China's Toxic Water and Its Impact On Food
China's smog gets a lot of airtime around the world, with footage like masked runners navigating the soupy air in the Beijing marathon, hordes of Zhengzhou residents lining up for bags of 'fresh mountain air', and kids playing at school under multi-million dollar domes. Given 99% of urban Chinese breathe air considered unsafe by EU standards, there's plenty of opportunities for coverage.
China's less visible soil pollution is equally concerning, with 19.4% of soil dangerously polluted according to a 5-year Chinese government study released last year.
However, possibly the most under-reported environmental issue facing China is its water pollution. Nearly two-thirds of China's underground water and a third of its surface water has been rated unfit for human contact by China's Ministry of Environment. Just 3.4% of China's water supply is classified as 'Grade 1'. Initiatives such as Jack Ma's water monitoring app have helped raise awareness of the problem, but unlike air pollution, which marginally improved in China last year, China's water continues to become more poisonous.
Toxic water isn't ideal for taking a shower or family camping trips by the river, but of grave concern is its influence on China's food and beverage industry. As a consumer in China, how comfortable would you be eating food irrigated with, processed by machines cleaned with, and in packaged products made with water that could be dangerous to touch? Would you be comfortable feeding it to your precious only child, or even your prized pooch? Add that to a lack of trust in the supply chain and it's no surprise that imported food is growing almost three times faster than FMCG overall.
China Skinny's research across China has found spending on food and beverage is growing fastest amongst affluent segments. This indicates that those who can afford it, are prepared to spend more on safe, quality, often imported food. The growing demand is contributing to the soaring rise of cross border ecommerce, and is why companies like McKinsey are predicting that imported fresh produce is 'about to get really big'. We hope you enjoy this week's Skinny
Chinese Consumers
China's Top-100 Brands: Campaign Asia and Nielsen asked Chinese consumers to rate their top brands. Interestingly Samsung came out on top, ahead of Apple in fourth place; whereas sales, particularly for smartphones, reflect quite a different picture in China. Chinese Traditional Medicine company Tongrentang was the top brand from Mainland China in 8th place.
Chinese Brands Lead China’s Top FMCG Brands: China's top three FMCG brands - Master Kong, Yili and Mengniu - were chosen by Chinese shoppers more than 1 billion times last year according to Kantar brand rankings. Danone's Mizone was the top riser.
It’s A Dog’s Life: How Affluent Chinese Are Falling In Love With Pampering Their Pets: Spending on pet care in China is expected to grow by more than 50% in the next four years according to Euromonitor. Foreign companies Mars and Nestle currently account for more than 80% of China's pet food market. Pets were banned during Chairman Mao's reign, as they were seen as a bourgeois pastime. Meanwhile, Chinese social pet network SmellMe reportedly has five million furry users - ten times more than a year ago.
Uber Is Logging 1 Million Daily Rides In China: 11 cities in China are said to be logging as many Uber rides as the rest of the world combined, although their claim of one million rides a day is quite different to recently reported numbers. Chengdu is logging 479 times as many trips as New York City did at the nine-month mark, and Hangzhou is logging 422 times as many trips. The company says it is creating 100,000 "new equivalent full time jobs" a month.
Environment
More Than 60% of China’s Underground Water 'Not Fit For Human Contact': Nearly two-thirds of China's underground water, and a third of its surface water, are rated as unsuitable for direct human contact in 2014 according to the Environment Ministry, with rates worsening from 2013. Anyone for a swim in the river?
Chinese Stick With Cars Despite Pollution Concerns: 55% of Chinese consumers were worried about environmental pollution and traffic jams caused by cars in 2014, up from 48% in 2010. Nevertheless, the portion travelling by private car at least once a week grew from 8% in 2010 to 33% last year. In related news, just 1% of Chinese don't want an international agreement addressing climate change, versus 17% in the U.S. and 7% in the UK according to a YouGov survey.
Food & Beverage
China’s Cross-Border eCommerce To Rise Ten-Fold In 5 Years As Taste For Imported Food Grows: China's ecommerce imports and exports are expected to hit $245 billion by 2020 according to a report by Alibaba and Accenture.
Exports of Fresh Produce to China Are About to Get Really Big: McKinsey sums it up well, 'Imports = Safe'. Buying fresh produce directly from the country of origin makes consumers more comfortable.
Starbucks in China: A Matcha Latte and Mooncakes, Please: Starbucks doesn't just localise with green tea lattes and red bean scones, but has its own versions of traditional festival treats such as mooncakes and zongzi. It also invests heavily in staff and making them feel loved. Starbucks has over 1,600 stores in 90 cities and accounts for around 60% of China's coffee chain market, versus McDonalds McCafe's 14% and Costa's 11%. Starbucks's same store sales have grown 12% in the China-AsiaPacific region this quarter, versus 7% in the U.S.
Internet & eCommerce
Alibaba Invites U.S. Small Businesses to Enter Chinese Market: "Our U.S. strategy is quite simple and clear: We want to help U.S. entrepreneurs, small business owners, and brands and companies of all sizes sell their goods to the growing Chinese consumer class," said Jack Ma prior to a three day trip to the U.S. More than 200,000 companies are running cross-border e-commerce businesses in China on more than 5,000 online shopping platforms.
Entertainment
Q&A: How Tencent Plans to Get Chinese Consumers to Pay for Music: Tencent has a difficult task ahead to convince Chinese consumers to pay for music. It is teaming up with global music companies such as Warner Music Group and Sony Music to create innovative value adds through its QQ and WeChat platforms.
Investment & Migration
Overseas Real Estate Investment Hits Record $7.5b in Q1: Chinese companies invested a record $7.5 billion in the overseas commercial and residential real estate market in the first quarter of this year, with reported transactions expected to hit $20 billion this year according to JLL. With the domestic market slowing, overseas investment by Chinese companies reached 52% of all real estate transactions last year.
Luxury
Can “Made in China” Become a Luxury Label?: In less than a decade, China has positioned itself as the world’s biggest producer of caviar. 44% of Chinese consumers are willing to try an emerging luxury fashion brand in the next three years according to Bain. Cosmetics and wine are other areas to watch.
What Luxury Brands Can Learn From Alibaba About China: While less than a quarter of luxury brands have online shops, Chinese consumers flock to ecommerce platforms to buy and research products. Foreign luxury brands in China can learn from Alibaba by: 1) Localising; 2) Pricing competitively; 3) Developing authentic brand advocates; and 4) Embracing mobile ecommerce.
Over 60% of Chinese Purchase Luxury Items Abroad: 64% of Chinese consumers choose to purchase luxury products overseas instead of in China. 88.9% cite lower prices and 83.5% claim guaranteed authenticity as the reason according to a Fortune survey. Chinese account for 46% of global luxury spending overall, with 76% of it happening abroad.
That's the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.
