China is one of the largest consumers and producers of food and beverage in the world. China’s food and beverage consumption has grown over the past decades, with the increase in consumers’ disposable income, their willingness to spend more, and the speeding up pace of change of consumer preferences, more brands and new categories of products are rising, thus, it is more and more important to properly do food and beverage branding in China. According to the China Chain Store & Franchise Association, China’s food and beverage (F&B) sector has reached around $595 billion in 2019, a 7,8% increase over 2018.
Since 2018, China’s food consumption has gradually entered the era of experience economy where consumers will pay more for products that fulfill the need of consuming food and beverage for enjoyment. For example, from 2016 to 2019, ready-made tea shops increased rapidly nationwide and achieved nearly 100% growth over the 3 years. As disposable income has increased, Chinese consumers will buy premium products on a much more regular basis.
Current trends for F&B branding in China
- Self-satisfaction and especially social satisfaction are becoming more important. The reason for consuming beverages has gradually shifted from satisfying basic needs, such as thirst-quenching, to physiological and psychological satisfaction such as function, taste, and differentiation.
- Brands are paying attention to the needs of the Chinese consumers by giving a complete consumer experience. Knowing how to satisfy the consumers from taste, health, interest, and enjoyment will become one key to success in this market, HEYTEA is a good example of a brand knowing how to give a full consumer experience.
Source: Heated.Medium.com, HeyTea product
- Health and guochao (国潮), have accentuated the impact of new trends on demand, including diversifying diets, food safety concerns, and healthier lifestyles, all of which are driving the market of higher quality imported and domestic products. Despite strong demand, imported food and drink products are facing increasing competition from improvements in the quality and profile of domestic products.
- With the sped up penetration of home delivery and e-commerce, the demand for food and beverages has further increased, and the scene of F&B delivery has changed.
How to do F&B branding in China
Define target audience
First, the Doxaganda team will help to define the key consumer group in China and highlight several key categories of consumers depending on which cities you want to develop your business.
Chinese cities are ranked according to a tier system based upon factors such as their population, Gross Domestic Product (GDP), economic growth rate, cultural and historical significance,etc.
- Tier 1 has 4 global cities (Beijing, Shanghai, Guangzhou, and Shenzhen). The markets for European produce are more developed in Tier 1 cities where there are better infrastructure and more sophisticated distribution channels, and the largest concentration of affluent and middle-class consumers. As the markets are better developed for some product categories, there may be issues of market saturation, with increasing logistics costs, rent, and competition negatively affecting retailers and distributors.
- Tier 2 (Wuhan, Tianjin, or Hangzhou for example) and sometimes Tier 3 cities, have the potential to be the major growth markets in the future. However, there are considerable logistical issues, including less well-developed infrastructure, fractured distribution channels, and a lack of cold chain storage. Consumer awareness of European produce and average disposable income can also be lower.
- Lower-tiered cities are often targeted solely by domestic companies and the challenges faced for establishing effective distribution and marketing for products will be higher than in larger urban centers, while demand for high-quality European produce will not be as large or consistent as in more developed urban centers.
Create a brand image and increase awareness
For food and beverage branding in China, the Doxaganda team will help build the brand’s image, create a story-telling for the Chinese consumers, and help with the organization of the tasting. It is important to consider the special needs associated with cultural origins. The Doxaganda team will help determine what are the preferences of Chinese consumers. This factor can have a significant impact on the promotion of your F&B brand nationwide and affect its success.
With the rapid rise of new generation consumers and improvement of their income, consumers’ needs have been upgraded, and their concerns and value have become more diverse. From functions and low prices to richer cost performance, higher quality, personalization, sharing and interaction, and recognition. These put forward higher requirements for professionals in the food and beverage industry. Facing and satisfying consumers’ Omni-experience demand and building Omni-experience is becoming a common issue for the whole foodservice industry.
Use of social media and co-branding marketing
Social media is an important tool for food and beverage branding in China. The Doxaganda team will help you promote your F&B brand account with quality content (photos, videos, etc.), find the KOLs you may need. A social account allows brands to interact with the brand’s public and receive feedback. Customer engagement on social media in China has the power to make or destroy a brand.
Brands look for influencers that are relatable with their brand values. Customers trust the influencer and their recommendations. According to a report by PWC, 29% of Chinese consumers, as compared to 13% globally, use social media to see what brands or products KOLs and celebrities are endorsing. KOLs differ from E-commerce merchants in three ways, they interact with consumers, raise awareness and help to build brands.
In China, branded collaborations are big business and a serious way for companies to reach new audiences while fostering associations that can help drive business from top-tier to lower-tier cities at an often-affordable price.
Find the right distributors
Finally, for F&B branding in China, it is important to find a distributor who can promote your product. Understanding the potential of various channels is important for understanding the market and shaping entry strategies accordingly. The Doxaganda team can help you find the right distributors for your company, depending on your product, where you want to sell it, and what kind of marketing strategy you want to use.
Here, some facts on different distributors channels:
- The number of small independent stores and wet markets has been on the decline as retail channels become more consolidated.
- The growth of convenience stores is slowing in tier 1 cities where saturation is becoming an issue, however there are low concentrations in lower-tiered cities. The sector consists mostly of domestic operators, however international operators also have an established market share.
- Supermarkets and hypermarkets are showing growth however due to increased competition and costs, operators are repositioning with several large chains that have been closing underperforming stores in tier 1 and 2 cities.
- Specialty and boutique stores, and high-end lifestyle stores, are increasing to respond to increased demand from increasingly sophisticated consumers. Primarily in Tier 1 and 2 cities and targeting affluent consumers and expatriates, these stores often stock specialty items not found elsewhere in the Chinese market. Even if the number of these stores is increasing, geographical distribution is currently limited, and volumes of sales are low compared to Supermarkets and Hypermarkets.
- Hotels, café, and restaurants targeting mass consumers. Catering to a wide range of consumers, these venues have been able to increase exposure to foreign products and build awareness of high-quality foods and beverages. Tier 1 and 2 cities have high concentrations of high-end venues, however mid-range venues, café chains, and fast-food chains are expanding in lower-tiered cities.
- ECommerce is on the rise with both B2B and B2C platforms performing well, opening new opportunities for foreign producers. B2B, B2C, and C2C platforms have all grown rapidly in recent years, and younger tech-savvy consumers are increasingly turning to eCommerce. Difficulties can arise with counterfeit products on platforms and poor service from outsourced logistics and delivery companies.
What Doxaganda will provide for your F&B branding in China
Doxaganda will help your brand to define a target audience, increase awareness for your brand and promote it through different methods, online and offline. Our team will also help you understand the local culture and their expectations because, in China, consumers look for new and trustworthy F&B brands. Sometimes, brands end up offending Chinese consumers because of the lack of knowledge about Chinese culture. Therefore, it is also extremely important to understand local culture and conduct a correct F&B branding in China. To learn more about the methodology, contact our Doxaganda consultants in China.