In China, young consumers (aged 15-29) already account for a quarter of the total population, and in absolute numbers, they exceed 300 million, more than the U.S. population. For all marketers, they are a very important consumer group," said Yu Jian, General Manager of Kantar Worldpanel China, in his speech titled "Winning China's New Generation Consumers" at the FBIF2017 Food & Beverage Innovation Forum. The following is a summary of his speech:

Structural Changes Brought by Consumption Upgrades

The food and beverage industry is struggling in the huge vortex of economic downturn and consumption upgrade trends.

Retail Decline: Winter Continues

The growth rate of the entire food and beverage industry (excluding outdoor products) is only about 1%, with price growth at 1% and purchase volume per trip increasing by 2%. What troubles all food and beverage manufacturers is the decline in purchase frequency, especially for traditional packaged food and beverages, which has dropped by 4%. A major factor is the significant decline in physical retail foot traffic, which has a huge impact on the entire food and beverage industry.

Star Channels: E-commerce, Convenience Stores, and Overseas Purchases

The large retail industry in the Chinese market is very sluggish. Last year, the growth rate of the 50 largest retail enterprises was -0.5%, a slight recovery from previous years. At the same time, there is a strong contrast in purchasing channels. On one hand, traditional modern channels such as supermarkets and hypermarkets are growing in the range of -1% to 1%, while grocery stores, which account for a large market share, have declined by 10%. On the other hand, there are some star channels maintaining growth. One is e-commerce, which still grew by more than 50% last year. For food and beverages, e-commerce is a channel yet to be fully developed; its market share is higher in maternal and child products or personal care products, while the market share for food and beverages is still relatively small. Another is convenience stores, with growth of 7%. The last is overseas purchases, which account for 1% of the market but grew by 12% compared to last year, making it a relatively fast-growing channel.

Yogurt, Packaged Water, and Cereal Grow by Over 15%

The overall food and beverage market is growing at about 1% or 2%, but there are also some star categories. For example, yogurt has grown by 15%, packaged water by 17%, and cereal by 16%. Of course, some categories are having a harder time. For instance, chewing gum, which developed well in previous years, has declined by 17%, chocolate by 12%, and pudding by 12%. This is because their purchases are impulsive, and the decline in purchase frequency, along with reductions in gifting and other aspects, has led to a drop in sales for these categories.

Imported Food Grows Significantly

Imported products can be seen as a clear stream in the market torrent. Although their share is small, they are growing very fast and playing an increasingly important role in consumers' shopping baskets. For example, while the overall chocolate market declined by 12%, imported chocolate grew by 45%. Whether for retailers or manufacturers, this market cannot be ignored.

Attracting the New Generation: Start from Five Aspects

In China, young consumers (aged 15-29) already account for a quarter of the total population and are gradually becoming the vane of market development. To truly impress them, we need to start from aspects such as product categories, channels, occasions, communication, and promotion.

Categories: Preference for Immediate Consumption Products

In the food and beverage industry, young consumers tend to prefer immediate consumption products, such as RTD (ready-to-drink) items like ready-to-drink coffee, ready-to-drink tea, and biscuits, which have relatively high indices, while packaged water has a relatively low index. Therefore, if you want to develop a category, you must ensure that the product can meet consumers' needs in terms of immediacy.

Channels: Taobao and JD.com Are First Choices; Both Online and Offline Are Possible

New generation consumers are digital natives. In terms of online shopping index, these consumers reach 133%, meaning they are 33% more likely to purchase on e-commerce platforms than average consumers. Interestingly, compared to Tmall, young people tend to prefer Taobao, possibly because they can find unexpected items there. At the same time, the purchasing paths of new generation consumers are becoming increasingly complex. E-commerce platforms, social media platforms, and offline convenience stores may all become their purchasing channels. Therefore, companies need to establish a seamless connection across various channels to help them complete their final purchases.

Occasions: Outdoor Consumption Scenarios Worth Exploring

Outdoor consumption scenarios have become very important. According to Kantar Worldpanel's survey, the outdoor consumption market, especially in food and beverages, is much larger than household consumption. This is especially true in China, where the ratio is about 6:4. So if you only focus on household consumption scenarios, you may miss many opportunities.

For example, 79% of consumers purchase beverages or other products in restaurants, and 54% purchase food and beverages in coffee shops and bakeries. In KTVs and cinemas, there is a 29% purchase demand, and in gyms and sports venues, 19% of consumption behavior occurs. In this sense, using more channels and consumption scenarios to attract new generation consumers is a good way to expand more market space.

Communication: The Era of Appearance; Packaging Is the First Step to Communication

According to Kantar Worldpanel's survey, products with beautiful packaging are very attractive to consumers. Now we can see that many products are putting a lot of effort into packaging. More brands and manufacturers are using packaging as a communication tool, which is also the first step to communicating with young consumers.

One successful brand is Master Kong. Last year, Master Kong launched a new product called Black and White Pepper Beef Noodles, with packaging design that has very distinct color contrast, one black and one white, which is a very popular CP (couple) combination. This made it different from its previous红烧牛肉面 (braised beef noodles) or traditional products, and also changed the way it communicates with consumers. So after the launch of Black and White Pepper Beef Noodles, within about 12 months, it helped Master Kong gain an additional 2% share in the instant noodle market.

Promotion: Heavy Reliance on the Internet; Video Deserves Attention

According to surveys, the new generation consumer group spends about 26 hours online per week. In terms of time spent on social software and online video, post-90s and post-00s consumers spend more time than post-80s, especially in online video viewing, where the difference is quite significant. Therefore, to impress them on social media, video can be said to be a very important tool for targeting post-00s and post-90s.

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