China’s budding online-grocery market a huge opportunity for Canadian food producers

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The first time Matthew Bragg tried to sell Atlantic Canada wild blueberries in China, he sent 1.5-kilogram bags, a club-sized pack that fruit sellers are fond of.

"It's a bigger-volume sale," he said.

It didn't work.

"It was too big," said the vice-president of sales and marketing for Oxford Frozen Foods, an Oxford, N.S.-based family business that is the top global producer of wild blueberries.

"They don't have the mentality where you buy two weeks' worth of food and put it in a deep freeze like you would in Canada."

So this week, he was back with an airlifted pallet of smaller 340-gram bags of quick-frozen New Brunswick berries, ready to try again.

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This time, he had a new retail partner, too – JD.com, a giant in China's fiercely competitive online shopping space.

Canada typically punches below its weight in China, a giant market that has been more successfully tapped by Australians, New Zealanders, Germans and Americans.

But JD is betting that the Chinese conception of unsullied Canadian lands and waters can prove a potent selling point for Canada's fruit and seafood, opening new opportunities for Canadian farmers willing to pursue a distant market with a hunger for clean food.

JD has at least one data point to prove it can work: On June 18, when the company marks its anniversary with a heavily promoted day of sales, Canadian shrimp were the top-selling foreign imported food on the company's online platform, which operates a bit like Amazon or, in China, Alibaba's websites and smartphone stores.

In that single sale this year, JD sold 4.5 million Canadian shrimp.

"The possibilities are immense," JD chief executive officer Richard Liu said Friday, during a visit by Governor-General David Johnston to the company's immense Beijing headquarters, a campus with more than 10,000 employees.

The visit coincided with a one-day national promotion for Canadian products by JD, the first time the company has placed a single country in its retail spotlight. It expected to sell 120,000 Canadian lobsters, as well as smoked salmon, oysters, sea cucumber – and blueberries.

Sales of Canadian food on JD were up 400 per cent in 2016 and another 742 per cent in the first half of this year.

"The speed is very fast," said Wang Xiaosong, president of JD Fresh, the corporate department that hopes it can do for food what the company has done for cellphones: persuade large numbers of customers to forego physical stores for digital purchases, delivered by the company's immense network of warehouses, delivery trucks and scooters.

The growth figures are high because they are starting from a very small base. Chinese online companies have only just begun to figure out how to sell fresh goods, a logistical challenge far tougher than delivering shoes and shirts that don't need cooling or careful handling.

Those hurdles haven't stopped a swarm of companies from trying, however. Some 4,000 online fresh-food shops have emerged, local media have reported. Only 1 per cent are profitable, but they are chasing an unfolding opportunity: though online fresh-food sales today make up just 2 per cent of the Chinese total, the industry expects that to grow to 8 per cent by 2022.

The growth coincides with a rising openness to foreign foods. Chinese tourists now make more than 100-million trips abroad every year, and "when they return to China, they may have some knowledge of foreign brands," said Jiao Dingkun, an analyst at consultancy iResearch. "These people are potential buyers."

Knowledge of China's air and soil pollution is also spreading, pushing more people to consider imported groceries.

To get more Canadian food onto online shelves, JD officials will do road shows in Vancouver, Toronto and Montreal later this month, promising to help suppliers with everything from logistics to product photography and Chinese-language marketing.

The challenge, Mr. Wang said, is for Canadian food producers to find a way to differentiate their goods. Few Chinese know what makes Canadian foods "different from other similar products," he said.

But, he said, the nascent state of online grocery sales means a window has opened into the Chinese market, one that won't exist forever. "Whoever comes in early to build market share may be able to reap the fruits," he said.

It's not merely a question of cost, either. China's middle class continues to grow wealthier, and "we often say that we aren't in a price war but a value war. Quality is very important," Mr. Wang said.

That, of course, means ensuring fresh food is actually fresh when it arrives at a customer's door. JD has begun outfitting some of its delivery scooters with insulated boxes that can maintain food temperatures for 16 hours.

If the company can set in place a robust, countrywide network for handling chilled goods – what industry calls the cold chain – it could even help address some of the broader food-safety problems in a country plagued by poor handling of agricultural products, Mr. Wang said.

For foreign companies, however, logistics may be the easiest problem to solve. China has long valued food self-sufficiency, and it maintains heavy barriers to many imported products.

On blueberries, it's a 30-per-cent duty and, on top of that, a 17-per-cent import tax.

"It ends up being almost 50 per cent," Mr. Bragg said.

That means his fruit won't be cheap: $6.50 for a 340-gram bag.

Still, he is optimistic. The number of Chinese consumers is vast, and a company such as JD can deliver products to 98 per cent of China's population.

Mr. Bragg hopes China will "be as big as Europe for us," he said, consuming some 15 to 20 million kilograms, or roughly 10 per cent of North America's wild crop.

"Is that going to take five months or five years or 50 years?" Mr. Bragg said. That, "I don't know."

With reporting by Yu Mei