“China's food safety situation has imposed a huge cost on the food industry. On April 22, at the 2015 International Food Safety Conference, Meng Suhe, president of the Chinese Institute of Food Science and Technology, reported that this is reflected not only in the 'domestic demand mutation' of Chinese people buying milk powder globally, but also in the 'loss of position' of Chinese food in the global market. Some companies report that some high-quality Chinese pepper products must be labeled with Indian labels to be exported. The global competitiveness of China's food industry is thus evident. Meng Suhe stated that it was from 2008 that China's food industry truly began its self-repair process, or was forced to carry out self-repair. Growth rate has fallen for 3 consecutive years, dropping to single digits for the first time The total output value (added value) of China's food industry increased from 578 billion yuan in 1998 to 10.89 trillion yuan in 2014, an 18.84-fold increase in 16 years. Meng Suhe said that this rare high-speed growth in the world is due to the great progress of Chinese society and the historic leap across three different demand stages. She said that from having enough food to a well-off society and then to health, we have completed in nearly 20 years a process that took developed countries 50 or even 100 years. Urbanization is the main driving force for the growth of the food industry. With 500 to 600 million people moving from rural areas to cities, this huge space is the biggest opportunity for the food industry. In 2014, 37,607 food enterprises above designated size in China created 10.89 trillion yuan in output value, maintaining an 8% growth rate. However, this growth rate was 0.3 percentage points lower than that of industrial enterprises above designated size nationwide, and this is also the first time that China's food industry growth rate has dropped to single digits. In fact, the growth rate of China's food industry has been declining for three consecutive years, and the profit rate has also been declining, from 8.6% in 2012, to 7.4% in 2013, and then to 7% in 2014, a drop of 1.6 percentage points in three years. For an industry of 10.89 trillion yuan, this means a reduction of 174.2 billion yuan in profits each year. Meng Suhe said, China's food industry is facing the most difficult and relatively long transition period in nearly 30 years. The most important transformation is that the food industry is gradually shifting from terminal competition based on 'price wars' to brand competition based on integrity and innovation, and value competition based on supply chain safety. Therefore, food safety has become the foundation of industrial competitiveness. Meng Suhe said that in this situation, whether this deep adjustment is forced or voluntary, as we enter the adjustment period, contradictions that were not apparent before will gradually emerge. This does not mean that things are worse than before, but that various deep-seated contradictions that were not discovered before—especially food safety issues—are emerging one by one, and we need to resolve them one by one. She said, Despite this, China is still the world's largest market, and the vitality of China's food industry is still being released. We can still position the current period as a strategic opportunity period for China's food industry to achieve great success, but 'we have to fight a tough battle.' Important turning point, facing new trends How to analyze the current situation of China's food industry? Meng Suhe said that first, the policy, economic, social, and technological environment of China's food industry are different from before, and the regional distribution of the food industry is gradually becoming balanced. The advantage of raw materials is forming industrial advantages. The top five provinces in the national food industry are all provinces with advantages in raw material resources. Second, from the perspective of the scientific and technological community, the government's work must be praised. The Chinese government's regulatory approach to food safety is becoming increasingly scientific and orderly, its handling of crises is more composed, and food safety management is gradually aligning with international standards. Many food safety hazards discovered in 2014 were first found after large-scale inspections by government departments. After discovery, warnings were issued to the industry and solutions were proposed. This chain of connection is relatively complete, not just crisis management. Meng Suhe said, 2014 was an important turning point. The enforcement of some food safety incidents this year was more composed and orderly than in the past, and the implementation of the recall system has gradually brought China's food safety management in line with the world. Third, the overall level of food safety in China is steadily improving. From 2004 to 2013, the number of food poisoning cases nationwide showed a clear downward trend. Meng Suhe said that compared with traffic accidents (28,000 deaths in 2014), although the number of deaths from food poisoning (110 in 2014) is much smaller, the sensational effect of food safety incidents is greater, and this is the reality. Finally, product innovation across the industry is accelerating. Despite the shadow of a trust crisis, taking the dairy industry as an example, product structure adjustment is accelerating, with output declining by 1.23% year-on-year, but main business revenue increasing by 18%. Food safety faces four major challenges Meng Suhe said that China's food safety faces four major challenges. First, food safety risks are moving forward, and agriculture-related enterprises have become high-risk groups. The main problem in China's food safety—illegal additives—is a surface phenomenon. In fact, the biggest hidden danger is at the front end, in the atmosphere, water sources, and environmental pollution. Without clean soil and clean water, how can there be food safety? This problem is difficult to solve effectively in the short term. Second, food fraud has become a cancer of the food industry, and this is a global problem. Third, the sources of food raw materials are becoming increasingly diversified, supply chains are becoming more complex, and imported risks are increasing, becoming new risks. At present, because China's agriculture is relatively backward, the three basic raw materials of the food industry—meat, dairy products, and sugar—have price troughs. Although the cumulative export value of the food industry increased by 6.2% in 2014, the trade deficit was 611 million US dollars. Large-scale raw material imports show that the development trend of China's food industry in the next 30 years is to use global advantageous resources to serve China's growing demand for healthy food, and the trend of globalization is increasing. At the same time, imported risks are also increasing. Any food safety risk abroad will affect China's food market, making supervision more difficult. Fourth, the trust crisis still exists, and public science education still needs to be strengthened. There is no clear correspondence between the hot topics of public opinion and the real food safety issues. The food additive issue, which receives the most attention, has relatively good monitoring levels, while aquatic product issues receive relatively low attention. In 2014, some changes occurred in China's public opinion environment, and mainstream media's understanding of food safety became increasingly accurate. At the 'Two Sessions,' food safety ranked second among the issues that representatives and committee members previously focused on, but this year it ranked tenth. How should large enterprises take responsibility Meng Suhe also raised new propositions for large enterprises in the food industry. She said that in the past 30 years, Chinese food enterprises have had relatively good times, 'big water raises big fish,' and a large number of large-scale food enterprises have been established. However, the development process focused on total expansion has in fact led to overcapacity in the food industry. She said that overall, there has been too much emphasis on seeking scale benefits from technology and management, and too little on leading industry innovation to form a differentiated pattern, resulting in a market that is too dense, too crowded, and full of price wars. First, probability risk. No enterprise can be infallible. There is a great contradiction between China's backward and scattered agriculture and highly intensive industry. An enterprise has to face hundreds of suppliers, so it has greater risks, heavier responsibilities, and greater impact than small and medium-sized enterprises. Second, attention should be paid to balancing the interests of all parties in the supply chain. Large enterprises are the biggest beneficiaries of the market. They should consider the balance and harmony of interests between upstream and downstream in the supply chain. They should 'think of others' when dealing with suppliers, and not rely solely on squeezing others' profit space to achieve their own interests. The key is to find suppliers with similar concepts as reliable strategic partners, and to pursue sustainable profits rather than maximum profits. Otherwise, unscrupulous suppliers who are squeezed and have no profit will recover their interests through fraud. Third, it is necessary to strengthen risk communication and public science education during 'peacetime,' which is far more effective than crisis public relations. Meng Suhe said that the Chinese food industry in the transition period still has too much to do. We should lay a solid foundation for China's food industry as soon as possible, step out of the quagmire of fraud and trust crisis, and enhance the competitiveness of Chinese food manufacturing. 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