BC Business
COVID-19 has made a dent in China's economy, and relations with Canada are testy. But the country is still vital to our province's food manufacturers
Jack Kao, shown at his Vancouver store, is betting on China’s appetite for Canadian edibles
This article was originally published in our April issue, and was written before the COVID-19 pandemic came to Canada.
During my recent visit to a bustling mall in downtown Shanghai, one small, red-and-white-themed shop stood out, and the items it hawked were pretty twisted. Pretzels may not be a well-known snack in China, but B.C.-based entrepreneur Jack Kao wants to change that, one doughy knot at a time.
His company’s name is CanTresor Pretzels, a riff on “Canadian treasure.” Kao believes the key to his success lies in the Canadian wheat he uses, and he’s not shy about letting customers know. CanTresor’s posters—featuring maple leaves and golden wheat husks against a blue prairie sky, above the slogan “Proudly Canadian”—could be straight out of a Destination Canada marketing campaign.
Kao hopes this over-the-top Canadiana will convince Chinese consumers to buy food from a land that many have never visited. “Chinese people think things from Canada are good quality,” he says from his Vancouver office. “For people to live, for [the] most reliable food, Canada always ranks on the top, so even Chinese who haven’t been to Canada see that the quality is good.”
Kao’s business approach is starting to pay off. As of March, there were six CanTresor franchises in operation, one in Vancouver and the rest in mainland China, with plans to grow to 50 in 2020. Customers seem to enjoy the plate-sized pretzels, with flavours like sweet almond and maple bacon, which sell for about $4 a pop. Sales have reached six figures since Kao opened his doors last July.
His pretzels are part of a relatively new trade in consumer goods between B.C. and China that looks beyond Hong Kong to the much bigger mainland market. Kao, who moved to Vancouver from Beijing in 2011, started out exporting hardwood flooring to his homeland, and he thinks he’s well positioned to succeed there. “Because I come from mainland China, I know what the people really want,” he says.
Goods that crossed the Pacific from Canada to China used to be limited to resources like lumber and metals, which remain dominant. CanTresor is one of a growing cadre of B.C. companies, including Norco Bicycles and clothiers Arc’teryx and Lululemon Athletica, seeking to sell lifestyle products to China’s rapidly expanding middle class, which could reach a staggering half a billion people in a few years.
Well-heeled Chinese shoppers are flexing their buying power online and at stores, where they snatch up items like Bordeaux wine and Italian haute couture. Luxury brands aside, Kao knows they’re willing to pay a premium to eat well, too. “The Chinese people are concerned about the food produced in China because of past issues, so people want to spend more money and buy good-quality stuff.”
He’s referring to the Chinese milk scandal of 2008, when makers of infant formula and dairy producers added melamine to make their offerings appear creamier and more nutritious. Melamine, a compound used to make things like dishware and glue, can cause kidney damage when ingested. As a result of the scandal, six babies died and thousands were hospitalized.
Thanks to lingering distrust, wary consumers will splurge on food from a trusted source, says Sarah Kutulakos, executive director of the Canada China Business Council. “It’s hard to erase these visions of really bad things happening from people’s minds,” she explains. That’s why “foreign products have become more trusted and reliable.” Canadian wheat from an imagined pristine prairie ticks the boxes.
Toronto-based Kutulakos believes this squeaky-clean reputation is fundamental to Canada’s entrepreneurial success in China. “The Canadian brand is associated with understanding that Canada is big and open and clean,” she says. “So when it comes to food a positive sentiment toward Canada can be very helpful.”
The arrest of Chinese telecom titan Huawei’s CFO, Meng Wanzhou, in Vancouver in late 2018 has tested Canada’s relationship with its second-largest trading partner. Beijing’s swift retaliation led to the arrest of two Canadians living in China, and at press time, Canadian canola seed was still shut out of the Chinese market.
But according to Yves Tiberghien, a UBC political science professor and a distinguished fellow at the Asia Pacific Foundation of Canada, this fallout is temporary and confined to the government and diplomatic class, with little impact on consumers. “There is anger about the arrest of Meng Wanzhou,” he explains, “but it doesn’t affect that deeper image of Canadian products and Canada as a great place.”
Lately, the coronavirus has been causing a different kind of economic chill. January through March, Kao’s sales had plunged 90 percent. “No one is going out, no one is buying pretzels,” he says. Still, Kao remains optimistic. “People will go back to work, things will return to normal.”
Tiberghien thinks the crisis could help strengthen Canadian brands, especially those that promote good health. “[The coronavirus] will remind everybody about the importance of healthy food, because all this started with wild animals in the market,” he says, citing an origin theory of the outbreak. “So meanwhile, a good Canadian wheat pretzel will be safe, and if anything, it will have a bounce-back.”
More B.C. brands should follow the pretzel’s twisty path to tap into China’s positive ideas about Canada, Tiberghien maintains. “If that image can be triggered and called upon, the market is there.” Kao agrees: “The growth in China is a huge opportunity for people who want to make money.”
Last Year China’s GDP reached an estimated US$14.14 trillion
The Chinese economy posted 7.6% average annual expansion for the past decade, though the International Monetary Fund recently downgraded its 2020 outlook to 5.6%
China is the world’s biggest market for cars, cellphones and seafood; the fastest-growing market for luxury goods, air passengers and nuclear power; and home to the most Internet users and online gamers
100+ Chinese cities have a population of more than 1 million
Mainland China’s top three imports from B.C. in 2019:
1. Pulp and paper $2.24 billion
2. Metallic minerals $1.23 billion
3. Wood products $1.15 billion
B.C. food exports to mainland China last year: $450 million, roughly 7% of total activity
Sources: World Bank Group, International Monetary Fund, Canada China Business Council, BC Stats