Michigan food makers hope to fill China’s appetite

Atwater Brewery owner Mark Rieth is bullish on China.

Rieth plans to get his Detroit company’s craft beer to Chinese drinkers, who he says have a “tremendous appetite” for a good brew. It won’t be this year, but he hopes it can happen by spring.

If exporting were a baseball game, Rieth said Atwater Brewery would be in the sixth inning. He invested in a flash pasteurizer that can increase the shelf life of beer to help prevent spoilage on the trip to China. And he said he plans to hire someone who has import and export experience in the auto industry to lead Atwater’s international business opportunities — and not only in China.

“We want to make sure we have the right partners in place in China so that when we do start exporting, we have all the I’s dotted and T’s crossed,” he said.

Chinese buyers are clamoring for American foods, from craft beer to fruit — good news for Michigan companies, like Atwater, looking to dip their toes into the Chinese market.

Getting a foothold is hard. That’s particularly true for businesses that specialize in fresh foods with short shelf lives. A maze of regulations and bans on certain imports also pose hurdles.

Trade is the federal government’s bailiwick, but Michigan’s agriculture leaders are trying to do what they can to open channels to China’s massive and growing middle class for the state’s farmers, growers and food businesses.

That’s one reason why Gov. Rick Snyder has traveled to the country seven times since taking office in 2011, including a nine-day trip that wrapped up a few weeks ago. Trips have focused on promoting everything from Michigan manufacturing to tourism to agriculture.

Jamie Clover Adams, director of the Michigan Department of Agriculture and Rural Development, led a group of Michigan-based companies, including Atwater, to China last November. She went on Snyder’s trip this month to meet with potential buyers before she returns this fall with another group of food businesses in tow.

“A lot of times, if I go and some of our companies happen to be there … I’ll go to dinner with them and their in-country people,” she said, adding that relationships with government leaders and Chinese distributors are key to opening doors.

“I think, ‘Why would they want me?’ But to the Chinese, government officials are important, even though I don’t feel I add any value. If I can help them by participating in a meeting or going to a dinner, I’ll go.”

The biggest opportunity

The big lure is the size of the potential market: China’s middle class is about 300 million people, with expectations that it will reach 600 million in the next 20 years, according to Chinese e-commerce platform Alibaba.

Even as China’s economic growth has slowed in recent years, its middle class is still growing — 76 percent of China’s urban population will be considered middle class by 2022, according to a 2016 McKinsey & Co. report. In 2000, that figure was 4 percent.

The Chinese “are really interested in different and unique things, and they want food safety and they want quality,” Clover Adams said. “Those are all things that Michigan products and U.S. products have.”

Case in point: Southfield-based Nirvana Tea Inc. is looking to distribute its fruit-infused teas to grocery stores and tea shops in China.

Alecha Benson-Lockhart, the company’s president and CEO, said buyers she met with asked questions about the taste of hibiscus she uses in a tea blend and appeared interested in her company’s fruit flavors.

“They were asking me what made me think about putting fruit in the tea,” she said. “It seemed to me that it was a novelty.”

Benson-Lockhart said exporting to China will help diversify her business and create more jobs locally. She said she is moving production to Southfield from space it used in Detroit Kitchen Connect, a program of Eastern Market Corp.

She said finding a co-packer will be necessary if the company is going to produce the volume of tea a Chinese buyer would want, and has identified a local company to help with that.

Benson-Lockhart said she has stayed in contact with the Chinese buyers she met on the state trip last fall and plans to go back.

She now is working to line up financing for a distribution deal to get her tea to market.

“We want to make sure that when we do, we will be able to execute on it,” she said. “One mistake can be financially very costly.”

The regulatory maze

A host of regulations make it tricky to export to China, from labeling requirements to limits on the types of products allowed into the country.

Among Clover Adams’ stops on the Snyder administration’s most recent China trip was a grocery store hosting a U.S. beef promotion. American beef was allowed back into the country this spring for the first time since an outbreak of mad-cow disease in 2003.

That opens up a growing, $2.5 billion market, the U.S. Department of Agriculture said.

In addition, Clover Adams said the opening of a $250 million pork processing facility in Coldwater, owned by Hatfield, Pa.-based Clemens Food Group, could lead to more avenues for meat exporters.

But American poultry has been kept out of China since 2015 after an avian flu outbreak, according to the USDA, which said reopening the market is a priority. U.S. blueberries are banned, too. Chinese consumers “would eat every one we send there,” Clover Adams said of Michigan’s blueberry crop, one of the nation’s largest.

The federal government is working with China on analyzing risks of spreading pests through blueberry imports to try to change the rules.

“This is a huge opportunity for Michigan blueberry growers if we’re able to get it over the finish line,” said Kevin Robson, a horticultural specialist with the Michigan Farm Bureau in Lansing.

“But there’s a lot of work between now and the finish line.”

Playing the long game

Nancy Niezgocki, who has owned Old World Style Almonds Inc. since 1984, is working to extend the shelf life of the cinnamon-roasted nuts she makes in Livonia and sells at special events at the Fox Theatre and Ford Field, among other venues.

Right now, she packages the snacks in cone-shaped plastic sealed with a twist-tie, which is fine for direct sales but not for international shipping. Plus, Niezgocki said, “there was no dull packaging in China, and we didn’t have anything that stood out like that.”

Niezgocki became interested in exporting to China after participating in Goldman Sachs’ 10,000 Small Businesses program in Detroit, which helped business owners identify ways to grow. Old World Style Almonds has 15 employees, five of whom are permanent. Sales are expected to hit at least $1.3 million for the fiscal year that ends Sept. 30, she said.

She has shipped a small amount to Canada as a trial run, but said it takes longer to prepare to sell in China: “You don’t just jump into it ... or else you set yourself up for failure.”

That’s why companies interested in China say they play the long game.

Rieth, of Atwater Brewery, said his company’s goal is to increase exports from 2 percent of business today to about 20 percent by 2022, within five years. Atwater has sent beer to Canada, Peru and Germany to date, he said.

“Unless you have a distributor partner or feet on the street, you could have product that could sit on shelves and maybe not stored properly,” he said. He also is looking to establish a brewing operation in China or a partnership with a brewer in China to get Atwater’s beer to market faster.

Several food producers pointed to Alibaba as an opportunity.

Clover Adams said the recent trip included a meeting in Hangzhou with Alibaba executives following the company’s recent conference in Detroit.

Alibaba is poised to best serve small food businesses, said Robson of the Michigan Farm Bureau. Yet he cautioned vendors against looking at Alibaba as a way to bypass China’s trade restrictions and regulations.

Niezgocki’s husband, Bruce, attended the company’s June conference at Cobo Center and was interviewed on CNN about the experience.

“They’re so aggressive and so on the forefront of exporting to China that we would be foolish not to (pursue it),” she said. “Not that we’re not going to work with individual buyers, but we’re exploring that avenue for China, definitely.”

Crain’s Detroit Business senior reporter Dustin Walsh contributed to this report.