Dive Brief:

• Smithfield Foods will begin selling its U.S. pork products online in China through JD Fresh, the fresh food platform of the country’s largest online retailer JD.com, according to a company statement. Smithfield was acquired by China-based WH Group, the world’s largest pork company, in 2013.
• The product offering will include bone-in cuts and variety meats, with a focus on small-packaged frozen products, which according to the statement are the types of products in highest demand in China. Pork is a staple food in most Chinese households.
• Online meat sales are skyrocketing in China. The gross merchandise volume from the direct sales of meats on JD increased more than 780% year-over-year in the first half of 2017, as reported in the statement. Reuters reports that JD.com’s meat sales have reached hundreds of millions of yuan in 2016, with imported meat accounting for more than a third of those total sales.

Dive Insight:

With online sales topping $800 billion, China is the largest e-commerce market in the world. China also has more internet users than any other country, so the development of e-commerce has essentially been fast-tracked, bypassing less developed physical retail altogether, according to a recent study by Profitero.

Little wonder a company like WH Group, along with its U.S. subsidiary Smithfield, wants to grab a piece of China's online action. Other Western food manufacturers penetrating China’s fast-growing online grocery market include confectionery brands like Mars, Mondelez and Nestle, which are all establishing a presence on rival platform Alibaba’s Tmall. But selling candy online in China is a far cry from peddling pork products.

There are challenges inherent in selling fresh and perishable foods online due to cold chain standards that must be maintained throughout the distribution process. In the U.S., Smithfield is solely responsible for maintaining product integrity by monitoring the temperature inside the cargo hold of a truck and other containers in the case of marine transportation.

When importing its products and selling online in China, however, Smithfield must rely on two sets of cold chain distribution systems — that of JD.com and WH Group-owned Shuanghui Development, which is acting as Smithfield’s exclusive domestic agent in China — to help ensure product quality and freshness. JD also has been implementing block chain tracing technology, which could come in handy for Smithfield should any food safety issues arise.

According to the company statement, “the cooperation between the two sides in the cold chain and traceability can ensure the cold chain system in place will protect the quality of every piece of pork cut transported from the U.S. to China.”

The move into online retailing in China sounds like a somewhat risky — yet potentially lucrative —  venture. Smithfield likely will learn a lot about selling online direct-to-consumer products in China, which it could eventually apply in the U.S. and other markets as online grocery sales — including that of highly perishable products, like meat — continue to grow.