Earlier this year, projections released by analysts at Mizuho bank claimed that retail sales in China were set to overtake the US in 2018, as the country’s growing middle-class begins to exercise its spending power.
This growth provides an opportunity for food and beverage companies if they can identify the needs of Chinese consumers and adapt their products and services to meet their demands.
Jason Yu, general manager of Kantar Worldpanel Greater China spoke at the Food and Beverage Innovation Forum 2018 (FBIF2018) in Shanghai, China about trends in the Chinese retail market such as e-commerce, premiumisation and ‘social commerce’, and he provided further detail to FoodBev’s Martin White.
How is China different to other food and drink markets, and are there ways in which it’s very similar too?
We saw very little volume growth in China over the last few years, as the country is ageing and the market is maturing compared with many other emerging Asian countries.
Market value was mainly driven by premiumisation and urbanisation, yet China is showing very similar patterns in terms of growth themes – i.e. pursuit of health, convenience and pleasure – that are occurring in other countries.
How can brands and companies best configure their products to appeal to Chinese consumers in 2018?
Aside from good quality, brands will have to deliver a compelling experience to consumers through its design, employment of technology and meeting the aspirational needs of millennials.
In addition, brands will have to take a side, either offering high quality with extremely competitive brands or go luxury/premium. It is very difficult to stick in the middle.
Can you tell us how trends such as ‘social commerce’ have affected the Chinese retail market? For instance, what effect do Weibo and WeChat have?
Social media is not just as a space to interact with others, but also a place where people shop online. In 2017, WeChat channel achieved a staggering 52% growth, and accounted for 1.4% in FMCG spend.
Though still relatively small, it represents a promising growth engine as Tencent began a serious push to open up its platform for developers to build e-commerce stores and a wide range of online services.
As WeChat’s wallet allows users to seamlessly make in-app purchases and social networking allows users to influence each other’s buying decisions, social commerce is also expected to facilitate sales conversion for all stores.
E-commerce continues to grow in the Chinese market – how do you think this will continue to challenge brands and what do you think they will have to do in order to adapt?
Brands will have to stop thinking about e-commerce platforms like Tmall and JD as merely a sales channel – they are offering brand engagement and consumer activation with the leverage of a wider internet eco-system in China.
Many brands are now building organisational suites under e-commerce, focusing on marketing, logistics, innovation etc as opposed to treating it as one of the many sales channels.
How has the emerging middle class affected the country’s food and beverage market, if at all, and how do you expect this to change in future?
Emerging middle-class consumers in China are characterised by higher spending power and demand for high-quality products.
They are increasingly in pursuit of experiences and aspirational products as their basic needs are fulfilled.
In retail, we are seeing the rise of a number of new retail formats such as brand stores, pop-up stores and hybrid stores which cater to their needs.
Middle-class consumers are willing to pay for quality and pleasure, hence premiumisation has been the major theme underlying the market development.
What do you think lies ahead for China’s retail market in 2018?
2018 will continue to be a challenging time for the food and beverage market. However, there are opportunities for growth.
Brands will have to build a deep connection with consumers to occupy their mind space. They will have to focus more on experience and leverage all the new occasions – especially OOH – to trigger new purchase opportunities.
Jason Yu spoke at the Food and Beverage Innovation Forum 2018 (FBIF2018) in Shanghai, China, hosted by Simba Events
© FoodBev Media Ltd 2018