By Joel Bacall & Andrew Kuiler (The Silk Initiative)
Eating on the run isn’t going away any time soon in major Chinese metropolitan areas. With the need for morning and mid afternoon energy boosts, and an increased consumer familiarity with healthy Western snacks, snack bars continue to grow in popularity.
With this said, consumption behavior in China differs in almost every aspect that Western consumption behaviour. Chinese consumers refer to an inherent guidebook on what kinds of foods they should include in their daily diets. Variety is important and consumers naturally seek out different food groups including colours, textures and flavour experiences.
There also tends to be less concern about fat content and carb level and more of a focus on whether the food delivers ‘heating’ or ‘cooling’ properties and what impact this may have physiologically.
Caloric intake concern isn’t completely absent among consumers though. According to a Beijing based physician, Lyn Wren, China’s waistlines are growing faster than the GDP. Grandparents, who lived through the great Chinese famine, are keen to ensure their children are really well fed and it’s commonplace to see restaurants piling huge amounts of food waste into plastic bins on the sidewalk each night. In contrast to underfed inland rural areas, almost a quarter of urban children in China between 10 and 12 years old are overweight.
While snack bars in China don’t yet enjoy the shelf dominance of Western snack aisles, there is an opportunity to tap into convenient, healthier snacking as well as functional food popularity that could help slim down some of those bulging waistlines – particularly among children and younger urbanites.
China’s snack bar usage and its players
Within four years the China snack bar market doubled to US$41.8m (2013) with another 9% expected by 2018 accounting for US$67.9m in retail sales. However, this is an area relatively free of aggressive advertising and consumer brand awareness due to a lack of competition (with one brand alone owning a 59% market share). The market is still to be matured with its future relying on the efforts of the few key players to educate their consumers and generate interest.
SoyJoy (VV Group – part of Otsuka Pharma) dominates the market with a 59% share. Otsuka have a range of nutritional products to provide the busy urban consumer with the complete ‘Soylution’ from trusted Soy drinks to tailor made flavours suited to consumers in different groups and regions (such as peanuts to attract male snacking to the female dominated snack market, and Hawthorne to appeal to Northern Chinese consumers).
Western brands are also attempting to increase their share in this market. Weetabix (now owned by Shanghai Bright Dairy group), under its Alpen brand, has developed 6 Chinese flavours, such as Green Tea and Dark Chocolate, ideal for lunch breaks during the morning rush. Other niche offerings include Dali Bar, which has an ‘eat good, do good’ brand mission.
China is now the global leader in health and wellness expenditure. In 2013, it overtook the U.S., Mexico and Brazil. Furthermore, there are now more Chinese adult gym users than in American. The Chinese sports nutrition market is expected to almost double in the next 5 years, though only 9% of this growth will be in the protein bar category with the other 91% coming from protein powder.
When it comes to healthy snacks, China’s market tripled in size between 2010 and 2014. According to the Beijing University of Science and Technology, profit margins for healthy snacks have risen to 40% (from 25% in 2006) though many of the local offerings are produced in less than desirable safe and healthy environment. Despite the popularity of fruit, sweet potato based snacks make up almost half of the category as sweet potato also delivers on another consumer need area (like dates, nuts and soy) – to increase fiber consumption.
Demand for snack products that are able to include pear, plum and other fruity flavours have also grown with rising popularity of eating for improved health and external beauty. It is not uncommon for Chinese consumers to talk about which ingredients specifically help improve immunity, digestion and skin condition. Functional ingredients with high cultural relevance include goji berries, mountain yam or even taro. Taro is a popular ingredient believed to improve the immune system and is frequently found in potato chip products throughout the country. PepsiCo’s Quaker brand has also successfully incorporated purple taro as part of their recent line of breakfast products.
Future proofing the opportunity
While new snack bar product varieties and flavours will almost certainly be welcome among Chinese for many years to come, there is opportunity for innovative, high quality, products that can meet Chinese needs beyond just being yet another yummy snack bar on the market. To achieve real growth in the China snack bar market, manufacturers should gain an in-depth understanding of the Chinese consumer (their habits, practices, usage occasions and needs from flavours and ingredients that will resonate with them culturally). Once this learning is established it is then possible to see exactly where the brand may have permission to play. Be prepared that this could, and should, look different to the brand’s remit back home.
One great example of utilising strong consumer understanding to explore brand and product extendibility is General Mill’s Haagen Dazs. When Haagen Dazs launched in China they went well beyond selling tubs of ice cream in retail channels to launching premium dessert restaurants that tapped into a rising Chinese urban desire for indulgent snacking (dessert) occasions. This thinking has enabled Haagen Dazs to go well beyond just creating an indulgent environment that serves overpriced sundaes. The brand has looked into how to raise the indulgent factor on everyday cultural celebration such as the annual Moon Cake festival. Haagen Dazs took the common Mooncake up a few notches by offering an array of colourful ice-cream based Mooncake products which fetch up to $100 for a gift boxes full of these treats. Though Haagen Dazs’ proposition is a premium one, any snack bar brand looking to reach more Chinese consumers can take a page out of the Haagen Dazs book by understanding what consumption occasions are important to its consumers and the flavours, ingredients and formats that have potential to be explored in that space. New product development opportunities should hopefully follow on quite easily after establishing this learning.
Though convenience, health and beauty trends in China signal possible avenues for snack bars in China, playing successfully in the category requires a commitment to understanding ingredients, flavor preferences, desired benefits and consumer usage behaviour. Brand owners must offer up a product that delivers a strong set of product (functional and emotional) benefits, is tied to culturally relevant occasions, and is uniquely positioned against the few brand offerings already bunkering down in the market.