How great the growth potential of imported snacks is in the China market? From the data collected by Guangdong Entry-Exit Inspection and Quarantine Bureau at the end of 2017. Last year, about 120,000 tons of snack foods such as cakes, biscuits, candies, chocolates, dried fruits and preserves were imported from over 60 countries and regions like the EU, ASEAN, the United States and Hong Kong via ports of Guangdong (excluding those of Shenzhen and Zhuhai), up by 50% year-on-year. And the value of these snacks was 230 million USD, an increase of 18%.
Although the growth of imported snacks in South China market was amazing, it is still at the primary stage of development in the China market, which means that the market is potentially large and needs to be further explored.
The sales of imported snacks account for more than 70% of the total sales of LOTUS, a large foreign chain supermarket. With more and more well-known or unknown foreign brands entering the China market, how can a certain brand takes its place in this huge market? Deng Chaoyi, Global Purchasing Manager of LOTUS, believes that now in China, imported foods with affordable prices and of good value are still the winners.
Southeast Asian snacks are Chinese consumers’ favorites
Imported foods in LOTUS fall into three categories: grain and oil, snack foods, and blunt drinks. In particular, the sales of imported snacks take up more than 70% of its total sales, and even 80% during the lunar new year. Whether a self-driving trip, visiting relatives and friends, or staying at home, imported snacks are always a popular choice among consumers.
Of the snacks sold in LOTUS, 70% come from Southeast Asia. Southeast Asian foods sell well because they suit the tastes of Asians, have high cost-effectiveness, and enjoy preferential tax-free policies of the ASEAN. Some popular snack brands such as Lily Cheese, Judith, and Little Boss Seaweed are among the best sellers.
Traditional snacks from the United States, Canada and Europe, such as Germany and France, maintained impressive sales. In recent years, "emerging" snakes from such countries as Russia, Turkey, Australia, and New Zealand showed rapid development momentum.
Some South American countries are also worthy of attention. Although these countries’ snack industries are still in their infancy, they have already realized the huge potential of the market in China. So local manufacturers and exporters have begun to seek for opportunities in this market.
Snacks in LOTUS are divided into seven categories: candy and chocolate, jelly, biscuits, puffed food (chips, etc.), seaweed (showing a great potential of growth in recent years), nuts, and dried fruits. In the past, consumers bought more puffed products such as biscuits and seaweed than others. But as people's desire to keep fit is getting stronger, the sales volume of dried fruits and nuts is soaring at an annual growth rate of 20-30%. The unit price of dried fruits and nuts is more expensive than that of ordinary products, but it does not affect people's enthusiasm of buying them.
The distribution of consumer groups of snack foods on a chart looks like an olive. One end is comprised of 19 to 22-year-olds, namely school students, whose spending power is not very high. They account for 10% of all consumers. The other end is constituted by 51 to 70-year-olds, who are either retirees or senior executives. They take up 9-10% of all consumers. If the middle part is further divided into two sub-parts, the first sub-part comprises young white-collar workers aged 23-35, and the second one 36 to 50-year-old middle class with a family and a higher spending power. These two sub-parts, with 2/3 being women, account for 80% of all consumers.
Cost-effectiveness is still a decisive factor for consumers’ choice
When it comes to the development trend of snack market, Deng believes that generally speaking, products with affordable prices and of good value are always favored by consumers no matter at home or abroad. The core of retail is commodity, while the essential core force of commodity is cost performance. In this respect, Chinese consumers are less mature than the international standard. If we make a comparison between Chinese and Occidental consumers, we will find that all consumers seek for cost-effective commodities, but they are at different stages of maturity. The consumption of imported snacks in China is now in the initial stage. There is brand-oriented consumption and opinions from key opinion leaders, but little ideas of consumers' own. Of course, many people go after "personalization", but the "personalization" is also influenced by key opinion leaders. In foreign countries such as Australia, however, not many varieties of products are supplied in local supermarkets. People's consumption there is also very rational, with consumers knowing which products are good and worth buying. Retailers do a good job in this respect. They tell you how many kilojoules of calories an adult needs a day. Labels on packages tell you how many calories a product contains. So people know exactly what they need. Another difference is that the Occident would buy products of self-owned brands, because they know these products are more cost-effective and are of good quality.
Consumers' buying products of self-owned brands is a proof that they understand the knowledge behind the goods and know what they should buy, instead of following the advertisement of big brands. Snacks outside China take on the following trends. Firstly, there is a greater proportion of healthy products and products with self-owned brands. Secondly, clean label is getting popular. Producers tend to tell you the origin of products and educate consumers through such advocacy. Thirdly, the package size of snacks is polarized, especially sweet foods and puffed foods, whose packaging is getting smaller and smaller, which makes it possible to reduce harm to health while satisfying people's desire for snacks.
In the next few years, Chinese consumers will gradually keep abreast with overseas consumers and undergo some transformation. There is now a major stratification among Chinese consumers. For example, the best sellers of imported snacks in general merchandise stores and boutique supermarkets can be different. Yogurts and nuts sell well in boutique supermarkets, while biscuits, seaweeds, grains, oils and potato chips are more favored in general merchandise stores. But this is only a current phenomenon. As the level of consumption upgrades, Chinese consumers will increasingly pay more attention to health and brand selection, and tend to select the products well worth the money.
Branding is essential
In order to take a share of the huge market in China, what "Aaron's serpent" should a foreign snack brand possesses? According to industry insiders, product quality should be put in the first place. Suppose a certain brand passes the quality inspection of China, then the first key to success before entering this market is a thorough market research on whether its products’ tastes, packaging, and pricing are acceptable to the market or not. The second key point is to understand its competitors. When a product is imported into China, where there are already strong competitors, it can hardly drive market penetration if it is not differentiated from other products. The last key factor is brand marketing. At present, most of imported snacks in the China market haven't launch any brand marketing yet. If a best-selling juice brand in Australia wants to enter the China market, where most consumers are not familiar with it, it is crucial for the brand to carry out brand marketing and advertise itself. Especially for markets where there is limited differentiation, brand marketing is more indispensable.
Deng believes that Southeast Asian products will still be the most popular ones among imported snacks in China in the next 3-5 years: "But this is just a transitional period. Consumers' preference may eventually go to cost-effective products probably from Eastern European countries such as Turkey and Russia, as those countries not only have developed industries and rich natural resources, but also will adapt their products to Chinese taste. Besides, many people will gradually turn their eyes to European and American brands. It is observed that in China’s food exhibitions, there are fewer exhibitors from Southeast Asia and more from Europe and America instead. European and American countries witnessed a sharp growth in China's imported snack market. This is also related to upstream resources, as resources in Southeast Asia have almost been fully developed. Therefore, with the upgrading of consumer’s awareness, people will finally turn to high-priced but affordable products."
