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August 26, 2020

Why China’s declining canned-food market still offers opportunities

China's canned-food market is set to decline in 2020 but just-food's columnist Peter Peverelli sets out how suppliers can still find pockets of growth.

China’s canned-food market is set to decline in 2020 but just-food’s columnist Peter Peverelli sets out how suppliers can still find pockets of growth.

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Canned food has been in the shadows in recent years, with sales stagnant and consumer interest – and media attention – centring on other parts of the store.

In China, domestic output is falling and, according to some forecasts, the size of the market is expected to shrink in 2020.

However, there are opportunities, especially for imported products, demand for which is in growth.

In official Chinese statistics, the term canned food (guantou shipin) consists of three categories: metal cans, glass jars and ‘soft cans’, sacks made from metal foil. The common feature of these products is they can be pasteurised after sealing to ensure the required long shelf-life.

Domestic production of canned food has been decreasing. Output in 2019 was 9.19 million metric tons, down 10.6%. In the first five months of 2020, output was 2.96 million tons, 11.8% lower on a year earlier.

Some industry watchers are not optimistic about the prospects for growth from China’s canned food market. An estimate from Beijing-based Insight & Info Consulting predicts the value of the Chinese canned food market in 2020 will be CNY90.5bn (US$13.14bn), down from CNY107.3bn in 2019.

One bright spot, however, are imports. China imported 85,447 metric tons of canned food in 2019, up 18.9%, according to the China-based Intelligence Research Group.

The import data does not provide a breakdown into product types but leading online grocery Jingdong allows a search for ‘imported canned food’, sorted by ‘sales volume’. On the first page of results – covering 95 products – Dongwon tuna from South Korea is the top-selling product. China has a huge aquatic industry of its own but it does not include tuna.

Next comes Kühne olives from Germany. Although China has a nascent olive industry, most olives are still imported. Kühne gherkins are also listed.

After the olives come Old Fisherman mackerel, sold in tomato sauce, from Taiwan. Although Taiwan is officially not regarded as foreign country, goods from that region still have to go through customs as imports.

Then come Cirio chickpeas from Italy; I have never seen Chinese eat chickpeas, but the product information provides suggestions of how to add them to various western and Chinese dishes.

Staying in Europe, Tulip cocktail sausages from Denmark also feature. Chinese love cocktail sausages as snack food. And then there’s another product from Taiwan, Riyuetang, Japanese-style braised eel.

Seafood is the main category of imported canned food. Products from Russia (fish and meat), Thailand (fish) and Spain (fish) appear on that first page of the search on Jingdong’s site.

One could easily interpret the discrepancy between decreasing domestic production and increasing imports as a lack of trust among retailers and consumers in the quality of Chinese products.

However, this is not the case with canned food. To understand this better, we need to consider how Chinese use canned food. Few Chinese will open a can of green beans to heat and eat. China produces top quality canned green beans but almost all are exported. Chinese will also not buy canned green beans to chop and stir fry them for a minute as way to save time. Even the busy city dwellers will buy fresh beans and the busiest ones will order them from a restaurant.

Similar buying patterns apply to fruit, although, recently, when Chinese started baking or preparing fancy ice cream desserts at home, they began to buy canned fruits, with peach as their absolute favourite.

Most of the canned foods you find in Chinese homes are meat and fish. The typical homemade Chinese dish consists of a vegetable with a little meat of any type added as a flavouring agent, with the protein it provides as a bonus. That is where canned meat and fish comes in handy. On your way from work, you see a street vendor selling fresh celery. You buy some for the family dinner. Back home, you get a can of luncheon meat or braised mackerel from the pantry. You wash and chop the celery, throw it in the wok and when it only needs a couple of minutes more, you add the chopped luncheon meat.

Occasionally, Chinese use canned meat or fish as a main ingredient. Luncheon meat is among the favourite canned foods for Chinese consumers. The consumption of luncheon meat rose from 136,000 metric tons in 2012 to 347,000 metric tons in 2018, according to data from Intelligence Research Group. Local production exceeds the demand (701,000 metric tons in 2019), but more than half of the production is exported to generate hard currency. This creates a niche for quality imported products that also look fancier than domestic meat.

There are opportunities for international suppliers of canned foods in China. They are niches, so they need to be discovered (or created?) and you need to make your products fit them. The first thing you need to make clear is your product can be used as an ingredient to add flavour and/or texture to the main ingredients of a dish. The products listed above provide pictures of how their products fit into a variety of dishes.

Marketeers then need to set their product apart from their competitors. One way of doing so is with flavour, so not just canned tuna, but Italian tuna, with Italian olive oil and herbs.

Rio Mare – owned by Italy’s Bolton Group – is a brand that offers a broad range of canned tuna in a number of flavours (lemon and pepper, pepperoncino). It also includes a series of tuna mixes with salads (Mexican, Texan, Couscous). They should appeal to Chinese consumers, provided Bolton invests in TV and social-media marketing showing how to change a dull dish into a feast for the palate and the eye. Rio Mare is available on Jingdong, but it does not appear high on the list of best-selling products. The applications shown on Jingdong are not the most appetising.

Another way marketeers can distinguish their products would be through packaging, such as, for example the small cans of vegetables marketed by France’s Bonduelle. A can of peas and a can of maize kernels can turn a bowl of leftover rice into a fresh helping of fried rice.

The beans sold by another European player, the Dutch vegetable-products group Hak, in soft cans are so suitable for Chinese kitchens that you hardly need to adapt the packing or the advertising campaigns as shown on Dutch TV. Bonduelle and Hak are, however, absent from the Chinese market.

There is a trend in China to decorate packaging. The fastest-growing domestic player in the canned food market is Linjia Puzi Food Co. from Dalian. It has introduced a number of fancy canned products with colourful packaging inspired by traditional Chinese designs. The company name itself is derived from a 1930s novel, so the presentation of the products fits the overall corporate identity.

Linjia Puzi almost exclusively produces canned foods: seafood, meat and fruits. The company recently added dried fish snacks in sachets. It generated a turnover of CNY452.5m in 2019, up 83% on a year earlier.

The company’s intensive use of social media, in combination with attractive packaging, would have contributed to its growth. There is only so much difference in taste between various canned peaches, but Linjia Puzi’s have become extremely popular in a short time due to its unique packaging.

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Free Report
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How is technology having an impact on Consumer buying behavior?

As the world rapidly becomes more connected, it is important for brands to understand the impact that improved technology is having on consumer purchasing behaviors. To react effectively, brands must know how to engage with increasingly digitally savvy consumers. GlobalData’s latest Trend Tracker report provides an analysis of Digital Lifestyles – one of GlobalData's top consumer trends for 2022. The report includes an overview of how digital lifestyles are evolving, including the significant impact that the COVID-19 pandemic had on accelerating digitalization, and how this trend is emerging across different Consumer sectors. Key features included in the report:
  • A breakdown of the trend’s prominence across sectors
  • Insights into consumer online penetration, preferred electronic devices and engagement
  • The key drivers and challenges impacting the digital lifestyles trend
  • A spotlight on key innovations set to reshape the consumer landscape
  • Analysis of what’s next for digital innovations and how brands can leverage the trend
Download this report to keep in touch with the more digital consumer.
by GlobalData
Enter your details here to receive your free Report.

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