China Skinny works with clients across 17 industries which has given us a well-rounded perspective of Chinese consumer behaviour. It’s been a helpful way to identify what works in one category, how it can be applied in others and any affinities between them.
One of the most dynamic industries we work in is food & beverage, which has welcomed some of the most innovative and exciting marketing we’ve seen in China. There are mega-brands with annual marketing budgets exceeding a billion dollars, to niche players that cleverly hone-in on specific target markets. Costly celebrities and KOLs are a regular feature in campaigns; 39% of Chinese food & beverage ads have celebs in them, versus 10% in the UK and US, according to Millward Brown.
Premiumisation has become a commonplace buzzword in China and its effect is seen at every level. Even rice saw 25% of consumers trade up between 2011-2015 versus 3% who traded down, according to McKinsey. Premiumisation and health concerns have also led sales of the workingman’s favourite instant noodles to drop by billions of tubs. Buzzwords such as healthy, natural, organic, GMO-free, functional and probiotics are increasingly making their way onto Chinese labels and with it, heftier price tags. Between 2012 and 2016 the portion of high- and middle-end product sales grew from 26.2% to 34.4% on Alibaba’s retail platforms.
The one thing almost all successful food brands have in common is their adoption of digital channels. Food & beverage has become the fastest growing ecommerce category and will continue doing so following significant investment in cold-chain and cross-border logistics. 60.5% of fresh food is now available online versus 26% in 2014. What makes the online food & beverage category interesting is that it is much less dominated by Alibaba and JD, with niche food-specific platforms accounting for a larger share of sales. With ecommerce now as much a marketing channel as a sales one, food & beverage brands are embracing it and the diverse opportunities it brings.
Traditional offline food brands are also embracing technology. China’s giant ¥3.5 trillion ($507 billion) eating out industry is taking to mobile payments. 45% of McDonalds China’s sales are now paid for through a smartphone. China’s insatiable appetite for food delivery has seen a storm of food delivery apps surface, which prompted KFC’s parent Yum China to buy a controlling stake in Sherpas this month. Apps developed by food brands provide a host of useful tools and are now used by 60% of Chinese consumers, according to Kantar.
No mention of online channels would be complete without the good old fashioned Daigou purchasing agents promoting their wares through WeChat, Taobao and other niche platforms. Although the fear of regulations was circulating again online in China last week, enthusiasm doesn’t appear to be waning for the grey channel. Countries like Australia, New Zealand and the US have seen an army of Daigou on their shores. A NY Times article earlier this month reported that as many as eight in 10 of the 136,000 Chinese students in Australia are involved in Daigou businesses in some form.
Food & beverage is abound with opportunities in China, particularly for brands that embrace China’s unique and exciting channels. Agencies such as China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.