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How food innovation is driving Dingdong’s growth in China

China’s online fresh foods sector could reach 1.27 trillion yuan (US$197 billion) by 2025, according to Chinese market research institute Qianzhan. Competition is heating up in this space and the key players are ramping up R&D investments and marketing strategies to gain market shares.

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In November 2021, Chinese grocery platform, Dingdong reported that its total revenue increased by 111 percent year-over-year to reach 6.19 billion yuan (US$ 976 million). Dingdong’s overall GMV increased by 107.7 percent year-over-year to 7.02 billion yuan (US$ 111 million) in the third quarter of 2021. The number of Dingdong’s average monthly transacting users for the third quarter of 2021 increased by 120.3 percent year-over-year to 10.5 million from 4.8 million in the same quarter of 2020.

Founded in 2017, Dingdong is a fast-growing player in the online fresh grocery sector in China operating in over 30 cities. Its growth has been fueled by the shift in consumer behavior who have moved online to buy everything from live seafood to fresh flowers during the pandemic to avoid frequent trips to brick-and-mortar retail stores.

Dingdong’s fast delivery service and focus on quality products largely contributed to the platform’s success. Dingdong’s highly centralized business model using self-operated mini warehouses (fulfillment stations) allows the company to bring fresh, high-quality products from the countryside to urban customers in less than 30 minutes. Dingdong has been heavily investing in R&D to adjust its offerings and services to consumer demand, developing a range of private label products that first launched in July 2020.

In 2021, Dingdong launched several new product series, including “Boxing Crayfish”, “Damanguan” Hot Pot, a “Light Potato” and “Eight-Treasure Rice Pudding”. These types of products are popular in the market, and private label products’ proportion of Dingdong’s total GMV is on the rise. The GMV contribution from private label products is targeted to reach as high as a 30 percent increase from the 5.8 percent in Q3 2021.

As Dingdong aims to develop more high-quality private label products in more diverse product categories in the future, Retail in Asia dives into Dingdong’s food innovations to see how they meet consumer demand and help Dingdong stand out from its competitors.

Boxing Crayfish
Source: Ding Dong

Dingdong leveraged the popularity of 3R products (ready to cook, ready to heat, ready to eat) which have become popular in China. In April 2021, Dingdong launched the “Boxing Crayfish” series, as part of its 3R product portfolio.

Customers can place orders of partially-prepared crayfish in different flavors, as well as a variety of semi-finished crayfish dishes developed by the platform.

To create the best flavor for the “Boxing Crayfish”, Dingdong hired a team of taste testers with an average of 20 years’ experience who tried a total of 55,620 crayfish. As a result, Dingdong has not only refined the traditional spicy and garlic flavors but incorporated seasonal fruit flavors and created various new popular flavors such as lychee, hawthorn, and brandy.

To meet customers’ various eating preferences and tastes as well as different dining scenarios, Dingdong developed pre-cooked crayfish in different serving temperatures. Based on Dingdong’s mature supply chain system, the company has developed China’s first fully automated production chain for cold and fresh crayfish.

After launching in April 2021, the “Boxing Crayfish” series has achieved more than 80 million GMV in just over 2 months.

“Damanguan” Hot Pot Series

In September 2021, to respond to the modern consumer “stay-at-home” culture and rising demand for 3R foods among Chinese consumers, Dingdong launched a hot pot series “Damanguan” to offer consumers a convenient and authentic at-home hot pot experience at nearly half the price of a dine-in experience.

Hot pot is popular across China, with flavors varying according to regional nuance. To better identify consumer tastes and preferences, Dingdong’s research and development team started to explore and taste different types of hot pot in China months before the launch. The team explored preferences and menus in 16 cities across China, tasting 31 varieties of hotpot and over 700 sample sauces.

To create the new hot pot series, Dingdong has built a dedicated supply chain from farm to table to deliver thousands of high-quality ingredients and co-branded products to customers. Chinese consumers can now order their hot pot with a variety of flavor options, including Butter-spice, Tomato-Ox bone, and many others via the platform’s Fresh Mobile app or WeChat Mini Program.

Light Potato

In November 2021, Dingdong launched a brand-new “Light Potato” on its platform. The “Light Potato” breeding was conducted by a professional Chinese potato research institute while Dingdong took care of the commercialisation including promotion, supply chain transportation, component testing and certification.

“Our team also excels at learning and researching products, especially in seeking differentiation and innovation among basic agricultural products. Dingdong Light Potato’s procurement team has a solid base of agricultural product knowledge and has been observing consumers’ healthy eating trends carefully and actively looking for various product varieties and origins. As a result, with the support of professional resources, the new potato was launched successfully and highly efficiently,” said Ms. Hui Zhang, Public Relations Director, Dingdong.

Dingdong invested in marketing to help consumers understand the nutritional and health benefits of this new product. The sales volume increased by 34 times in just one week after it was offered online and the number of users who are willing to try new products keeps increasing.

Eight-Treasure Rice Pudding
Source: Ding Dong

Eight-Treasure Rice Pudding is a popular traditional Chinese food for the Lunar New Year. As part of its 3R product portfolio and to offer consumers a new and healthy eating experience, Dingdong has introduced some new characteristics and flavors to the traditional Eight-Treasure Rice Pudding dish this year.

Dingdong has reduced the serving size of the pudding to encourage healthier lifestyle choices among Chinese consumers. It also created a non-sticky, low sugar and fiber rich quinoa-based pudding.

Traditionally, the pudding is filled with red bean paste, winter melon candies, red and green plums. To meet customers’ various eating preferences and tastes, Dingdong incorporated popular ingredients worldwide into the rice, such as durian and cheese.

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A kids-friendly, tiger head-shaped option has been developed to appeal to families too.

After launching the product in late December 2021, sales of Dingdong’s special Eight-Treasure Rice Puddings have increased by over 400 percent month-on-month.