The snacks market is developing steadily in China, with changing lifestyles, increased consumer spending power and westernisation resulting in more eating between meals. Francisco Redruello of Euromonitor International reports.
Economic growth, westernisation and growing consumerism are influencing Chinese culture in many ways but one trend that has not so far received much attention is the increasing prevalence of snacking between meals, which has led to growth in both the savoury and sweet snack markets.
According to Euromonitor International, retail value sales of sweet and savoury snacks grew by between 8% and 10% per year in the six years to 2005. Annual value growth in chocolate snacks ranged from around 8% to as high as 16% between 1999 and 2005, while the cakes market has also consistently grown at between 8% and 12% per annum.
The snacks market in China consists of sweet and savoury snacks, and to a lesser extent baked goods. Chinese consumers prefer savoury, particularly salty, snacks to sweet ones. Traditional savoury snacks – such as watermelon seeds and peanuts – are purchased largely on impulse from street markets and in larger urban areas through the nascent convenience store sector.
However, packaged sweet and savoury snacks are growing in popularity, as the expansion of cities and changing lifestyles increase demand for food “on the go”.
Among the products benefiting from the rising demand for snacks is popcorn. Developing from a small base, popcorn is expected to emerge as a star performer in the snacks market, with estimated retail sales growth of 13% in 2005. Similarly, chips/crisps increased in popularity, growing by over 8% in value terms in 2005.
Popcorn is tasty and convenient and as such it matches the rising demand for convenience food in urban centres, where consumers are increasingly leading fast-paced lives. The rise in microwave ownership has increased the popularity of microwave popcorn, which accounted for an estimated 80% of retail value sales of popcorn in 2005.
The growing popularity of chips/crisps in China has not been lost on international players which, with advanced production processes, sophisticated marketing techniques and strong financial support, dominate the market.
PepsiCo China Ltd has successfully taken the lead in new product development, supported by high-profile marketing campaigns. Keeping its finger on the pulse of consumer trends, the company has adapted new products to meet local consumer needs. Its China Gourmet series, for example, is available in traditional flavours, such as Peking Roast Duck and Spicy Crab, and is presented in oriental packaging.
The westernisation of Chinese culture has also given rise to the rapid development of more western-style foods such as baked goods. Baked goods, particularly cakes, are consumed by some Chinese consumers for breakfast or as a snack food, but are most commonly given as a gift.
One of the key trends in the snacks market noted by Euromonitor International is the trade up from sugar confectionery to chocolate, resulting from increased consumer purchasing power.
In China, the purchase of chocolate confectionery is usually planned and rarely done on impulse. Generally, tablets or boxed assortments are bought from local supermarkets as gifts. Boxed assortments account for the majority of the market, representing 40% of total retail sales in 2005, according to Euromonitor International estimates.
Chocolate consumption arrived quite recently in China, going back only about 50 years in comparison with hundreds of years in Western European countries. The lack of a strong tradition of eating chocolate among Chinese consumers, coupled with low per capita income, means the chocolate industry remains underdeveloped in China.
However, smaller packs of boxed chocolate confectionery are gathering popularity in middle class urban areas, as high-income consumers begin to treat themselves to chocolate as an indulgence. Among the popular brands are Dove Hearts (32g), manufactured by Mars subsidiary Effem Foods, and the Le Conté Séduisant Milk & Rice Chocolate (60g), produced by Shenzhen Le Conté Foodstuff Co Ltd.
Overall, the snacking landscape in China is undergoing a transformation, moving from traditional unpackaged sweet and savoury snacks to packaged concepts, namely chips, crisps and popcorns. At the same time, Chinese consumers are trading up from sugar confectionery to chocolate confectionery, particularly boxed assortments.
These trends are set to change the competitive environment of the Chinese snacks market. On the one hand, they will add value to retail sales through the expansion of premium branded packaged lines, while they will also change the distribution landscape by moving product away from traditional street markets to supermarkets and convenience stores.
Euromonitor International believes, however, that sweet and savoury snacks and chocolate confectionery will remain as fairly independent segments, as chocolate confectionery is more expensive and generally targeted at more affluent consumers.