DuPont Sees Niche in Curing China’s Indigestion

Just reading recent headlines about food-safety scandals in China might be enough to give a polite person indigestion. This week CCTV reported that ice cubes found in some KFC (YUM) and McDonald’s (MCD) Beijing branches contained more bacteria than toilet water. Other recent media investigations have exposed gutter oil “recycled” as cooking oil; rat meat sold as “lamb”; and growth-chemical-laced exploding watermelons. But where there’s a problem, there’s often a business opportunity: Companies selling digestive aids, dietary supplements, are nutrition products are now finding a hungry market in China.

Last week DuPont (DFT) opened a new state-of-the-art probiotics blending and packaging facility in Beijing. Previously the company operated a small pilot plant to test the Chinese market. Probiotics are the “good” bacteria—such as live cultures found in yogurts—that can help maintain a healthy digestive and immune system. DuPont’s new facility will work with both dietary-supplement and dairy companies in China.

According to industry estimates cited by DuPont, the global probiotics market is valued at $32 billion and projected to grow to $45 billion by 2018. Asia is seen as a prime growth region, says Fabienne Saadane-Oaks, vice president for health and protection at DuPont Nutrition Health, adding that the Beijing facility will cater to “specific Chinese needs for flavors, formats, and textures.” (Beijing grocers often carry blueberry-taro root yogurt, for instance.)

According to DuPont’s research, the market for health supplements in China is growing at a fast 15 percent a year. Supplements to enhance digestive health are especially popular. According to Saadane-Oaks, half of all diseases caused by microorganisms in China are due to contamination in the food supply. Word up: Gutter oil is tough on the tummy.

Mintel, a global market research firm, surveyed 3,000 shoppers in 10 large and midsize Chinese cities last year. Among the clear trends that the September 2012 study identified was a growing consumer preference for international food brands, which are presumed to be “safer.” This was true across multiple product categories, including frozen foods and cooking oils. It has certainly been the case with baby formula.

China also has a nascent organic foods industry. For instance, Green Yard, a small “organic” dairy farm on the outskirts of Beijing, where cows are fed only organic fodder, is becoming popular among expats and capital foodies. (Still unconfirmed is whether the cows breathe rarefied air, apart from Beijing’s toxic smog.)