Healthy, convenient consumer products targeting a growing middle class will be the winners in the new China economy but long-term success relies on understanding and responding to a rapidly changing consumer.
Foreign brands can no longer rely solely on their clean and green image with mass market strategies to capture the Chinese health and wellness market.
For food and beverage brands to succeed into the next decade they need to spend time understanding and segmenting consumers in an increasingly fragmented market.
The Chinese consumer is becoming more discerning. They want quality products that help them achieve a more balanced, healthy and family-focused life. We’re seeing premium segments outrun traditional value segments and an increasing amount of money spent on experiences, rather than products.
Ongoing issues with food safety and quality, rising incomes, effects of urbanization and an aging and stressed population is expected to see China’s growing health and wellness market hit almost $70 billion by 2020. Chinese consumers are some of the world’s most health conscious with 73 per cent prepared to pay a premium for products deemed healthier – 12 points higher than the global average, according to Boston Consulting Group (BCG).
We’re seeing demand for imported organics continue to rise. This was very evident at SIAL this year as we saw a large number of exhibitors from Australia, New Zealand, the UK and the US showcasing everything from organic coffee and olive oil to nuts, meats and cheeses.
Fifty per cent of Chinese are now focused on eating healthy and nutritious foods, and food safety is a growing concern with 72 per cent now worried the food they eat is harmful (up from 60 per cent in 2012), according to a report by McKinsey.
However, country of origin and the clean and green image are no longer enough. Consumer suspicion means there still needs to a credible reason to believe. Consumers are increasingly reading labels, and while clear information on functional benefits is useful, some of the points might still be missed. These are the contradictions we work through everyday.
There are also unique preferences and regional differences that have to be taken into account. While we’re seeing a high demand for nuts and nut products across multiple categories, like milks and snacking, in Guangzhou too many nuts in a cereal bar might cause “overheating”.
Imported fruit is gaining momentum in a very big way. Despite the ubiquitous fresh fruit stands on nearly every corner, there is huge demand for higher quality, safer fruit products, like cold pressed fruit juice and fruit sold in pouches.
Consumers are looking for more convenient solutions both in snacking and read-made meals. We’re seeing the appearance of a number of ready to eat meal solutions in reheatable or microwaveable pouches where all you need to do is microwave or boil and add meat and rice.
As urbanization continues to grow at rapid pace consumers are looking for quick, easy and convenient solutions.
By 2020 51 per cent of the urban population will be middle class – that’s 167 million households or 400 million consumers, according to McKinsey. The value segment is projected to drop (from 82 per cent in 2010) to 36 per cent, with 116 million households or 307 million consumers.
The mass market strategies we’ve seen used in the past are becoming less relevant. Today brands need to think about their proposition differently across value, core and premium segments, offering clear functional benefits for premium ranges.
We’re seeing consumers become more individualised and seek out tailored brand experiences that deliver on promises. Brand loyalty is growing and word of mouth is key as consumers gain status from recommending quality products to their friends. In this race to the top, brands getting ahead early will be at an advantage as competition grows.
It’s more important than ever to test and validate brand concepts, product ideas and packaging by talking to distributors, retail partners and consumers on the ground in China.
How you reach and engage with Chinese consumers can be a constantly moving target. You don’t just need above the line and below the line activities but ‘through the line’ integrated plans that help you build value for the long term.
Foreign brands are evolving in the way they tackle the challenge. We’re seeing our clients really getting their hands dirty – home immersions, market safaris, and visiting supply chain and distributors personally. They are spending money to adapt their brands to the Chinese market with product variations and packaging.
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