Retail in Asia


What does it mean for Moutai to enter the Chinese ice cream market?

Recently, a new entrant to the Chinese ice cream industry caused a stir on social media, the Chinese luxury Baijiu brand Moutai. It opened two ice cream stores within ten days and sold pre-packaged ice cream on its App. For now, it released five SKUs, three pre-packaged ice creams priced at CNY 59 (USD 8.78) to CNY 66 (USD 9.82), and two freshly made ice creams priced at CNY 39 (USD 5.8). Despite the high prices, these new products were super popular, whose sales reached CNY 200,000 (USD 19761) within seven hours. Long queues can be seen in its offline stores.

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Chinese consumers’ demand for high-end ice cream has risen in recent years, and the whole ice cream market is being upgraded as more brands emerge and consumption habits change. According to the Chinese Ice Cream Industry Trend Report (2022), the ice cream market size reached CNY 160 billion (USD 23.8 billion) in 2021, ranking the first in the world.

Although the total consumption of ice cream in China ranks among the top in the world, Chinese per capita annual consumption is about 3.5 liters, lower than that in Western countries (6-8 liters), implying Chinese ice cream market still has space to explore.

Regrading brands, Yili, Wall’s, Mengniu, and Nestle keep their leading positions in the industry, accounting for over 50 percent of the market share. These brands kept rapid growth. For example, in 2021, Yili’s cold product business achieved operating income of CNY 7.161 billion (USD 1.065 billion), increasing by 16.28 percent yearly. Its sales in 2022Q1 were CNY 2.8 billion (USD 416.65 million), a year-on-year increase of 35.5 percent. Another giant, Mengniu reached CNY 4.24 billion (USD 630 million) sales in 2021, increasing by 61 percent yearly.

Source : Yili ice cream

Seeing the potential in this market, big brands accelerated expansion in 2022. Recently, Unilever officially unveiled that WALL’S Taicang factory, were selected as a “Lighthouse Factory”. It is the first “Lighthouse Factory” in the ice cream industry worldwide. Nestle also has confidence in the market and plans to launch over 20 new ice cream in China this year.

New brands are also rising, which bring new changes to the industry and boost positive competition in the whole market. Chicecream is a representative. Founded in 2018, Chicecream focuses on providing high-end and creative ice cream for Chinese consumers. Its sales exceeded CNY 100 million (USD 14.88 million) within 16 months after its establishment. In the 618 shopping festival and Double 11 shopping festival in 2020 and 2021, Chicecream was the top 1 brand by sales in the ice product sector on Tmall.

The market share of ice cream’s online sales also grew with the rise of these new brands who rose online and the development of cold chain transportation, rising from 5 percent to 20 percent in 2021.

Expensive Ice Creams becoming a New Social Currency

These innovative expensive ice creams become a new social currency among young consumers. Young consumers like to post pictures of these products online to show that they are part of the fashion circle, contributing to brands’ exposure and sales.

According to the manufacturers, for the ice cream with a retail price of CNY 4 (USD 0.6) to CNY 5 (USD 0.74), the ex-factory price is only about CNY 1 (USD 0.15); for those with a price of about CNY 11 (USD 1.64), the ex-factory price is about CNY 5 (USD 0.74); and for those with a price of about CNY 49 (USD 7.29) the maximum cost is less than CNY 20 (USD 2.98). The high profit of high-end ice cream allures more players to dive into the market. More and more expensive ice creams take up the market and squeeze affordable ice creams out of the market. However, another voice appears, calling for the return of the affordable ice cream to the market. Now Chinese ice cream market now shows the following distribution trend: most mid- and high-priced ice creams are distributed online and in convenience chains, such as 711 and FamilyMart, while consumers can find more affordable products in traditional offline channels, such as some individual-owned offline grocery stores.

What’s next for the  High-End Ice Cream trend?

Besides the high quality and high prices, some other trends are also worthy of attention.

Low fat, low calorie, and low sugar

Brands want ice creams to get rid of the label of “unhealthy food,” so they developed quite a few new products by limiting products fat, calorie, and sugar content. For example, Chicecream’s youth series only contains 3g/100g fat, 80 percent less than the fat content of ordinary milk ice cream. Using plant-based ingredients is another way for brands to achieve the goal of low fat, low calorie, and low sugar. Represented by OATLY, quite a few brands launched plant-based ice creams, which were popular. OATLY’s oat milk ice creams achieved over 100,000-unit sales in Shanghai within ten days.

Source : Dylan Ferreira

Multiple scenarios

In the past, ice cream was more like a refreshment to relieve summer heat, but now, its consumption scenarios have been expanded. According to the Chinese Ice Cream Industry Trend Report (2022), 17 percent of consumers also buy ice cream in winter, and 39 percent purchase ice cream in all seasons.

With the upgrades in distribution channels and transportation chains, ice cream has gradually become one of the consumption options suitable for multiple people to share in office and home scenarios.

Even in some historical sites, tourists can purchase cultural creation ice cream, shaped like historic constructions or other cultural elements. The release of cultural creation ice cream has become a typical marketing strategy for famous historical tourist sites in China, including Palace Museums, West Lake, Summer Palace, etc.

Written by: Ye Chen, ChemLinked Research Analyst
(Source : ChemLinked)