.

Carrefour SA, France's largest retailer, is focusing on growth in China as well as Latin America and Europe. The Boulogne-Billancourt, France-based company opened three hypermarkets in China in November and announced another five in January.

"It's not a secret that the Chinese are quite brand conscious, especially the more affluent parts of the demographic," Andrew Orchard, a Hong Kong-based analyst at CIMB Group Holdings Ltd. said by telephone on May 20. "Food itself is a big thing. You can look at any type of luxury or expensive food and you will be seeing a pick up."

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