Chinese consumers are increasingly looking for new experiences and flavours when it comes to the Food & Beverage market. As a result, brand loyalty to food brands has dropped, and new product development has become essential for staying ahead of the competition.
The Food & Beverage market in China has become increasingly saturated, with both foreign and domestic brands vying for consumer attention. Prior to market entry, brands need to ensure that they understand Chinese consumers, they want to engage them and understand the trends in order to take advantage of them.
It is important to realise that Chinese customers generally conduct a great deal of research into products prior to purchase. Thus, brands need to ensure that detailed product information is readily available online and in Chinese, such as ingredients and the types of certifications that either the brand or product has received.
The Health Revolution
Although Chinese consumers have long been on the trajectory towards healthier diets, COVID-19 caused the focus on health to skyrocket. Especially among the Chinese youth, healthier and trendier food and beverage offerings are becoming a core driver, with many looking for “low fat” and “low sugar” keywords for their snacks, and “0 fat”, “0 sugar”, “0 calories” keywords for their drinks. Many consumers are now showing an increased willingness to pay premium prices for products that are considered ‘healthy’.
The push for healthy products is not just among snacks and beverages, but also for instant or ready-to-eat meals, or meal replacement products. More than ever, Chinese consumers are looking at food and ingredient labels prior to purchase and conducting research on each of the ingredients.
The ‘She’ Economy
Over the past several years, China has seen the emergence of the ‘she’ economy. With a higher level of education and income, the more than 400 million Chinese women aged 20-60 years old are increasing their consumption power within the Food & Beverage market.
Previously, women were often in charge of purchases for the entire family, however, now they are shifting towards becoming more willing to make purchases for themselves. Therefore, many brands have begun developing products aimed at female consumption, including meal replacement products, no fat and no sugar beverages, as well as protein bars and milkshakes among many other offerings.
Plant-milk alternatives have stepped into the spotlight, as more Chinese consumers become familiar with products such as oat milk, almond milk, rice milk, cashew milk, etc. This is in addition to Chinese consumers expanding their view on soy milk, which is a traditionally popular beverage in China. In fact, the plant-based protein beverages market in China saw an 800 percent surge in YOY growth in 2020.
As cafes have also risen in prominence in China, particularly in tier 1 cities, most locations offer milk-alternatives as well, further popularising plant-based milk options. Part of the reason for this surge may be due to increased market education and exposure to Western drinking habits, in addition to the high percentage of Chinese consumers who are lactose-intolerant and would prefer to avoid traditional milk.
Over the past decade, China has emerged as a heavy consumer of meat, with Chinese consumers eating 28 percent of the world’s meat supply and half of its pork. However, plant-based meat alternatives are beginning to make an appearance, slowly growing from a niche phenomenon to a more widely accepted lifestyle decision among Chinese consumers. The outbreak of diseases including COVID-19 and swine flu, an increased awareness of the environmental impact of consuming meat, and the belief that plant-based alternatives are healthier, are all factors contributing to the growth of this market.
In 2021, the plant-based meat market in the Asia Pacific region was valued at CNY 1.1 billion, of which China contributed CNY 780 million, which is more than 70 percent. When looking at the rest of the world, China already accounts for 53 percent of the global meat substitute industry, compared to the 5.5 percent contributed by the US.
With that said, although the market in China is large, new brands need to face the challenges that come with China’s history of eating soy alternatives to meat. Therefore, new brands need to continue to conduct market education to differentiate themselves, whilst also understanding under which circumstances plant-based meat alternatives are most likely to be consumed. Some of the top identified consumption scenarios include in hot pot, during Chinese-style barbecue, as snacks, and in prepared foods (ready-to-eat and ready-to-cook offerings).
The Coffee & Tea Obsession
Tea has always been a staple among Chinese consumers; however, coffee is rapidly becoming more widespread, growing at a rate of 15 percent annually, compared to the global growth rate of 2.2 percent.
Coffee drinkers tend to be white collar workers aged 20 to 40 years old, living in higher tiered cities. They are more educated and have higher disposable income. Especially among Gen-Z and Millennial drinkers, who are interested in novelty experiences, which means they will seek out new cafes and new methods of drinking coffee. Depending on the region in China, consumers can differ in terms of which factors they place more emphasis on, e.g., new concepts or pricing and quality.
The expansion of the coffee market is not limited to cafes, but also includes at-home drip coffees and ready-to-drink (RTD) canned options. In fact, China’s RTD tea and coffee market is estimated to reach a market size of CNY 182 billion by 2023.
Even as coffee consumption rises, tea consumption has not been left behind. The demand for tea has continued to rise, with new flavours and ways of drinking tea becoming popularised through the expansion of tea and beverage chains in China. In 2021, the sales value of domestic tea consumption reached CNY 300 billion.
Author: Sandra Weiss, RedFern Digital