China is now the world’s second biggest economy after the U.S., as fourth-quarter economic and political problems took their toll on former No. 2 Japan's year-long performance: a strong yen dampened exports; real gross domestic product slid by 1.1 percent; car purchases dropped with the end of government subsidies; and cigarette sales were bashed by a new tax on tobacco. Adding to the pressure on the Japanese government were a huge public debt, protracted deflation and low approval ratings. China’s economy has overtaken Japan’s several times during individual quarters, but this is the first time it has jumped ahead based on full-year performance. Despite the poor showing in the fourth quarter, Japan’s real GDP actually expanded by 3.9 percent for the year.

Soy isoflavone supplements apparently improve the endothelial function of blood vessels of hypertensive patients, leading to a drop in blood pressure, according to a new meta-study by Chinese researchers. The review of findings from eleven clinical trials showed that a daily intake of 65 to 153 mg of soy isoflavones with soy protein for at least a month and up to a year significantly lowered blood pressure in people with  high blood pressure. According to the researchers, the average decrease in blood pressure (5.9 mmHg) compares favorably to decreases induced by antihypertensive agents, such as beta-blockers. The researchers said it is still not clear how soy isoflavones work in hypertensive individuals, but evidence suggests that “oral isoflavone supplementation leads to a significant improvement in endothelial function.”

Green process herbal extracts and natural supplement manufacturer ONE Bio, Corp. announced that subsidiary Green Planet Bioengineering Co., Ltd., has contracted with botanical products distributor P&G Ingredient to distribute Green Planet products in the U.S. Included in the distribution agreement are raw extracts such as resveratrol, stevia leaf powder, 5-HTP, polygonum extract and spirulina powder. P&G produces botanical and chemical extracts, besides distributing raw botanicals and chemical ingredients. ONE Bio said the distribution agreement is a key element of a plan to expand sales of nutraceuticals, health-related products and organic food products beyond China and Japan to the U.S.

Following a three-year gap working in the US , PepsiCo chief marketing officer for Greater China, returned to the country to find it greatly changed, and with change accelerating. In addition to spreading urbanization Lee sees a greatly expanded digital footprint with activity extending far beyond tier 1 cities, creating anomalies with people without basic plumbing knowing English soccer stars. In this fast changing environment Lee sees local competitors as more effective than multinationals that rely on approaches that are outdated and not relevant for China; local competitors, he says, are fresher, faster moving and more innovative in their marketing.

Campbell Soup Company has entered into a joint venture deal with Swire Pacific Ltd., forming Campbell Swire, to help develop its soup business in China. Campbell will take a 60 percent stake in the joint venture, which will start operating in early 2011 from Campbell's existing offices in, and will take charge of manufacturing and distribution in China, now the second largest economy and with one of the highest per capita levels of soup consumption worldwide, although most is homemade. 

Seventy percent of Chinese worry about food safety and think government should improve management and surveillance to protect people, says a survey by Insight China magazine and Tsinghua Media Survey Lab. Consumers are concerned about incidents like the 2008 baby formula contamination, which killed six children and made over 300,000 ill. They worry most about the health impact of puffed and fried foods popular with children, but they are also concerned about many other types of produce, processed and instant food. Other perceived threats include excessive pesticide residue and abuse of food additives. The central government is trying to improve food safety by investing in quality inspection centers and proper food hygiene, and by ensuring accurate public information.

Canadian stevia extract producer GLG Life Tech Corporation says that its joint venture partner China and Healthy Foods Company Limited (CAHFC) has begun production of four all natural stevia-sweetened beverages under the ANOC brand name in China. The production line is capable of producing 108 million 500 ml servings a year, and is starting with green tea, black tea, peach juice and orange juice products. Key Chinese government objectives in participating in the joint venture are to show that a rural farming region such as Xioagang can support a strong farming economy and that industrial development will increase economic prosperity in a rural region. According to GLG, China’s food and beverage industry has grown 20 percent a year from 2002 to 2009, when it was valued at $693 billion.

There are a number of larger Latin American companies, known as “Multilatinas,” that are competing globally with corporations from the developed markets as well as those from other rapidly developing economies, such as China and India. A 2009 report from the Boston Consulting Group lists 100 “new global challengers” from Latin America, including Mexico's Grupo Bimbo and Embraer from Brazil. This push is supported by improved socio-economic conditions in the region, including economic reform and stability, better education, and technological advance, reinforced by vast a natural resource base. The region’s GDP equals that of China, and is expected to have grown some 4 percent this year. Some Latin American companies are investing abroad, including acquisition deals, and activities overseas have been helped by a series of bilateral free trade agreements with Asian countries and a general trend towards a Free Trade Area for the Asia Pacific that could include some Latin American countries. 

Omega-3 EPA/DHA supplier Ocean Nutrition Canada (ONC) announced that a collaboration with Singapore-based agribusiness Wilmar International has resulted in the launch of Wilmar’s Arawana 3A+ premium cooking oil containing ONC’s MEG-3 fish oil. A major market for the oil is China, whose government determined through a national survey that the average daily intake of EPA/DHA is only 37.6 mg, less than 25 percent of the level accepted by the U.S. Institute of Medicine. According to ONC, the oil is now widely distributed in China and available at supermarkets and traditional markets. Arawana 3A+ premium cooking oil is a blended vegetable oil product that “contains sufficient Omega-3 to help Chinese consumers meet IOM Omega-3 intake recommendations,” according to ONC.

Beset by a rise in chronic illnesses such as diabetes and cancer, Chinese consumers, especially women and the elderly, have turned to wellness foods and beverages, whose sales in 2009 were $1.5 billion, up 28 percent from five years ago. Multinational food giants Nestlé SA and PepsiCo and other companies have begun to mine the health food market opportunities in China. A new Quaker oatmeal product, for example, contains the traditional Chinese folk medicines wolfberry and tremella, a fungus thought to benefit the skin. Nestlé is clinically testing five new functional food products, including a mulberry yogurt for diabetics that regulates blood sugar. And, according to Euromonitor, Chinese consumers spent $9 billion on meal replacements, vitamin pills, sports nutrition products and other dietary supplements.

Besides vitamin D and calcium supplements – which an Institute of Medicine committee said were unnecessary and perhaps even dangerous – experts interviewed by Wallet Pop listed seven other products that should be avoided consumers. At the top of the list is the calorie-packed sweetener high fructose corn syrup, which has been blamed for the rise in obesity and diabetes. HFCS is being gradually replaced in food products by other types of sweeteners. Also on the list is bisphenol A (BPA), a chemical widely used to make plastic bottles and line food cans. BPA can leak into baby formula, water, food and cosmetics and harm the brain. Other blacklisted substances include bovine growth hormones; genetically modified foods; parabens that prevent growth of mold, fungus and bacteria in cosmetics and food; trans fat; and anything “Made in China.”

In an example of China’s growing ambitions in the global mergers and acquisitions market, reports indicate that one of the country’s largest food and beverage companies, state-owned Bright Food, is set to acquire US vitamin and supplement retail chain GNC Holdings for US$2-3 billion dollars. Bright Food operates 3,300 grocery outlets in China, specializing in novelty food, and had recently been in talks to acquire United Biscuits. GNC has some 7,100 stores. If it goes ahead, the acquisition is part of a wider pattern of government-backed Chinese corporations aggressively pursuing international investment opportunities. 

A review conducted in China of several trials that studied the effects of ginseng on cognitive function has revealed that it has no beneficial effects on study subjects’ cognition. It is currently a best-seller in the global herbal market but, although it does appear to have some benefits for cognition and quality of life, the study concluded that there was a lack of credible evidence showing that Panax ginseng enhances cognitive capability in healthy participants, and little in the way of quality evidence that it benefits patients with dementia. The review also recommended the need for more thoroughly designed studies that would look deeper into the herb’s supposed health benefits.

Japanese and South Korean retailers are opening shopping centers and convenience stores in Vietnam. Targeting mostly young consumers and middle-income families, these retail outlets are a new business concept in the country. With four convenience stores operating in Ho Chi Minh City, FamilyMart Co. of Japan plans to open about 300 more in the city and is looking at Hanoi too. Meanwhile, South Korean retail giant Lotte has opened two supermarkets, with one branch large enough to include a six-screen cinema complex. Lotte plans to build more than 30 supermarkets in the country by 2018, and build a department store in Hanoi. After joining the World Trade Organization in 2007, Vietnam has allowed foreign companies to enter its retail business, which grew to 1,200 trillion dong (about US$61 million) in 2009, a threefold increase from 2004 figures, according to government data. The South Korean and Japanese companies are hoping to gain a foothold before global giants like Wal-Mart and Carrefour arrive in the country.

McCormick chairman, president and CEO, Alan D. Wilson, said in an interview that his company is charting large-scale expansion in India. Wilson added that the recession had no significant impact on the U.S. seasoning market, which doubled in the past 20 years. Asian markets account for 7% of the company’s business and McCormick hopes to increase this to 15% in the next five years. China, where McCormick has located its biggest operations in Asia, and India, where branded seasonings account for just 10% of a market valued at $5 billion, present the biggest expansion opportunities for the company. Wilson sees his company benefitting from the growing popularity of various types of cuisine worldwide. Meanwhile, McCormick plans to implement its recipe-driven sales strategy in India, from which the company sources some 40 spices including pepper.

The debate in China over the safety of genetically-modified food heated up recently when the Ministry of Agriculture awarded bio-safety certificates to a corn variety and two rice varieties that were genetically modified to resist pest damage. The move makes China the first country to approve GM food staples for field testing. But there remains significant disagreement among government officials and scientists over the question of commercializing GM food, despite the lack of scientific evidence that it is dangerous to humans. There is agreement, however, that ongoing research into human and environmental safety issues, as well as economic security issues, is needed. With food security a high priority, the government is looking closely at gene modification technologies as a way to ensure food supplies keep up with the ever-growing population.

Seeing an improving global economy, Starbucks Corp. CEO Howard Schultz said his company plans to more than double the rate at which it opens stores. For fiscal year beginning October 2010 Starbucks plans to open 500 stores, which will be the biggest number since the 1,669 stores opened in fiscal 2008. 400 stores will be located outside the U.S., most of them in China where Schultz sees great potential. Starbucks has nearly 70% of the market in the country and Boston Consulting Group estimates that middle-income and affluent consumers will nearly triple over the coming decade. Starbucks plans to set up a farm and processing facilities in Yunnan, China.

Chinese companies, many of which are state-run, accounted for 10 percent of the value of cross-border acquisitions this year. Cross-border deals often generate concerns, and the growth in the global influence of what people see as communist-controlled enterprises is regarded as unacceptable in some quarters, partly because many are worried that politics will influence decisions more than profits. Some countries, including Australia and Canada, are creating obstacles to Chinese investment, especially in primary industry. But there are good reasons why the trend should be allowed to continue. First, the current economic malaise in the world has been partly attributed to economic liberalism, giving a boost to those advocating more state capitalism. Second, Chinese companies are relatively new to the scene and far from being able to influence supply conditions significantly. Third, many state-run companies in China have to compete at home too, and competition in foreign markets should ensure that Chinese investments are profit-oriented. Fourth, some of the Chinese investment is coming from the private sector, such as Geely, the new owner of Volvo.  Finally, the global economy needs the capital and energy that Chinese investment should bring.

The USDA’s Foreign Agricultural Service reports that global organic food sales more than doubled in the five years ending in 2008 to $7.2 billion from $3 billion. One of the world’s hotspots is China, where analysts forecast sales to surpass $8 billion over the next five years. Launched in 1990 with the export of organic tea, the Chinese organic foods industry now exports minimally processed or raw foods such as honey, soy powder, beans, sesame, fruit, vegetables and poultry to North America, Europe and Japan. Annual growth rate in Chinese organic exports was 30 percent from 1995 to 2006. Demand for organic food among domestic consumers in China was sparked by a spate of food safety issues. More affluent consumers are the primary buyers of organic products in the country.

China’s largest Internet companies, Alibaba, which controls 75% of the country’s ecommerce through business-to-consumer site Taobao, and Baidu, which accounts for 80% of online search traffic in the country, are set to become fierce competitors with their plans to launch ventures competing directly with each other’s core businesses. Baidu, in partnership with Rakuten, Japan’s leading ecommerce company, launched the Lekutian online shopping site. Meanwhile, Alibaba revived its ecommerce platform Taobao Mall and launched its Etao search engine. The companies also face a new competitor in the world’s biggest retailer, Wal-Mart Stores, which plans to start an ecommerce site for the Chinese market, forecast to reach $65.9 billion in value in 2010. Online sales will account for 7.2% of the retail market by 2013, according to Deutsche Bank.

The $68 billion global market for vitamins and dietary supplements is growing more slowly these days, though certain product categories and countries report strong sales. The enduring recession, regulatory problems and product saturation in older markets have all contributed to slower overall growth, according to Euromonitor. Nevertheless, certain supplement categories – fish oils, lutein and zeaxanthin, glucosamine and probiotics – report double-digit growth. Buoying the success of these products is strong awareness among aging Baby Boom consumers of the scientific evidence supporting their health benefits. A notable trend is the popularity of combination supplements, such as fish oil blended with CoQ10 or tocotrienols. The $20 billion U.S. market and $8.2 billion Chinese market are posting healthy growth trends, while the No. 2 market, Japan at 15.3 billion, is showing flat growth, due in part to a regulatory clampdown on health claims.

International companies operating in China must expand their sales, marketing, and distribution efforts to cover the country’s smaller cities or risk losing market share to domestic and foreign rivals. Demand for consumer goods is increasing in these secondary cities, which are territories not familiar to many multinational consumer goods vendors but often serve as launching pads for regional Chinese vendors before they grow and expand into the country’s larger cities. Realizing this trend, international consumer goods vendors, such as Procter & Gamble Co. and KFC Corp., expanded their operations to include provincial cities. P&G products are now available in Tier 5 markets. In order to expand to new territories, companies must realise that there are regional variations between the smaller cities, with different cuisines, dialects and cultures, as well as climates. The companies will also need to be able to work not only with modern trade channels, but also the traditional channels in the country, which are likely to exist for some years to come. Local merchandizing is often weak, and so the companies might also need to build and run a large sales force of their own.

An informal study of single, “twenty-something”  office workers in 12 Asian and Australian cities, found that toast remains the dominant breakfast whether at home, during the commute, or at the office. The McCann study involved workers who were asked to take photos of their breakfasts and lunches for two weeks and upload them to the publication’s Facebook page. Though toast dominated the breakfasts, there was a comeback of traditional foods with some innovations: instant noodles and rice dishes in “convenient takeaway forms.” Cereals still struggle as a breakfast choice everywhere but in Australia. Favorite brands included Nutella, Smuckers, Nescafe, Coffeemate and Minute Maid, and Danone, Meiji and Nestle yogurts. For lunch AdWeek found a relative lack of brand names, but a rise in popularity of pasta.

Thanks to consumers’ ongoing demand for healthy, low-calorie beverages, producers and industry experts expect continued strong sales growth for natural, sugar-free juices as well as new fruit and vegetable offerings. While Europe led in consumption of natural fruit and vegetable juices at 11 billion liters last year, North Americans drank about 9.5 billion liters and Asians about 8 billion. A leading U.K. beverage consultant expects a 1.2 percent sales increase in Europe in 2011, though a global juice packager sees Asian and South American markets showing the strongest growth. Selling well in produce aisles are Bolthouse, Odwalla, Naked, Acai and pomegranate juices, while new products like coconut water are gathering steam. Meanwhile, Coca Cola is fortifying its traditional beverages with vitamins and nutrients and low- and no-calorie options.

To further examine the level of estrogen in diary products, the Ministry of Health will be conducting another examination in Beijing and Shanghai using not only manufactured diary products but breast milk as well. The Chinese CDC also formed a team of experts from the area of food safety, pediatric, and women’s health to discuss results from a previous examination in Wuhan, which they say was performed meticulously. The experts are not yet sure if the dairy powder caused an elevated estrogen level in the children who participated in the Wuhan examination. Ministry of Health resources say that the results of the recent test can be obtained in about two or three days, but they are not sure how they will be announced to the public. 

U.S. natural and organic products supplier Hain Celestial Group continues to expand its business beyond North America and Europe with the introduction of a co-branded organic infant formula in China through its Hutchison Hain Organic joint venture. Produced in Switzerland, Earth's Best (U.S. and Canada) and Zhi Ling Tong (Chi-Med, China) have received organic certification from the China Organic Food Certification Centre. Hutchison Hain Organic began marketing and distributing selected Hain Celestial products earlier this year through A.S. Watson and PARKnSHOP stores in Asia. Chinese pharmaceutical holding company Chi-Med estimates that sales of infant formula in 2009 in China were about $3.4 billion. By the beginning of 2010, Zhi Ling Tong was being sold through 13 sales offices across China covering more than 130 cities.