Continued: A billion good reasons to expand

SHANGHAI - The scalper lingered by the door, taking money and handing out slips of paper, before moving on to another deal.

The "yellow cows" of Shanghai -- scalpers in America -- don't sell Bruce Springsteen tickets or front-row seats. Just ice cream, made by Häagen-Dazs.

Each year during the Chinese harvest festival, customers and scalpers swarm Häagen-Dazs shops for muffin-size "moon cakes," an ice cream and chocolate nod to the Chinese tradition of exchanging pastries during the festival. The pastries rank with the American fruitcake for their appeal: Traditional? Check. Tasty? Not so much.

General Mills, which owns Häagen-Dazs, saw an opportunity in the lotus paste. For the six weeks of each year's festival, the ice cream moon cakes draw lines of eager customers -- and black marketers -- to Häagen-Dazs stores throughout China. (Vouchers, not the treats themselves, are presented as gifts.)

Three students at the shop bought three lavish desserts with money they said they rarely had. And yet they are there frequently.

"It's a little bit expensive," art student Jo Sah said of her $7 treat. To save money, she said, there's always Dairy Queen.

The cornerstone in the rush to feed our hungry planet is the rush to feed China. And it's a potential bonanza for many of Minnesota's food companies -- with their meat, dairy and grain emphasis -- as the Chinese change their diets to include more of those ingredients.

In a country where rural households spend just $107 a year on food, growing the rest in their own gardens, food companies are targeting only the richest of the country's consumers. And even for them, grocery shopping typically consists of buying raw vegetables and live fish splashing about in the country's numerous "wet markets."

So it's not as easy as shipping food from Minnesota and getting 1.3 billion new customers.

The Minnesota Department of Agriculture has for more than a year now engaged two researchers at Chinese universities to determine whether turkey, considered too large for the ovenless kitchens of most Chinese, can still be marketed to the world's largest nation.

A big opportunity

For Minnesota -- the country's largest producer of turkeys -- finding an answer could mean big business, particularly at Hormel, which owns Jennie-O Turkey. That experiment has so far led to turkey dishes prepared for guests at high-end hotels, state officials say. A Shanghai supermarket recently had three frozen Jennie-O turkeys, but each retailed for about $80.

"Someday we will have a nice turkey business in China, it's just been a difficult go," said Richard Bross, group vice president of Hormel Foods overseeing international expansion.

Cargill has dramatically built up its presence in the country after years of quiet engagement that began in the 1970s, when Cargill first came to China. It recently added three new soybean crushing plants to the one it owned there.

Its Nantong plant -- in a city north of Shanghai that's home to 7.8 million people -- eats 5,000 tons of soybeans a day, or nearly two container ships' worth each month. The company has 300 such ships moving around the world, handling corn, beans and other materials, said Liu Weiwei, production manager for the Nanton soybean crushing plant.

The $100 million plant, along the Yangtze River, crushes the pea-size beans and then separates the bean into its constituent parts. Soon it will complete an oil refinery to turn the crude oil pulled from soybeans into food-grade oils.

Combined, Cargill's plants in China crush 13,000 tons of soybeans each day, enough to provide about 7 percent of China's soybean oil needs.

Liu says more are to come, with Cargill planning to build a 5,000-ton crushing plant and another one two years after that. "But we are still waiting for the construction," he added.

Moon cakes and more

The somewhat comical madness outside Häagen-Dazs -- "yellow cows" often are shooed away by shop managers, only to return minutes later -- stands as a marketing coup for General Mills.

"Imagine if Chinese people go to the U.S. and try to sell hamburgers to the American people, and they beat McDonald's," said Marina Guo, a spokesperson for General Mills in China. "The moon cake for me is this kind of thing."

The company won't release sales data, but General Mills said that, once the idea caught on, it spread quickly through the middle class of Shanghai, Beijing and other major Chinese cities. During moon cake season, it opens seasonal stores beyond its 120 shops throughout the country.

"Now it's one of the biggest businesses here," said Guo, the company spokeswoman.

Selling a premier brand of ice cream in China seems counterintuitive, given the country's generally low incomes. But it's precisely the high cost of Häagen-Dazs that makes it popular. A person who gives away the ice cream earns a kind of cachet worth every yen, one customer said.

"It's for a very important friend," said a customer who gave his name as Mr. Ji, as he bought moon cake vouchers recently at the Shanghai Häagen-Dazs. He said the traditional cakes are still a good gift, but for VIPs, he goes with Häagen-Dazs.

The company's other big score in China, the Wanchai ferry dumpling, is a Chinese staple that required little alteration to appeal to the mass market. "In all cities we entered it's the No. 1 brand," Guo said.

The company also sells Bugles, the corn chip snack, using corn grown in a single village in the north of China. Several years ago General Mills made a deal with the village that it would buy all of its corn at a premium price if farmers grew the corn to the company's instruction.

Yongqing, a village in the larger city of Cjixi, now features new homes and many farmer families who have cars, Guo said.

"Their living standard has changed," she said.

A less meaty Hormel

Hormel ventured into China 10 years ago with pork plants in Beijing and Shanghai. This year it opened in Shanghai a food lab for creating new products for Chinese consumers.

CEO Jeffrey Ettinger called the lab "the future of Hormel." And this month the company unveiled Spam in China.

"We're learning every day as we go," said Bross, who is based in Austin, Minn.

"Undoubtedly, the demand in China is going to be vibrant."

Hormel has had its best luck with products that aren't available in the United States, such as Select Ham, which has more starch and less meat than the ham sold in this country, making it affordable to more Chinese. It is the same with sausages sold there, and corn dogs.

"There it's a hot-dog-like emulsion with whole kernels of corn," said Bross, adding that it's popular with children.

So how important has China become to the business? Bross, after 10 years in the international division, recently signed up for something he kept meaning to do.

He has begun studying Chinese.

Matt McKinney • 612-673-7329

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