Click 'Read Original' for details. When happy, eat something to celebrate; When sad, eat something to cheer up; When bored, eat something to pass the time; When stressed, eat something to vent. In the "foodie era" where no problem can't be solved by delicious food, the food industry embraces infinite opportunities while also facing many challenges.

In the context of consumption upgrades, what mainstream trends are emerging in the food industry? How should food manufacturers face new challenges and opportunities? With continuously increasing consumer willingness, the food industry is entering a new cycle, new consumption, new changes, and new gameplay.

People: Purchasing power in lower-tier cities further released Rapid urbanization is stimulating the economy of lower-tier cities. It is expected that by 2020, the urbanization rate will reach 60%, bringing new business opportunities to the FMCG industry. Nielsen research shows that compared to the past two years, household consumption changes in different city tiers show that consumption growth in lower-tier cities is higher than in first-tier cities. More and more consumers in lower-tier cities are enjoying life, spending more on non-essential consumption such as dining out and holiday travel, and the demand for quality consumption is gradually increasing.

From a national perspective, which groups deserve more attention from food manufacturers? Nielsen research finds that the post-90s generation and the affluent silver-haired group are two groups worth attention. In terms of consumption willingness, post-90s have the highest willingness among all age groups, and it is expected that by 2030, they will contribute 20% to consumption growth. In terms of personality, post-90s are more self-focused and willing to express their individuality, which is one of the main reasons for the rise of niche brands in recent years. For example, self-heating hot pot and cocktails first became popular among post-90s and quickly captured market share in their segments. As digital natives, appropriate social media marketing for post-90s is a good choice for food manufacturers.

In addition to the young post-90s group, the silver-haired generation born in the 1960s also has consumption willingness that cannot be ignored. Currently, China's silver-haired population is 250 million, and it is expected that by 2030, they will account for 25% of the total population. With the increase in monthly income, more and more silver-haired people are thinking about how to enrich their lives, and their consumption willingness is also rising. They spend money on travel, healthcare, and "living life to the fullest" is increasingly becoming a common pursuit among the elderly.

Goods: Consumption upgrades drive growth in food categories Nielsen retail measurement data shows that consumption upgrades are the main driver of category growth, but the impact varies across different categories. Looking at the contribution of consumption upgrades to category growth in 2017 and 2018, biscuits, instant noodles, and traditional Asian beverages show obvious growth trends, while packaged candy, juice, and milk powder have slowed in growth contribution, indicating that consumers are becoming more rational about these categories.

On one hand, the driving factors of consumption upgrades come from consumers' pursuit of health. Healthier ingredients have become an important booster for category growth, such as edible oil, soy sauce, breakfast cereals, and instant noodles with added healthy ingredients growing faster. Nielsen retail measurement data shows that breakfast cereal products with a health focus accounted for 4.1% of sales in 2018, quadrupling compared to 2017.

On the other hand, product innovation has become another factor driving category growth. According to Nielsen's 2018 data on sales growth drivers in food categories, growth in categories like chocolate and ready-to-drink tea mainly comes from new products. What kind of new products can be first perceived by consumers? Nielsen research shows that half of consumers believe innovative packaging is an important factor in attracting their attention. At the same time, excellent packaging design is also one of the reasons consumers are willing to try and buy; creative packaging design can lead to higher purchase intention.

In addition, IP empowerment has also become an important element of innovative packaging. In the past few years, IP topics have continued to heat up, becoming an important product marketing tool in the food industry.

Place: Growth shifts from traditional channels to modern channels While the industry undergoes structural adjustments, the channel environment in the food industry has undergone earth-shaking changes. According to Nielsen's offline retail channel census data for three consecutive years from 2016 to 2018, the proportion of traditional channel stores has been declining, gradually shifting to modern channels. In 2018, nearly 70% of stores in the market were traditional retail channels, while modern channels accounted for 9%. If modern channels are further subdivided (modern channels can be divided into hypermarkets, large supermarkets, small supermarkets, and convenience stores), the number of hypermarket stores is gradually shrinking. In 2018, the number of hypermarket stores declined by 2% year-on-year. Compared with the relatively sluggish hypermarket situation, convenience store channels have seen continuous double-digit growth in store numbers over the past two years.

In this context, all food categories have the fastest sales growth in convenience stores, with some categories growing by 20%. Especially for new beverage products, convenience stores are an excellent "test field"; for example, more than half of the sales of new ready-to-drink coffee products are concentrated in convenience store channels. With the continuous transformation of new retail, some large channels are beginning to move towards community-oriented, transforming into premium supermarkets and fresh food supermarkets*. Data shows that in upper-tier cities, more than 30% of newly opened large supermarkets are premium supermarkets. Unlike traditional hypermarkets, which have disadvantages such as large footprint and high costs, premium supermarkets have advantages such as small area, low rental costs, high-end brands, superior quality, and clear differentiation, which better cater to current consumer needs and better meet the investment attraction needs of shopping malls. This has given them huge development space and has also become a breakthrough for traditional hypermarkets to transform and upgrade.

According to Nielsen's definition, a supermarket located near high-end shopping malls, department stores, commercial centers, or high-end residential areas, with imported food accounting for more than 30% of sales, is called a premium supermarket. It must sell four major categories: imported meat, imported pasta, imported ham, and imported olive oil.

Overall, if food manufacturers want to grasp the mainstream development trends of the food industry, they need to analyze products from the perspectives of people, goods, and places. From the perspective of people, understand consumers' age groups, income levels, lifestyles, etc., and provide products that meet consumers' pursuit of quality life; from the perspective of goods, study the attributes of categories loved by consumers in the market and understand the development trends of categories; from the perspective of places, pay attention to the development of categories in different sub-channels and adopt different marketing methods for different channels. Only by comprehensively interpreting from the three aspects of people, goods, and places can one better integrate into the current new retail environment, resonate with consumers, and achieve a win-win situation.

Source: Nielsen (ID: Nielsen_China)