What Food Exporters to China Commonly Overlook
Imported food and beverage is big business in China. While Chinese consumers may be buying more locally-made goods overall, foreign fare is one of the shining segments for exporters around the world. Chinese shoppers are trading up, adopting more international tastes and continue to worry about the health and safety of locally-produced provisions.
Nearly every year since 1990 China’s imports have seen steady growth. Bucking the trend are 2009 and last year, where total imports contracted 14% on the back of lower demand for natural resources. However, China Customs data puts 2015 food imports at 15% growth outside of dairy. Tanking global dairy prices dragged down imported food and beverage growth which sat at just over 7% for the year. The big movers were categories like vegetables, cakes and desserts, which all grew in the high 30s.
Yet with such great opportunities, we see many exporters getting the basics wrong.
These days, most brands know not to treat China as one homogenous market. This is particularly relevant in the food category, where taste preferences and eating habits can vary wildly between regions. However many China product strategies still have the same product offering and positioning across the China market.
Although targeting specific cities or clusters of cities is popular to launch food products, too many brands fail to factor in those regions’ unique traits. A common mistake is to do taste and concept testing with Chinese immigrants in a brand’s home country. These migrants have often developed local preferences and come from different cities than where brands are launching their products.
Another regular misstep is the ‘one-size-fits-all’ approach to sales channels. A product in a smaller premium supermarket will sometimes have quite different packaging size requirements to a super-store like Walmart or Carrefour.
It is also common to align one’s ecommerce and bricks & mortar strategy identically. On the theme of packaging, what is bought online can be quite different to physical retail channels. The look of the packaging is often notably different. Whereas customers in brick & mortar stores value transparent packaging so they can inspect the quality of items, it is much less relevant online, with an item’s ability to stand out on a page full of products of the most importance.
Food is one example where localising can ensure a brand makes the most of the opportunities China offers, but it's valid across most categories. A small investment in understanding the market early on will usually pay for itself many times over. China Skinny can assist with that. See below to see highlights of the news this week.
Chinese Consumers
It Looks Like China’s Great Slowdown is Over for Now: China’s GDP grew 6.7% year-on-year in the September quarter, the same as the previous two quarters. Consumption contributed 71% to GDP growth, up 13.3% on the same period in 2015. Average disposable incomes rose by 8.4% over the past year, or 6.3% adjusted for inflation.
China to World: We Don’t Need Your Factories Anymore: Chinese manufacturers once bought high-tech materials from overseas firms. Rising expertise means they now source locally, altering global trade.
The Five Companies Leading China’s Overseas Expansion: Five Chinese companies – all privately owned but well connected with the Chinese regime, are on the forefront of China’s global expansion, growing beyond traditional resource-related industries into high tech, transportation, media, and consumer products. They are: Anbang Insurance (tourism), WH Group (meat), Dalian Wanda (entertainment and tourism), Fosun (tourism, entertainment, fashion, property, energy, food) and HNA Group (aviation, logistics and hospitality). China’s outbound M&A activity for the first nine months of 2016 totalled $174 billion, surpassing the U.S. for the first time.
Two Reasons Chinese Millennials Have More Cash To Burn: Chinese millennials aren’t indebted with student loans and many don’t have housing expenses. About 90% of Chinese households own their homes, and 80 % of these homes are owned without mortgages or any other loans, although the number of mortgages is increasing.
Food & Beverage
Chinese Online Consumers Spending Less Each Purchase, says Fruitday: Most of the packages for fresh food are designed for display in the supermarket or the wholesale market, not for ecommerce. New Zealand Zespri kiwifruit changed packs from 12 to 6-piece, increasing penetration from 14.4% in June 2015 to 33.4% in June 2016. With the smaller packaging, the period between purchases reduced from 10 to six days.
China Busts Group Selling Expired New Zealand Milk Powder: Police in Shanghai have arrested 19 people suspected of repackaging 276 tons of expired New Zealand-made Fonterra milk powder to sell on the market.
Taco Bell Will Put China’s Appetite for Nacho Cheese to the Test: Taco Bell is adjusting its menu to meet local tastes including having the food hotter when it arrives than in America. Nacho cheese – not part of Chinese culture – was seen as a way to make Taco Bell more palatable to locals according to focus groups.
Fizz Gets a Premium Touch: Two decades ago, beer was regarded as a luxury drink in China, but as consumers are getting wealthier, many now think it is low-end, or just a very affordable drink in summer. Brewers are now focusing on premium beers to counter declining volumes, creating drinks that appeal year round and for various occasions and scenarios.
China Gets a Taste for Weet-Bix: After Weet-bix cereal featured on popular Chinese soap Ode to Joy, sales have spiked. But with trademarking issues causing a rebranding in the market to ‘Nutri-Brex’, the brand is likely to struggle to maintain momentum aside from daigou and cross border channels from Australia and New Zealand where it is still being sold as Weet-Bix.
Digital China
China Overtakes the U.S. in iOS App Store Revenue: China spent $1.7 billion in Q3 2016 on iOS apps, spending five times more than two years ago. The growth has been driven by games, which account for 25% of apps downloaded, but 75% of revenue.
Chinese Tourists
New Chinese Tourists Open New Markets for Industry: The new Chinese traveller expects more than just leisure. They often don’t travel for either leisure or work, but a combination of interests. They often look for fashion, education, etiquette and for world knowledge that assumes the position of a new status symbol.
Top 10 Destinations Where Chinese Luxury Buyers Spend Most: Chinese consumers account for nearly half of the world’s luxury spending, with spending expected to increase 3% to $120.4 billion this year. The top-10 countries per transaction are 1. Switzerland ($7,277) 2. France ($6,534) 3. UK ($5,643) 4. Italy ($4,158) 5. Macau ($3,119) 6. Hong Kong ($2,525) 7. Singapore ($2,228) 8. Japan ($1,931) 9. USA ($1,337) and 10. South Korea ($817)
Health & Beauty
Chinese Prefer Asian Cosmetics Brands: Chinese brands such as Pehchaolin Daily Chemical Co. and Shanghai Shangmei Cosmetics Ltd. are growing their market share after investing heavily in marketing and distribution channels, with many consumers thinking local brands are better value for money than international brands. 33% of consumers said they had purchased South Korean skin care more often than any other kind in the past six months, 23% purchased Chinese brands, 18% Japanese and 11% French according to an online survey by Mintel.
Fashion
Uniqlo Targets 100 More Stores in Greater China Expansion: Uniqlo is aiming to open about 100 stores in Greater China during the coming financial year, with new campaigns intended to tap into the Chinese travel boom. The chain looks to double the store count to 1,000 in the future. Uniqlo was the top selling apparel brand at last year’s Single’s Day with ¥637 million ($94 million) in sales.
That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing, research and digital advice and implementation.
