Food and Hotel China (FHC), is one of the biggest trade shows in China and China Skinny was on the floor to scope out the latest trends, newest product entrants and to hear from attendees on their China experience. This year had less of the X-factor of editions past, but there were still main takeaways that hint towards new developments and indicate how ongoing trends are taking shape. Below are China Skinny’s top three takeaways from the 2017 show.
The land of pizza and cheese
Everywhere one looked there was pizza and cheese at this year’s FHC show. While there is typically a good showing it seemed as if this year there was enough cheese to feed China’s 1.4 billion people. There were parmesan rings, mozzarella sticks and flavoured cheese as well as bulk cheese. Much of the cheese was topping the pizzas that were being slung left and right. To indicate the range of pizzas there was even something called “Cake Pizza”.
The vast number of cheese and pizza offerings bodes well for the growing out-of-home dining market. According to the 2017 China shopper report, the value of dining out grew 10% from 2013-2016 compared to in-home meal prep at 3% and food delivery a robust 44% over the same period. The fact that products such as cheese and pizza were ubiquitous signifies that consumers are becoming more adventurous and increasingly have a taste for Western style products when out and about. This is a good sign for direct-to-consumer food sales too. As ingredients and dishes become more common outside the home, it’s more likely the Chinese consumer will try, become familiar with, and eventually buy for in-home consumption.
Western-style offerings are typically far fewer outside of Tier 1 cities (Shanghai, Beijing, Guangzhou, and Shenzhen). But with improving cold chain logistics and increased familiarity, lower tier cities are quickly following suit. But the offerings must be tailored to each specific area. China Skinny research across Tier 1-3 cities has found distinctly different styles and offerings between restaurants which reflect consumer preferences and their choices while buying for in-home. For example, restaurants in Shenzhen tended to a lighter fare and more subdued restaurant design. Chongqing proved to be adventurous in fare and lively in atmosphere, compared to a more sophisticated experience and food in Shanghai. These are representative differences to take into account when selling nearly any consumer product in China.
Differentiation between health claims is far and few between
Despite the clamouring over pizza and cheese the health trend is still going strong in China. It is estimated that China’s health food market will grow from ¥260 billion ($39 billion) in 2016 to ¥400 billion ($60 billion) in 2021.
More brands are positioning themselves as the healthy choice. Brands pushing the ‘healthy’ claim left much to be desired: many were too general in just saying they are the ‘healthiest’ or ‘the best’ which will be caught up by regulators who don’t allow superlatives. The relevant and differentiated positioning of a brand is vital as health foods are becoming less of a treat and more integrated into everyday diets.
While there are many brands trying to capture health-conscious consumers with general marketing, a few savvy brands were getting down to the core. Punchy, short claims are preferred among Chinese consumers. This is especially relevant for new-to-China brands, who are competing in an already crowded market.
Products lauding extra protein were among the most common targeted health products. The success of targeted products depends on a well-considered entry plan. Concepts like added protein may resonate with a specific target market, such as health and fitness aficionados. Other products used such claims as “gluten free”, something which is still early days in China.
In terms of other food products, the offerings were fairly standard. There were not as many inventive products or eye-catching packages as in years past. Additionally, a large majority of exhibition booth staff failed to spur excitement. If they engaged, they would meekly suggest to scan a QR code linking to uninspiring Official Accounts. Including a call to action, a personalized message or special offer to encourage engagement is likely to have gone over better.
In years past the number of inventive beverages have been impressive. This year there were only a small number of beverage innovations. A line of soy milk attracted a number of interested tasters and distributors while beautifully packaged Italian water is already selling in China and hoping to expand its presence to smaller tier cities.
China has become the largest bottled water market in the world, overtaking the United States in 2013, and it is projected to expand 58% by 2019. Coca-Cola, who sought to sell a $9 water in China earlier this year, is an example that just because a category is hot, doesn’t mean anything will sell. As Coca-Cola learned, price point isn’t everything, but it is a crucial part of the puzzle. Consumption habits vary by region, with domestic companies tailoring to meet the needs of local consumers.
The presence of foreign wines at FHC’s ProWine hall was notable. Australia, Italy, Chile, the U.S. and Canada all had a strong showing. The different offerings and regions were more expansive in years past. Exhibitors stated that interest was strong and knowledge among the passersby was stronger but still much education was needed.
Country of origin (COO) is vital in marketing wine and countries did well in presenting a strong front. But beneath the COO brands must remember Chinese consumers are still relatively new to wine culture. This can get tricky as Chinese consumers value a wine’s brand over its COO, grape variety or quality level. Zeroing in on consumers’ detailed perceptions of a brand’s qualities, including its COO, will help position wine brands to stand out among consumers. The wine sector in China continues to progress quickly and wine brands must keep pace to remain relevant.
The FHC show this year was as popular as in years past, but the lack of innovative products, packaging and marketing was notable. Staying inventive in your offerings and top of mind among Chinese consumers is an ever-evolving task. Get in touch to learn how China Skinny can help you enter or expand in China and for imaginative and resourceful marketing tactics.
Excitement was the prevailing feeling at Alibaba’s Gateway 17 conference. The big numbers, learning about the opportunities in China, hearing the success stories and talking to the attendees all contributed to a feeling of exuberance in Detroit last week. Yet after going back to the day-to-day reality of running a business, many are asking: now what? While entering China is exciting, it’s also hard work with many serious considerations and choices to take into account. To assist, China Skinny has three next steps to start to see if China is right for your brand.
Learning about China’s middle class and an overview of Chinese consumers’ shopping habits is only the beginning of understanding China. Find out more about Chinese consumers, your specific product category and niches in China, regional differences, trends, routes to market and marketing tactics in China.
China Skinny’s blog is a great way to read more about various topics in China and our newsletter provides a weekly update on what’s going on. What’s hot one day in China, may be in the dumps the next – remember China’s moves fast and constantly learning about China is mandatory.
Take a Deeper Dive
Once you’ve armed yourself with ongoing China knowledge, take a deeper dive with the help of experts to further explore your product category and options.
Find out the size of the prize for your brand, further explore options and platforms for entry which can vary greatly in cost, learn how to get consumers interested in your brand or how to leverage the current awareness that you may have. Professional research by experts such as China Skinny will help you avoid mistakes, focus on the right opportunities and save time and money in the long run.
If you are even thinking about China get in touch with an experienced China law firm. Many brands run into problems for simply failing to protect their IP. China is a first to file county and getting started on IP protection is a must do. Also, start looking for a reputable distributor partner. Due diligence is a must.
Be Open and Ready to Adjust
Take the next steps with an open-minded and flexible strategy. Changes that have taken place over decades in Western markets, can happen in less than 12-months in China. Understand that China can shift suddenly and your brand should be able to keep pace. Invest in trips to China for hands-on learning, but don’t be wowed by the bright lights or tall promises from distributors – it takes a long time to really understand China. Be prepared to constantly learn and adjust while leaving your Western-formed assumptions behind. China is a land of opportunities, but they won’t be realised without many lessons along the way.
Get in touch today with our Shanghai or North American office to talk about your specific needs.
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Alibaba’s first U.S. conference, Gateway ’17, came to a close last week. Three thousand attendees were present at the conference signalling that U.S. small and medium sized businesses are interested in selling to Chinese consumers. The curiosity is mutual from Chinese consumers looking to buy their wares.
China Skinny was on the ground at the conference and below are our top takeaways.
The Chinese Opportunity Extends to Small and Medium Sized Businesses
The conference didn’t fail to deliver a slew of astonishing stats: A middle class larger than the population of America. 454 million shoppers on just Alibaba’s platforms. $485 billion in top line gross merchandise value. The astounding rise of the Chinese consumer and Alibaba – highlighted throughout the conference – left many enthusiastic over the growth and subsequent opportunities in China.
Small U.S. brands that have found success in China shared their stories throughout the conference. Brands such as California’s 100% Pure and online brand LuckyVitamin.com among others shared how they entered the China market. 100% Pure began by sourcing from China and is now selling to China, growing revenues 20-30% yearly in the market. LuckyVitamin.com did their homework on potential markets and saw the opportunity to sell to Chinese consumers. The company now offers 10,500 products to Chinese customers.
Using case studies from smaller brands demonstrated that one does not have to be a powerhouse brand to enter the China market. Alibaba’s UK Managing Director, Amee Chande, advised that whilst brands don’t need to be well-known to be successful, they need to be the right kind of brand. Brands entering China must be:
- Agile – China is fast moving and requires flexibility
- Ambitious – China is tough, and is why entrepreneurial SMEs can be the right fit for China
- Patient – China is not an easy market, and
- Work with the right partners –which leads to the next point.
Find the Right Partner
Key Alibaba figures from Jack Ma and Amee Chande to individual proprietors and industry experts repeatedly stressed the importance of finding the right partners in China.
China is too complicated, dynamic and large to take on alone. From the contracts and legal requirements, rules and regulations, setting up a store, distributing product, customer service, marketing assistance, on-the-ground know-how and more, the right partners are a must when selling in China. Navigating the cultural differences, language barriers, and geographic distances require due diligence when choosing your partners. Partners should work with you while keeping you up-to-date on the China market.
The necessity of the right partners is a story we hear time and time again. Australia’s Bundaberg Ginger Beer is a prime example of problems that arise when the wrong partner is picked. Bundaberg entered China in the early 2000’s and took on a local partner with little research and preparation. They quickly found the relationship to be one-sided, with the partner’s lack of transparency on sales, distribution and customer details causing issues. Additional complications arose from different values, business ethics and a lack of control. After recovering and pivoting from the first China phase, Bundaberg is taking it slow and learning along the way.
Localise for China
Beyond choosing the right partners, tweaking your brand and product offerings for your Chinese target market is a must. Chinese consumers are curious about smaller brands outside of the well-known established brands because they want options. New-to-Chinese brands give consumers novel experiences, but those brands must be tailored to the ever-pickier Chinese shopper.
“Brand USA” is strong in China as consumers know that America produces quality goods. Use “Brand USA” but do not rely solely on this. Investigate and understand how your story will resonate with Chinese consumers and what your hierarchy of messaging should be. China’s complex culture and language leaves room for many mistakes to be inadvertently made – even big brands such as Nike and Louis Vuitton have experienced this. Spend ample time and effort on due diligence to make sure this doesn’t happen to you.
As mentioned at the beginning of the article, China’s growth is phenomenal. This growth coupled with Alibaba’s vision to be the 5th largest economy by 2036, means that Alibaba’s and China’s growth is set to change the world.
Alibaba aims to be inclusive of American businesses and becoming a part of this growth story takes a lot of time. As China’s middle class grows and more foreign businesses learn about the opportunities in China, the market is only going to get more crowded. An average of 160 products launch daily in China, making it a hard market to enter. Take it slowly by learning about your potential customer, the wider opportunities for your specific products in China and the different modes of entry and platforms available. How to build awareness is an important consideration. These are all things China Skinny can assist with. Understanding and fine tuning to the market will take time and if you intend to ride the China wave now is a great time to establish your brand. The market will only become more competitive.
Welcome to the final part of China Skinny’s Food and Beverage Trends in China series. Part 1 covered developments in China’s health trends, flavours and frozen products. Part 2 touched on the continued trend of premiumisation and packaging innovations. Today we’ll discuss some of the bigger changes we noticed.
More Diversity Among Countries Represented
SIAL brings together food and beverage products from the world over and this year saw more countries represented than in previous years. Not only did the number of countries represented grow but there was a strong presence from less well-known countries such as Slovenia and Estonia, who offered goods like crisps, puffed cheese and beer. Their eastern European fellow Russia took up a large section of the show exhibiting confectionery, condiments, wines, water and of course vodka. The increased interest in China is spurred by China’s growing consumer power but is also likely helped by the developments of China’s One Belt, One Road efforts.
The Guest County of Honor this year was Argentina, who showcased their meat and food options. Argentina’s presence was surrounded by other lively Central and South American countries such as Mexico, Belize, and Brazil. The diversity of countries represents the pull of Chinese consumers looking further afield for products and the growing interest in selling to Chinese consumers.
Local Branding on the Rise
Local brands have been stepping up their branding efforts in the past few years. This can be seen in their design, packaging and products. Chinese consumers choose a brand or product for many reasons, not only country of origin. Domestic players are making efforts to understand their target consumer and are using emotive marketing to grab attention and hearts. They are quickly learning that this type of marketing goes much further than typical functional marketing. An example of this is a variety of spicy snack food (‘la tiao’) marketed by Weilong Food (卫龙食品). The brand’s social media presence uses an unexpectedly modern approach to connect with millennials, surprising their target consumers that the brand is so interesting. Overall, domestic brands are upping their game, but this doesn’t come without mishaps and face palms such as the latest advertisements for Coconut Palm, a Chinese coconut drink.
At the trade shows, many of the mega-booths were represented by domestic brands and at first glance the booths were indistinguishable from the those of North America, Europe or Australasia brands. Chinese brands coupled their slick booths with smart marketing and engagement. VR, photo opportunities, live streaming and interesting dispensers caught and kept show goers’ attention.
More Cartoons & Cutesy Characters
Along with the sophistication of branding among Chinese companies, more are incorporating fun, adorable and cartoony characters. Chinese love cutesy characters and many brands are riding on the success of local snack brand Three Squirrels by adding fun and engaging personalities to their marketing.
Action figures, princesses, animals and other cute characters were all present in branding and marketing. To Western eyes these mascots may seem childish but Chinese welcome them and the imagery and personalities help them relate and connect to a brand. China’s Air Force even turned their machines into cute cartoon characters to celebrate Chinese New Year! When using characters there are plenty of opportunities to get it wrong in China so best to test and verify that a certain image, brand or name will resonate with the target audience.
Always fakes: Nutella, Super Mario
Much like last year, there were bad copies and even fakes that innovated on established brands. A few that caught our eyes were a take on Super Mario and a variation of Nutella. While there was only fake Nutella last year; this year offered several new Nutella-like spreads, including one made from dates. While consumers may initially be fooled, they are bound to find out the truth sooner or later.
Conclusions to Food & Beverage Trends in China Day 3
China’s fast-moving food and beverage industry is growing rapidly and allows for abundant opportunities. But it is also getting more competitive, something we see firsthand through our research and experiences in China. The competition from domestic brands and among other imported products is tough. Getting China right means taking a strategic approach to geographic locations, products, packaging, branding and marketing. Get in touch with China Skinny to see how we can help you succeed in China.
Following part 1 of China Skinny’s Food & Beverage trends, we bring you part 2 which delves into premiumisation and packaging.
Premiumisation Goes from Strength to Strength
Premiumisation of products and packaging was more evident this year than past years at SIAL China and Craft Beer China. Chinese consumers are maturing quickly and looking to trade up, so brands are providing plenty of options.
Premiumisation is particularly apparent in the craft beer scene. Total beer volume sold has been falling approximately 5% for the past three years, while the value of beer sold has risen as younger and more affluent consumers choose premium drinks such as craft beer. By 2020 premium beers are expected to account for over a third of the $80 billion Chinese market, compared to 10% in 2010.
Craft Beer China is supporting this trend through their second China trade show, which indicates where craft beer is going in China. One German distributor noted that of the Chinese distributors he works with, several are now trying to compete on quality and differentiation rather than traditionally promoted features – quantity and price. Efforts to differentiate products were seen through the types of beer being imported and their distinction through packaging and bundling. One distributor aimed to give their beer a ‘more luxury feel’ through fancy packaging complete with a necklace as an ‘extra treat’.
Premiumisation is also taking place in snack and beverage offerings with companies providing value through superior products and packaging. Branding among domestic companies also shows local players are catching on to the premiumisation trend, something that will be further discussed in part 3 of this series coming later this week.
Creative Packaging Innovations
Much attention is paid to getting the packaging correct, and rightly so as packaging is one of the categories Chinese consumers review via ecommerce. As packaging is one of the first things consumers see it should demonstrate the value of a product, communicate the benefits and clearly exhibit the brand’s ethos. Packaging is an extension of a brand and should not be an afterthought. Innovative packaging is typically well-received in China, and SIAL China showed off some of the latest concepts.
One product that we were impressed by was the incredibly secure ‘crocodile’ packaging that kept Polish cereal fresh and crisp. Cereal and big bags of snacks are often eaten over a period of days or weeks and the packaging must be easy to use and keep the product fresh. Chinese are particularly fussy over product freshness. Lids that pop off and bags that don’t seal tight are two of the top complaints when it comes to packaging.
Another inventive product was a drink from the Czech Republic that stored an ‘active substance’ sealed in the lid. The ‘active substance’, akin to an energy drink powder, is released from the lid and mixed with the bottle’s water. ‘Dosage’ control is allowed with cap settings giving you the option of one, two or three ‘doses’. Control over quantity is likely to be well-received as Chinese often complain that flavouring is too strong or that products are too concentrated.
Domestic brands are continuing to improve their packaging and meet the demands of consumers. Traditionally snacks are packaged in nondescript, low-cost plastic bags. Now brands are using more sleek and stylish packaging that makes it hard to detect where a brand is from without close examination of the package. This was more prevalent this year compared to last. An example of the superior packaging is the Beijing beer below looking as if it could be straight from Chicago or Copenhagen.
Conclusions to Food & Beverage Trends in China Day 2
The fact that Chinese consumers are trading up in droves has led to brands providing more premium offerings, both in quality and presentation. Both premiumisation and packaging are part of the mix in order to capture the Chinese consumers who are increasingly looking to try new products
The China Skinny team was out and about this past week taking in the latest trends, innovations and happenings in China’s food & beverage and craft beer scene. Attending last week’s SIAL China and Craft Beer China gave us the opportunity to reflect on how the industry has developed since the 2016 editions. Through this three-part series we will share our observations and insights into the notable trends driving the market.
China’s Health Trend is Still Going Strong, but Diversifying
The health trend is still going strong in China. With 72% of consumers last year worrying that the food they eat is harmful to their health, brands are quickly adapting to offer healthier products. With the health trend well-established for several years now, new products trying to capture untapped healthy niches caught our interest.
From quinoa crisps to fruit snacks, organic offerings to natural, healthy desserts, the range of healthy food and snack options was bigger than before. Meat products were a particularly contentious area, with Canadian meat producers touting superiority over their U.S. counterparts, which they attributed to healthier farms and safer processing. Health is clearly being promoted across a wide variety of products with more detail and attention given to individual selling points.
Nuts and dried fruit are healthy and popular snacks in China with 40% of urban Chinese consumers eating more nuts and seeds this year compared to Fall 2016. Nuts and dried fruits were ubiquitous this year but compared to last year flavoured products were far fewer. Past years touted a swathe of flavour combinations, from honey butter almonds to chili pistachios and candied walnuts. This year, the field was dominated by plain, shelled nuts. Additionally, the nut exhibitors lacked slick marketing with many staffing booths operating solely on hired helped, displaying unattractive bowls of nuts and QR codes with no added engagement. Fun mascots, WeChat connected games, and cool sample dispensers were all absent; a missed opportunity for B2B marketing.
Fun Flavours and Product Innovation in Honey, Oils & Drinks
Innovative flavours in oils, honeys and drinks were prevalent. From orange, avocado and cedar nut flavoured honey to creamed honey in a tube, honey was one of the most experimental categories. Oil had a strong showing with flavoured olive, hazelnut and walnut oils. Flavoured olive oil was also presented in a convenient spray-able canister. When it comes to oil use, Chinese consumers re-purpose it well beyond just eating. However, we spotted only one olive oil booth that also displayed their olive oil based skincare. The brand manager noted that the skincare products had received positive reviews from the Chinese audience but hesitation regarding the ‘boutique’ price.
Fusion drinks were popular with many touting the health card by adding nutritious ingredients to make the offerings more interesting. Many of these drinks combined their products with home-sourced ingredients to give brands provenance as a further avenue to market. Maple syrup infused cranberry juice from Canada, Australian fruit cocktails and fresh French fruit and vegetable smoothies were all available. One of the more innovative products was Dip and Sip straws from Hungary that delivers flavour that stays in the straw until you suck. Straws were available for both water and milk.
China’s Frozen Food Market is Evolving
Frozen products were more prevalent than years prior. Russian ice cream, Italian gelato and Californian ice pops were all available and luckily giving out samples! The ice cream was typically marketed as a treat whereas the ice pops took the note of healthiness, offering dairy-free and fruit and vegetable variations. Domestic players also had a strong showing in frozen categories. Most of the products present were straightforward with little experimentation.
The variation of frozen products coupled with a complete hall dedicated to cold chain logistics demonstrates how serious China is taking logistical development. Increasing demand of fresh food, particularly through B2C ecommerce, continues to drive growth in the cold chain industry. It is expected that by 2020 the cold chain industry will be valued at RMB 400 billion allowing delivery to both big and small cities all over China.
Conclusions to Food & Beverage Trends in China Day 1
China’s fast growing and dynamic market offers abundant opportunities, but consumers are diversifying along with brands. The health trend still going strong. Ever-growing product innovation and introduction means a more crowded market. That requires a smart entry or expansion. Get in touch with China Skinny if you’d like to know more about how we can assist in your specific product category, product innovation or China plan.
China Skinny attended the debut of ITB China, the latest B2B trade show specifically for the Chinese Travel Market. Growing on the success of the travel industry’s largest trade show ITB Berlin as well as ITB Singapore, ITB China looked to service growing demand for the world’s most important tourism market with its inaugural year in Shanghai. Below are our takeaways among the Chinese travel market.
Strength of Europe
With the inaugural year celebrating Europe as the first partner destination of ITB China, European presence at the event was strong. Approximately 40% of the exhibitors were from Europe, 10% from the Middle East and 10% from the Americas. Germany, Austria, Portugal, Turkey and Ukraine were among participants that were not only marketing their country but also the unique regions within each. This reflects the move towards Chinese travellers going further afield than the regular hot spots. These efforts are likely to support the EU-China Tourism Year in 2018, which is expected to bring more focus and Chinese visitors to various destinations throughout Europe.
Finland made a good showing, with the Finnish participants celebrating 100 years of independence. Attendees were suggested to “Party like a Finn” at the evening affair organized by Visit Finland, Finavia, and Finnair. And no Finnish party is complete without Old St. Nick in the house which provided the all important opportunity for attendees to take selfies and spread the word on China’s social networks.
Middle Eastern Might
Europe wasn’t the only locale making their destinations known. The presence among Middle Eastern countries reflects the efforts by specific countries and the growing interest of the destination among Chinese tourists. In 2016 Abu Dhabi received over 226,000 Chinese travellers and have plans to attract 600,000 by 2021, a 265% increase. Dubai received 83% more Chinese tourists in 2016 compared to 2015 as they started allowing visa on arrival for Chinese tourists in late 2016.
A Small Presence from the Americas
The Americas presence was smaller than expected, but had reps from places such as Los Angeles, Las Vegas, Georgia, Bolivia, the Dominican Republic and Argentina present. The small presence among U.S. destinations was surprising as the U.S. saw a record number of 2.6 million Chinese visitors in 2015 according to China’s National Tourism Administration.
Along with Las Vegas and L.A., a surprising discovery was the Myrtle Beach contingent, who is looking to attract and accommodate Chinese travellers with tailored itineraries for both FITs and groups.
Clever B2B Activation
A notable aspect was the increased efforts to attract and engage buyers and attendees at the show. Typically trade fairs exhibitors pay a few bucks to minions to translate materials and represent the brand to Chinese speakers. These representatives typically lack the knowledge and skills to fully display a company’s offering. In the past it would be common to approach an exhibitor and receive little more than a name card and brochure. This did happen but not as often. Exhibitors at ITB China were more engaged and interactive, with several using VR in their displays. Notably WeChat was seamlessly incorporated into a handful of brands’ presence with lucky draws and free picture printing. This can be a highly effective engagement strategy, as 83% of WeChat users use the app for work.
It is great to see how destinations are positioning themselves for the Chinese travel market and their initiatives to attract the number of Chinese tourists. Chinese travellers have more options than ever with many new flight connections launched monthly and over 60 regions and countries offering visa-free travel for Chinese. Whilst many travellers are still relatively unsophisticated they are increasingly going further, taking more trips and exhibiting much more sophisticated traits. Like much else, the Chinese travel market is competitive and only going to get more so. With the right branding and approach destinations big and small can participate. Get in touch if China Skinny can assist you in understanding and reaching Chinese travellers.
China Skinny recently attended the Asia Pacific Business Outlook conference in Los Angeles. As an agency servicing brands in both China and abroad, we find it valuable to hear perspectives about China from businesses who are both close to the market, and an ocean apart. The conference was full of enlightening details regarding the Mainland China market. Below are five key takeaways from the conference.
- China is becoming more competitive as both domestic and foreign companies focus on expanding their offerings in the “Middle Kingdom”.
The opportunities in China, particularly among China’s middle class, were detailed throughout the conference. China’s economy is growing at 6.5% per year, which is the equivalent of adding Switzerland to its economy each and every year. With this growth, China’s upper middle-income group is projected to expand from 7.1% of the population in 2015 to 19.7% in 2030. This means a new consumer class of more than a hundred million strong, eager for products and services for their new lifestyle.
The increased opportunities presented by China’s growing middle class is attracting its share of suitors; more companies than ever are looking to sell to Chinese consumers. One particularly interesting group is manufacturers who were once simply concerned with production. They are now heavily investing in the China market and developing brands to sell in China. Some examples of recently successful China brands include phone makers Xiaomi and Oppo, cosmetic brand Proya and snack brands Three Squirrels and Bestore. Foreign companies who once relied on their ‘foreignness’ to sell can no longer rest on their laurels as it there is now a battle of the brands between “national consumer champions” and global premium brands.
While foreign products typically do hold a higher status than domestic products this doesn’t mean foreign brands are assured of success. Often domestic players have better distribution, deeper insight to their target market, and are quicker in adapting. A great example of this is the dairy industry where despite the lack of trust in local brands domestic milk is sold for 38% more per litre than imported milk.
- Don’t rush into China
The massive opportunities in China might make it easy to think that your brand needs to be there tomorrow. But don’t make the mistake of rushing in and making fatal missteps such as Marks & Spencer’s, Home Depot or even slight blunders such as Nike.
Go slowly, conduct due diligence on specific categories, product size, packaging, price and branding in order to make educated moves. Fully research and get to know your partners to avoid being burned. Get covered legally, protect your IP, and minimise the unpleasant company of trademark squatters. One thing you should do now is to register your IP even if you aren’t thinking about entering China just yet. A middle term to-do list should include investing in research and trips to fully understand the market. This brings us to point three.
- Know your customer
Taking time to know the China market means deeply understanding your target market. Too often we talk about selling to China in vague terms. Instead of ambiguous thoughts of who the target market is, you need to discover who they are, what they like, and where and how they shop. Maybe more so than anywhere, the customer journey in China is unique. Don’t just sell to the ‘China market’ but rather a carefully crafted segment. Dig deep to understand the people in the country, and they will be drawn to dig deep about you and your brand.
Drilling down to understand your target consumer, different segments, and their unique requirements will save you time and energy in the long run. Additionally, make sure you’re doing business in the right part of China. With dozens of Chinese cities’ GDP topping GDP topping ¥1 trillion ($145 billion) there are many opportunities outside of Tier one, two or even three cities. Get to know where these are and what the unique characteristics of each place are and how this affects citizens (and their buying habits) in the area.
- China’s Millennials are the growth engine driving China’s economy
When discussing who the Chinese consumer is, millennials were brought up again and again. Nearly as big as the entire population of the U.S., this group cannot be ignored. It’s not only the size of the group but also their expendable income, desire to shop, and international mindset. This group of Chinese consumers is unique even within itself with those born in the 80’s and 90’s exhibiting different characteristics, with notable variances geographically. This group is extremely aware that Chinese products may not perfect, but they are also extremely proud of China. They are more independent and identify with brands that understand them and cater to their needs and desires.
- Business is still moving forward despite the uncertainty brought on by Trump administration.
Lastly, in today’s world one cannot go to a conference about doing business abroad without mention of the U.S. president and his administration. There are a lot of uncertainties and unknowns with the Trump administration. The key direction is not yet set, and there is much left to be determined. While calamity is a possibility there is also a chance that business opportunities may increase at a rate never seen before. While negative sentiment among Chinese consumers is understandable, the full effect of the Trump show is yet to be seen and there are reasons for optimism. Stayed tuned.
Whilst U.S. brands exporting to China have their own sets of challenges, many of the opportunities are within grasp for brands with the right approaches.
This is part 2 of China Skinny’s observations at the SIAL Exhibition. Check out part 1 here.
In addition to wafers, coconut products, nuts and inventive flavourings China Skinny observed a few more interesting trends at SIAL.
Rising trend of freeze dried food
Freeze dried food was one of the noticeable trends of the show. Freeze dried involves pulling the water out of fruits and vegetables while leaving the taste, texture and nutrient content almost 100% intact. This makes for easy logistics and is growing in popularity with Chinese consumers. Popular freeze dried products were sweet potatoes, taro, corn and about any kind of berry.
One interesting observation was not only the freeze dried products promoted on their own, but also with other ingredients. For example, Singaporean brand Gulliver utilised freeze dried fruits inside their chocolate. Freeze dried fruits showed up in everything from chocolate to gummies, cereals and more.
As SIAL is ‘China’s largest food innovation exhibition,’ it is only fitting that innovative packaging is central to the show. From alternative snack packaging sizes to resealable packs, packaging within packaging (a big package with smaller packs inside) and different bottle materials and shapes. There was no shortage of new sizes, styles and even shapes in packaging coming into China. What it comes down to is what sells.
A marketing manager of an Italian cookie brand stated that with all the packaging available, their best seller is big packs of cookies. Working alongside Walmart, the rep attributed the popularity of the big packs to their weight so consumers felt as if they were getting more for their yuan. The package is large and heavy, not filled with air like so many other packaged snacks. If the value play is driving sales, it shows the further complexities of the Chinese consumer – each brand has to have the right mix of characteristics to be considered for purchase.
While nothing as big or blatant as Uncle Martian, this being China there are bound to be copy cats. Two of our favorites were a Nutella knock off and Ritz stand-in. There were also an increasing number of Chinese brands sourcing ingredients internationally. These products looked as if they were from abroad, but with a closer look it was clear the brand was Chinese. Products posing has foreign but in reality a Chinese brand are not likely to fool Chinese consumers who do much more research about their purchases than their Western counterparts.
China is a competitive and fast changing market, something that can be seen at SIAL every year. What stuck with us the most was words from an imported sauce brand. This particular brand sells fish sauce and had tested with Chinese consumers who stated they liked the sauce and would use it at home. This was a product that is familiar to Chinese and fits their palate, but the brand representative said the product was not selling well in China and attributed low sales to the fact that the brand is not well-known among Chinese consumers. This goes to show that even if the product, packaging and price are perfect for your target market, the right marketing mix must be spot on for a chance at success in China. China Skinny can help with this.
Asia’s largest food innovation exhibition SIAL, comes to China every spring. This is a fresh opportunity to see what items are selling in China and looking to enter the market. On display are up-and-coming trends for products, packaging, positioning and more. China Skinny was at SIAL to track what’s new and below are some of our observations.
Wafers growing in popularity
With China being a snack-y culture, especially in offices, it was no surprise the amount of snack products displaying at SIAL. From crackers, cookies, chips and more from every place imaginable, the one product that was more prevalent than in the past was wafers. Brands and distributors we talked to said wafers have taken off. A Malaysian brand representative attributed the popularity of wafers to the fact that they are light in flavor and texture. He stated Chinese consumers liked wafers because they are not as dense as cookies and therefore have been selling better than their cookies. Another Korean brand believed that wafers lighter texture is seen as healthier than their cookie cousins.
Coconut products widely available and wanted
Coconut water is widely available in first and second tier cities in China, helped by Vita Coco’s entrance into China in 2014. The popularity of coconut products extends beyond water to coconut-flavored products and food made directly from coconut.
One Malaysian brand selling coconut water, oil, cream, flour and coconut-flavored ice pops and snacks said their coconut oil and cream were recent hot sellers. This was attributed the increasing interest in cooking and baking at home. Their coconut cream is a big seller as consumers use it to make desserts and perceive coconut cream to be healthier than traditional cream. The baking DIY trends indicates that more Chinese are not only interested in healthier products but are taking food into their own hands where they are more aware of what is going into it. This is likely to increase demand for baking utensils, classes and outlets for baking information and even ovens in their homes.
Nuts for nuts
There were many types of nuts exhibited at the show. From almonds, to pistachios, to pecans, Chinese have gone nuts for nuts. California had a strong showing with their nut associations, but the most interesting observation about the nuts being displayed was the variety in flavouring. Honey roasted was a popular flavor. Chili, roasted and wasabi flavours were also popular. We didn’t notice anything too out of the ordinary (no durian flavoured nuts) but the increase in the different types of flavorings on the nuts was a new to China trend.
Flavours on flavours on flavours
Speaking of flavourings, there were some interesting and even unidentifiable varieties in the mix. From rose-flavoured (for beauty) to banana-flavoured everything, drinks, snacks and candies were the main carriers of flavours. In addition, we did notice more flavoured olive oil than previous years. Two other curious products to take on flavoring was honey and tea. Lemon, blueberry and even durian-flavoured honey were all displayed as was Cookies & Cream tea. Not sure how well the tea will go over as one exhibitor stated that it is hard enough to get consumers to try rooibos tea.
Dairy, cereals and granola and wine were still prevalent throughout the exhibition indicating an ongoing strong demand for these products. The presence of frozen food was less expected. This made up a very small percentage of products at SIAL but was a bigger proportion than previous years. It was surprising as Chinese consumers typically don’t buy frozen items. This could also imply improvements in China’s cold chain logistics and a cultural shift to using freezers in apartments.
Check out Part 2 here.
To make waves in the China market, you need more than just the right sales agreements and communications platforms. Having a China-optimised website, solid social media channels, and sales channels doesn’t necessarily mean consumers will come running. So, what will entice the ever-morphing Chinese consumer?
One essential aspect is using those channels in appealing and engaging ways to represent and promote your brand story. Consumers today are looking for something more than ordinary marketing strategies. They are looking for brands and items that not only understand them but also speak to them and their key concerns and to be a part of their lives.
Relevant to Your Target Market
Chinese consumers are bombarded by countless commercials every day. Between ads popping up on their phones, fliers being handed out and commercial breaks interrupting their streamed TV shows, they are no stranger to advertisements. To break through the clutter your message must really speak to the consumer, and ensure that it is in the right context.
Whether your target market is a tech-savvy millennial, a busy working mother, or grandpa Zhou, speaking to your target market in a way and on platforms familiar to them is vital. For example, the older generation is not as familiar with social media so using more traditional means to reach them can lead to success. The 80’s and 90’s generation use their phone as an extension of their body, but mobile ad messaging can be competitive.
To find out what truly matters to your target market, it is necessary to understand not only modern day mind sets, perceptions, and views, but also historical and cultural influencers.
With the amount of messaging received by consumers, hitting them at the right time is vital. Not many have time to check their phone and spend time reading their WeChat messages at 10am, but come lunch time, 5pm and 10pm, the peak time for using WeChat, everyone is face down in their screen. To allow maximum exposure plan your messages accordingly. Regardless of your location, your messaging must be conveniently timed to target the consumer and not only what is convenient for you.
Don’t be afraid to try a few different timings when posting. Track and analyse to see what receives the most views and engagement. But don’t stick to just one time forever on, try a few things to see what works and what doesn’t.
From belly button challenge to face-kinis China does not shy away from the strange, weird or wacky. Finding unique ways to promote your content without being obnoxious or offensive is a good way to gain exposure in the China market. Don’t be afraid to get weird, but make sure that weird is aligned with Chinese likes and trends. For example, Durex is a leader in innovative offerings and marketing. To market their intimate product, they created a character called Little Dudu, who promoted brand communications with messages, pictures, video, sexual health information, and emotional support. Dudu provided a fun channel to reach consumers in a way that was comfortable and not confronting to them.
Content entirely about products or services will likely bore consumers who see right through blatant sales promotions. This type of behaviour can also drive consumers away as it does not attempt to connect with them on a personal level. Sydney Airport is using engaging WeChat content to connect with the influx of Chinese travellers coming through. Their content ranges from fun cartoons featuring a Chinese couple and their travels to Australia and products coveted after by Chinese consumers to useful information addressing key concerns such as how to apply and obtain tax refunds after shopping up a storm.
Getting on the right channels is one of the first steps to reaching the Chinese consumer. To make waves with your target market means understanding their wants and needs and how to deliver these in a style comfortable, appealing and engaging to the consumers. To understand your target market or assist with your marketing needs be in touch today.
The pressure is on. Michael Evans, President of Alibaba Group, said it best in the lead up to Singles Day that “Over the past decade, Alibaba measured our impact and our success by how much we changed China. Going forward, we will be judged by how much we change the world.” This Single’s Day, all eyes will be on what steps the company makes to change the world.
Although vague about specific plans to expand worldwide, we see three distinct actions directly relating to Alibaba’s internationalisation efforts.
Turning Singles Day into a Worldwide Day
Traditionally the Chinese government has been looked upon to provide support, growth and well-being for its citizens. In China, government support is shifting from solely state-run organisations to private companies as well. Alibaba is one of the three main Internet players in China, so naturally they have a big role to play in this structural change. All eyes are on Alibaba as it delves deeper into domestic markets and probes outward into foreign markets.
Once solely a Chinese celebration, Single’s Days is now being pushed worldwide. Each year Single’s Day growth in sales leads to a rise in media hype. And for good reason. Last year’s Singles Day sales reached ¥57.1 billion ($9.3 billion) which is expected to be surpassed this year. In just one minute and twelve seconds GMV sales reached ¥1 billion with total GMV for cross-border commerce surpassing last years numbers in one minute and 45 seconds. In 2014 consumers in 217 countries and regions shopped up a storm with over 200 countries doing the same just one hour and 15 minutes into the event. An international angle is being heavily pushed with foreign products being front and center in advertising and promotions in China. Now it is time to see if Alibaba position itself overseas as successfully as it has in China. An example of recent foray to reach markets outside of China Alibaba is marketing in southeast Asia through online advertising, videos, and social media in order to raise their profile. While smaller markets may be easier for Alibaba to gain ground in, it is yet to be seen if Alibaba can gain a foothold in more developed markets such as North America and Europe.
In the U.S. November 11th is already a holiday, Veterans Day. Many retailers already offer Veterans Day sales and discounts. The following period between Halloween and Christmas is loaded with shopping holidays and promotions. This could go either way for Alibaba: Americans might embrace another day with killer discounts or they might disregard Singles Day as just another day. Alibaba has been cautious in their U.S. efforts to this point, and going in head first is not in their best interest. It will be interesting to see where Alibaba’s North American efforts lead.
Another advantage for Alibaba as they move into international markets is their partnerships, specifically those with post offices around the world. Partnering with postal groups from Australia Post to Singapore Post to the U.S. Postal Service implies that Alibaba is developing inroads into economies outside China. Although there has only been limited details concerning the opening of these routes they are likely beneficial to Alibaba in two key ways: sourcing products to bring to China and delivering Chinese products to the world.
Cross-border commerce is a main component of partnerships helping companies tap into the Chinese market. But commerce is a two-way street and Alibaba’s efforts to develop logistics worldwide is something to keep an eye on.
A Star Studded Shindig
Who doesn’t like a party? And what better way to bring Alibaba to the world? Much like the TV show leading up to China’s biggest holiday, Spring Festival, Alibaba is hosting a gala the night before the big shopping day. Complete with big celebs from star director Feng Xiaogang to America’s Adam Lambert and an ad from Kevin Spacey as the President of the USA as well as guest appearance from Britain’s Daniel Craig. Alibaba’s gala ensured that there’s plenty of attention on Singles Day, signaling the efforts to make it a true holiday. This effort of course starts in China but we wouldn’t be surprised if Alibaba promotes and encourages celebrations worldwide much like we see Chinese New Year decorations and celebrations worldwide.
Singles Day is one part of the major effort to make Alibaba as synonymous with shopping in the West as it is in China. This is the next test for Alibaba’s foray into other markets and we will be watching closely.
The Early Results
By 1:15am, consumers from 200 countries and regions had made a purchase. Chinese couldn’t get enough international products, with Japan, USA, Korea, Australia and Germany being the top-5 origins in the first hour. Top imported brands included Aptamil, Nurtion, Bellamy’s, Cambridge Sachet, Missha, Coach, Avenue, YSL and Clarks.
As a lead up to the strike of midnight Alibaba aimed to keep China’s online shoppers awake and engaged. The Pre-Singles day gala put on by Alibaba and exclusively aired on Hunan TV engaged watchers and shoppers with a big night of entertainment. China Skinny was hosted by Alibaba to attend the big event and was able to soak up the buzz from the night. Below are some highlights from the Singles Day gala. Be sure to check back to find out more about the astonishing facts and figures from this years Singles Day.
As Alibaba expands abroad it is not overlooking its home market, with domestic growth being one of Alibaba’s key strategic areas. That’s with good reason. Whilst only 10% of products sold in China’s physical stores are imported, 40% of products sold online are foreign. With China’s hinterland underserved by brick and mortar stores selling foreign products, Alibaba is playing a part in bringing the world to them. Three factors are helping to drive domestic growth.
1. Rural Focus
Alibaba plans to expand its empire into the remotest areas of China. It is investing 10 billion yuan in logistics, hardware, and training. Over the next three to five years, ecommerce infrastructure will become available in 100,000 villages in China.
Villages in hard to reach places have thus far missed much of China’s ecommerce boom, with their remoteness partially to blame. Yet with online shopping maturing in major cities, and evolutions such as mobile shopping enabling widespread access, looking to rural areas for new growth is a smart move. Not only does it bring new shoppers onto Alibaba’s platforms, it also provides online job opportunities to rural Chinese. Owning a Taobao shop or becoming a logistics driver has now become a viable way to make a good income while being able to stay close to home.
Chinese living in smaller cities and villages are typically more traditional than big cities consumers, and are much more likely to be reached by traditional communication channels such as television. Alibaba’s Single’s Day Gala, broadcasting on Hunan TV tonight, is a good approach to reach these villages who may not have considered ecommerce before. Expanding into smaller cities and villages also capitalises on Alibaba’s impressive logistics investment.
2. Logistics Feats
Singles Day gives us the opportunity to look at the booming logistics industry in China. Last year Ciaonao coordinated the delivery of 278 million Singles Day packages in China and overseas. This year is expected to see more than 1.7 million delivery personal, 400,000 vehicles, 5,000 warehouses, and 200 airplanes deployed by Alibaba’s logistic partners with imported products reaching consumers in as little as 48 hours.
To ensure that even China’s smaller regions are well-serviced, Alibaba’s logistics arm Ciaonao is ensuring that the ‘last mile’ of those in the hinterland get their packages too by providing estimates on the number of packages for various routes down to the county level to coordinate delivery.
3. Ecommerce is Well-Suited for Rural Residents
A good logistics system is crucial when aiming to reach sparsely populated parts of China that often have dodgy infrastructure. This is vital to the continued growth of China’s ecommerce as the First and Second Tier cities become saturated. Residents in smaller Tier cities are responding enthusiastically to the ecommerce drive. The number of online shoppers in rural areas increased 40.6 percent to 77 million in 2014 according to the China Internet Network Information Center (CNNIC). Growth in online shopping in counties and villages in China now outpaces that in cities. Penetration is only expected to increase as further investments make it more attractive.
Taobao and Tmall, even more so than other tech players in China, seem to resonate with rural residents. For example, WeChat, China’s most popular, do-it-all app, enjoys 93 percent penetration in Tier One cities versus 27-28 percent in Tier 4-5 cities. This is further evidence of just how different consumer behaviour is across China, even in their online usage.
Alibaba’s commitment to bringing the world to China is no easy task but is well-planned. Alibaba’s rural efforts and logistic feats in conjunction with China’s urbanisation, increasing internet penetration and growing ecommerce expansion will all assist Alibaba in reaching every corner of China.
There are 640 million are women consumers in China. Their average contribution to household income jumped from 20% in 1980 to 50% in 2013 and they now have a louder voice in financial decisions from everyday purchasing of daily goods to big ticket items such as finances, electronics and even automobiles. It’s not only China’s female consumers shaping the world, but also the women behind the scenes. According to Grant Thornton International Business Report released in 2014 38% of senior management roles in China are held by women – one of the highest rates in the world. Some of the shining stars from that group were recognised on Monday night.
China Skinny was honored to attend the fourth annual Women to Watch series hosted by Ad Age and Thoughtful Media in Shanghai on Monday night. Ten women in industries from China’s media, marketing and advertising industry were bestowed the Women to Watch award for 2015. Seeing the women on stage one can not help but to be humbled by all they have achieved from the development of L’Oreal’s groundbreaking “Makeup Genius’ app to giving startups an opportunity to be on show in Marriot Hotels in China to taking a Chinese skincare brand international to creative innovations using the Internet of Things and more.
All were eager to share their awards with their teams and family with Jane Lin-Baden CEO, Isobar China Group, bringing her daughter on stage showing how important it is for young women to have role models.
China’s growing leadership in mobile and tech helps to develop evolved products, services, and data. Not only is it technologies and innovation driving the marketing world in China but also the consumers. Jalin Wu, chief marketing officer for Greater China at Uniqlo, said it best when stating how she draws inspiration from the consumer. As well as Ellen Hou, group managing director and chief strategy officer of McCann Worldgroup Shanghai, who knows that going beyond just connecting with the consumer is key to creating a lasting brand in China. All in all, it was a great event to showcase the significant contribution that China’s intelligent and passionate women are contributing to China’s dynamic marketing landscape.
Read about China’s 2015 Women to Watch and be inspired.