THE CHINESE FOOD MARKET - With Focus on Healthy Products - Switzerland Global Enterprise
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With Focus on Healthy Products THE CHINESE FOOD MARKET Please insert a suitable picture in this size OFFICIAL PROGRAM PARTNER
THE CHINESE FOOD MARKET
This report provides a comprehensive reference for Swiss
companies wanting to expand and/or develop in the Chinese
food market. It contains market insights on the rapidly
changing food market, for the general Food & Beverage as
well as the Healthy Food Market.
Date:
Language: English
Number of pages: 66
Author: Fiducia Management Consultants
Other sectorial Reports: Are you interested in other Reports
for other sectors and countries? Please find more Reports
here: s-ge.com/reports
DISCLAIMER
The information in this report were gathered and researched from sources
believed to be reliable and are written in good faith. Switzerland Global
Enterprise and its network partners cannot be held liable for data, which might
not be complete, accurate or up-to-date; nor for data which are from internet
pages/sources on which Switzerland Global Enterprise or its network partners
do not have any influence. The information in this report do not have a legal or
juridical character, unless specifically noted.
Contents
4.5.1. Market Development ___________________ 29
1. FOREWORD____________________________7
4.5.2. Main Players ________________________ 31
2. EXECUTIVE SUMMARY __________________8 4.5.3. Distribution Channels __________________ 32
4.5.4. Opportunities for Swiss Companies _________ 32
3. MARKET OVERVIEW ____________________9
3.1. Market Trends _______________________ 10 5. HEALTH FOOD MARKET ________________ 34
3.2. Market Potential for Swiss Products __________ 11 5.1. Baby and Infant Food __________________ 34
5.1.1. Market Development ___________________ 34
4. FOOD AND BEVERAGE MARKET _________12
5.1.2. Main Players ________________________ 35
4.1. Convenience Food _____________________ 12
5.1.3. Distribution Channels __________________ 36
4.1.1. Market Development ___________________ 12
5.1.4. Opportunities for Swiss Companies _________ 36
4.1.2. Main Players ________________________ 14
5.2. Organic Food ________________________ 37
4.1.3. Distribution Channels __________________ 15
5.2.1. Market Development ___________________ 37
4.1.4. Opportunities for Swiss Companies __________17
5.2.2. Main Players ________________________ 39
4.2. Dairy Products _______________________ 18
5.2.3. Distribution Channels __________________ 41
4.2.1. Market Development ___________________ 18
5.2.4. Opportunities for Swiss Companies _________ 42
4.2.2. Main Players ________________________ 19
5.3. Dietary Supplements ___________________ 43
4.2.3. Distribution Channels __________________ 20
5.3.1. Market Development ___________________ 43
4.2.4. Opportunities for Swiss Companies _________ 21
5.3.2. Main Players ________________________ 44
4.3. Soft Drinks __________________________ 21
5.3.3. Distribution Channels __________________ 44
4.3.1. Market Development ___________________ 21
5.3.4. Opportunities for Swiss Companies _________ 45
4.3.2. Main Players ________________________ 23
5.4. Sports & Fitness ______________________ 46
4.3.3. Distribution Channels __________________ 23
5.4.1. Market Development ___________________ 46
4.3.4. Opportunities for Swiss Companies _________ 24
5.4.2. Main Players ________________________ 47
4.4. Alcoholic Beverages ____________________ 25
5.4.3. Distribution Channels __________________ 47
4.4.1. Market Development ___________________ 25
5.4.4. Opportunities for Swiss Companies _________ 48
4.4.2. Main Players ________________________ 26
4.4.3. Distribution Channels __________________ 27 6. FAIRS AND ASSOCIATIONS _____________ 49
4.4.4. Opportunities for Swiss Companies _________ 28 6.1. Food Fairs __________________________ 49
4.5. HoReCa (Hotel, Restaurant, café) __________ 29 6.2. Associations __________________________51
7. REGULATORY ENVIRONMENT ___________52 9.3.3. Success story – SwissTaste _______________ 59
7.1. Authorities __________________________ 52 9.3.4. Suggestions for market entrants – SwissTaste __ 59
7.2. Food Safety _________________________ 52
10. EXPORT CHECKLIST ___________________ 60
7.2.1. Regulation Specific to Healthy and Organic Food 53
7.2.2. Regulation Specific to Genetically Modified 11. APPENDIX ____________________________ 62
Organism ___________________________ 53 11.1. Cross-border e-commerce of Bonded Warehouses 62
7.3. Labeling Requirements _________________ 53 11.2. Cross-border e-commerce in Bonded Logistics Parks
7.3.1. Mandatory Labelling Items of Pre-packaged Food 53 and Free Trade Zones __________________ 62
7.3.2. Requirements Specific to Nutritional Labelling _ 54 11.3. Potential importing partners for China _______ 63
7.3.3. Requirements Specific to Baby Food Labelling __ 54 11.4. Local taxation and levies on alcoholic beverages in
7.3.4. Requirements Specific to Organic Labelling ____ 54 China _____________________________ 64
11.5. Reference ___________________________ 65
8. SINO- SWISS FTA ______________________55
8.1. Import Procedures ____________________ 55
8.2. Import Duties ________________________ 56
9. SWISS COMPANIES IN CHINA____________57
9.1. CHEERS Wines ______________________ 57
9.1.1. About CHEERS Wines __________________ 57
9.1.2. Road to success – CHEERS Wines __________ 57
9.1.3. Success story – CHEERS Wines ____________ 57
9.1.4. Suggestions for market entrants – CHEERS Wines57
9.2. Emmi _____________________________ 58
9.2.1. About Emmi _________________________ 58
9.2.2. Road to success – Emmi _________________ 58
9.2.3. Success story – Emmi __________________ 58
9.2.4. Suggestions for market entrants – Emmi _____ 58
9.3. SwissTaste (Beijing)____________________ 59
9.3.1. About SwissTaste _____________________ 59
9.3.2. Road to success – SwissTaste _____________ 59
THE CHINESE
FOOD MARKET
4List of figures Figure 1. 1: Geographic distribution of disposable income of urban households .............................................................................10 Figure 4.1.1. 1: Convenience food market development in China 2009 – 2019E (in RMB bn) ....................................................... 12 Figure 4.1.1. 2: Impulse and indulgence product market development in China 2009 – 2019E (in RMB bn)............................... 13 Figure 4.1.3. 1: Convenience food distribution channel development in China 2012 – 2014 (in %) ............................................... 15 Figure 4.2.1. 1: Dairy products market development in China 2009 – 2019E (in RMB bn) ...........................................................18 Figure 4.2.3. 1: Dairy products distribution channel development in China 2012 – 2014 (in %) .................................................. 20 Figure 4.3.1. 1: Soft drinks market development in China 2009 -2019E (in RMB bn) – Off-trade ............................................... 22 Figure 4.3.3. 1: Soft drinks distribution channel development in China 2012 – 2014 (in %) ......................................................... 23 Figure 4.4.1. 1: Alcoholic beverages market development in China 2009 - 2019E (in RMB bn).................................................... 25 Figure 4.4.3. 1: Alcoholic beverages distribution channel development in China 2012 – 2014 (in %) .......................................... 27 Figure 4.5.1. 1: Consumer foodservice sales by location 2009 - 2019E (in RMB bn)...................................................................... 29 Figure 4.5.1. 2: Consumer expenditure on hotels and catering by income 2009 – 2019E (in RMB bn) ....................................... 30 Figure 4.5.1. 3: Hotel price platform - retail value breakdown 2011 – 2013 (in %) ........................................................................ 30 Figure 5.1.1. 1: Baby and infant food market development in China 2009 – 2019E (in RMB bn) ................................................. 34 Es konnten keine Einträge für ein Abbildungsverzeichnis gefunden werden. Figure 5.1.3. 1: Baby and infant food distribution channel development in China 2012 - 2014 (in %) .......................................... 36 Figure 5.2.1. 1: Organic packaged food market development in China 2009 – 2019E (in RMB bn) ............................................. 38 Figure 5.2.1. 2: Development of number of organic certifications in China 2004 - 2013 ............................................................... 38 Figure 5.2.3. 1: Organic packaged food distribution channel development in China 2012-2014 (in %) ........................................ 42 Figure 5.3.1. 1: Dietary supplement market development in China 2009 – 2019E (in RMB bn)................................................... 43 Figure 5.3.3. 1: Dietary supplements distribution channel development in China 2012-2014 (in %) ........................................... 44 Figure 5.4.1. 1: Sports nutrition market development in China 2009 – 2019E (in RMB bn) ......................................................... 46 Figure 5.4.3. 1: Sport & fitness distribution channel development in China 2012-2014 (in %) ..................................................... 47 Table 4.1.2. 1: Main players in the convenience food industry in China (excluding dairy players) ................................................. 14 Table 4.1.2. 2: Main foreign players in the impulse and indulgence market in China (excluding dairy players) ........................... 15
Table 4.1.3. 1: Largest food retail stores in China in 2014 ................................................................................................................. 16 Table 4.2.2. 1: Largest domestic players in the dairy industry in China ........................................................................................... 19 Table 4.2.2. 2: Largest foreign players in the dairy industry in China ............................................................................................. 20 Table 4.3.2. 1: Largest players in the soft drinks industry in China ................................................................................................. 23 Table 4.4.2. 1: Most popular alcoholic brands in China (according to volume) .............................................................................. 26 Table 4.4.2. 2: Most popular imported wines in China .................................................................................................................... 27 Table 4.5.2. 1: International enterprises in the hotel sector .............................................................................................................. 31 Table 4.5.2. 2: International enterprises in the chained consumer foodservice sector ................................................................... 31 Table 4.5.3. 1: Consumer foodservice by independent vs chained: units/outlets 2013 .................................................................. 32 Table 5.1.2. 1: Largest players in the baby and infant food industry in China ................................................................................. 35 Table 5.2.2. 1: Largest domestic players within the organic food industry in China ....................................................................... 40 Table 5.2.2. 2: Largest foreign players within the organic food industry in China ......................................................................... 40 Table 5.2.2. 3: Local producers of organic food products in China................................................................................................... 41 Table 5.3.2. 1: Largest players in the dietary supplements industry in China ................................................................................. 44 Table 5.4.2. 1: Largest players in the sports and fitness nutrition industry in China ..................................................................... 47 Table 8.2. 1: Chinese customs duties on major food products (goods exported from Switzerland to China)................................ 56 Table 11.3. 1: Local distributors and importers ................................................................................................................................. 63 THE CHINESE FOOD MARKET 6
1. Foreword Dear Reader, Thanks to its speedy growth in recent years, China has become the world’s largest consumer market for food and beverage (F&B). At the same time, the demand for imported food has also seen a remarkable development. As consumers increasingly turn towards higher-valued products, the Chinese food market offers excellent opportunities for foreign foodstuffs companies. Switzerland and Swiss products enjoy an excellent reputation in China as the Swiss brand stands for a high standard of quality and safety that is highly valued by a quickly growing number of middle class consumers. Whereas China's affluent urban consumers appear to be the most inclined to pay premium prices for healthy food, even lower-income Chinese preferences are shifting. 84% of Chinese consumers are concerned about food safety according to a recent research. This is reflected in soaring demand for products suc h as imported fresh milk, and increasing awareness for healthy foreign foodstuffs. As a consequence, China's organic food market grew more than 10-fold in the past six years. While nutritious and safe food is the dominant theme today in China's F&B sector, other noteworthy trends include convenience food, online shopping, and lifestyle products. This “Food Report with focus on healthy products” offers an overview of possibilities, be it for established Swiss brands or new niche products. For a successful entry into the market you will need to partner with local distributors. The Swiss Business Hub (SBH) is familiar with the market and has a well-established network in China. Are you looking East? Then let us discuss and evaluate the chances of your company’s success in the region. Alain Graf Wolfgang Schanzenbach Head of Swiss Business Hub China Regional Director APAC Swiss Embassy in the People’s Republic of China Switzerland Global Enterprise Sanlitun Dongwujie 3 Stampfenbachstrasse 85 100600 Beijing 8006 Zurich alain.graf@eda.admin.ch wschanzenbach@s-ge.com Phone +86 10 8532 7532 www.eda.admin.ch/beijing s-ge.com THE CHINESE FOOD MARKET 7
2. Executive Summary
China has experienced remarkable economic growth in the last two to three decades, which has resulted in a steady increase in
consumer’s income. China now ranks amongst the top 80 countries in the world in terms of GDP per capita. By 2016, 340
million Chinese are expected to belong to the middle class, more than the population of Western Europe, thus creating a huge
market for all sorts of food and beverage products. Coupled with increasing urbanisation and internationalisation, this rising
middle class will have a great impact on the changing food culture in China, mainly in terms of increased consumer spending,
shift in dietary patterns and raised health awareness, and sophistication regarding food ingredients.
Seeing the vast opportunities in the China food market, this report aims to provide an overview of the current situation, as well
as future trends for certain food categories, with a special focus on exploring potential opportunities for Swiss enterprises and
entrepreneurs.
This report covers the following nine sectors of the China food market:
Food & Beverage Market
Convenience Food
Dairy Products
Soft Drinks
Alcoholic Beverages
HoReCa
Healthy Food Market
Baby & Infant Food
Organic Food
Dietary Supplements
Sports & Fitness
Each sector is structured according to the below four segments:
Market development
Main players
Distribution channels
Opportunities for Swiss companies
The content of this report will provide Swiss companies with an overview of the Chinese food market and a basis to formulate a
suitable entry and/or expansion strategy for, not only China, but the greater Asia-Pacific market.
THE CHINESE
FOOD MARKET
83. Market overview
Increasing income and urbanisation have been the most significant drivers for change in China’s food system. China is
nowadays considered one of the largest consumers of food and beverage, catering to more than 1.36 billion citizens and 117
million tourists in 2014, traveling to China from all over the world. Overall, food consumption in China is expected to continue
growing at a compound annual average growth rate (CAGR) of 9.4% between 2013 and 2018.1 To fulfil the need of its people,
China has naturally transformed into one of the largest producers of food and beverages worldwide.
Besides an increase in the sheer amount of food and beverages produced and consumed, the quality and range of products
available in China are changing. The rising middle class, and hence increased disposable income and spending patterns are
adding sophistication to the market with consumers’ appetite being whetted. In order to match consumer’s needs, retailers are
using a greater number of purchasing channels and providing availability of a richer array of products. Nowadays, Chinese
consumers have more choice than ever which has resulted in a general change of diet. Many Chinese are slowly moving away
from their traditional diets of rice, noodles, vegetables, and small portions of meat, towards a more Western style of eating,
including more meat and dairy products.
Along with a changing diet, Chinese consumers are placing more importance on healthy, nutritious, and higher quality food.
This trend is seen for both rural and urban households, which are willing to buy products that are branded as “healthy” even if
prices are higher. Recent food scandals have increased consumer awareness and have facilitated the popularity of healthy and
functional foods, whereby consumer confidence is however only slowly recovering, since the Chinese government only recently
increased its attention to food regulations and safety, and it may take some time before consumers will be able to fully trust the
legal framework and the influence of the state.
In order to fulfil the growing consumer demands, China is still relying on importing food and beverage products from overseas,
especially for sensitive and scandal-tainted categories, such as baby food, dairy, and meat. Besides food scandals, high levels of
pollution in China have also fuelled the common belief to mistrust local brands. According to the Ministry of Environmental
Protection, up to 40% of rivers and 20% of farmland in China are polluted. Until the country is able to tackle its environmental
issues, the Chinese consumers that can afford it will keep favouring imported foods and rely on internationally recognised food
standards. In addition, China is struggling to meet its domestic food demand as production is lagging and the supply of basic
food is expected to be insufficient by 2050. The current situation of the Chinese food market can therefore offer many
opportunities for international food producers, especially from Switzerland. On the one hand, Swiss companies are able to
leverage on the benefits from the signed Free Trade Agreement (FTA) between Switzerland and China.2 On the other hand,
increase in urban households and the rising middle class in China, based on their purchasing power and patterns (see Figure
1.1) , and food trends, like organic and gourmet foods, such as wine, coffee, cheese or chocolate, provide a lucrative market for
many Swiss companies.
Even though there is demand for international companies and imported products, it should not be neglected that due to the
projected slowdown of the Chinese economy, the food and beverages market in the country is expected to grow at a slower pace
compared to its historical levels. Other factors that might have a relevant impact on the market development are: growing price
pressure, saturated markets for many basic foods, more stringent regulations on imports, and the slow recovery of consumer
confidence regarding food safety regulations.
1
Compound annual growth rate (CAGR) is the average rate of an investment’s growth over a variable period of time.
2
Please refer to Chapter 8 “Sino-Swiss FTA” for more information on the Free Trade Agreement between Switzerland and China
THE CHINESE
FOOD MARKET
9Figure 1. 1: Geographic distribution of disposable income of urban households
Note: Colour based on amount of disposable income
2013 per capita disposable income of urban households as % of national average (RMB 26,565 per capita in 2013) and proportion of urban population
Source: China Yearbook 2014, Fiducia Analysis
3.1. MARKET TRENDS
Urbanisation and rising middle class: In the last 35 years the scale of urbanisation in China has been unprecedented
with nearly 54% of the nation’s total population becoming urban residents. Despite a relatively stable total population of
1.36bn, urban population is steadily increasing with 3% annual growth. Supported by higher disposable incomes, this
leads to increased prosperity and thus a change in the average consumers’ lifestyle, shopping habits and consumption
patterns. Moreover, with the prevalence of more sedentary lifestyles, there is also a change in metabolic and nutrient
requirements, forcing the market to adjust.
Demand for convenience: Particularly urban citizens spend a larger portion of their income on buying processed and
packaged food and beverages due to more stressful lifestyles that demand a higher level of convenience. This trend can
also be witnessed in a rise in dining out based on the possibilities and urges to try new products and dishes and the
demand for more variety.
Food safety: The increasing regulatory scrutiny and new laws of China’s food market will on the one hand ensure better
food quality and eliminate corrupt food producers but, on the other hand make it harder for foreign players to introduce
new products into the market. A key challenge for the government will be to manage food safety across the entire supply
chain while ensuring regulatory compliance and environmental sustainability.
Health consciousness: Historically Chinese people have put much emphasis on healthy and nutritious food. The many
recent incidents revolving around food safety and quality have only added to this health awareness. As a result, food
manufacturers have increasingly capitalised on the trend towards healthier nutrition and the fact that Chinese consumers
have become increasingly demanding in terms of product offerings. Nowadays, the average Chinese consumer has a very
developed understanding of food ingredients. Therefore, food quality and selection of ingredients will have a great impact
on the dietary choices of Chinese consumers.
Growth of e-commerce: Internet retailing has been growing at a rapid pace, currently accounting for 6-7% of total
retail sales in China, which is higher than in many European countries. This trend is supported by savvy online shoppers,
successful online shopping drives, such as Singles Day, and rapid development of mobile applications and social media in
China. The most well-known online food B2C marketplace is Yihaodian.com, which is majority owned by Walmart and
also the first online supermarket in China established in 2008. Other e-commerce giants, such as T-mall, Dangdang, and
Jingdong, have currently also included food products on their platforms. Online supermarkets are a major challenge to
traditional retail outlets, with 60% of online sales already cannibalising traditional brick-and-mortar sales and taking up
almost every aspect of the food and beverage sector including fresh produces and fruits. Moreover, online platforms often
provide lower prices than many physical stores, convenient payment options, real-time online sales support, and home
THE CHINESE
FOOD MARKET
10delivery. In 2013, China already overtook the US as the world’s largest e-commerce market and is forecasted to become the
largest retail market in the world by 2018.3
Adoption of Western foods: Chinese taste is changing and adopting more Western-style foods. With the success of
international food chains like McDonalds or Starbucks, Chinese people developed a taste for Western products very early
on. Through consumer education and sophistication, the trend is moving away from these fast food chains towards more
“status” affiliated product groups, like imported wine, coffee, or confectionary. Chinese consumers are also more and more
interested in lifestyle trends from around the world. Wine, for example, is already seen as a fashionable drink for China’s
elite.
3.2. MARKET POTENTIAL FOR SWISS PRODUCTS
Private labels: As the market for imported food continues to grow, there will be new opportunities for new, mid-range
brands, in addition to the well-known commercial brands. Switzerland especially has a wide range of private labels that
are already well-established locally. Introducing these traditional, family-run businesses with a recognisable brand to the
Chinese market could provide growth potential beyond their traditional markets.
Gourmet foods: The niche segment of “gourmet” or speciality stores with imported products from Europe is expected to
grow in the coming years. Upmarket supermarkets, like Ole or BHG, have already stocked many high-end specialty goods.
There is however potential for smaller individual stores, catering to a small group of high-end customers with demand for
imported and traditional speciality food, such as Swiss cheese or chocolate.
Organics: Chinese place increased attention to health, whereby food produced organically is especially popular. Key
words such as “eco-friendly”, “organic”, “natural”, or “healthy” are well-received by consumers. Launching products with
different health elements, providing recognised official organic certifications and detailed information regarding
nutritional value are expected to increase sales.
Dairy: Not traditionally part of the diet in many regions in China, milk and yoghurt are increasingly considered essential
to the diet of children. Domestic food safety scandals and continuing concern about the domestic dairy industry have
created demand for high-quality, reliable dairy foods, particularly from overseas markets. Especially milk, milk powder,
yoghurt, cheese and butter have seen a rise in demand in recent years. Also the newly introduced Sino-Swiss FTA has
introduced beneficial regulatory environment for importing Swiss dairy. From July 1, 2014 onwards, import tariffs for
most milk products exported to China will disappear within a decade.
Cheese: Swiss cheese is famous worldwide and is reported to increase in demand over the next years. Chinese consumers
are already slowly recognising the nutritional value of cheese and are also adjusting to the unfamiliar “pungent” smell.
Coffee: Coffee, historically seen as a luxury food items, is already a part of the daily diet of most urban citizens. Starbucks
or Costa Coffee have positioned themselves in the Chinese market as the go-to coffee provider. There is however still a
niche market for premium coffee beans.
Chocolate: While chocolate still lacks a retail dining culture, it is more naturally compatible with the Chinese taste and
more suitable for gift giving compared to coffee. Even though the government has been cracking down on the gift giving
culture amongst officials, nicely packaged chocolate will show future growth potential within the retail market. Also
popular for social occasions, chocolate is already well-established and continues to be an essential part of the Chinese
confectionary market. Especially a recognisable brand name, high quality and originality are the most efficient ways to set
oneself apart from the competition, which serves Swiss chocolatiers well, since Swiss chocolate is already seen as a
premium product worldwide.
Beer: China has become the world’s largest beer consumer by volume. The market however is highly competitive, which
makes it hard for international players to establish themselves. To compete with domestic players, foreign companies have
built production sites in China and developed brands especially for the Chinese market. The microbrewery market has
been growing recently making room for small beer companies to enter China.
Wine: Wine in general plays a more important role in the Chinese diet, as it greatly represents Western drinking and
eating habits. While there is still social status associated with drinking imported wine, local wine is gaining more
attention. Domestic players however are no direct competition yet, as they still mostly cater to the lower price segment. In
China, red wine is generally preferred, mainly due its broad choice and popularity, but also due to its proclaimed health
benefits. It has been successfully marketed in China as a healthy alternative to Chinese white spirit (baijiu). Sparkling wine
sales have increased amongst wealthy Chinese, especially served during special occasions. Market saturation is not yet
considered a problem, as there is still significant potential in second and third-tier cities.
3
Please refer to Appendix 12.1 and 12.2 for more information on cross border e-commerce trade
THE CHINESE
FOOD MARKET
114. Food and Beverage Market
4.1. CONVENIENCE FOOD
4.1.1. Market Development
Urbanised lifestyle and rising income are fuelling the growth of China’s convenience food market, where Chinese consumers
are searching for convenient food with an increasingly stronger focus on health. Main target groups for convenience foods are
urban households and then especially the younger generation. With the advancement along the value chain of processed foods,
such as improvement in packaging technology, cold chain logistics as well as growth of the retail industry, food producers are
able to meet the trends and higher needs of these consumers. Nowadays, almost all sorts of food products can be safely
transported and shipped throughout the world. Moreover, products are sold in a broad range of distribution channels,
including typical supermarkets, convenience stores or on online platforms.
Figure 4.1.1. 1: Convenience food market development in China 2009 – 2019E (in RMB bn)
2,028
1,409
1,272
1,154
1,034
905
805
Notes: Meal Solutions include: Ready meals, canned/preserved food, dessert mixes, dinner mixes, chilled processed food, sauces and condiments and soup / Impulse and Indulgence
include: Snack bars, ice cream, biscuits, pastries, cakes, sweet and savoury snacks and confectionary / Nutrition and Staples include: bread, breakfast cereals, dairy, meal replacement, oils
and fats, baby food, spreads, pasta, noodles and rice
Sources: Euromonitor (2015), Fiducia Analysis
According to estimates by Euromonitor International, the Chinese market for packaged and convenience food like ready-made
meals, snacks and drinks, will surpass America’s by 2015. On a per capita basis, the average Chinese resident will however only
eat about a quarter as much convenience food as an American citizen. Still, Chinese consumption of convenience food will have
grown around 75% from 2009 figures.
THE CHINESE
FOOD MARKET
12Figure 4.1.1. 2: Impulse and indulgence product market development in China 2009 – 2019E (in RMB bn)
506
388
353
322
293
260
234
Sources: Euromonitor (2015), Fiducia Analysis
Highlights:
Meal Solutions
Busy lifestyles have increased the demand for pre-prepared meals due to the need for more convenience. This trend is
strongest among working adults, particularly those in single person households. Preferred foods are frozen Chinese-style
products, such as dumplings, wontons or buns, in part due to improved cold chain logistics. For younger generations,
ready meals, noodles and rice that are pre-cooked and only require reheating, are a good and cheap alternatives to home
cooking or dining out, especially for single households. Western-style prepared meals are still less favoured but see an
uptake with Chinese higher-income consumers.
Cake mixes are still a novelty in China as most traditional households do not have a proper oven. Chinese are however
slowly discovering home baked products and bakery or cake mixes and are interested in learning the art of baking, which
will have a positive impact on prepared mixes in the future. For the time being, Chinese are still preferring cakes and
bakery products from professional bakeries, either from small artisanal outlets or prepacked products from grocery stores.
Impulse and Indulgence Products
Chinese costumers are expected to reduce their consumption of impulse and indulgence products, like snack
bars, pastries and ice cream, and shift more of their expenditure to essential goods. In addition, the growing interest in
healthy eating and the rising concerns about being overweight and obesity-related diseases such as diabetes are also set to
negatively impact growth for the future.
Chocolate contributed revenues of USD 2.7 million in 2014, with foreign brands still dominating the market and the top
5 multinational companies (Mars, Cadbury, Nestlé, Hershey, and Ferrero Rocher), accounting for the majority of sales.
Among those, Swiss giant Nestlé holds more than 10% share of retail value sales in 2014. As the current per capita
consumption of chocolate in China is only a tenth of that in Switzerland and major chocolate giants are making an entry
into China’s vast market, the chocolate confectionary market is expected to grow by two-thirds by 2019. Main players are
projected to focus on increasing brand awareness in tier-one cities while also looking to expand into lower-tier cities where
there is lower brand presence. Even though dark chocolate has widely being recognised as healthy and known to lower
both blood pressure and cholesterol, many consumers still find its bitter flavour to be unpalatable, which is for now still
constraining sales growth in this area but is expected to be adopted as well given the increased importance placed on
healthy and Western foods.
THE CHINESE
FOOD MARKET
13Nutrition and Staples
Wheat-based products, such as breakfast cereals and muesli, are expected to gain share in the future. Especially
products targeted at children with functional ingredients and attractive packaging are forecasted to gain high demands
within the nutrition/staples category. For adults, single-cup packs will see growing popularity offering a convenient and
healthy breakfast choice.
4.1.2. Main Players
Brands of multinational players are often more popular than those of domestic players for convenience food in first and second
tier cities, supported by their strong penetration in modern grocery retailers as well as the increased demand for Western-style
foods. The Chinese-style convenience food market is almost solely dominated by local players.
Table 4.1.2. 1: Main players in the convenience food industry in China (excluding dairy players)
COMPANY ORIGIN RETAIL VALUE BRAND MAIN CATEGORIES
SHARE 2014*
Wilmar International Singapore 3.5% Koufu, Arawana, Wonder Edible oils, palm oil,
Ltd Farm, Golden Carp, Olivoila rice, flour, mixed grains,
noodle
Ting Hsin International China / 2.8% Cheng I, Master Kong Instant noodles, oil &
Group Taiwan fats
Nestlé SA Switzerland 2.7% KitKat, Maggi, Gerber, Water, chocolate
Nespresso, Nescafe confectionary, baby
food, coffee, ice cream
Shineway Group China 2.3% Shuanghui Frozen meat, canned/
(Shuanghui) processed food
Want Want Holdings China 2.3% Want Want, Laoweng, Mr Rice crackers, dairy,
Ltd Bond, Hot Kid, Snack bean coffee, milk, soft drinks,
ice pop, candy, biscuit
Hangzhou Wahaha China 1.9% Wahaha Milk drinks, soft drinks,
Group bottled water, tea,
porridge
Bright Food Group China 1.8% Bright, Big White rabbit, Dairy, candy, ice cream,
Aquarius, Aiseng sugar, rice wine, cereals,
rice
COFCO China 1.4% Fortune, Lohas, Le Conte, Kitchen food, snacks,
Cereal Way, Great Wall beverages, instant food,
wine, dairy
Notes: *Global Brand Owner (GBO) retail value shares of packaged food
Sources: Euromonitor (2015), Fiducia Analysis
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14Table 4.1.2. 2: Main foreign players in the impulse and indulgence market in China (excluding dairy players)
COMPANY ORIGIN RETAIL VALUE BRAND MAIN CATEGORIES
SHARE 2014*
Wrigley Confectionary USA 2.8% Extra Chewing gum
Mondelez China USA 2.2% Oreo, Toblerone, Cadbury Cookies and crackers,
chocolate
Mars Foods (China) USA 1.8% Dove, Skittles, M&M, Chocolate, gum, candy
Snickers, Wrigley
Perfetti Van Melle Italy 1.0% Alpenliebe, Mentos, Chupa Gum and candy
Confectionary Chups
Pepsi Co China USA 1.0% Lay’s Chips
Nestlé SA Switzerland 0.8% KitKat, Crunch Chocolate
Ferrero China Italy 0.5% Ferrero, Kinder Chocolate
Shanghai Hershey Food USA 0.5% Hershey’s Chocolate
Co Ltd
Notes: * National Brand Owner (NBO) retail value shares of impulse and indulgence food
Source: Euromonitor (2015), Fiducia Analysis
4.1.3. Distribution Channels
Supermarkets and hypermarkets are still the prime sales channels for convenience food, benefitting from providing a wider
product range to their customers. Meanwhile, as more online shops emerge, consumers are also increasingly opting for online
shopping due to heavy price competition and increased convenience, such as home delivery. However with Chinese consumers
focusing on product quality, ingredients and origin, food, drink and tobacco specialty stores are gaining market share in certain
product groups, especially for baked goods or ice cream.
For Impulse and Indulgence products, independent small groceries remain the main distributor channel, mainly due to its
wide-spread presence across the country and convenient locations facilitating impulse purchases. By 2014, many independent
small groceries however lost market share to larger modern grocery retailers such as hypermarkets or supermarkets because of
their broader selection, volume expansion, low pricing, and increased promotions.
Figure 4.1.3. 1: Convenience food distribution channel development in China 2012 – 2014 (in %)
2014 39% 20% 18% 8% 7% 3% 3% 3% 1%
2013 39% 19% 19% 8% 6% 2% 3% 3% 1%
2012 39% 19% 20% 9% 6% 2%3%2% 1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Supermarkets Hypermarkets Independent Small Grocers
Other Grocery Retailers Food/ Drink / Tobacco Specialty Stores Internet Retailing
Convenience Stores Non-Grocery Retailers Others
Sources: Euromonitor (2015), Fiducia Analysis
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15Table 4.1.3. 1: Largest food retail stores in China in 2014
NAME ORIGIN NO. OF SALES 2014 (YOY STORE BRANDS
STORES SALES GROWTH)
DOMESTIC PLAYERS
China Resources Vanguard, Co. China 4,127 RMB 104.0bn (12.6%) Tesco (JV), Suguo, Ole, BLT,
Ltd. Voila, Pacific Coffee
Lianhua Supermarket Co., Ltd. China 4,325 RMB 61.7bn (-10.3%) Hualian Supermarket, Century
(Bailian Group) Mart, Quik
Yonghui Superstores (Dairy China 337 RMB 43.0bn* (22.6%) Yonghui Superstores
Farm International 19.9% stake)
Dashang Group China 200 RMB 37.7bn* (-4.6%) Dalian Market, Xinmate
NSG (Group) Co., Ltd. China 2,566 RMB 29.4bn (-2.1%) NGS, Alldays, Kedi
Beijing Wumart Stores, Inc. China 565 RMB 22.0bn (11.3%) Wumart
Beijing Hualian Hypermarket China 145 RMB 16.6bn* (8.8%) BHG Lifestyle, Market Place
Co., Ltd.
FOREIGN PLAYERS
Kang Cheng Investment (RT- Taiwan 304 RMB 85.7bn (6.9%) RT-Mart
Mart Shanghai)
Wal-Mart (China) Investment USA 411 RMB 72.4bn** (0.2%) Wal-Mart
Co., Ltd.
Carrefour China Inc. France 237 RMB 45.7bn (-2.1%) Carrefour
Metro Jinjiang Cash& Carry USA 81 RMB 18.9bn (8.0%) Metro
Lotte Mart Korea 123 RMB 18.0bn* (16.1%) Lotte Mart
Auchan (China) Investment France 68 RMB 16.5bn (5.1%) Auchan hypermarket
A.S. Watsons & Co., Ltd. Hong Kong 2,088 RMB 16.4bn* (14.0%) Watsons
(Guangzhou)
C.P. Lotus Corporation Thailand 77 RMB 13.8bn (0.2%) Lotus Supermarket
Family Mart Co., Ltd. Japan 1,281 RMB 4.2bn (13.5%) Family Mart
Notes: *Estimated sales figures, **Wal-Mart sales figures not including Yihaodian.com
Sources: China Chain Store and Franchise Association (CCFA), Fiducia Analysis
THE CHINESE
FOOD MARKET
164.1.4. Opportunities for Swiss Companies
Focus on e-commerce shopping: As online shopping continues to gain popularity among Chinese consumers,
companies that have previously relied solely on traditional retail channels will need to reconsider their strategies to
promote their products online. Online shoppers are also mainly young urban and wealthy Chinese citizens, which is the
target group for imported and premium products. Swissmooh, a Swiss dairy company, and CHEERS Wine, a Swiss import
wine wholesaler, for example, are already successfully providing their products on Taobao.com or social media platforms,
such as Wechat. Another benefit is that the online channel is highly attractive for start-up companies. In the early stages of
development, many small independent brands choose online stores as their exclusive distribution channel because
through online sales they can reach as many consumers as possible at the lowest cost.
“Premiumisation”: Chinese consumers that can afford it are increasingly longing for premium, luxury, and specialty
items, in terms of quality and taste but also packaging. There is a growing market in China for high quality products
offering new and exciting flavours, which can be satisfied with imported products. Particularly within the chocolate
industry, Swiss chocolatiers have an advantage over local ones due to the credibility and trust that foreign brands embody
which local competitors cannot copy. Swiss chocolatiers especially pride themselves in their century-long experience that
enabled them to arrive at the quality that consumers enjoy today. Chinese competitors will lack this expertise in the
production process, as well as selection of raw materials. Nestlé once tried mass producing their KitKat bars at a local
factory in Tianjin. As markets did not pick up as expected, Nestlé decided to lower their cost by using a cheaper substitute
for cocoa butter. The resulting product however could not compete with the quality of their competitors which meant great
loss of market share. Chinese consumers favour international brands because of their premium quality and are very well
prepared to also pay a premium. It is therefore unrealistic for foreign companies with higher operating costs to compete
with local companies on price.
“Localisation” and introduction of new “Chinese” flavours: In order to remain successful in a highly competitive
market, companies need to constantly introduce new flavours and products to satisfy the changing needs of their
customers. In China, this means understanding the Chinese culture and taking this into account when introducing new
products. Foreign players are recommended to take inspiration from traditional and local ingredients, such as red dates,
goji berries or sesame, by introducing products with a “Chinese twist”. Burger King’s black burgers, which was a local
adaption of the Cheeseburger for the Asian market, is a good example for successful localisation. Swiss companies that are
already in China have a chance to make use of the existing awareness and positive perception towards available products
in China and translate those to new products, thus making it easier to offer new varieties and flavours.
Multitier market strategy: With advancing supply chains, logistics and infrastructure into lower-tier cities, companies
have an opportunity to introduce their products to retail stores in emerging second- and third-tier cities. Successful
companies are providing to China’s multitier market through selectively distributing their products according to the
individual consumers’ taste and their ability to buy the product. Hence, one can provide product offerings based on size
(small and large-sized packaging), as well as, of course, price. Especially for the vast chocolate market in China and the
growing saturation of first-tier cities, a strategic multitier strategy will be a great value driver for international companies
in the coming years.
THE CHINESE
FOOD MARKET
174.2. DAIRY PRODUCTS
4.2.1. Market Development
Traditionally, dairy has not been a major component of the Chinese diet because of diverging cultural preferences and the
prevalence of lactose intolerance among Chinese citizens. Over the years however, dairy consumption has shown an upward
trend, as Chinese children are being raised on dairy, thereby changing their capability to digest lactose. The government’s
efforts to promote dairy as a major source of calcium and protein has had a big influence on intake. Therefore, dairy
consumption has become increasingly common in urban areas; in rural China it still remains relatively low. Milk production in
China reached 40.7 million tonnes in 2014, growing by 5% from 2013, and is expected to surpass 47 million tonnes by 2019,
placing China’s manufacturing market ahead of major European dairy producers such as France or Germany. But the country’s
self-sufficiency has been declining over the years, with high milk consumption of approximately 12.2 kg per capita, which has
led to an increase of China’s milk import, growing with 78% in 2014, and making it the world’s largest dairy importer. China’s
dairy consumption on a per capita basis is, however, still modest with 19 kg per year in 2014, only half of the average in Asia
and one third of the world average. Liquid milk represents the largest share with 70% of new dairy sales and posting the
highest growth rate. Cheese on the other hand is still representing less than 1% of the total dairy market. As a reference, China’s
cheese consumption per capita in 2014 is around 0.23kg compared to 2.3kg per capita in Japan and 17.6kg per capita in the
EU.
Figure 4.2.1. 1: Dairy products market development in China 2009 – 2019E (in RMB bn)
514
348
302
263
232
196
170
Source: Euromonitor (2015), MarketLine, Fiducia Analysis
Highlights:
Currently food quality control is still conducted in-house by the milk processing companies rather than by independent
third parties. This means that the systems remains susceptible to corruption and processors themselves are able to set
their desired price based on own statements of quality. End-consumer prices are thus rarely linked to the farmer‘s raw
material prices, which forces the smaller and less powerful ones out of business. Chinese companies have also suggested to
introduce the US- standardised “grade A milk system“ to China as a means to increase quality control.
Ever-growing demand for milk products in China and the suspicion against locally produced milk both create
opportunities for foreign brands. Many domestic farmers are already fearing a loss of their domestic market shares
due to the recent removal of the EU milk quota system, which had restricted the milk output of European farmers for more
THE CHINESE
FOOD MARKET
18than 31 years. Additional factors that will have an effect on domestic production are higher labour costs and reduced
supply of raw milk, as a result of small-scale farmers leaving the business, a drop in breeding efficiency and the potential
spread of cattle diseases and epidemics due to less sanitary breeding environment and less efficient disease control in
some parts of the country.
Liquid milk still plays a fundamental role, accounting for more than 70% of China’s total dairy market. However, due to
the economic downturn, sluggish demand was seen in the previous years. Chinese consumers are beginning to favour
pasteurised milk for more nutritional value and perceived better flavour over Ultra Heat Treated milk (UHT). It is also a
growing market for domestic milk producers, who are trying to promote pasteurised milk in order to keep the supply local.
UHT products, however, are still expected to dominate the market for a number of years as, for example, raw milk safety
standards in China are still less strict than the international norm and consumers are still afraid of food borne illnesses
often associated with pasteurised milk.
While Chinese consumers increasingly prefer products with nutritional value and perceived abilities to improve digestive
and the immune systems, such as pro/pre biotic and wellness yoghurts, the impact on health through dairy
consumption is still varied. Certain health benefits might be undermined by increasing consumption of fatty and
processed dairy, such as cheese, butter, sugary milk drinks, and ice cream. Moreover indirect health problems might arise
with increased greenhouse emissions and other forms of pollution during the dairy manufacturing process.
Development of milk sources and cold chain logistics will have a positive impact on dairy sales throughout the
country, and especially in lower tier areas. In these markets however, domestic players will for now retain an upper hand
as they already have a distribution network in place or are already located within second and third tier markets. While
China is home to only a few large dairy companies and entry barriers are high, they are better equipped to service these
markets than new foreign players due their existing network and still insufficient infrastructure in these areas.
4.2.2. Main Players
During the last centuries, dairy output and fierce competition has increased among dairy companies. Major dairy farms started
consolidating smaller dairy processors and the market was dominated by a couple of large dairy companies, like Yili, Mengniu
and Bright, some of which rank among the top 20 largest milk producers in the world. In order to keep up with the increased
price pressure, firms started to alter or add substances to keep up the volume sold, which ended up in nation-wide scandals,
such as the infamous 2008 melamine scandal involving the Sanlu Group. In order to regain consumer confidence, the
government demanded further consolidation of the market which was believed to enhance quality and balance pricing as well
as provided strategic subsidies to increase output. Nowadays the top three Chinese dairy companies, Yili, Mengniu and Bright,
take up more than 50% of the market share of liquid milk, whereby foreign brands are still popular within the powdered milk
and infant formula market.
International companies are expected to start investing in JVs with Chinese players in order to leverage on domestic supply
chains and distribution networks, whereas Chinese companies are increasingly investing in processing facilities abroad to
secure their raw milk supply and benefit from overseas food safety reputation.
Table 4.2.2. 1: Largest domestic players in the dairy industry in China
COMPANY ORIGIN RETAIL VALUE BRAND MAIN CATEGORIES
SHARE 2014
Inner Mongolia Yili China 25.0% Yili, Satine, Ice Factory Milk, ice cream, milk
Industrial Group powder, yoghurt
China Mengniu Dairy China 21.6% Xin Yang Dao, Just Yoghurt, Milk, ice cream, milk
Sui Bian, Merla powder
Hangzhou Wahaha China 8.3% Wahaha Milk and yoghurt drinks
Group
Want Want Holdings China 6.6% Wang Cai (Flavoured) milk
THE CHINESE
FOOD MARKET
19Bright Dairy & Food China 3.4% Bright, Ubest, Abioo, Milk, Yoghurt, milk powder
Momchilosky
Wondersun Dairy China 2.1% Wondersun Milk, milk powder
Beijing Sanyuan Food China 2.0% Sanyuan, Ilactou Milk, milk, coffee powder,
infant milk powder
Source: Euromonitor (2015), Fiducia Analysis
Table 4.2.2. 2: Largest foreign players in the dairy industry in China
COMPANY ORIGIN RETAIL VALUE BRAND MAIN CATEGORIES
SHARE 2014
Nestlé Switzerland 0.9% Nestlé Milk, infant formula
Danone France 0.3% Activa, Mizone, Dumex Yoghurt, infant formula
Fonterra New Zealand 0.3% Anchor Milk, baby food
Lactalis France 0.04% President, Celia, Lactel Milk, cream, butter, cheese
FrieslandCampina Netherlands N.A. Campina, Friso Milk, cheese, infant food
Source: Euromonitor (2015), Fiducia Analysis
4.2.3. Distribution Channels
Dairy products are also facing an increasingly fragmented retail channel with the rapid rise of online retailers, which have been
consistently gaining market share over the years. Especially Independent Small Grocers and Other Grocery Stores have
witnessed a drop in market share.
Figure 4.2.3. 1: Dairy products distribution channel development in China 2012 – 2014 (in %)
1%
2014 38% 20% 16% 16% 6% 3%
1%
2013 39% 21% 17% 16% 4% 3%
1%
2012 39% 22% 18% 15% 3% 3%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Supermarkets Independent Small Grocers Other Grocery Retailers Hypermarkets
Internet Retailing Convenience Stores Other
Source: Euromonitor (2015), Fiducia Analysis
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FOOD MARKET
204.2.4. Opportunities for Swiss Companies
Leveraging on the Swiss image to import milk: The domestic tainted milk scandals have created rapidly increasing
demand for high-quality dairy products, particularly for products from overseas. Especially imported milk therefore is
seen as a safe choice and will also enjoy popularity in the future. Swiss brands like Emmi and Nestlé, even though they
operate manufacturing sites within China, have the benefit of being regarded as especially nutritious and safe given
Switzerland’s reputation for quality products. The Swiss dairy industry owes a great deal of its success to alpine pastures
and its clean environment. Therefore, Swiss companies should leverage on this image and maintain marketing efforts
focusing its remarkable natural scenery, wildlife, and the beauty of the Swiss Alps.
Educating the Chinese consumers: Cheese is still a niche market in China, not being part of the traditional Chinese
diet, and still relatively alien to Chinese consumers. It is however becoming more popular amongst Chinese children, as
their parents are gaining awareness of its nutritious value. With the efforts of the government, cheese is nowadays widely
believed to support vital functions such as growth of children and preventing osteoporosis due to its high calcium content.
To leverage on this growing trend, Swiss cheese producers should seize this opportunity to market their products and,
importantly, also educate the average Chinese consumers. As Swiss cheese production can be very complex and there is a
wide variety of different end-products in terms of ingredients, aging processes and origins, it can be marketed as a status
and connoisseur product similar to wine. In combination with food education, there is thus a viable chance to change the
Chinese consumer’s taste. Moreover, it is wise to introduce Swiss cheese as representative of Swiss culture and familiarise
Chinese with traditional Swiss dishes, such as Raclette or Fondue.
Collaboration with the right Chinese partner: For producers with high-quality products and a limited supply, it
may be more appropriate to work with a selected high-end retailer that has its own import and distribution system.
Especially for exporters with large supply volumes, it is advisable to work with Chinese importer-distributors, such as the
Beijing Milkyway Trade Corporation or grocery stores such as City Supermarket, because many retailers depend on them
to identify new products and organise logistics, such as bulk importing, repacking, labelling, and distribution. These
importers usually understand market demand better and have wider distribution networks. Moreover, dairy farmers
should consider teaming up with local farmers to exchange knowhow and share facilities. Nestlé, for example, has just
inaugurated the world's first dairy farming institute in Shuangcheng, Heilongjiang province, which serves as a platform to
share technical knowledge between China and Switzerland and to educate young farmers. 4
Exporting know-how to China: Besides increasing its imports of dairy products, ingredients necessary for the
production of dairy products, dairy cattle genetics, and breeding cattle are highly sought after in China. Swiss milk farmers
produce high quality milk with low somatic cell counts and advanced processing technologies. Moreover, the milk quota in
Switzerland has been abolished in 2014 and European-wide abolition followed in March 2015, which is expected to imply
overcapacity and increase of pricing pressure. The Swiss and European milk market is already relatively saturated.
Therefore, exporting high-quality dairy and milk as well as its technology overseas and entering into partnership with
Chinese dairy farms might be a long-term solution.
4.3. SOFT DRINKS
4.3.1. Market Development
The soft drinks market in China is highly mixed with domestic and foreign producers both playing a vital role. Bottled drinking
water, fruit juice, and carbonated soft drinks make up the top three categories of bottled soft drinks in China, with the share of
carbonated soft drinks declining since 2002. Currently, carbonated soft drinks only account for 12% of the total market,
dropping from levels of 29.8% in 2002. The main reason for the decline is the renewed focus on health of many Chinese
citizens, which has restrained the purchase of carbonated drinks. Generally, China’s soft drinks industry is expected to enter a
relatively mature stage and maintain an annual growth rate of around 8% in the coming years, lower than the historical
average of 14% between 2009 and 2014, mainly due to the uncertain economic climate and weak consumer confidence.
Throughout the year, different seasons also have an impact on the sale of soft drinks with increased purchase of chilled drinks
in the summer months.
4
Please further refer to Appendix 12.3 for a list of potential partners in China
THE CHINESE
FOOD MARKET
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