Dragon companies

In early February, representatives from VPN, LEI and C-point visited China, in connection with an exchange project between the Chinese LEI, LEA and CEFA, the lobby group for mushroom growers in China. The idea behind the project is to improve commercial relationships and exchange knowledge of both markets. An important part of the project is introducing Chinese and Dutch trading partners.

By Marc Maas

This first visit by the Dutch delegation was aimed at getting to know the other participants. The problems facing the mushroom growing sector in China and the Netherlands were inventoried and expectations from the project drafted.

The time in China was also used to visit various growing facilities and see some of the amazing range of varieties offered for sale on the Beijing market. The programme included visits to an Awei mushroom grower, a Shii-take grower and the market in Beijing.

Both growing facilities are so-called Dragon companies, that offer many thousands of small growers the chance to produce fungi and market their produce via these organisations. This satellite system has a social responsibility for the small companies in the surrounding area. They may be called private companies but in China the interest and influence of the government are still strongly felt in the organisation. Funding comes from the local authorities, which complicates the conflict of interests.

Market

On one of the wholesale markets in Beijing the “mushroom street” houses some 30 dealers who trade 300 tons of mushrooms each day. This is around 1.5 % of the total 8.6 million tons produced in the entire country (in 2002). See graph below.

The rise in total mushroom production in China is impressive. In 1996 production levels of the whole range of mushrooms reached 3.5 million tons. An increase of 250 % in six years!

Exports have been lagging behind growth in recent years. Export is stable and in fact dropping as a result of import restrictions imposed by Japan, the USA and Europe.  These trade barriers look like staying in place for the time being. In the USA, people even expect them to be extended. If the export restrictions in the European Union were lifted for mushrooms for the canning industry, the results for the sector would be disastrous.

General developments

Most growers use quite primitive lean-to buildings, with the plastic part being south-facing. Reed matting is placed over the plastic at night to improve the insulation properties. These lean-to sheds generally provide 1 or sometimes 2 crops a year. The huge variation in temperature zones in this country permits year-round production. With major effects on logistics and homogeneity.

Supermarkets are springing up and developing faster than the production units. The demand for fresher, quicker, larger volumes and food safety guarantees is becoming increasingly important here too.

Another development is a shift in production areas. A shortage of raw materials such as wood has forced activities to relocate to other provinces, where there are still forests. China is one of the countries that imports much illegally felled timber. As well as this threat, chiefly to wood fungi, many logistic changes take place throughout the year. As only one crop can be yielded each season, purchasers have to move to colder regions to create a form of year-round production. The mushroom growers often move with them. Mushrooms such as oyster mushrooms and Agaricus grow on waste products from rice harvesting. The availability of this raw material is not (yet)a problem.

There are about 900 different types of fungi in China. In the region of 50 types are grown commercially. China has a rich and long traditional of mushroom consumption. As well as for culinary purposes, many fungi are grown for their medicinal properties. The Chinese are great believers in natural healing, where mushrooms fulfil a large role.

Nanchen Tianhong

Shii-take growers Nanchen Tianhong Agriculture CO., LTD is based in Daxing, Beijing. This company is a kind of satellite, and also described as a ‘Dragon Company’.

Production occurs in small cylindrical bags weighing 1 kilo. The thousands of suppliers fill their sheds with 2000 to 100,000 of these bags, which are supplied by the mother company Nanchen Tianhong.  They are filled by hand with chippings made from wood pruned from fruit trees. The suppliers make sure the length and blend of the wood chips is the same each year, plus the basic mixture must be between 3 and 6 months old.  The humidity of the ‘sawdust’ must be below 20 %. This material is then sterilized and inoculated in a sterile room. After a month of incubation the bags are transferred to the growing areas and encouraged to start fruiting.After harvesting, the mushrooms are delivered to the mother company. This is more or less an obligation, as the substrate is supplied free and minimum prices have been agreed.

This method gives the mother company a considerable supply so they are able to meet the demands of their customers. This system gives a good insight into what is produced where so provides a certain level of assurance for food safety. Substrate preparation is done by the company itself and when the produce is readied for sale inspections can be made for compliance with the strict standards of ‘Westerns’ buyers.

Buyers

The company produces for the top of the domestic market and counts Carrefour and Wall-mart as customers. With its 1000 satellite companies the main production concerns Shii-take for the convenience market with a turnover of around 3 million euro. The fresh shii-take is blanched and vacuum packed in plastic. Various flavourings can be added to the product as required. The final product has a storage life of 6 months. The production capacity of the substrate and marketing company is 1.5 to 2 tons of shii-take daily - this is 70 % of the total production. The remainder is sold fresh at the wholesale market. As well as shii-take, 10% of the production is of other varieties, including White-Elf mushrooms and Pleurothus eryngii.

 30 % of consumer purchases of mushrooms are done in supermarkets. This percentage is low, but increasing. The company gets a price of approximately 4 RMB (€ 0,40)/ 100 gram. The produce is mainly sold as a snack and eaten with Chinese noodles or rice. 

Health aspects are a deciding factor when purchasing mushrooms. The healthy and medicinal working of certain mushrooms is viewed very positively in China. The motto is beneficial and delicious.

Beijing Yuxue Awei Mushroom Technological Development CO.

The Dutch delegation also enjoyed a guided tour around the Beijing Snowy-Awei farm in Yuxue in Beijing. Awei stands for White-Elf mushroom, a beautiful white, fleshy mushroom. The current company, co-owned by Mr.Zhaobing, was started in 2000 and already comprises 1500 units of 800 m².The mother company has around 250 lean to sheds and controls the chain in the Beijing region. The company takes care of substrate preparation and buys back the produce of the 1250 associated (part-time) growers. The company conserves Awei mushrooms and packages the results in a variety of forms. Last year, the same company also opened a growing facility in Japan, where an agent handles sales.  Like Nanchen Tianhong, this is a private enterprise, but the government is co-owner of this “Dragon Company”.

The Awei

Awei mushrooms were discovered by the present owner in the mountains to the north of Beijing. He noticed that women from a certain local tribe quickly recovered after giving birth by eating this type of mushroom - they rapidly regained their strength and could resume working. Awei only grow in the wild in Mulei, the Tuoli desert and the area around Gobi in Xinjiang. The local population uses it to prevent fever and gastrosis. It also lowers cholesterol levels in the bloodstream and stimulates digestion.

It took Zhaobing 5 years of experimentation before he could produce the mushroom commercially.

Production

The raw materials for substrate consist of wood chippings and waste from the cottonseed industry.  5 % of spent substrate is also reused. The waste material is allowed to ferment aerobically. The material is stacked in windrows of 75 centimetres high, with an opening every 50 centimetres for the oxygen supply. When the bags have been filled with substrate, they are sterilized for 12 hours at 100 degrees Celsius, cooled then inoculated.

The production units are so-called lean-to sheds with a growing surface area of between 600 and 800 square metres. Each unit holds 5000 bags filled with 1.3 kilos of substrate. The yield per kilo of substrate is 15 to 20 %. The growing cycle lasts 90 days and depends on the season. Colonization takes 60 days. Peak production is between February and April, while production comes to a near standstill during the hot summer months.

Market

Total production is 500 to 800 tons annually, of which 40 to 50 % is canned. The majority is sold fresh. Most of the production is destined for the Chinese market (80 %), one fifth of the total production is exported to Taiwan and Japan. Japanese buyers come and inspect the process twice a year. Zhaobing indicated that a hygiene standard is a necessity to export this produce.

When the mushroom is sliced there is no brown discolouration through oxidation. Slices can be eaten as a meat or fish substitute, or it can be used as a salad ingredient. Fresh mushrooms can be stored for around two weeks. Zhaobing sees excellent prospects for the product. “The Awei will take over the position of shii-take and white Agaricus ” he predicts. “It's now a niche market, but at the same time one with gigantic growth potential; the Awei will become a mass product.”

The market for Awei offers many opportunities. Mr. Zhaobing is careful to protect his process, but realises that the competitors are following at his heels. He sees great possibilities in producing close to the Japanese sales market. He plans rapid expansion to retain and consolidate his market share.

Price build-up from producer to consumer:

·         Producer 10-20%

·         Local purchase company (village collectors) 10%

·         Wholesaler at wholesale market 30-50%

·         Retailer 30-50%

·         Consumer