As the year draws to a close, anxiety is tinged with anticipation. We are truly, truly, truly about to bid farewell to 2019, and we need a stable ending and a precise beginning.
In the past five days, FBIF Food & Beverage Innovation exclusively invited five global consulting firms—Kantar Worldpanel, Nielsen, Mintel, Ipsos, and Accenture—to participate in the Foodtalks Trends Week. During the event, Mintel shared forward-looking global food and beverage trends for the next decade. Yesterday, we provided an in-depth analysis of Ipsos's eight major dairy trends. Today, we combine the excellent content from Kantar Worldpanel, Nielsen, and Accenture to distill over three hours of live streaming information as follows.
This article is divided into four parts:
- Reviewing 2019: What changes have occurred in China's food and beverage market?
- Which key consumer groups are redefining the market?
- What key points have Kantar Worldpanel, Nielsen, and Accenture highlighted for you?
- Is China's food industry's 2020 worth looking forward to?
-01- In 2019, is the food industry still dominated by giants?
In China's food and beverage market this year, facing the rise of emerging domestic brands across various categories, the giants are somewhat "headache." Facing diverse consumer demands, the internet-famous brands that have tasted the benefits of traffic dividends and continue to "fight" also dare not take it lightly.
Both Nielsen and Accenture mentioned in their live streams that the Chinese market is no longer a simple consumption upgrade or downgrade, but a dynamic consumption stratification and multi-level consumption trend.
According to Nielsen retail research data, as of the first half of this year, among all offline FMCG manufacturers in China, the growth rates of the top ten international manufacturers and the top ten local manufacturers were lower than those of mid-sized local manufacturers and small local manufacturers. Local enterprises and small and medium-sized brands maintain a higher growth rate.
Growth rate of overall offline FMCG manufacturers (%)
Mid-sized manufacturers, sales > 1 billion RMB. Image source: Nielsen
Accenture's global CMO survey shows that 58% of Chinese CMOs believe that big brands are losing their appeal to consumers, and 66% of Chinese enterprises face competitive pressure from new entrants. Among them, 14% believe that compared to industry leaders, numerous ant-like competitors are more formidable.
Accenture's market research found that from "Made in China" to "Quality Made in China," three forces—consumer changes, digitalization and business transformation, and capital—have driven the rise of emerging Chinese brands.
Data from this year's Double 11 (Singles' Day) further demonstrates the challenge and impact of emerging domestic brands on big brands in online channels. The dark horse in the soda industry, Genki Forest, surpassed Coca-Cola and Pepsi in brand sales ranking. Domestic brand Three顿半 (Saturnbird Coffee) achieved the top sales in the coffee category, breaking Nestlé's unbeatable myth in the instant coffee field. Wang Baobao, launched only a year and a half ago, won the top spot in the oatmeal category on Taobao and fifth in the cereal category, and recently completed a Series A financing of tens of millions of RMB.
According to data shared by Kantar Worldpanel, in the third quarter of 2019, China's food and beverage market sales grew steadily, with a year-on-year increase of 2.5%, driven mainly by price increases and higher purchase frequency.
In the reality that giants no longer hold absolute say and emerging brands cleverly enter and erode the market, fluctuations in China's food and beverage market are more rapid, market share is more fragmented, and future competition will be more complex and subtle.
Are there any underlying logics behind this? Let's first find clues from the perspective of "people."
-02- Who is redefining the market?
Nielsen pointed out that the development of the internet, improvements in production efficiency and logistics, have changed the people, goods, and places in the market operating mechanism. Today's business logic has shifted to being people-centric; consumers are more like "production partners," providing direct preferences, demands, and even solutions. The era of DTC (Direct-To-Consumer) that requires facing consumers directly has arrived.
Among them, which consumer groups deserve key attention?
1. Four key consumer groups
Chen Mufan, Client Director at Kantar Worldpanel, shared in the Foodtalks Trends Week that the Chinese consumer market is showing a trend of "de-aggregation," and he identified four opportunity groups: urban youth, small-town youth, families with babies, and the silver-haired generation. They need more precise products tailored to their personas and actual life needs.
Image source: Kantar Worldpanel
Facing work pressure and the hidden danger of "overwork obesity," urban youth who need coffee to stay alive and sugar-reduced beverages have a higher sales share index in ready-to-drink coffee and sugar-free beverages than lower-tier youth. In contrast, small-town youth, who are "rich and free," have a higher sales share index in experiential consumption of red wine/foreign liquor than upper-tier youth.
Regarding small-town youth, Chen Yilin, Associate Director of Innovation Consulting at Nielsen China, stated that small-town youth lead the lower-tier consumption trend. China has 120 million potential lower-tier consumers, of which 56% have a monthly disposable income exceeding 3,000 RMB, enjoying a relatively stable life, with a higher willingness to try new things and upgrade consumption than upper-tier consumers.
Families with babies under 14 years old spend more. When parents buy food and beverages for their children, they pay more attention to "children's exclusive" elements.
For example, Milkground (妙可蓝多), in 2017, about 90% of its cheese business revenue came from catering channels. In 2018, Milkground used children's cheese sticks as a breakthrough to expand retail channels. At the beginning of this year, its cheese advertisement adapted from "Two Tigers" frequently appeared on CCTV and elevator ads, aiming to create a consumer mindset of "children's cheese = Milkground." In the first half of this year, its flagship product, cheese sticks, saw a year-on-year sales revenue increase of 449.38%. Image source: Weibo @妙可蓝多
The silver-haired generation is also a consumption force that cannot be ignored. In 2018, the annual expenditure of elderly families on food and beverages exceeded 160 billion RMB. In 2019, the population proportion of China's silver-haired generation (over 50 years old) is about 32%, and it is expected to reach 40% by 2030.
Currently, this group has shown a trend of being "old but vigorous," pursuing quality and enjoyment. Over time, the post-70s generation, who are gradually entering the silver-haired group, will be more colorful. At the same time, consumption related to younger generations honoring their elders is also growing. For example, the gift-giving growth index for elderly nutritional products is 189, higher than that of overall nutritional products.
2. The rise of the post-90s and post-95s
Nielsen specifically analyzed the consumption habits and potential of the post-90s and post-95s in its live stream.
According to data from the National Bureau of Statistics and the China Consumer Trend Index, China's current post-90s population is about 210 million, with an average monthly disposable income close to 2,200 RMB, forming a consumer market of nearly 300 billion RMB. 60% of post-90s pay more attention to "my thoughts" rather than others' or society's norms. They are accustomed to collecting information, comparing, purchasing, and sharing products in the internet environment.
Post-90s have a strong sense of self-identity, habitually forming their own judgments through research and analysis, and 66% claim to be "slash youth," meaning they have broader interests and a wider knowledge field, and are not easily swayed by external voices.
Looking at China's nearly 785,000 post-95s, their average monthly disposable income is about 1,400 RMB, forming a new consumer market exceeding 100 billion RMB. They value emotional needs such as uniqueness and interactive experiences in food and beverage consumption.
Chen Yilin shared that the current post-95s are in a stage of self-exploration, willing to trust advice from authority figures and friends, and are more open to accepting different concepts and phenomena, with relatively higher curiosity and acceptance of new brands.
Image source: Nielsen
China's food and beverage consumer market is being quietly changed and reshaped by the above groups. After understanding the industry's service targets, how should companies explore their internal needs and gradually implement them in practice in the future?
-03- Preparing for 2020: Key points highlighted by three global consulting firms
How to make consumers' hearts flutter in 2020? First, listen to the five suggestions from Kantar Worldpanel.
1. Kantar Worldpanel: Five guidelines for tapping into consumers' inner needs
(1) Diversified definition of health
Facing the health trend, brands are trying to balance "taste enjoyment" and "health" through production technology innovation, sugar reduction, and fat reduction.
Those potential or already occurring production technology innovations are providing consumers with more options. For example, the plant-based and artificial meat that became popular this year, starting from protein sources, provides more animal-based alternatives for lactose-intolerant people, environmentalists, vegetarians, and curious consumers.
Nongfu Spring plant-based yogurt. Image source: Nongfu Spring Tmall flagship store
According to Kantar Worldpanel's "Who Cares? Who Does?" research report, 69% of Chinese consumers surveyed claim they are trying sugar-reduced products. Sugar-reduced and fat-reduced products are providing new opportunities for category refinement in food and beverages.
Beverages have also entered the sugar-reduction era. According to Kantar Worldpanel data, sales of sugar-free and low-sugar beverages increased by 13% in the past year, far higher than the overall beverage growth rate of 0.6%. Carbonated beverages are challenging the "unhealthy" label. Coca-Cola, the representative of "happy fat house water," launched a 0-sugar + fiber carbonated beverage in the Chinese market, achieving good market performance.
Sprite Fiber+, after six months on the market, its cumulative penetration growth rate reached 6.55%, higher than the 1.35% average for new beverage products in the past three years. Image source: Weibo @雪碧
(2) Environmental actions in progress
Do Chinese consumers care about "sustainability"? "Who Cares? Who Does?" shows that more than half of Chinese consumers pay attention to "sustainability" and have begun to shift from environmental spectators to environmental believers and environmental activists.
Proportion of different types of consumers in the population (%). Image source: Kantar Worldpanel
In July this year, after Shanghai officially implemented waste sorting, it is only a matter of time before administrative promotion of waste sorting occurs in other regions.
At the same time, Chinese consumers' attention to "sustainability" stems more from concerns about their own health. 42% of Chinese consumers believe that manufacturers should bear more responsibility for environmental protection. Food giants and even mid-sized enterprises willing to continuously promote environmentally friendly packaging are engaging in warm dialogues and interactions with consumers through practice.
(3) Combining good taste and an interesting soul
This is an era of wild ideas, crossovers, or miracles, and both enterprises and consumers are enjoying it. Crossovers in taste, category, and marketing will continue to ferment.
In terms of taste, from limited editions and novelty mixes to local cultural characteristics. For example, packaged food and beverages leveraging "catering" elements can stimulate the memory points of both consumer groups, triggering resonance and converting it into consumption motivation.
Pocky "Honeymoon Dessert" series. Image source: Weibo @满记甜品HoneymoonDessert
In terms of category, brands use cross-category forms to create crossover new products and new product lines, expanding business areas and attracting consumers from related categories, while also bringing new competition to different fields. For example, carbonated beverages + coffee, the collision of two 100-billion-level markets, will spark more and more sparks.
Nongfu Spring Tanbing carbonated coffee. Image source: Nongfu Spring JD.com flagship store
(4) Consumption scenarios expand blue ocean
Only through specific scenarios can we match consumers' increasingly fragmented needs. To some extent, product improvements based on specific scenarios are more efficient and effective than disruptive innovation. Disruptive innovation requires sufficient resources and enough new information with a large base, but more enterprises need to focus on micro-innovations that cut into micro-scenarios, stimulating needs that consumers may not yet be aware of.
Scenario-based marketing is providing more opportunities for brands of all sizes. For example, Nongfu Spring, targeting the drinking scenarios and applicable groups of packaged water, has formed a matrix including basic, household, sports, high-end banquet/zodiac, baby water, and middle-aged and elderly water. As of June 2019, its packaged water sales increased by 18% year-on-year.
By redefining products, it is also an opportunity to extend usage scenarios and increase exposure. When Oatly oat milk entered China, it penetrated consumers by entering boutique coffee shops, gaining a large number of fans among baristas, yoga teachers, and white-collar workers.
Image source: Oatly
Packaged food and beverage products do not only have to appear on shelves, or be ready to eat or drink. Pairing with catering may inspire more creativity and facilitate sharing.
(5) Retail services 2.0
O2O is connecting the last mile and breaking the limitations of physical retail. According to Kantar Worldpanel data, as of August this year, more than half of upper-tier urban households have used O2O delivery services, and the average purchase amount for FMCG is 45% higher than non-delivery shopping.
China's food delivery services are developing rapidly. According to public data, 53% of sales come from outside the living environment, especially for beverages and alcoholic beverages with higher volume and weight. Kantar Worldpanel's outdoor sample group shows that as of September 2019, in the outdoor market for beverages and snacks, delivery services accounted for a 6% market share. Enterprises can further refine their distribution channels based on their own products.
2. Nielsen: How to make your product stand out? Grasp three keywords
(1) Appearance
According to Nielsen's neuroscience research, consumers' shopping decision time is only 3-7 seconds, and 64% of consumers try new products based on packaging. For example, compared to sharp lines, the brain prefers soft curves; transparent packaging facilitates product preview and presents product texture; designs with strong color contrast can help products quickly stand out on shelves or in web lists.
Image source: Nielsen
From the perspective of corporate returns, the return on packaging investment is 50 times higher than that of advertising. High appearance not only excels in display and sales stages but also has strong capabilities in triggering sharing and secondary dissemination.
(2) Health
Nielsen's global food ingredient trends show that 83% of Chinese consumers actively adjust their diets to prevent health diseases, and 82% of Chinese consumers are willing to spend more money to buy food and beverages that do not contain undesirable ingredients. Both figures are higher than the global average and rank first among countries worldwide.
According to Nielsen FMCG data, in the first half of 2019, categories with health elements, such as cereal, packaged water, and yogurt/lactic acid bacteria drinks, saw growth rates of 11.2%, 7.4%, and 3.5%, respectively.
Image source: Nielsen
It is worth noting that Chinese consumers of different age groups have different pursuits of "health." Post-90s pay more attention to skin health, weight, and appearance; post-80s care more about nutritional balance; post-70s place more importance on body function and organ health.
Given Chinese consumers' innate and increasingly strong "survival desire," enterprises can start from natural ingredients, green/organic certification, nutritional composition, and other angles, and move their products closer to health through improvement or new product development. At the same time, use corresponding health claim language to communicate more accurately and efficiently with consumers of different age groups.
(3) Innovation
Nielsen survey data shows that in China's FMCG market, more than 20,000 new products appear each year, and their market share accounts for 46% of growth, but the average survival period is less than 18 months. This shows that the Chinese market has high new product activity, but competition is fierce.
From the consumer group perspective, the younger generation is leading the food innovation trend. According to online packaged food consumption data, consumers aged 18 to 30 account for 47%.
From the premium perspective, according to Nielsen's Global Consumption Upgrade Study (2019), consumers in the Asia-Pacific region are willing to pay above-average prices for products with attributes such as high quality/quality certification and indicators (56%), stronger functionality/better performance (52%), and organic/natural ingredients (50%).
Which of the following product attributes would make you willing to pay more to buy the product? Image source: Nielsen
Chen Yilin stated that "innovation" that is done by shooting from the hip to quickly launch new products is too accidental and uncontrollable for success. Starting from consumer needs and pain points, and from the characteristics of the target age group, viable innovation comes from careful observation.
3. Accenture: Four strategic recommendations for mature enterprises
Accenture's 2018 China consumer survey shows that nearly 30% of consumers have changed brands more frequently in the past year. This situation is a significant impact on big brands that are accustomed to maintaining business growth through customer loyalty.
In 2009, Accenture selected the top 5 brands from 10 major consumer industries and conducted a 10-year market share tracking observation. Among them, the market share of the top 5 brands in dairy and alternatives, soft drinks, snacks, and beer all declined.
Large enterprises and big brands, in the "fast consumption era," are more likely to become "slow enterprises" lacking vitality and agility due to factors such as more departments and personnel, communication barriers from chimney-style management, lengthy internal review processes, and complex business lines.
Image source: Accenture
How can large, mature enterprises rejuvenate and stay sharp, allowing "big" and "fast" to coexist? Accenture offers four suggestions.
(1) Deploy dynamic growth strategies based on consumer market insights
The era of scale consumption, where a single advantageous brand or even a single flagship product occupies most of the market and satisfies consumer minds for a long time, has passed.
Accenture believes that under new consumption trends, large mature enterprises must keenly capture changes in consumer demand and personalized emotional appeals in a fluid and segmented consumption environment, and dynamically adjust and deploy market growth strategies.
(2) Introduce innovation empowerment platforms to promote organizational agile transformation
Accenture suggests that large mature enterprises need to build digital infrastructure that can deploy new ideas, new processes, and new technologies, integrating responsive innovation into every process, from predicting, responding to, and implementing consumer needs, consistently.
At the same time, they can learn from internet thinking and establish internal innovation mechanisms. The experience of internet giants in "small front desk, big middle platform" transformation is worth learning from.
(3) Small but beautiful innovation is more agile and efficient
Introducing new brands and carrying out breakthrough innovation requires substantial capital and risk investment. Innovation ≠ earth-shattering; from market practice, from ordinary to extraordinary may just be attention to a detail.
Mature enterprises can use small but beautiful agile innovation in daily operations, such as IP co-branding, to leverage small investments for big returns and improve marketing efficiency. In corporate culture, they should also give innovators appropriate incentives and opportunities to try and fail.
(4) Focus on consumer interaction channels, empower brand power with technology
Consumers' expectations for brands and services are increasing. While large mature enterprises are committed to building integrated online and offline channels, they should also pay attention to every link of interaction with consumers, providing as consistent and highly relevant product and service experiences as possible.
Compared to emerging brands, mature enterprises have more data. They can use digital technology to embed intelligent analysis into channel and marketing systems, realizing the value of consumption data while maintaining and enhancing consumer trust in the brand. Increasingly mature artificial intelligence technology is providing finer granularity for data analysis and consumer insights. Personalized, real-time satisfaction will be the main theme of future competition.
Finally, Deng Nie, Managing Director of Accenture Strategy, emphasized that whether for enterprises or individuals, the ability to learn and an open mindset are worth continuous attention and improvement.
-04- Conclusion
Is there a secret to food and beverage innovation? Perhaps the only answer to this question is: The only constant is change. The era of "one trick works everywhere" no longer exists.
For products that your company is about to launch or has already launched, you might ask yourself: Do I want to buy it? Where do I want to buy it? When do I need to eat it? Perhaps improvement or even new product plans will emerge.
Accenture shared in its live stream that from 2009 to 2019, China's consumer market has been full of vitality and sustained growth. Online retail transactions have increased 37 times, and total consumer retail sales are expected to exceed 40 trillion RMB this year. China is becoming the world's largest single consumer market.
Combined with data from the National Bureau of Statistics and Nielsen's Consumer Trend Index, in the third quarter of 2019, China's consumer trend index continued to be higher than the global level, and consumption contributed 60.5% to the growth of national GDP, showing sufficient consumption capacity. The growth momentum of the Chinese market remains.
Do you have confidence in the future of China's food and beverage market?
Shen Shuaibo, head of Jinjibo Finance and CEO of Paidong Influence, mentioned in a recent speech: "My personal mantra is always to believe in the Chinese market, believe in its stock, believe in its resilience, believe in its depth, and believe that China has the most people in the world who are eager to change their destiny."
Consumers are always willing to pay for good things. Small cuts can bring big business opportunities. Pay attention to the market, grasp the preferences of segmented consumer groups, assess the situation, and do your best.
Source: FBIF Food & Beverage Innovation (ID: FoodInnovation)
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