Effect of E-commerce on the instant food market in China

Since 2002, E-commerce gradually became the main way of shopping in China. With all the E-commerce platforms, the consumers can easily obtain the instant food they are looking for in the lowest expense. Additionally, the commenting and sharing platform on E-commerce also provides the consumers a broader overview of the products that they want to purchase and have more comprehensive information that they need to evaluate the quality of the product.

 China’s ready-to-eat market: Instant food brands are in vigorous competition with each other

The Chinese market share breakdown

As the most popular instant food in China, the instant noodles market is dominating by large domestic brands. As the pie chart shows below, Master Kong is occupying 51% of the market and Uni-president is occupying  21% in 2017. Therefore, the industry is locked in a monopoly-oligopoly situation and only 28% of the whole market is sharing by other brands. In recent years, more international brands have entered China’s instant noodles market, mainly from Asian countries, such as South Korea and Japan. Such new competitor entrance also increases the competition as the consumers are having more choice. Moreover, KOLs in China also help the international brand to enter the market as the consumers will be curious to try the new brand out due to the low cost of the products and the increased disposable income that the consumers have.

E-commerce overview of the main brands/products in the Chinese market

On Taobao/Tmall, the sales of domestic instant noodles brands (leading brands) are much higher than most international brands. As the table demonstrates below, international brands like SamYang and Nong Shim and are having their top seller’s price almost 3 times higher than the price of Master Kong’s top seller and the price range for the international brands are also much wider. Such a trend indicates that the consumers are willing to pay more for the instant food from international brands but with a higher expectation.

As for instant rice, on Taobao/Tmall, the most sales of instant rice (mixed with other cooked food) come from domestic brands. As shown in the table below, International brands’ online sales are significantly lower than the domestic brands, even if they are cheaper. For example, Xinmeixiang, the most popular brand of these 4 brands, has a sale that is 1000 times more than Nissin, the lowest sale brand among these four.

Due to the good reputation of Chinese domestic brand of instant rice in the market and many international brands significantly focus more on instant noodles, instant rice market on E-commerce platforms is dominated by domestic brands.

Instant meat is also a popular product among Chinese instant food industry. The sales of domestic brands of instant meat are obviously higher than international brands on Taobao/Tmall, which means domestic brands are also more popular among Chinese consumers as well. One of the possible reasons for the popularity of the domestic brands might be their price as the brands like Ganzhu offers a price that is 3 times less than international brands like Spam and The Ho.

Comparing online interest for ready-to-eat leading brands in China

On Baidu index, Master Kong showed the highest search frequency, Sanquan had the second highest search frequency and Uni-president showed the lowest search index during the past year. Such trend demonstrates that Master Kong has a large market penetration rate and excellent reputation among the industry. Also, on WeChat index, Master Kong showed the highest search frequency and much higher than the other three brands in past 30 days.

Instant food consumption in Mainland China: Distribution channels

The distribution channels of instant food in China consist of 5 parts: supermarket, convenient stores, e-commerce platforms (Taobao/Tmall and JD), wholesales market and vending machines.

Online sales

As the most important online sales channel, Taobao/Tmall showed high instant food sales in June and November for 618 Ideal Life Carnival and Double 11 shopping Carnival (both are large shopping days launched by Taobao/Tmall). Therefore, the consumers tend to store instant food during the campaign period and wisely plan the purchase frequency.

Online retail coverage in China

The number of brands on JD is more than Tmall, mainly due to the higher requirements and deposit of Tmall for those brands want to enter the platform. International and imported brands mainly come from Europe countries (Italy, England and etc.), Southeast Asia (Singapore and Thailand) and South Korea.

Online Sales-Volume assessment

Instant noodles showed the highest sales on Tmall/Taobao, which was the 9 times of instant rice (rice mixed with meat and vegetables) sales on the same platforms. The sales of instant meat were much higher than instant vegetables, which means instant/processed vegetables haven’t been popular in China.

Offline retail-coverage in Shanghai

Since the instant food is one of the most common food in China, supermarket and convenient stores are its important offline retail channels. We use Shanghai’s convenient stores (different brands) as examples of distribution channels. As the table shows, Family Mart is the most significant channel to sale the instant food, which has 1722 stores in Shanghai, following by Alldays and Lawson, which consists 708 and 753 stores, respectively.

On-the-shelf: representation of the category in stores

As one of the most common products in China, instant food is purchased by consumers in a supermarket, convenient and cooked/processed food stores. In those stores, instant food usually has an individual area (several shelves) and one segment (such as instant noodles ) have one shelf. Most types of instant food are cheap products in those stores since they are daily/fast food.

New trends  in China’s F&B market

In order to increase the sales of instant food in China, most brands (domestic and international) are investing more resources in R&D to create new products.

Health is the direction of development in the instant food industry. For health perspective, low-fat food, low calorie (sugar) food and low-salt food are becoming popular among Chinese consumers and the instant food brands have created more healthy instant food, such as the non-fried instant noodles and additive free instant food. As for becoming more nutritious, the raw ingredients of instant food has also been improved. There are more vegetables, fruit and whole grains have been a significant part of many types of instant food in China. Therefore, the future of instant food will focus more on the value and innovation of the product.

Therefore, as analyzed above, even though the Chinese instant food market is slightly shrinking due to the efficiency of the food delivery system, it is still a large industry that affects almost everyone’s daily life. For the leading brands, it is important to actually understand what the consumers are expecting and developing new products that are healthier and more nutritious. Also, increase the variety of instant food and allowing consumers to have the food ready in a more convenient way can also be the focus for companies.

SOURCE: Daxue consulting