Food & beverage new product development – how to set yourself up for success in China

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Written by Andrew Kuiler, Managing Director @ The Silk Initiative

How do you go about introducing a brand new product concept in a market where consumers are already used to that product in a tried-and-tested format?

What are some lessons we can learn from brands that have succeeded in getting consumers to try their food and beverage innovations?

This week at The Silk Initiative (TSI), we explore answers to these questions as we take a look at what has influenced the evolution of Chinese consumers’ appetite for new tastes over the years.

More choices

Before China initiated market reforms, consumers were more focused on necessity instead of pleasure when it came to food.

As China has grown richer and disposable incomes have risen, people have had more opportunity to travel and gain exposure to different foods.

As a result, they have developed appetites for tastes and cuisines from around the country and beyond China’s borders, too. This has created many new business opportunities for both homegrown and international brands.

For example, on Dianping’s Shanghai Dining section webpage, one of the more popular local sources for information about where to eat in the city, consumers can now choose from over 5,000 options under the “Western Food” category alone, including choices of food from Latin America, Europe and the Middle East.
Dazhong Dianping has over 5000 options for Western food delivery in Shanghai

 

Trading Up

With their additional spending power, Chinese consumers are also opting for more expensive versions within the same product category.

In recent TSI focus groups to better understand consumer motivations for trading up, we learned how people have been using smart phones to scan QR codes on food packaging to educate themselves about the origin of ingredients before making a decision about purchasing.

Now with access to this type of information, consumers are abandoning cheaper products, such as peanut oil, and favoring more expensive and healthier options, such as olive oil, for example.

More chinese opting for healthier cooking oils  

Keep up or be left by the wayside

Another change in F&B consumption dynamics has been the success of food delivery apps, such as 饿了么 (Eleme), which allows consumers to order what they want to eat from local restaurants and it is brought straight to their home by couriers.

This has hurt sales of instant noodles in China because they no longer have the advantage of being convenient, and healthier options are now only a click away.

Eating is increasingly done for pleasure and consumers are seeking new and interesting ways to dine that are more social, experiential and sensorial.

Consequently, brands are having to come up with more inventive ways to appeal to them. For example, Yum! China has launched a new Pizza Hut concept restaurant in Shanghai which is using robots to attract attention and draw in customers. (Read TSI’s Executive Director of Client Strategy Manohar Balivada’s reaction to this strategy in AdAge this week.)

Shanghai Pizza Hut new concept store has robot waiters

Some brands are getting it right

When Starbucks entered the China market 17 years ago, the company took a long-game strategy, and it has paid off.

In the beginning, Starbucks made little money and the company’s clientele was largely expats, but today, the majority of its customers are Chinese. And over the next five years, Starbucks is planning to roll out a new café in China every day.

To get to this point, CEO Howard Schultz says, the brand had “to educate and teach many Chinese about what coffee was”.

Starbucks also positioned its coffee-drinking experience as a symbol of an upwardly mobile lifestyle, which younger Chinese consumers readily accepted because it played into their aspirational needs and allowed them to appear cool and successful.

Starbucks China now sees more local customers than never before

TSI has worked with many dairy product clients and we know when it comes to successfully introducing the Chinese consumer to products in a category that they know already, such as yoghurt and milk, brands often need to get creative.

For example, Bel Cheese was at one time considering product innovations to suit the local palette, such as fruit-flavored cheese, as a stepping stone to introducing the more traditional cheeses that have been so popular in the West.

Western brands introduce new products by localizing flavors

[Above: Burger King, Lays and Starbucks have all successfully introduced new products by localizing flavor offerings]


5 Key Takeaways:

  1. Chinese consumers are evolving in their acceptance of unfamiliar categories. It can only be good news to multinational players who would like to sell their products in China.
  2. The role of education is undeniable when it comes to categories that have been hitherto unfamiliar to Chinese consumers.
  3. Customization is definitely needed to stay relevant. You could come in with your product history and beliefs, but if you don’t connect with consumers on their terms, your product is less likely to be accepted by them.
  4. To be successful at the top end of the category, one needs to offer more than just a good product as a proposition. A brand needs to sell an element of lifestyle to the consumer, or introduce some pleasure/sensory-related components.
  5. Be prepared to play the long-game and reinvent yourself in order to create products that better fit with opportunities on the ground.

TSI offers a suite of 8 Solutions to help brands create new future-proof growth opportunities and generating sustainable new revenue streams.

If the above article touched on challenges that you are facing, email info@thesilkinitiative.com and ask us about our Silk White Spaces, Silk Curve, and Silk Product Lines solutions today.