Chinese Fitness for the National Interest
The latest consumer confidence index shows a Chinese consumer who is more upbeat and optimistic about the future than any other time in the last two decades. Yet with an already enormous base of goods and a maturing market, such a positive outlook is unlikely to bring back the mouth-watering consumer product growth rates of yesteryear.
Nevertheless, certain segments ripe with growth and potential bubble away amongst China’s overall 10-11% retail growth rate. The fitness and health category is one in particular. We only need to look to gym memberships which are expected to almost triple in the next five years, the number of marathons which grew from 22 to more than 400 in six years, or Lululemon's 350% year-on-year growth. Many of the most impressive achievements fly under the radar such as Les Mills which now has 1,000 Chinese gyms paying for their programmes and thousands of influencers attending their events and passionately filling their WeChat feeds about them.
Many trends in China start with the most affluent demographics. A Hurun survey found wealthy families spend about a quarter of their household budgets on health and well-being - boding well for the future of the industry. Interestingly, the young, single, male millionaires are paying the least attention to their health, while their more mature, married female peers are the most committed.
With so much potential, there has been a significant uptick in brands across the spectrum of fitness, health and nutrition-related categories. Many are becoming more sophisticated in how they appeal to Chinese consumers, following some of the successful strategies from other segments in China and abroad - such as fitness personalization and technology integration.
Like most countries, the fitness movement still has a long way to go before it will woo everyone. In recent weeks in an unnamed city in Hubei province, more than 55% of the 1,233 youngsters who tried out for the army failed. One 20-year veteran of the tests noted a significant decline in fitness levels during his tenure.
The problem has become so widespread that the PLA Daily posted on social media last month saying too many video games, not enough exercise and excessive masturbation were among the 10 reasons so many failed. With the current focus on expanding the Chinese military, this is likely to provide further impetus for Beijing's push to get the nation exercising reinforcing its inclusion in the 13th Five Year Plan and 22 other related documents to support the cause.
The beneficiaries of a more fitness-focused China won't just be the obvious categories. Brands involved in tourism, food and beverage, entertainment, clothing, accessories and others should explore if and how they can tap into the trend. It will only get bigger, particularly among the affluent segments. Agencies such as China Skinny can assist with some exploration.
Here are this week's news and highlights for China:
Sport & Fitness
China is Popping Pills and Pumping Iron More Than Before: The number of gym memberships in China is forecast to grow from 26 to 70 million in 5 years. China Skinny was at the FIBO tradeshow in Shanghai to see the interesting new ways fitness, supplement and vitamin brands are tapping into this growth.
China’s Rich Families are Putting Health Before Wealth, Study Finds: Families owning assets of more than ¥10 million ($1.28 million) are spending an average of ¥14,000 ($2,140) per month on their health and well-being, out of total household expenditure of ¥57,000 ($8,700) - 25% of monthly outgoings. Families with assets of ¥30 million ($4.6 million) or above, spend ¥23,000 of ¥82,000 ($3,500 of $12,500) - 28% on health according to Hurun research.
Chinese Consumers
China's Consumers Haven't Been This Confident in Two Decades: Wages are rising, growth is robust and the yuan is on a tear leading to the consumer confidence index climbing to 114.6 in July - the highest reading since 1996.
China Closes Prominent International Hospital: YOUR Most Important Lesson for the Year: Earlier this month the Shanghai government ordered the closure of one of the city’s top maternity hospitals as the 20 year lease was on land owned by the armed forces who have been banned from commercial activities since 1998.
Are Young Chinese Liberalizing as China's Political Leaders Crack Down?: "For many people in the cities, in this burgeoning middle class, and for many young people who already have a lot of the opportunities which those young people 20 years ago would not have had, the question is not now, 'how can I get rich?' The question is, 'what now?'," says Alec Ash, author of Wish Lanterns: Young Lives in New China.
China Moves to Evict Trademark Squatters: Chinese businesses implicated for registering trademarks without using them will be added to a new blacklist making it difficult for them to apply for future trademarks [paywall].
South Korea's Lotte to Sell China Shops in Face of Boycott: South Korea's fifth-biggest conglomerate Lotte is selling stores and considering a full exit from the China market. Around 80% of China's 112 Lotte Mart stores have been closed for more than six months as authorities tightened safety and sanitary inspections and consumers boycotted them after the company provided a golf course for the THAAD missile-interception system.
Digital China
Here's How Chinese Media are Reacting to the New iPhone Lineup: Last week's iPhone announcement saw some interesting feedback from Chinese media. Tmall has the exclusive for online presales of the iPhone 8 and X with Apple's official site. Whilst not exclusive, vendors on Taobao are already selling 'iPhone security face masks' for owners concerned about having their phone unlocked by someone else as they sleep with the facial recognition function.
Food & Beverage
Pagoda to Open 10,000 Stores by 2020, Providing Global Superior Fruits for Chinese Consumers: Pagoda is opening 4-5 new outlets every day. It expects to grow from 2,500 to 10,000 outlets by 2020 and substantially increase the quantity of imported fruits. Annual sales reached ¥6 billion ($917 million) early in 2016 with 23 million high-end members and 64 overseas suppliers. Imported fruit sales in China have been growing 17% year-on-year for the past decade.
A Craft-Beer Boom with Chinese Characteristics: By 2016 there were around 150 craft breweries in China, up threefold from 2015. Consumption of craft beer increased by two thirds over the past five years. Distinctive local tastes have become a feature of the market with wheat beers being popular, perhaps because they go well with Chinese food and locals like to combine carousing with chewing. Domestic brewers must also make the most of readily available ingredients. Barley in China is mostly poor quality and importing it is costly. Some brewers use exotic items like Sichuan peppers and Oolong tea.
Health
Chemist Warehouse Extends Exclusive Agreement with Tmall Global: Australian pharmacy Chemist Warehouse has announced an extension of its exclusive partnership with Tmall Global which will see Alibaba support the chain during major promotions such as the 11.11 Global Shopping Festival in addition leveraging Alibaba’s e-commerce and media properties to better reach Chinese consumers.
Fashion
Lululemon Sees Runaway Growth in China, Confirms Expansion: Lululemon grew 350% year-over-year growth in China. The company plans to open at least 12 new stores in Asia over the second half of 2017, with about six being in China.
After Dior, Angelababy Is UGG’s New Brand Ambassador: The 'Kim Kardashian of China' became UGG's new brand ambassador last month. “Angelababy has now become the ambassador for three luxury brands: UGG as accessible luxury, Dior as premium luxury, and Tag Heuer as top luxury,” said one Weibo user.
Payments
Heavier Credit Card Use Expected from Chinese Consumers: Loans via credit cards in China are up 31% this year with the total sum reaching nearly ¥4.7 trillion ($720 billion). Chinese banks make about 20% of their revenue through the interest and fees from heightened credit card use in China. 29 million new credit cards were issued in the second quarter of this year.
That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.
