Author: A Yun Source: Hua Shang Tao Lue (ID: hstl8888) Is the trillion-yuan meal replacement industry taking off? "Eating another country's cuisine is dangerous. With one bite, you inevitably lose your cultural belonging and shake your most fundamental identity." In the book Shark's Fin and Sichuan Pepper, British food writer Fuchsia Dunlop uses this sentence to describe the differences between Chinese and Western food cultures. But the popularity of meal replacements seems to be breaking down the barriers between Chinese and Western food cultures. -01- Trillion-Yuan Trend Capital always smells the trend of the times first. In the first half of the year, when the economy was cooling, the meal replacement market was astonishingly hot. Multiple meal replacement brands such as Wonderlab, ffit8, Wang Baobao, and Dongchi completed sizable financing rounds. Meal replacement products also performed impressively on the sales side. According to CBNData's "Functional Nutrition Meal Replacement Market Consumption Trends," in the past year, both the consumption amount and the number of consumers in the domestic meal replacement market have grown at a rapid 50% rate. Behind this rapid expansion is the huge potential of the domestic meal replacement market. Global Industry data shows that in 2018, the U.S. meal replacement market had already exceeded $20 billion, and from then until 2025, it will continue to grow at a compound annual growth rate of 6.64%. Currently, the domestic meal replacement market is only about 20 billion yuan, but it is expected to reach 120 billion yuan by 2022. This means that in the next two years, there will be a trillion-yuan market space for explosive growth. But people's definition of meal replacement is vague. The literal explanation of "replacing regular meals" seems meaningless in the many scenarios of meal replacement. So, let's think from a different angle: Who exactly eats meal replacements? As early as the 1920s, Americans hoped to invent a pill to solve the food and population crisis. In the 1960s, the development of the space industry made convenient and nutritious space food the initial prototype of meal replacements. It wasn't until 1986 that the "energy bar," common today, was created by a Canadian marathon runner to "help athletes persevere through long-distance races." Now, the two main audiences for meal replacement products in Western countries are those who exercise and those who don't have time for regular meals. In China, the largest purchasing group is people with weight loss needs. From its origins as a "food substitute" to a unique weight loss product, the development of meal replacements shows that they have been given more meaning in terms of demand: efficiency, convenience, satiety, nutrition, health... Chen Momo, investment vice president at Yuanjing Capital, which participated in the investment project of "Super Zero," further believes: "Choosing a meal replacement is not simply choosing a type of product, but choosing a healthier lifestyle." The special definition of meal replacement products determines the diversity of their categories. Low-fat meals, meal replacement snacks, and weight management are all subfields of meal replacement. Whether it's low-fat ramen using konjac noodles instead of wheat noodles, common meal replacement powders, shakes, energy bars, or providing a complete fat-loss plan, these are all applications of meal replacement products in different scenarios. These meal replacement products in different scenarios attract partially overlapping consumer groups. Behind this overlapping effect lies the potential huge scale of the meal replacement market. -02- Three Pillars Undoubtedly, the meal replacement market is huge in both market size and potential. But this does not mean that the bigger the pool, the more koi fish. In recent years, emerging internet-famous new brands, traditional food giants testing meal replacements, and overseas brands popular in Europe and America have formed a "three pillars" situation in the meal replacement market, with their respective advantages and limitations gradually becoming apparent. Internet-Famous New Brands With the dual support of market and capital, many internet-famous new brands have emerged. Examples include Wang Baobao's fruit oatmeal sold out in Viya's live stream, ffit8's protein bars personally tested by Luo Yonghao for weight loss, and WonderLab shakes with ads flooding social media... These are endless. The birth of "internet-famous" products is often the result of the combined effects of capital, product, and marketing. These internet-famous meal replacement brands carry obvious "internet genes": celebrity endorsements, influencer promotions, live-stream sales, and online sales. This whole process is no different from the electric toothbrushes, fascia guns, and other internet-famous products that are promoted by various bloggers on Weibo every once in a while. For all internet-famous brands, the biggest problem is: How not to be replaced by new internet-famous products? In fact, most light meal replacements on the market are OEM products. They may come from the same factory, with similar tastes, similar formulas, and even similar packaging and marketing. The follow-up to an internet-famous product's breakout is the emergence of more "imitators." For example, some yogurt fruit oatmeals have low production and processing technology barriers, leading to countless similar products. For new internet-famous meal replacement brands, whether they are popular may not be the criterion; how long they can stay popular is. Traditional Food Giants While the barriers for internet-famous new brands have not yet been fully established, traditional food giants have begun to carve up the meal replacement market. Examples include Kangshifu's "Sunshine Youxian," Want Want's healthy snack brand Fix Body, and Liangpin Shop's meal replacement brand "Liangpin Feiyang"... For the meal replacement market, the entry of traditional food giants is undoubtedly "revitalizing the field." The entry of super players is, on one hand, proof of confidence in the market's potential; on the other hand, meal replacement users are still a niche group, and big players are needed to educate the market. But for internet-famous new brands, this is like a Sword of Damocles. Recently, Liangpin Shop launched "Liangpin Feiyang" protein meal replacement shakes, which not only have a similar product form to WonderLab shakes, but even the products come from the same OEM factory—Hangzhou Hengmei. Currently, Liangpin Feiyang shakes are priced at 89 yuan (6 pieces) on Tmall, while WonderLab shakes sell for 149 yuan (6 pieces). In terms of core technology, industry giants are clearly more "capable." For example, Liangpin Feiyang shakes have "triple sugar-control black technology" (first, low glycemic index; second, interfering with sugar; third, inhibiting sugar), which is said to have applied for a national patent and is unique to Liangpin Shop. The more basic the category, the harder it is for new brands to emerge, and the easier it is for super players to occupy. The victory between new brands and super players depends on dual innovation in product and strategy. Overseas Brands According to a report by Euromonitor International, the Chinese market is currently the fastest-growing meal replacement market globally, with an expected market size of 120 billion yuan by 2022. However, data also shows that the penetration rate of meal replacement products in European and American markets is as high as 90%, while the domestic penetration rate is only 40%. ▲Image source: CBN Data Low penetration and high growth mean that the Chinese meal replacement market is still a vast virgin land, and foreign meal replacement brands naturally will not let it go. Not only have traditional food giants like Nestlé and PepsiCo launched meal replacement products, but emerging foreign brands like Smeal and Huel have also entered the Chinese market through cooperation with e-commerce platforms like JD.com and Tmall. Reports show that Smeal is a meal replacement brand founded in New Zealand by Chinese national Cao Peng: it started in New Zealand supermarkets and entered the Chinese market in May 2018. According to Cao Peng, within just one year of launching in China, Smeal sold over 20 million bottles of a single product, with a repurchase rate of about 20%. In marketing, the company planned a "China Grass Planting Plan," which became a hit on Xiaohongshu within 6 months, with over 500,000 people "planted"; in the supply chain, Smeal does not use OEMs but converted a pharmaceutical factory into its own production line, allowing for the development of complex product formulas and more technicality. Overseas brands entering China usually suffer from "acclimatization," but "overseas brands" created by Chinese people seem to thrive. Due to their obvious advantages in raw materials and supply chain, coupled with the fact that consumers in the sports and fitness field have higher recognition and consumption habits for overseas brands, overseas meal replacement brands, as long as they can adapt to domestic consumer needs and internet gameplay, will find it not difficult to get a share of the Chinese market. How can internet-famous new brands, which rely on marketing to gain attention, build core barriers? Will traditional food giants, which have not yet entered the market loudly, continue to increase their investment? Can overseas brands adapt to domestic consumer demand? These questions will determine the future direction of China's meal replacement market. -03- Reality's Dilemma The meal replacement market is hot, capital is flocking in, and new brands are rising. But is the future of meal replacements really bright? The demand is real, but the trend may be fake. From the perspective of market development, foreign meal replacements initially were nutritional supplements for sports and fitness people, then gradually transformed into health management products for a wider range of people, and now they have become truly mass-market food. Currently, the domestic meal replacement market is still in the early stage of the second phase. Whether it can truly complete market education and move to the third phase remains to be seen. From the sales channel perspective, foreign meal replacement products have a wider range of sales channels and are already a daily routine for consumers. In contrast, many domestic meal replacement products are only sold online, appear very infrequently in daily consumption scenarios, and have not reached most consumers. Moreover, meal replacement products are priced higher. Instead of spending 20 yuan on a meal replacement shake, people would rather order takeout. Market cultivation still has a long way to go. In the view of Zhang Guangming, founder of ffit8: "The competitors may be nearby restaurants or a bowl of instant noodles. Your competitors come from all directions, and may not even be concentrated among meal replacement companies." ▲ffit8 meal replacement bar Even setting aside the differences between domestic and foreign markets, the meal replacement products themselves are a natural dilemma. The "2020 Light Meal Replacement Powder Comparative Test Report" released by the Shenzhen Consumer Council showed that some nutritional indicators of four meal replacement powders—COFCO Tianke, Smeal, NetEase Yanxuan, and BESUNIN—did not match their labeled values and did not meet the requirements of GB 28050-2011 "General Rules for Nutrition Labeling of Prepackaged Foods." ▲Image source: 2020 Light Meal Replacement Powder Comparative Test Report That is to say, the low-fat, high-protein, high-nutrition effects that meal replacements tout are likely questionable. If even the big brands that were sampled have such issues, how can we ensure that small brands are not cheating? For the meal replacement industry, between "demand" and "trend," one must also consider "reality." -04- The Path to Breakthrough The domestic meal replacement industry is still in its infancy, and future development trends and paths are not clear. But with reference to the development of foreign meal replacement products, the following trends can be glimpsed: The key to future meal replacement consumption lies in developing new scenarios Soylent, an American company, designed meal replacement products for office workers, not limited to weight management, but to solve the problem of "what to eat today" for busy office workers. It is said that drinking a cup of Soylent meal replacement immediately makes you full of energy and provides the basic nutrition your body needs. As a result, Soylent quickly became the gospel for Silicon Valley coders who are "rich, quiet, and die young," deeply moving a large group of young, rational, highly educated tech industry straight men, unlike domestic meal replacement products that mainly target women who want to lose weight. Under fierce competition, only by continuously developing new scenarios and new users can one leap from the "red sea" to the "blue sea." Comprehensive customized services are the future trend Behind meal replacements is consumers' pursuit of a healthy, self-disciplined, and efficient lifestyle. When the essence of consumer demand becomes a lifestyle, what brands need to provide is not just products, but services. Atkins, which holds the largest share of the U.S. meal replacement market, provides a comprehensive customized service of "weight loss APP + data tracking + customized exclusive meal replacement products." Turning products into services increases users' dependence on the brand on one hand, and increases the brand's added value on the other. For modern people who are increasingly busy but want to lose weight, a "one-stop" service that requires no extra effort is the first choice for lazy people. After all, most people who choose meal replacements do so with the lazy mentality of "losing weight easily." ▲Data source: Euromonitor International; Image source: FBIF Food & Beverage Innovation Brand connotation and community will be barriers Whether in the United States or China, Herbalife has a place. The core of its success is not just the product, but its unique club community model: gathering users with similar needs, providing them with a life scenario, and bringing them together to exercise, communicate, and eat meal replacements. What Herbalife provides is a lifestyle. The potential of the domestic meal replacement market is an indisputable fact, but in the current situation of unstable market structure and continuous influx of players of all sizes, how meal replacement brands can break through requires returning to the question we initially considered—when people choose meal replacements, what kind of lifestyle are they choosing? Different answers to this question are the different paths each brand chooses. Emerging industries may seem like all roads lead to Rome, but in reality, they are full of traps and every step is alarming. What coexists with opportunities and challenges is that, given the current stage of development of China's meal replacement market, whether it is internet-famous new brands, traditional food giants, or overseas brands, everyone is temporarily on the same starting line.