Full transcript below:

Hello everyone, this is China paradigm where we, Daxue consulting, interview season entrepreneurs in China.

Matthieu David: Hello everyone I’m Matthieu David the founder of Daxue Consulting and its podcast China Paradigm and today I am with someone who knows the food businesses very well in China. It’s David Beutin. You are now working at Lactalis as a sales manager and you have a very long experience of over nine years in China, in the food industry with a company called Daregal for more than 7 years, Qwehli, and then Lactalis to manage a food service company in China. Especially something I’m very interested in is the Horeca. So, Horeca is hotels, restaurants, catering, and B2B sales. At Daxue we have about 20-30% of our clients who are in the food business (discover one of our case studies in the food service industry) – food and drinks business and questions occur to be very often the same. Should I have a master distributor? Should I manage my distribution? How do you get in touch with the right person, the ones who make decisions? How do you build a sales team? Because of the context, today is the 21^st of March 2020 – because of the occurring crisis, the virus crisis, the Covid-19 we will certainly begin, which is unique here, with a bit of an update of what the situation now is for an industry which has been highly impacted, which is the food industry – especially restaurants, hotels, cafés, and catering. Before that, I’d like to add one thing, we interview entrepreneurs and intrapreneurs and so far I found the word intrapreneur as being overused as a way to actually glorify some people within the company which may start a product, but here I think – with you, David we are looking at an intrapreneur, being that you built a sales team, you built a sales system in B2B for a company for more than 7 years. You have set up a WFOE (learn more about the WFOE structure in China), you have set up a business – the entire business for Qwehli – and you are developing again sales – and it’s that in China for everything which is related to the market is in front of us. Thanks for being with us David and first of all if you could update us about the situation of the Chinese food industry during the virus outbreak and your perspective of the current situation.

David Beutin: Hello Matthieu, thank you for inviting me to this podcast. With pleasure, I would like to discuss a little bit the Chinese food industry during the virus outbreak. So, when the Covid-19 started a little bit more than two months and a half – actually three months – ago, but we were affected in Shanghai around 2.5 months ago. You know it was Chinese New Year. So, I would say, businesses at this period in Shanghai are a bit low anyway but since the Chinese New Year has stopped, the economy and I would say restaurants and hotels have been down around 5%, 5% off of last year’s turnover which is divided by 20. Hotels could not accept most of the guests for less than 14 days, they could not in the meantime close down because if they were closing their operations, which could have saved some money but it would have been very hard to restart, which is the moment now where people can start to travel a little bit more in China. They would be able to restart in a much slower path, so hotel businesses are down to 5% of last year turnover and the restaurant industry is down to 20%, so divide by 5 for February I would say. So, now restaurants are picking up, the sales for March are picking up I would say gradually. We expect maybe the restaurant industry to go back to 25 -30% depending on whether you’re located in a shopping mall or an individual restaurant, but I would say that the figures are very positive. The hotel industry which is mostly relying on travel businessmen and exhibitions will take more time to recover, but let’s say they will open by June or July, which is by the way low season in China, but we expect the hotel industry to be back to more or less number figure. It also depends on the virus situation in Europe, but basically, figures are bad but it’s a very good direction for the past few days, especially in Shanghai. Originally in China is also – each region has a different path and speed to recover, Shanghai, from my point of view, is a bit ahead of the other regions. Beijing will come very soon but, as a capital, they don’t want to take any risks with the Chinese food industry during the virus outbreak. So, they also take more time to reopen businesses and restaurants and close down the accounting, but it’s very positive for China right now, I think we should be back to normal in a very quick time.

Matthieu David: For people listening to us and are not in China, are not linked to China but may try to understand what could happen in their own country because China was a bit ahead in time on the crisis. How long did it take for hotels and restaurants to recover? Are we talking about 1-2 months for that – I mean recover, it’s not fully recovered yet, but to increase again?

David Beutin: It really depends, because there is no case, no more case. Schools have not reopened so all the people food catering because that’s what we are talking today – hotel, restaurant catering, so the first one to recover depending on I would say – the information was at the beginning, in Shanghai if you get no new case twice for 15 days, for a period of 15 days no new case, and then there is the second period of 15 days with no new case, then that’s a moment where the pandemic will be officially stopped. So, we are on that path. It’s almost been a month or maybe a bit less where we have no new cases in Shanghai. So, it will depend on the end of the pandemic, but the first one to recover will be definitely restaurants because people after staying home, they want to get out, they want to enjoy themselves, eat outside, especially the weather is getting great in Shanghai so restaurants will be the first one to recover right after the pandemic, I think it could be quite fast. Then all the catering industry supplying schools and companies take time, especially all the cruise and airlines (learn more about the virus’s impact on Chinese airlines) are much more deeply affected now, so the catering industry is expected to be much longer to recover. For the hospitality industry – hotel it should be in-between. I am not very sure about this but it will also take some time, maybe another 6 months, but restaurants will be faster, individuals’ restaurants, shopping malls should start to pick up in the coming weeks very fast. Hotels probably in a matter of months, and catering might take a little bit more time, especially since the pandemic is in Europe now, so there are fewer flights, it’s also, in fact, affecting cargo and transportation costs for good, to import from Europe, I mean I would say these three crises – there is the sanitary crisis, then there was a big supply chain crisis, even before an economic crisis really happened. Logistically it was a mess and it still today is a mess. So the catering industry, airline, and cruise are mostly affected by that.

Matthieu David: What did you do with Lactalis and the Chinese food industry during the virus outbreak? Because I believe the business was slowed down. Down in volume, slowed in terms of speed, but still, you had to serve some clients, some people, some distribution so what kind of things you did to protect people, what things you were asked by the government to do as a business to deliver food?

David Beutin: We actually worked mostly on the distribution business model. We import some products by ourselves but mostly go via a distributor. We sell in C&F – Cost, and freight, in Shanghai. So, we just end all production and exportation in Shanghai. So, I would say our distributor was mostly affected by the figures I mentioned to you at the beginning of the podcast, they were the first ones hit in the Chinese food industry during the virus outbreak. I would say – our orders which were on the sea were already planned and scheduled so we had to maybe reduce our production but we had, especially had a supply chain issue which was all those containers coming to Shanghai. Even the business was low, we had to deal – we had a lot of trouble with rerouted containers to Korea or Singapore because all the China ports were full of containers that could not be cleared. So, imagine that a lot of people didn’t want to send any goods in China during the Chinese New Year due to China’s supply chain issues during the coronavirus outbreak. They expect a lot of containers arriving just after Chinese New Year, and what happened is, all those containers arriving at that time, could not be cleared out because there was pandemic, everyone was at home, there were no trucks, so a lot of containers sent to Korea and then just finally got rerouted to Shanghai and was at the port of China this week as a consequence of China’s supply chain issues during the coronavirus outbreak. So, we had to deal – we had a lot of issues of logistics, supply chain. You can see that this crisis was global, it really put a mess with an increase of containers price with a possession fee of a $1000 and also a blank selling fee because it’s a yearly thing, it’s a logistics aspect that they re-route a lot of boats and there was not the same flow from China and Europe, so there was a lot of blank selling. So, we almost doubled the logistic cost because the freight forwarder and the maritime company increased their fee a lot and all the flights were canceled, because no passenger flight, so then most of the cargo flew all those passenger flights, so we could not get goods in by plane, or the price was crazy expensive. So we had a lot of work to deal with all those China’s supply chain issues during the coronavirus outbreak and I would say, since a lot of people were not even in the office or in the warehouses also we had difficulties to really add any action on the end last part of the deliveries, there was no order, just all the stock coming up, so we had to make a promotional plan trying to come up with the idea to clear the goods, but actually, we already anticipate that some overstock we have today, might come up with a shortage in the coming months. So, at the end of the day the business is picking up so it’s okay, we can still clear the product out and I would say this was in the supply chain point of view for the importation and we also had a factory locally acquired two years ago, so this one was closed down, but opened quite quickly anyway. We opened three weeks ago, so basically the office was also opened very quickly, so we could go back to the office just after the one week after the Chinese New Year holidays stopped, so I was able to go back to the office one month ago. I mean in Shanghai it was very well organized. So you know, at the end of the day we tried to make a lot of plan, but you had no choice but to follow the actual pandemic, every day you follow the pandemic development, expecting the slowdown of the new cases and hoping, cause there is nothing much you can do, just hoping that things get better and that your container finally arrives despite China’s supply chain issues during the coronavirus outbreak.

Matthieu David: Actually, I had two questions but now I’m adding one, so three questions related to what you just said. So the first question is – and it’s linked to the second one, what would you advise to businesses which are in the food business and strongly affected – restaurants, hotels, food service, which are now in Europe and the US, what would you give as advice or as warnings, if there is no advice and we just have to suffer it a bit, but warnings on what to be aware of and what to do to reduce the pain from your experience in the Chinese food industry during the virus outbreak. What would you advise?

David Beutin: Waimai, so Waimai in China this is the home delivery which you had Uber Eats (learn more on how Uber Eats may learn from Meituan) or any other, Panda Food, any other delivery system. So a lot of restaurants could reopen, because also sometimes your country open, but if you have a central kitchen office you can reopen, but not accept customer in because you don’t want people to sit less than 1 meter from each other or for whatever reason, so then you have this delivery solution which I think in all major cities already, are in place through Uber Eat or –

Matthieu David: If I may, because exactly – Uber Eat, because people may not know what waimai is, because waimai in Chinese means to take from outside, to buy from outside, so basically like Uber Eats. So, what you are saying is that restaurants need to rely on home delivery. I may add one thing on this, people may not be aware outside of China but for home delivery, for some time, on the package, it was written the temperature of the staff, of the cook who cooked the food. What the temperature was – 36.5 or 36.7 and so on and there was a very strong communication, of course, it’s just communication, you cannot check if it was true but a lot of transparency, communication transparency when delivering.

David Beutin: Yes, no it’s true. I mean in China they were very quick at finding solutions, reassuring the public, at the same time warning them not to go out, but they still had to eat right. I mean the food industry I would say – not all the turnover loss in foodservice Horeca hotel, restaurant, catering, went back to retail, but that’s the other thing. A restaurant, if they can deliver ready goods, it’s a good thing, but for a food manufacturer and for food importer of raw material or finished or unfinished goods, they should redirect more to online retail. I would say from what happened, Hema, even Hyper Market which is a more local platform for foreigners, these are a lot of platforms for retail and the one actually who took the most opportunity of this crisis were the ones relying mostly or only on online deliveries. So, we had Hema which actually maybe even closed their stores or didn’t have many people in their stores, were able to deliver to you in your home and they were overwhelmed with the number of the order they could receive (learn how Hema and other online grocers dealt with the outbreak). Hypermarkets are more expat-oriented platforms also informed their customers through email that they had so many orders that they would have maybe some delays or some product out of stock or they would not be able to respond as quickly as before. But I would say some retailers multiplied by 7 their turnovers. So once again, this business transferred to retailers, online retail especially – didn’t cover their loss in global foodservice, but some people still profit from this business and I think a lot of restaurants maybe tomorrow we think, oaky maybe I get the smaller restaurant, something I can – with the rent which I can have a better return on investment quicker and rely more also on deliveries or this kind of online platforms, rather than just 100% classic model which in terms of rent – I think rent today is the biggest issue for the Chinese food industry during the virus outbreak because even if you don’t have a business, your cost is so high, and you have to pay the tenant which don’t really care.

Matthieu David: What we may expect is that China will be back to business – it is on track to be back to business much earlier than Europe and the West. An official from Hong Kong said, “We may die of economic loss, earlier than of the disease” so ideally in the coming days and weeks what will be the priority is to try to find markets, maybe emphasize some markets. My question is – and I think we’ll dive into detail on some tips and understanding on how to do that, but what would you suggest for companies which are in the food business ingredients or whatever they do, in order to take advantage of the fact that China is back to business. From France, from Europe, from the US, from the West, from the rest of the world – would you have suggestions, warnings at the same time? On how to create a new channel?

David Beutin: Unfortunately, I would say the crisis is there, it’s already too late. In terms of the supply chain, now even you think China could consume more goods than Europe would do, it’s impossible or very hard to ship them out or even to manufacture them. Now, you see that the world is totally globalized because when we manufacture whatever dairy product for instance, maybe we can open the factories because we’re doing food and you need food and they will never close those factories during the quarantine, but you also rely on your packaging supplier, and you need to export to China administration to edit documents for you, phytosanitary certificate of origin and then you need the logistic company to be able to ship your goods to the port and to have someone taking your goods, put in a container and transfer this container to the boat. So, everything today I would say is a challenged model as the global model is really challenged. What we see today the opportunity for Lactalis group, which might not be reproduced by any other company but we at this local factory that we opened two years ago, and didn’t really pick up for various reasons until now that localism I would say and people with local manufacturing and local team, the sales team will be much easier and much faster to get back to business. Then you would have 11,000 kilometers away. So, at some point, and it’s just a matter of time because that’s the way I would say in terms of enduement and the way the customer wants to buy products. They want to buy products with less carbon (read our latest article discussing green products in China)  trace than before, they want to buy products which are made locally. They want to know more about those products, where they are made and you need to adjust those goods to match regulation, but also the taste of the people and that’s what you can do when you have a local plant or local activity, could be a manufacturing or transformation or at least development with a local team, adjusting all those marketing, communication products and so on. It’s important to be locally implemented.

Matthieu David: Talking about reopening the factory, can you tell us more – is it 100% reopened now? What kind of things you had to do? What kind of constraints you had from the government to reopen? Would you mind just telling us how you reopened and what are the changes compared to the past to manage a food service company in China?

David Beutin: Okay, I would say food manufacturing, it’s the standard in China, it’s in term of the standard of production. Food safety (learn more about the challenge of food safety in China), cleanliness of the facilities. When you talk about Shanghai, I would say – its super high. So, I would say producing today in China is not what it used to be. It’s more expensive at some point because you have a lot of standards you need to follow, which are even sometimes, especially in the Shanghai area you can say that in the kitchen and restaurant business is the same, standard will be even higher than Europe. In terms of cleanliness, food safety, we have a lot of control,  a lot of constraints so I would say food manufacturing was in such a high level anyway, everybody wears masks in the factory, you need to clean all the clothes, we have boots, we have the equipment, blouses and so on, so the standard was already high, we just had to clean and sanitize the whole plant, which also we are doing in order to improve and the cleanliness of the product. The whole plant was clean, even cleaner than a hospital and we just had to sanitize one more – train the staff on the cleaning habit, which they were already trained as a food manufacturer, so it was quite fast. Developed with the regional district to help us in the opening as fast as we could and actually, we were already back on track even before restaurants and foodservice businesses reopened and start reordering, so it was pretty fast.

Matthieu David: I feel indeed the hygiene standards are high in China and greater to China compared to France. I think we all had the experience in France to go to a bakery, to go somewhere and someone is serving you without gloves and with his own hands, cutting the bread or whatever. That would not happen in China, you would even have a kind of mask to protect the mouth.

David Beutin: Sure, Shanghai is not China I would say because to educate the whole population takes a lot of time but I would say in Shanghai what happened, one bakery which I won’t name, a big chain from Korea, one guy was doing bread behind glass, in the baking lab in the stores and the mask was just put on his chin, not covering his mouth. One customer took a picture, put on social media. And it actually affected greatly the image and even the staff himself, the employee himself. So, this happened in Shanghai, in other regions it takes time, but standard in Shanghai are very high and the social media, I would say is exactly on Taobao, people will take a picture, you have to be careful. You have no choice. So yeah – standard in Shanghai for the rest of China it’ll take a little bit more time but in Shanghai especially its very, very high.

Matthieu David: We’re talking about the situation and I think it was good to get an update, It’s not related to the podcast, more looking at the long term – to go back to the more usual podcast and talking about your current position managing a food service company in China, we may actually go further than your current position and go back in time later on, but could you tell us what Lactalis is doing in China currently and how different Lactalis is in China compared to the West. Specifically. I see from your website that China – let’s say, Asia because there is no number about China specifically but what we call Asia and Australia, is 13% of the revenue so compared to the population it’s much lower and in terms of revenue as well worldwide, 34% is cheese and we know that cheese is not a daily consumption in China, it’s not even a common consumption in China, not even in Shanghai or Beijing which are international. Even Milk, Yogurt, Butter are not products that are daily consumed in China the same way than it is in the West. So, would you mind telling us what do you do in China, with Lactalis what do you sell and how different is it from the West to promote dairy products in China?

David Beutin: So, Lactalis group is very strong in cheese manufacturing, this is the number one dairy company in the world. I think second food manufacturing in Europe and 10th food manufacturing world-wide. So, they’re strongest is processing dairy, but in cheese and in retail.

In France everybody knows about the President or you know Le Petit, we have a lot of brands of cheese, we acquire gourmet cheese brands but also more I would say commodities and volume items, but we are very strong in cheese. In China, as you pointed out very well, we do mostly cream. Cream for cooking or for pastries because of a bakery in China, so bread or I would say pastries is developing much faster as you mentioned than the cheese consumption. But, actually, things are moving very fast with cheese and my idea is really to try to push this consumption of cheese to promote dairy products in China and following a trend which is happening where actually dairy, one of my friends told me okay – you’re moving to Lactalis, good luck to going into a company who is selling dairy where I would say half or more than half of the population is lactose intolerant. They can’t drink raw milk, but they can actually eat our cheese with no problem. You can even if you’re lactose intolerant eat cheese, and there is – so other products that you would go through education, through the yogurt, so dairy consumption doesn’t come right away, which we are very strong in France and in Europe and globally, they would go through snacks, through yogurt, milk at some point maybe, but the education and I would say the consumption of cheese is already happening. More in processed cheese, which is like you would say a small triangle of cheese that you spread on your bread, you know it’s like cheese with herbs, that we all put on some bread, fresh cheese, so spread cheese and then people will get educated to our cheese like Emmental or Comté (learn more about the cheese market in China), this kind of cheese, and then they will start to try new soft cheese, such as Brie and many others. So, it’ll take time. The volume obviously compared to the population of China is not that big, but the growth is very, very important.

Matthieu David: May I ask you a further question. We looked into the case, I believe it’s a conflict of group Bel, with famous cheese called ‘La Vache Qui Rit’ – Crazy Cow – we have translated it in English – and they entered the market I think pretty early, I don’t know how early compared to Lactalis. Their market entry was not very successful and then they redirected their cheese towards children because children need milk, need cheese to grow, and also, they added a flavor in their cheese, which was like strawberry, like a banana in the crazy cow cheese. What do you see as the use of cheese which is different in China? I would add one more thing, we always think about cheese that’s personal consumption, added to the desert in France, but cheese is present in fast food a lot. McDonald’s is putting cheese in hamburgers. You may find cheese in other places and in restaurants as you said. So, I feel the market is driven by B2B, by those fast-food chains and also may be driven by new segments that have to be invented, compared to Europe. How do you react to this?

David Beutin: As we talked before, yes you need to start promoting dairy products in China with kids, education towards cheese will be mostly on the youngster, on the teenager, on the kids. They need protein and milk is one of the best ingredients with the highest ratio of protein intake you could get. So definitely all those sweet or non-sweet, I mean like we discussed at the beginning, you have to have a local operation and customize your product. Give it fancy, nice packaging or even a different way of eating it. Not on bread but on a stick. So, there’s a different approach to adapting our vision and the way we think cheese to a teenager and young people and definitely, this is something that needs to be done in order to educate them to later eat cheeses. But, as you mentioned still if you give those kinds of – I would say through retail – those kinds of protein intake, with good flavor, adapted to kids, then the second stage of experiencing cheeses would be via QSR and that’s something that I’ve seen previously with Darégal when I worked in that company, you cannot come with some new products like Emmental, or with some herbs like basil and develop a recipe towards retail right away. People don’t experience and don’t want to try something new in retail, they would try something new usually in food service when they go to a pizza chain or a burger chain or a bakery chain. It’s the best way for us and for all brand to promote dairy products in China, whether it’s Lactalis or another brand, to promote dairy products in China this brand to our bakery or to a QSR, then people will be easier to try something new there and then buy your product, in maybe a different format or buy your brand in supermarkets. Yeah, so the approach of QSR is I would say very – is necessary for a lot of ingredients and even for some end consumer brands to get the visibility, the brand awareness, and to educate the consumers. It’s very important.

Matthieu David: I believe the question next would be – maybe it’s not something we can elaborate right now but the challenge will be in the future – how to create B2B2C brands when you’re used by restaurants, you’re used by bakeries and the final consumers don’t know about you, but still you could be useful for the restaurants, you could be useful for the bakery because Lactalis is well known, Lactalis is by the way 18.5 billion euros worldwide. So, it could be actually an asset for those businesses using such good ingredients in their food, in the same way as in the restaurant, in good restaurants you may have better water, for instance, you may have an Evian and other water.

To go back on sales, because I feel you expect you are developing sales in China beyond the fact that you have started a business, created a business, and so on. One of the focuses is on sales, and especially B2B sales. Would you mind sharing about currently Lactalis? Are you handling everything yourself? Are you going through distribution? Do you have a master distributor? Do we need to have a distribution pair province? There are a lot of questions about it and I believe there’s no simple answer but what could be at least the parameters to consider?

David Beutin: With Daregal, I would say, with Lactalis when I joined the company obviously you know the system and the channels and the distribution system was already in place for quite some time and they always – I would say every company, big or small starts with the distributor. You need to understand the market and at some point, whenever you’re ready to do your own importation or your own distribution or even open a local factory and manufacture yourself, most of the time you will fail. The first time.

Or, you are in the market and work closely with the distributor and you really learn the market, learn what the customer needs, learn how sales operate or logistics operate and then maybe you will have more chance to succeed to manage a food service company in China but even so I would say you most likely will fail the first time when you try to do everything on your own. Yourself.

So, the first approach of Lactalis at the time, they definitely went through a distributor, they were acquired by another company and then they find a new distributor and now what they are doing is they started to import some product themselves of different brands, to distribute to other channels, not to compete with the actual distributor and at the same time have local manufacturing. So, I would say, even in Daregal, first we had a lot of struggle to import but we were trying to import. One of the first mistakes you do is trying to rush to find the first distributor. In China, you really need to take time, evaluate all those potential distributors that you have, build up your network, go for exhibitions, through networking, through your pair and I would say in the French community, maybe not always on your field of expertise in the market in China that you’re looking for, but I would say, most likely yes. You really can find peers and friends and people will help you to find this channel. And China goes very fast, people are very open, very entrepreneur-minded. So take time, make a good study and once you did this study then you can really sit down – a lot of companies make the mistake to take an intern or someone for the short term, they really have to study, even though a consulting company, maybe first but do a deep study and – one big CEO says, it’s not a matter of early you start, but whenever you’re ready and you have a clear path, that’s when in China, you arrive late or not late – it’s okay. But – if you have a clear direction, then that’s when you’re going to be efficient. And the study of the distributor is very important, the first stage. The first ability of importation, it’s the key. A lot of products are going to be imported for various reasons. Is your factory accredited? Is your ingredient list allowed? There’s a lot of research needed to be done first.

In China, one of the approaches we have is not what the market needs, okay – what market needs are important but what China imports. That’s the first question and from that, you already narrow down a lot and it also helps you to have more focus somehow, and you kind of walk backward. What can I import? . Where do I have the opportunity? And then you narrow down to distributors, channels and all these things. So, basically, that’s what I’m doing now. Motivating the distributor and finding opportunities, always developing your network, trying to build brand awareness. Chinese people in the industry are very much looking into your technical advice, education about the products – where are they coming from? How to consume it? How to use it in a dish? For example, when you mentioned about cheese previously, nobody eats cheese at the end of the dinner, I mean that’s pretty French. No one after every meal would say okay, I will have cheese and then dessert. No. most of the consumption of cheese now comes with a glass of wine, some cold cuts, at the beginning of dinner I would say. Or incorporated into a dish. So, you need to rethink the way to consume cheese, you need to rethink the way how to sell it through distribution channels, online, offline and I would say you have companies in China who can help you promote dairy products in China. You have other people who did this work before and Chinese business people are very open to have these kinds of discussions and find the right direction for you, so it’s a very interesting market I would say.

Matthieu David: Okay, so go through a distributor, don’t do it yourself when you start in China. What kind of deals to expect from distributors, could you give some landmarks? In terms of percentage, do you give a free will on how much they price a product, what kind of elements do we need to have an agreement on and what kind of deal is expected by a distributor?

David Beutin: I think it’s – the first time you start something in China, most of the time you get it wrong because there are no such rules. Even if you are a huge company, the leverage you have with your local distributor maybe – you have to see how big your distributor is, and how strong he is on the market, but the leverage is not that easy to get. You need to entrust. You need to really study what the competitor does. If you can bring a value chain and say okay, what is a distributor – I would like to ask you first? It’s an importer. Someone who can also help you to clear the goods, because you need good knowledge about clearing products from the customs. Someone who stores and delivers your goods, or someone who sells and promote dairy products in China. This is three different businesses, three different works which actually companies are focusing on each of them and also hardly sometimes manage to do it perfectly. So, how can someone be able to import, stock, deliver, sell, and promote your products? Hardly they can do everything. So, try to find a distributor who matches your requirement, see where he’s strong. And from that you can start to build the value chain and say okay – maybe importation you’re not so strong, so I’m going to import it myself, open a WOFE, store the products here and then sell it to you, so you avoid also all those issues and create them, and then you can say okay then – from the margin, I give you before, I can reduce by that much percentage because I am taking the risk on the importation, storage and stock here. And I just sell you afterward, in China. But to arrive at this you really need to have a team, long term team here and learn these things, but it really depends on how much work they’re going to put on the distribution of your products and to get a number maybe goes from 10 for very big commodities to over 30% margin for a distributor. Another thing I would not suggest to do is sign an agreement, because whenever you do such a thing, then you tend to lose totally any leverage because the distributors have all power over you, but at the end of the day leverage, you acquire it by helping your distributor, being close to him, trusting him, but following him as well. So, it’s a very hard balance to find, but it’s something that when you’re in China for a long time you tend to acquire. Get lose and let some benefit to him whenever he really needs it, but be able to strike it and ask reporting and really following hard whenever you feel that he’s not pushing hard enough. Because at the end of the day every distributor is the same, you need to make him think of you more than other brands. So, it’s a game which is an endless game but you need the right person and the team to push forward.

Matthieu David: What do you do? What do you do to make them aware of you? What do you do so they push more your products than other products? Some tactics, can you share some very precise tactics or things you have in mind when you want to push your distributor to go further.

David Beutin: So, you know when I was in Daregal I had to handle 15 countries, so this you don’t – really can’t spend a lot of time, with all those distributors. So, I would say exhibition, to go to their country exhibition or to invite them to your own country exhibition, invite them there, treat them to dinner and take care of them it’s important to build this kind of relationship. Because what you want is, whenever you need to call them and ask them to push forward some projects for you, they will remember that and help you out. China of course drinking and going out with some customers and distributors, it’s important. It’s part of the business I think like in every country, but in particular in China. So, you need to do that, you need to be involved – you can’t be reactive, reply to an email quickly. Whenever they – never say no, it’s hard to say no but you have to sometimes, but in China, the culture says you have to do your best. You have to try to understand. Sometimes regulation in China is difficult, so if they ask you something, in particular, a special document for importation, you need to understand them that China it’s not like any country. It could be sometimes in terms of an administration very complicated as well, as French I think and like sometimes bringing in some competition is good. So, if you have one distributor and doing most of the business and start to be a bit slow, then you have to show him that maybe for the other part you’re also looking for new China, new distributors, or doing it yourself. So, it’s some tips but yeah – I mean you can look at many stories of Danone when they come to China and maybe overcontrol their first joint venture partner they had, and it was a failure because then you lose the advantage of having a local partner doing it, his local way, which is more flexible, with better guanxi and you know, who has some flexibility. So, if you control too much, it doesn’t work. If you don’t control enough, then they might have the temptation to push you away from this business and take another brand or do it directly or manufacture locally, so it’s once again the balance. I would say, Chinese businessmen and Chinese business world, it’s not that different. You just need to get to understand it and see from their perspective rather than yours. Really looking at the business through their eyes will help you to take the appropriate action.

Matthieu David: Is it correct to say that your experience with sales is a lot through distribution or have you built also a sales team to sell directly? Was it a mix or was it focusing only on distribution?

David Beutin: You have some direct, you need at some point to have some direct account, international account or even big local account which at the end, the price ratio sometimes can be so hard that you have to supply directly in order to be competitive but I would say, French people – maybe European people, other people maybe are not that business oriented sometimes, but whenever you arrive in China you see that people are friendly but also talking about their business. You do constant networking (learn more about how companies enter China and build their network). WeChat, I would say – if I look for something, rather than going through Google now I go through WeChat because I have all those history of groups and you can get very quickly information, so I would say, of course after 9 years, after many years in China, you have a good network, you build your contacts, whenever now you have a direction to supply a certain channel then you call your friend, you call some business partner, you try to get information about a specific channel. So, I would say- but you can’t do all the little ordering process. Foodservice is all about food and service. How can you yourself respond to all the customers’ requirements? Urgent deliveries? You need people to do this. So, if your distributor has the capability to deliver and to supply and to answer your customer question and user question then it’s the best. So, I would say you go back to the same first reason. Are you distributor good at distributing and selling, then let him do it. If he can’t, then okay – distribute but then you will assist him with your own personal team to contact and directly. So, from our point of view now, from Lactalis’ point of view, we have two-person in Beijing, one in Shenzhen, one in Guangzhou, and then we’re going to open in Chengdu soon. So, we have these people managing basically the distributor and also contacting and talking to some chefs and customers directly, but it’s a mix of everything. You just have to identify whenever you have a distributor, whether they are strong or weak and then you can develop particularly – for us we are working on the technical team. Maybe the sales we still sell and promote dairy products in China but for technical advice, we will send our team to support consumers and customers to help them how to apply the products in their recipes, how to use it, what’s the advantages of the products. So, China is such a big market, manage a food service company in China, and do it yourself it’s impossible. Even Taobao at some point doesn’t do the distribution themselves. It’s just a platform, it’s a matchmaking platform so people want to sell goods, people want to buy goods and then that’s it. This JingDong then, they will have fewer goods, have their own platform and distribution, but also it makes them slower. So, a distributor could be to some extent – whenever you sell those kinds of very mass-market products, have to be through those channels, who have all operation and strength. Otherwise, it’s too big.

Matthieu David: I listed a question but I feel I may have to change it a little bit which is – what is still missing in the market in the food business? Where do opportunities still lie in the market? The reason why I’m thinking that the question should be changed because based on what you just said I think that products, most products are already in China. Are findable. But what’s missing is education and how to know how to use it and when to use it, for what and how. Is it your perspective too? What do you feel? Do you feel that there are still products to import which are not present or the efforts are more about marketing? Getting to be known as a product?

David Beutin: If you go towards food service, I would say distributor as you mentioned, they already have quite a bit catalog. Not as big as other countries in the foodservice like Hong Kong and so on, because you can import basically anything and I would say the market is a bit more mature, but the distributor first thing he will ask you is what’s your marketing budget? Can you help us to promote dairy products in China? Do you have a brand ambassador? Because at the end of the day, they can’t finance your stock here and push your products, rather than all this, you need to show them you have – marketing power, brand ambassadors (learn more about brand ambassadors in China), someone who can help us to promote this. So, now I know in the French community there is a lot of culinary consultants, helping you to adapt your recipe or incorporate our products into some local dishes and there is a lot of company like yours helping maybe online or to help people to understand the market to promote dairy products in China. China has a lot of opportunities, but as you say – you need to be able to come up with a plan and with product adaptation and a direction. So, all those culinary consultants, I think it’s something pretty new. Some people with both cultures who are able to tell you from a local point of view, okay I think this product has potential there. And there is definitely a lot of opportunities, even on the dairy, on the beverage, in many aspects. So, I mean – it’s just a matter of the approach really. Consumers for example for cheese I would say, people are willing to buy expensive cheeses, but you need to be there and explain to them what’s this cheese, how it’s made, where it comes from. How to eat it? How to pair it, with which wine. And this as you mentioned, it’s actually costly but it’s effective and there is a lot of small distributors, or now big distributors who are doing this work in a very niche perspective but I think it’s the right investment to start with small distributors now, even with a niche product, do it step by step to promote dairy products in China. Finding the right guy locally and develop it bit by bit and you know, like oysters a few years back was a niche product, now it’s a huge volume item. So, yeah – China needs to react fast but there is a lot of things to do.

Matthieu David: Yeah, I confirm, the oyster market, we have a client in the oyster business and they consider China as really a very, very important market.  I’d like to talk about what a producer of food, processed food, and the food inspecting has to consider when exporting to China. I can give you a bit of explanation of why I’m asking this question. I understand that regulation asked you to change the packaging so that you can write in Chinese and so it’s understandable by the local market. That’s one thing. The other thing is you have to get a certification that you can export the product, food is not something that is under looked by the government. The government is very, very careful about it because they had some issues in the past with infant formula for instance. In 2008, not as big as this one, but still – so it’s in some ways a bit of a risky business to sell food in China. So, what would you at least as a top priority to consider to change on your product when you are considering exporting to China?

David Beutin: China regulations on the importation, even the GB standard, local GB production standard, which is basically every factory in China have to follow this standard. So, whenever you import goods you also have to follow GB standard. All of those are changing very fast. If you’re working on an ingredient of finished product business, a big volume item, a commodity but its somehow not sure whether you can import or not, the first thing you do is put someone in Beijing, start to do the lobbying and really trying to work with the local French embassy and all these constituent companies trying to understand whether how it’s going forward. Because there is a lot of company opportunities from the food ingredient point of view, it’s hard to import. China is protecting its frontier on the importation, we have a lot of regulation that sometimes it’s hard to make sense of it, but its opening. I’m very convinced and positive about it, it’s opening.

So, I think the first stage would be very understanding. The mean and the reason for all this regulation behind it and it takes a lot of time but it’s possible and a lot of products have been working hard on it to open any kind of buyer that could block you from importing your goods. So that’s for the commodities.

For more niche products, understanding the importation is the key. As once again it’s the same thing, distributor. What your distributor can do – can he import? Can he stock? Can he deliver? Can he import? So, does he do it himself? Does he really have knowledge about it? Because his knowledge is power. Every time you ask a distributor – how did you import this product? It’s supposed to be forbidden, not forbidden, in the end, everybody is confused. It’s a blurred area and actually, you usually work most of the time in the grey area. Just have to be careful not to be in the black area, but you know importation sometimes is always a bit grey area. So, if you have a distributor, get involved in this, understand how does he import? What’s the reason behind a problem with the document? Really trying to get involved and not saying oh I can’t do it or can’t do that. You need to ask him – why? And understand the reason behind this, because tomorrow, whenever you want to change the distributor, you will have to restart from zero, unless you really get involved in this importation business and that’s the first thing, I did with Daregal. It was really complicated. And then with Qwehli, and even Lactalis now I’m seeing – and we’re talking about opportunities, but I’m saying opportunities because when it’s difficult, no one – not everyone can do it. But when you have good knowledge, when you understand the market, the regulation, the importation issues, then you kind of tend to see opportunities and in Qwehli in particular when I did the WOFE importation, the type of fish you can import, the herbs was the same, the variety of herbs, the species of fish, all the formulation and the origin of milk of products you can import, all of those make it very complicated but when I have knowledge about it, then it’s much easier. It’s much easier. You see opportunities, the distributor will always stay in the grey area for this because that’s what Chinese say, it’s in troubled water, then you catch most fish. Because whenever you don’t see it – you can’t make any move. You don’t see someone’s coming on top of you. So, a distributor, if you don’t know how to import, you’re not going to change distributor. You know it’s going to be hard. So, if you understand all this first part, you understand how to import and you have products on hand, then a lot of doors will open, a lot of opportunities, you can react faster, and to me, importation is the crucial point. Whenever you think of a business in China, import food, if it’s important for you, you think this market has potential, you need to at least be involved. And this will change dramatically the attitude your distributor will have with you, the leverage you have, the understanding in the market, you’ll be more reactive, and able to find new opportunities much faster.

Matthieu David: We are soon leading to one hour and I’d like to add one more question. How do you stay up to date about China? What’s going on? Whatever it is about, if it’s about information about the market, about information about regulations, about information for yourself. What sources do you use?

David Beutin: So, as you know in China there’s a great firewall, so gfw right. So I would say all the – LinkedIn for me it’s a very important platform to keep connected with people rather than Facebook and so on, but to know where people are, keeping touch with them, posting any article related to their industry, somehow it’s a good way to keep informed. WeChat is a tremendous platform to share news about business opening, business closing for the restaurant industry, and hotel opening and closing. Networking and guanxi, that’s where you get the most accurate and close information about your markets – who is importing what, what are the new distributors in the new products, new brands coming in. so all those – these are a lot of networking and events. There’s one tonight in Shanghai, I think the first networking since the pandemic, so that’s a good sign, but those networking are very important.

Matthieu David: That’s very interesting because I think if we ask – there are so many I interview who have said that my source of information is WeChat, LinkedIn, social networks. I think if you asked the same questions to Europeans, Americans, they may say – they may name some well-known newspapers, some well-known magazines in their industry or website in their industry, but they may not say that I’m crowdsourcing information through WeChat groups and LinkedIn groups or Facebook groups or WhatsApp groups and I feel that in China, information is fragmented, because of this social networks. It goes fast but it’s sort of fragmented because you have groups, you may not be part of or you may be part of. So, it’s very, very interesting. Thank you, David, for being with us, already one hour. Thanks for the update on the crisis, I think it was very useful. Hopefully, we’ll be able to publish very soon so people can protect themselves from what may happen in their own country in the world. And thanks for the tips on distribution, I think it’s a question we very often have. I hope you stay safe; I hope everyone stays safe and thank you for listening.

David Beutin: You too, my pleasure. Bye Matthieu. Bye, everyone.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article China Paradigm transcript #97: Managing a supply chain in the Chinese food industry during the virus outbreak is the first one to appear on Daxue Consulting - Market Research China.

In 2018, the scale of ice cream industry in China reached 124.3 billion yuan, up 11.98% year-on-year. The sales volume was approximately 1.234 million tons, up 3.52% year-on-year.

[Data Source: Guanyan World Data Center, ‘Market size of ice cream industry in China’]

The market size distribution of ice cream industry was dominated by East China in 2018. It accounts for 28.2%. Market size in Central China was 9.5%, in South China 23.9%, in North China 18.9%, in Northeast China 6.9%, and in West China 12.8%.

With the development of China’s economy, the income of residents will continue to increase. Therefore, the ice cream market still has a lot of room for improvement. Forecast shows that the market size of the ice cream industry in China will reach 223 billion yuan in 2025.

With the continuous expansion of the industry’s market space, the industry’s total profit will continue to increase. The industry’s total profit in 2019-2025 will maintain a year-on-year growth rate of about 3% -6%.

Ice-cream shop market shows is growing

Ice cream shops market in China grew 14% to reach an estimated 41 billion yuan in retail sales value in 2018. Forecast predicts that the ice cream shops market will grow further at a CAGR (compound annual growth rate) of 11.9%. It will reach 71 billion yuan in the five years to 2023.

COVID-19 impact the ice cream consumption in China

During the first two weeks of the coronavirus outbreak in China, in-home ice cream sales increased 18% year on year. The following fortnight this accelerated to 38%, surpassing the growth of both food as a whole and snacking.  This is quite a different effect to 17 years ago when SARS hit China and ice cream sales lagged those of food and other snacks.

Chinese consumption habit is different

Chinese food buying habits are different from Western ones. In China, ice cream is something you enjoy on the spot where you buy it. This is partly due to the late development of a reliable cold chain in China. Currently this is changing due to dramatic increase of online shopping in China.

Despite the growth, ice cream has the lowest penetration rate among Chinese respondents when compared with Chinese and Western desserts. According to Mintel, 22% of Chinese respondents haven’t had ice cream in the last 12 months in 2018.  Just 12% have not had Western desserts and a mere 8% have not had Chinese desserts. Moreover, over a tenth (12%) of Chinese respondents say they eat both Chinese and Western desserts. Just 3% claimed that they contribute ice cream very often.

New ingredients attract Chinese consumers

Almost two-thirds (64%) of dessert consumers would like to try ice cream that incorporates seasonal fruits (e.g. pomegranate, grapefruit). Mintel research also reveals that 43% of dessert consumers in China would like to try ice cream with superfoods (e.g. chia and avocado).

The use of natural ingredients is becoming more important in the food and drink industry overall, including the dessert category. In fact, consumers are willing to pay more for options with natural ingredients.

In past few years, China has surpassed the US to become the largest ice cream market in the world. At Daxue Consulting, we observed in a previous article that this explosive growth has given rise to both international and domestic powerhouses. In 2015, the ice cream production volume in China was 3.06 million tons, and total sales value yielded over CNY 40.8 billion (USD 6.04 billion). Through a combination of forces is driving increased consumption, one of the chief proponents is rising middle-income stratum in China. With more disposable income and a proclivity for goods enjoyed in the West, ice cream consumption has never been higher in China.

Still, Chinese have yet to surpass the West in terms of per capita consumption. According to Mintel, US citizens were still the largest ice cream consumers in 2014, as they consumed on average 18.4 liters of ice cream per capita. Contrast with Chinese consumers, who ate less than four times that amount on average. The latest data from Mintel shows that Chinese ice cream sales value climbed to CNY 96 billion (USD 14.21 billion) in 2016, which was 20% higher than last year. In addition, the consumption volume in China reached 4.3 billion liters in 2016.

As higher leisure spending increasingly contributes to the growth of the ice cream industry in China, emerging consumer tastes and interests are changing how Chinese consumers are taking their ice cream. All things considered, this trend of growing consumption and new preferences is likely to continue for the foreseeable future.

Engines of Growth

Of all the growth drivers of the ice cream industry in China, perhaps the greatest is the increasing average socioeconomic levels and incomes across China.

In the past decade, according to the National Bureau of Statistics (中国国家统计局), annual Chinese salaries have tripled from CNY 21,001 (USD 3,108) in 2006 to CNY 67,569 (USD 10,000) in 2016. In the first quarter of 2017, the average monthly disposable income in China was CNY 7,184, which is a 7 percent year-on-year increase from 2016, according to Global Economic Data (全球经济数据). With higher income levels, Chinese citizens are spending more than ever before on leisure goods, and have taken particular interest in non-traditional desserts like ice cream.

When considering China’s population of over 1.38 billion, the increase of total consumption is staggering. Also, as current rapid economic development in China attracts more foreign enterprises and domestic investment in the frozen food sector, the industry is beginning to develop and address that growth accordingly. Notably, the frozen foods logistic industry is expected to maintain a 25% increase in market size and reach CNY 470 billion (USD 69.6 billion) in 2017. Thankfully, China is investing in improving the retail infrastructure and capability of the frozen food industry and its diversified distribution channels, which will make meeting the growing demand for ice cream a reality.

Ice cream has become a daily enjoyment for almost everyone in China. Photo source: Daxue Consulting

Product Adaptation According to Current Trends in China

More bizarre flavors

From the perspective of ice cream companies, ice cream consumption behaviors have changed in the past few years, which is presenting both challenges and opportunities. For Nestlé (雀巢), the growth of the ice cream industry in China has revealed two interesting trends. Not only are Chinese consumers looking for more refreshing and cold foods to beat the summer heat in China, which can reach 30℃- 42℃ on average in big cities, but also are gravitating towards subtler flavors. The traditional milk, chocolate, and vanilla flavors are not satisfying middle-class Chinese customers anymore. These new trends are forcing companies to adjust by diversifying their flavors and developing new products for the changing preferences of a growing upper middle-class in China.

For instance, Wufeng (五丰) introduced a spicy chocolate flavored ice cream called Mengxiaola (萌小辣) in 2016. Moreover, an ice cream store called Global (全球) has squid ink flavor and other unique flavors from across the world. The yolk ice cream can be found in Bonus (陆记蟹行), a Chinese ice cream store in Shanghai. These are all newly invented flavors and consumers are keen on trying them. On a widely used restaurants review and recommendation app called Dianping (大众点评), Global scored 8.3 on a scale from 1 to 10 in terms of its flavors, which is a pretty high mark.

Less sugar, less cholesterol, healthier food material

Considering that China has the largest number of diabetes cases in the world, an increasing number of people are calling for healthy or low-fat diets, which facilitates the creation of new ice cream lines. Indeed, conventional ice cream ingredients may contain high sugar, fat, and additives, but to satisfy customers’ healthy requirements, many manufacturers are returning to natural ingredients. For instance, in Europe and the U.S., many brands are experimenting with 35 percent of concentrate whey protein instead of dried skim milk for a healthier end product, a design choice that Chinese brands may seek to emulate.

Noticeably, frozen yogurt has also become a popular choice in China. The probiotics found in frozen yogurt help conserve some of the nutritional value in ice-cream, which is conducive to maintaining beauty, slimming, and digestion. Another example is the “one egg” ice cream (一个鸡蛋) introduced by Deshi (德氏), a well known Chinese ice cream company, in 2016, the special ‘’egg + oats’’ ingredients draws a significant amount of attention. Astoundingly, In Dongbei (东北) region, the average daily sales volume of “one egg’’ was 2 million in the beginning of 2017.

The WeChat index of “One Egg” ice cream (一个鸡蛋) remains high this summer, with a massive peak in searches in July. Source: WeChat Index (微信指数).

Offer DIY experience

As Chinese are putting more focus on experience as opposed to the food itself, ice cream are no longer just seen as just treats, but as a product of modern life. In traditional Chinese mindsets, eating very cold food is perceived as adverse to health; however, the considerable impact of Western ice cream has changed perceptions. Since overseas ice cream companies began entering China in the 1990s, ice cream sales in China have maintained a 20% increase each year.

Nowadays, opening DIY experience ice cream stores is a new strategy to cater to the requirement of customers. Nestlé（雀巢）, Yili (伊利), and the Japanese brand Meiji（明治） have all invested over CNY 1 billion for developing new ice cream projects in 2016 to win more shares on the market.

In May 2017, Magnum (梦龙) reopened its DIY experience shop called “Pleasure Store” in K11 Shopping and Art Center, Shanghai for the third time, which rekindled the enthusiasm of many ice cream enthusiats. In other cities like Nanjing (南京), Beijing (北京), Chengdu (成都), Pleasure Store also left footprints in the busiest commercial districts like Jinmaohui (金茂汇), Sanlitun (三里屯) and Taiguli (太古里) in the last two years. Notably, this DIY shop only opened for one month, the short time period stimulates consumers to seize the opportunities to try. The DIY experience does not only endow ice cream with higher value, but also strengthens the ice cream brand and customers relationship.

In its experience shop called “Pleasure Store”, Magnum (梦龙) offered a fascinating experience which included a wide array of toppings, sauces, and other garnishes for truly unique products for every consumer. Photo source: Baijiahao (百家号)

The aesthetic advantage

To sustain people’s interest, constant innovation is a necessity for every ice-cream brand striving to succeed. Hence, more and more unique styles can be seen in the ice cream market, and some of them are considered as “food celebrity”（“食物网红”）on Weibo because of their novelty.

Huang Cheng Chi Zhu (皇城吃主), a food KOL on Weibo who has more than 490,000 followers, highly recommended Gooble（果堡）, an ice-cream that turns the fruit into the wrapper of the ice-cream, which is both aesthetic and nutritious.

Food KOL Huang Cheng Chi Zhu (皇城吃主)] introduces Gooble: a relatively healthier option for ice cream lovers. Source: Weibo (微博)

Another trendy type is the shining ice cream (闪光冰淇淋), which is made by putting ice-cream on top of sparkling soda water in a delicate jar. This eye-catching design attracts numerous customers to queue for it and post pictures of it on social media afterwards. Additionally, mini ice-cream (迷你冰淇淋) is a new fashion. For instance, Cornetto (可爱多) launched a mini set of ice cream collaborating with Line Friends (连我), a famous cartoon brand in June, 2017. This mini set of ice cream is priced at CNY 15.9 per box and has received wide popularity in China. The topic #Mini Cornetto LINE FRIENDS# on Weibo has accumulated 390,000 reads up to now.

Chinese citizens beating the summer heat with the new “Shining Ice Cream” (闪光冰淇淋) on top of the colorful soda water. Photo source: Sohu (搜狐)

Brands Competition Escalated: Domestic VS Foreign

The expansion of domestic brands in the ice cream industry in China has not gone on unchallenged, has many international brands are innovating as well. The competition between domestic and foreign ice cream brands has entered a critical point after ten years of development. Here is a table presenting all the major Chinese and foreign brands on the market now.

Chinese ice cream brands

Foreign ice cream brands

While domestic producers are superior concerning distribution channels and prices, international brands are known for higher quality. Fonterra Co-operative Group (恒天然集团) launched Tip Top（哈奇贝奇）, a beloved New Zealand ice-cream brand in China and collaborated with Tmall (天猫) to deliver them efficiently. Seeing the tremendous potential in a geographically close market, a Russian fresh milk ice cream brand Kopobka (格里诺夫) also decided to get in on the action. The proportion of butter in Kopobkais approximately 15 percent-18 percent, which is healthier than most other ice cream brands.

Shawn Lou, senior project manager at Daxue Consulting, stated that fresh milk ice cream could be a segment with large potential in China. Photo source: Daxue Consulting

According to Shawn Lou, senior project manager at Daxue Consulting, fresh milk ice cream could be a hit as Chinese’s awareness of healthy diet is rising and fresh milk contains the largest amount of nutrition among all kinds of liquid milk. Kopobka also benefitted by partnering with various distribution companies in Chinese industry to ensure quality deliveries. Consequently, the sales of Kopobka mounted to CNY 20,000 CNY on the first day of it’s sales on the Silk Road Expo (丝博会), an exhibition of new products in various industries from countries and cities near the Silk Road (丝绸之路), making a grand entry in June 2017.

The rising of foreign ice-cream brands can also be identified from the data on Taobao (淘宝).

Chinese brands Yili（伊利）, Modern (马迭尔), Guangming（光明）, Mengniu (蒙牛), Zhongjie (中街) taking over the sales volume ranking. Source: Maijia(卖家网)

Six international brands ranked in top nine of sales value due to higher quality and rising popularity, namely Haagen-Dazs, Nestlé, Poonmanee, Tip Top, Walrus and Wall’s. Source: Maijia (卖家网).

The higher chart of the two above presents the top eight ice cream brands in terms of sales volume, and the lower displays the top nine brands in sales on Taobao in June 2017. Notably, Chinese brands still dominate with regard to sales volumes, with only three foreign brands; Haagen-Dazs (哈根达斯), Wall’s (和路雪) and Walrus (海象) cracking the list. It is also interesting to note that foreign brands took six places of the sales value ranking：Haagen-Dazs (哈根达斯)，Nestlé (雀巢), Poonmanee (蓬玛尼) , Tip Top (哈奇贝奇), Walrus (海象) and Wall’s (和路雪). By occupying these slots in sales value, they represent a declining effectiveness of the domestic brands’ low price strategies. As Chinese consumers are prone to switch to the high-end ice cream market, which is priced at between CNY 150 and CNY 300, they are willing to pay extra for premium quality or attractive features of the products, which is a golden opportunity for overseas brands.

Keywords related to foreign ice cream brands soars on Taobao in June, 2017. Source: Maijia (卖家网)

Here, we see that the top 10 keywords related to ice cream industry from 12th June to 18th June on Taobao, with “imported ice cream” (冰激凌进口) being the hottest search keyword with a growing percentage of 1.95 %. The search frequency of the keyword “ice cream” and “Nestlé” (雀巢) also increased sharply with 0.58% and 0.48%, ranked 6^th and 10^th respectively.

Foreign ice cream brands take the leading position in the internet voting of popularity. Source: CNPP & Maigoo (买购网)

The results from a recent internet poll of 41,823 people showed that Haagen-Dazs is the most popular ice cream brand in China from a comprehensive perspective placing over three popular domestic brands in the top five and 51 other brands. Haagen-Dazs received 9,670 votes, followed by Dairy Queen (冰雪皇后) at 3,681.

Still, domestic brands have certain advantages in the homeland. For instance, De Shi was the first enterprise in ice-cream industry that held new product release conference in the Great Hall of People (人民大会堂) in February 2017，helping to convey a trustworthy, people-focused image. Holding a conference in this place used for formal government meetings and high-grade business conferences, stands for high recognition and great honor for companies.

There are still some well known foreign ice cream brands that have not entered China, like Coppelia (葛蓓莉亚), BimBom of Cuba, Crescent Ridge Dairy (新月山脊) and Handel’s Homemade (汉德尔自制)  from the U.S. Seeing the large potential in Chinese ice cream market, it is highly probable that these companies will attempt to enter China in the near future.

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Daxue Consulting’s Expertise: Market Entry Study

Daxue Consulting helped a client, a French frozen food company, to develop its line of dairy products in Chinese brick and mortar grocery shops. Initially, we conducted a market entry to help understand the competitor’s positioning in China. The second stage of the project was to implement a market survey with a focus group in first and second tier cities in China. Our research revealed that Chinese ice cream consumes in grocery stores are predisposed to first look at the brand, then the flavor, and then the price to make their decision. Indeed, the aesthetic appeal of a product is therefore paramount in the ice cream industry in China.

In the food and beverage industry and in other practices, our clients share our passion for results and success. For more on our expert insights on and our work in the Chinese market, please see our site, follow our newsletter, or reach out to us to learn more.

This article The Ice Cream Industry in China: The Biggest Market in the World is the first one to appear on Daxue Consulting - Market Research China.

Historical reasons explain the rejection of cheese by Chinese consumers

Traditionally, dairy products were associated with the nomadic tribes who lived on the fringes of China and who were regarded as barbarians. So back then, eating cheese was associated with an unsavory lifestyle.

Also, the majority of Chinese people avoided the consumption of dairy products, including cheese, because so many of them are lactose intolerant. In fact, many East Asians are lactose intolerant because of a lack of exposure to cheese. It’s a vicious cycle.

Cheese currently becomes trendy in China: Booming cheese market

Daily dairy intake is consistently an important theme in China, however, cheese consumption, while growing still remains low. Chinese dairy consumption of fresh & UHT milk, yogurt, and milk powder account for 95% total cheese market share. Cheese, butter and other dairy products share the remaining 5%. Cheese consumption in China recorded 0.1kg per capita in 2016. Looking at the neighbor countries, Japan and South Korea, both were over 20 times higher than China (2.4kg and 2.6kg respectively), which implies a significant opportunity for cheese in China in the future.

The market has seen a surprising growth, revenue in the Cheese segment amounts to US$1,056m in 2019. The Chinese cheese market is expected to grow annually by 5.3% (CAGR 2019-2021). Between 2009 and 2017, the volumes of cheese demand, as well as supply, see continued growth, thanks to emerging diverse formats, acceptable flavors, and textures catering to Chinese palates. Domestic suppliers of cheese still account for less than half of the whole demand, meaning cheese consumption in China relies heavily on imported cheese.

By 2019 the cheese currently becomes trendy in China particularly Shanghai and other 1-tire cities. This may be preceded by the following reasons. First, Increasing upper-middle-class and affluent households. Second, a new generation of freer-spending, sophisticated consumers, born since 1980. Third, the growing power and ease of e-commerce delivering cheese to China’s doors. Forth, the rapidly accelerating Western culinary influences have introduced cheese to these cultures. Last but not least, an increasing number of expats requiring Western goods and, as a result, the active growth of imported stores.

Cheese consumption in China: What’s the image of the cheese?

The Chinese Nutrition Society issued updated dietary guidelines for Chinese consumers in 2016, recommending that each adult should consume 300 grams of dairy products per day – current consumption is 100 grams.

Most of the time, protein and calcium intakes are presented to Chinese consumers. “Good for pregnant women and the elderly” states Baidu Baike (the Chinese Wikipedia). The nutritional side is explained and the description highlights that the cheese is a concentrate of milk, from 10 kilograms of milk only 1 kilogram of cheese is producing.

Moreover, amidst increasing awareness of children’s diets, cheese snacks have been well-received by parents, especially in tier1 and tier2 cities. Kids cheese market dominates 55% of the retail cheese market (Kantar 2017) and sees positive growth in the near future. Therefore, many processed kinds of cheese can be seen as more common in supermarkets and convenience stores due to light flavors.

[Source: Yili]

“Cheeses do not only attract expatriates any more. We can see a lot of Chinese customers coming to buy cheeses,” said an experienced dairy salesperson in Ole, an upscale supermarket in Shanghai.

The landscape has changed a lot recently compared with the situation in 2015.  Before 2016, it was nearly impossible to find cheese in small stores, and 94% of the imported cheese market was sold through large international supermarkets and hypermarkets.

The Chinese cheese market should overcome cultural barriers

The cheese consumption mix in China is dominated by processed cheeses, which are more suited to the local palate. Chinese consumers, in general, do not favor the strong tastes and scents of many natural cheese varieties. Furthermore, processed cheese is easier to handle when used in hamburger and pizza preparation.

The attractiveness of the Chinese cheese market as a large consumer of cheese is enforced by the lack of Chinese cheese producers, enabling international companies to shape the market. Despite France being the largest producer of cheese in the world, France only accounts for 4% of the current market share. New Zealand, Australia, and the U.S. are the largest exporters of cheese in China.

[Source: OEC]

Shanghai is for many years the leading power of China economic and trade development. International trade of goods is facilitated in Shanghai, enabling the city to discover new products at an earlier stage; it includes the cheese market implementation.

Therefore, the deep analysis of the Chinese taste and cheese preferences will help to study this market and the audience and in the future easily predict acceptation from customers. Shanghai Roria, a European food importer offered tastings of various French, Italian and Spanish cheeses in Shanghai. As a result, the rate of satisfaction toward the strong blue cheese was extremely low, as only 30% said it was amazingly good. Unlike in western countries, a lot of Chinese consumers have never tried Cheese and have an image of a bad smell concerning to this good; this is illustrated very well by the Chinese word for cheese “nailao” (奶酪), meaning “milk jelly”. Whereas Cheese has another Chinese name: “zhishi”(芝士, a buzz word now in China ), is mostly being used in the context indicating cheese.

Why the Cheese market in Shanghai can lead the way

In Shanghai, people enjoy experiencing new products and discovering new tastes from imported products. For foreign companies, educating and changing consumer tastes represents a real challenge. That’s why firms such as Bongrain Food preferred other strategies to enter into the Chinese market by adapting to the market and introducing tailored products according to Chinese tastes. Thus their products have already seen 50 new varieties. In Shanghai, the most famous cheese brands are cheese snacks for children such as Stick Cheese, Kiddy Cheese and Small Triangle Cheese. Those may represent the beginning of the Chinese adaptation to the taste of cheese; especially by going through new Chinese youth.

According to Euromonitor, cheese is being added to school lunch menus in many primary schools in Shanghai.

In the nearly past, Cheese was strictly considered as a luxury food. But with the rise of consumer awareness of the nutritious benefits of the product due to exposure to western culture and style in large international cities such as Shanghai, parents have started to buy cheese snacks for their children. Typical families believe that the presence of calcium in cheese will support vital functions in the growth of children.

Another sign of the increasing popularity of the cheese market in Shanghai is the recent apparition of traditional cheese makers in the streets. La Parisienne and La Formaggeria, for example, offer both a decent array of cheese right in the center of Shanghai. A wide range of cheese can be found on the Internet and deliver high-quality cheese in China quickly.

Also, there is an increasing amount of tasting events held in Shanghai and will get more Chinese consumers to try cheese for the first.

A variety of cheese-related foods sparks the wave of “cheese lover”

Western-style cuisine began to enter into the Chinese market a decade ago, and now it has been widely accepted by Chinese people, no matter the burgers from McDonalds or KFC, or pizza from Pizza Hut, or creative popular dishes all having options for cheese flavors. But still, Cheese’s development in China is at an early stage with low per capita consumption and novelty driving sales.

1. Cheese has emerged thick and fast in many recipes

Nowadays, Chinese netizens are favor of sharing everything about their daily lives through social media, such as LRB, short for Little Red Book(小红书), a social network for Chinese users. If we search “芝士”(Cheese)on LRB, more than 220,000 posts are shown in the results, teaching you how to cook “Tomato cheese rice”, “Cheesecake”  or other dishes receipts of each include cheese.

[Source: Little Red Book]

2. Cheese milk cap (奶盖) becomes ridiculously popular amongst the young generation

With the rise of Wanghong drinks (网红饮品)，for example, HEYTEA and Lelecha among famous cheese tea brands, young milky tea lovers are obsessed with the type of tea with cheese on the top. According to HEYTEA’s official website, this type of topping is made of salty cheese imported from New Zealand. Cheese tea lovers are willing to queue up for several hours only to order one cup of drinks.

[Source: HEYTEA]

3. Cheese snacks are gaining more popularity in Shanghai

Cheese snacks in retail performed well in 2018, and most of them are processed cheese which is trendy at the moment.

How to select proper cheeses for kids?

• 4 critical contents: protein, fat, calcium, sodium;
• Cheese is the concentration of milk, ready for kids supplementing protein and calcium;
• Cheese can be categorized into “natural cheese” and “processed cheese”, most kids cheeses are processed one. In terms of nutrition, these two types of cheese are almost the same.

Similar to kids cheeses, normal cheese snacks are majorly processed and have a variety of shapes, including stick, mini cup portion, cube, ball, triangle, bar shape and so forth. Considering user-friendly, convenience-in-use and easy-to-carry is a crucial factor for snacking consumption. On the other hand, innovative appearance is leading consumer trends. It’s very likely that in the near future, traditional original flavor cheese snacks can hardly meet the varied demands of sophisticated Chinese consumers. Compared to slight taste improvement by foreign brands, some Chinese brands provide very unique offerings, such as potato, date, peanut, and pizza flavor.

Shanghai given its unique attributes about open to new things and large disposable income of citizens, is expected to lead the cheese evolution in China. Lactose intolerance, according to studies, can be less of a problem if people begin to have cheese and milk in a younger age. It is reasonable to believe that exponential cheese consumption is expected to grow continuously in the foreseeable future.

Daxue Consulting helps you get the best of the Chinese market

Daxue Consulting can provide you with support in discovering the Cheese Market in Shanghai. We conduct all the market research and consulting services you may need, such as potential analysis, cost analysis, implementation feasibility etc. To know more about the Chinese cheese market, do not hesitate to contact our dedicated project managers by email at dx@daxueconsulting.com.

This article The cheese market in Shanghai: Cheese evolution | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Importation of margarine to China

China as a country is not a strong margarine exporter globally but its importation and consumption are very high. This is seen with China ranking second in the world imports list by OEC with 6.1% of total margarine imports value and volume globally equalling 300 million US dollars. This is as there is a huge demand for margarine in China with domestic margarine makers not being able to keep up with consumer consumption.

Are western trends driving the margarine demand in Mainland China?

In 2017, the market demand for margarine accounted for approximately 1.5 million tonnes, while the market consumption in 2016 was at 1.06 million tonnes. The consumption difference in a year shows the growing trend of margarine consumption which can be partially attributed to the recent western lifestyle adoption in larger cities. This is especially with the urbanization and rise of the middle-class which has contributed to the development of western lifestyles and alternative food trends in China. Chinese people, especially those in higher tier cities, welcome western food especially baked goods, cakes and sweet pastries, and the increase of bakeries is directly linked to margarine sales.

Moreover, consumption on the go has increased in China with consumers in higher tier cities living a faster pace of life. This is as the large busy cities themselves has led those working between the ages of 25 to 44 years old changing their consumption habits. This group is having fast lunches and consumer a lot of taking away food which includes products usually made with margarine such as fast food, sandwiches and bread-based meals. This is made easier by the availability of delivery services, convenience stores and restaurants catering to the consumption habits of these consumers.

Chinese people are also very active on social media with social network and status being of great importance to them. Posting pictures on social media feed such as Wechat and Weibo are a very common practice with food being a popular topic among Chinese consumers. This is evident with consumers posting pictures of cakes from famous brands of homemade baked goods which also helps perpetuate the popularity of baked products leading to increased consumption by Chinese consumers as a whole.

Industrial demand vs consumer demand for margarine in China

The business to consumer demand is very low in the Chinese market with it being only 18% of the total demand. This is as margarine does not yet have a strong awareness among Chinese consumers and is not a commonly used product. Industrial demand is very high, however, with it being 75% of the total demand as bakeries frequently use margarine in baking products. This figure can be linked to the globalization of food, with more international food being integrated into the Chinese lifestyle especially in tier 1 cities. This is with over 80% of Chinese people buying imported products which, as a result, is influencing margarine consumption as a whole. Consequently, the main place to target in order to enter the Chinese market is industrial production.

Chinese consumers concern about health in 2019

Food safety is a huge concern among Chinese consumers in general, with other health issues arising in the past. As a result, consumers tend to look for information about products before buying them- especially in regards to new products. The use of processed trans fats is a recurrent question with consumers asking about trans fatty acids effect on health. This is evident, for example, with consumers being concerned about whether margarine is cardiovascular unfriendly. This concern is heightened with the South China Morning post talking about margarine causing a cancer-risk food scare this year for Hong Kong.

Further, the food scandals that have taken place over the last decade has made Chinese consumers wanting to know the ingredients of what they are eating and seeking out seek out quality and healthy food as a result. Consequently, these health concerns have shaped the margarine industry, with opportunities arising for international companies to appeal to Chinese consumers by improving, innovating or developing new products which are lower in fat or contain a limited amount of trans fatty acids.

Further, even the industry itself has mixed feelings towards margarine with international giants and Chinese companies showing a split. Mcdonalds responding to consumers and trying to change its health perception stated and stopped using liquid margarine and started using real butter in its fast food. Further, the world’s largest margarine and spreads producer Unilever also sold its margarine business to KKR as it didn’t see the business as still profitable. In comparison, Chinese lifestyle firm Fosun and food company Sanyuan is jointly buying the French margarine maker St-Hubert, as they see the business is still growing. Opportunity is brewing with brands having the chance to appeal to and address the health concerns of Chinese consumers.

Do Chinese consumers understand the difference between margarine and butter?

As stated, food safety is very important to Chinese consumers and as such with the low awareness of margarine and what it contains is an issue for the market. This is with 80% of Chinese consumers buying butter whilst 20% of consumers are buying vegetable margarine. Moreover, for consumers, the difference between butter and margarine is not clear. This can be attributed to the Chinese characters used for both products with the distinction being quite small with only the first character differing.

• Butter: 动物黄油 è literal translation: animal butter
• Margarine: 植物黄油 è literal translation: vegetable butter

This is evident, for example, when looking for margarine on online supermarkets, results are often a mix of butter and margarine. This is further a key issue in business to consumer promotion with brands not always making clear their classification as either butter or margarine. This leads to confusion as consumers sometimes end up buying one or the other without paying attention due to the lack of clarity by the brand. Further, the most popular questions asked by consumers in regards to margarine makes it clear that Chinese people do not know the difference between both products and how to use and eat margarine.

The three questions most asked about:

• 动物黄油和植物黄油区别? What is the difference between butter and margarine?
• 植物黄油有什么用途？ How to use margarine?
• 植物黄油怎么吃? How to eat vegetable butter?

Another reason for margarine lack of awareness by Chinese consumers is its lack of presence in supermarkets or general shopping areas. This is as Chinese cooking traditionally usually involves cooking with vegetable oils such as soybean or sunflower oil. Moreover, unlike western households, a lot of modern Chinese kitchens do not contain ovens because baking is so uncommon. This is due to time, the convenience of baked goods already available and unfamiliarity. China is still expected to become more westernized over time but it is likely to still keep a lot of its own traditions especially in regards to home cooking. As a result, margarine is still very new to consumers and not yet adopted by China’s population. This, however, has the potential to change over time with greater awareness and adoption being needed in order to integrate it into Chinese home consumption and cooking practices.

Major players in the margarine and butter market in China

When looking at the overall product range of the main market players in China, it can be noted that margarine is only a small part of their business. This is as margarine is a more recent development in the Chinese market and to be successful, brands need other products to support them in order to stay profitable. The products that these brands offer are mostly dairy and baking products. This is as margarine is considered as a butter replacement and therefore it is relevant for dairy businesses to have it within their offerings. This is the case with Shanghai Gaofu Longhui Foods Co Ltd, Bright dairy and Food Co. Ltd and Goodman Fielder Ltd all selling margarine as only part of their business model. Further, this business structure provides a good platform off of which known brands can develop new products and benefit from their awareness and customer loyalty. This is especially important as the dairy industry has suffered from several food safety issues thereby making imported products and raw materials a major competitive advantage for international brands.

Margarine manufacturers in Mainland China

Domestic vs international raw materials in China

Soybeans are the main material used for margarine production in China. Despite this, less than 10% of the soybean production is used for modern processed productions including margarine. Soybeans are grown in three regions in China including the north (Heilongjiang, Jilin, Liaoning and Inner Mongolia provinces) with large production farms, the Huang Huai Hai area which includes the Central region of China and South China around the Yangtze River Valley area.

There is a sharp increase in soybean imports and a decline in domestic production. This is with the price of domestic soybean production being higher than the beans produced in the USA or Brazil, due to the smaller and rarely mechanical based farms in China. In the oil production process, cheap prices and the oil extraction rate are the most important, with imported products being preferred. China, however, does not measure up on a global scale with Chinese produced domestic bean oil content remaining 3 to 5% lower than imported beans from other countries causing its soybean production to decline steadily.

Imported materials consequently are a significant source of raw materials for margarine production in China. As stated by OEC, in 2016, major oil imports in China include Palm Oil, Coconut Oil, Seed Oils, Rapeseed Oil, Soybean Oil and other pure vegetable oils. Most of these oils can be used as raw ingredients in margarine production especially palm oil, rapeseed oil and soybean oil. The main suppliers for raw materials are the USA and Brazil where they have larger scale production farms.

[Source: Daxue Consulting]

International margarine manufacturers in China

Some of these companies produce imported raw material as the basis of their business model for margarine production. These include Unilever, Cofco and Fuji oil who are all international producers and only have margarine as part of their business along with soybean oil, rapeseed oil and palm oil (mostly vegetable oil). There are also other companies who also specialize in margarine but also produce other oil-based products such as Daxin Oils & Fats Industrial Co. Ltd, Anhui Kangermei Oil & Far Co. Ltd and Guangzhou Yahe Food Ingredients Co. Ltd.

Importance of imported products in the value chain of margarine in China

The value chain of margarine in China also illustrates the reliance of China on imported raw and processed material. This is with these materials being present in the very early stages of margarine production. The demand from the food industry requires margarine producers to source beyond domestic suppliers for raw materials as domestic producers are currently unable to efficiently meet the quantity needed or the cost-effective measures undertaken by other countries in production. Furthermore, beyond sourcing, domestic margarine production just cannot sustain China’s food industry with its smaller scale production farms. This current situation has, as a result, caused China to rely heavily on margarine imports.

Opportunities for international brands in China

The Economist indicated that from 2017, margarine sales in Asia-pacific region will not grow much but that butter sales will grow at a faster rate from 2017 to 2021 approximately double the total sales in five years. Similar trends have already happened in the US as in 2013; the per capita consumption of butter exceeded that of margarine for the first time since the middle of the 1950s. This increase in demand for butter in China has caused a butter crisis in Europe with the increasing demand from Chinese consumers. Further, other demand in the oils and fats industry includes soybean oil, rapeseed oil and olive oil (mainly vegetable oil).

Foreign expertise in margarine production is highlighted as strength in the industry. This is especially so where international organizations could partner with Chinese manufacturers to bring technology for margarine production and improve competitiveness in the Chinese market. Additionally, another opportunity for international brands is to provide new production techniques in order to provide healthier margarine that would align better with Chinese consumer needs and wants. Moreover, awareness is also needed in order to educate consumers about the difference between margarine and butter. The fast pace of western lifestyle trends is also likely to continue to increase consumer demand in the future. It is also highly recommended for brands to import raw material in order to obtain better quality products and to keep the added advantage of foreign knowledge and value in margarine production. This is especially with the need for international brands to focus on maintaining the competitive advantage in industrial production supply. As a whole, there are a variety of ways for international brands to get involved with production technology. This includes by providing new production techniques to the domestic market, by providing healthier product developments and by targeting industrial production.

Author: Jessica Farrell 

Finding accurate data concerning distribution and supplier in China has become nearly impossible. Daxue Consulting has the capacity of screening in China with the help of our nationwide reach network involving main actors of universities, industries, and cities.

So, to use such a service as Distribution & supplier screening in China and find answers to all questions do not hesitate to contact our project managers at dx@daxueconsulting.com.

This article The development of the margarine B2C and B2B market: Are Chinese consumers ready for margarine? | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

According to the National Bureau of Statistics of China, the turnover of RTD market in China was 107.3 billion RMB in 2016, with 89% of which was wholesale and 11% of which was retail. Along with economic growth and consumption concept development, China RTD market has turned into the market with various segments such as RTD tea and energy drinks vigorously growing, from the market with soft drink being the absolute dominant segment.

Top 18 most popular RTD brands in China according to the rank of sales volume from E-commerce platforms

Among the top 18 popular RTD brands in China, near half of them are from mainland China and others from Taiwan, Hong Kong, the USA, Japan, France, Switzerland and Thailand. RTD tea, soft drink and juice are the top 3 leading RTD products of these brands.

Besides traditional offline distribution channels such as supermarket, convenience store and vending machine, online channels are getting an increasing share of sales volume thanks to the booming E-commerce in China. Main RTD brands either have opened official stores on Tmall, JD, YHD etc., either have their products sold by the third-party sellers on those platforms. As the result, almost all RTD products could be found on various E-commerce platforms.

Due to the popularity of social media such as Weibo and WeChat account, most of the top RTD brands have opened Weibo and WeChat accounts to conduct marketing campaigns. They use Weibo and WeChat account to gain traffic to official stores, release new products, publish cooperation information with celebrities and lottery activities.

As RTD market in China has become both broad and mature, the early players have occupied a strong position. Thus, sorts of development strategies have been applied to the battle over market share. From importing new types such as energy drink and alcopop to setting up premium brands in order to avoid a price war, and of course the emerging of local brands, with a better understanding of traditional culture. Those strategies have somehow changed the RTD landscape in China, which we would discuss in the following parts.

Historical VS New Players

The typical historical RTD segment is soft drinks. Coca Cola entered China in the 1920s and several domestic soft drink brands grew fast in 1980s. Energy drink and alcopop are two RTD segments that have developed in China relatively late, after the 1990s and 2000 respectively.

In recent years, the carbonated beverages market has been suffering the decline, the production of carbonated beverages has dropped by 3.71% even though the overall production has risen by 1.9%. Data show that only 7% of total consumers prefer buying carbonated beverages with the improvement of people’s awareness of health. For retailing channels, offline retailing channels including supermarket, convenience store and vending machines still accounts for most market share, though online retailing has been growing fast.

According to the data of China Industry Information Website, 4 of the top 10 carbonated beverage brands belong to Coca-Cola and 3 of them belong to Pepsi. Coca-cola, as the first foreign RTD brand which entered China in the 1920s, went back to the mainland market at the end of 1970s. Pepsi, the main competitor against Coca-Cola, followed its step into China in the 1980s. The two RTD magnate corporations adopt vigorous measures such as expand marketing channels, product and promotion innovation to face the new challenges.

The target consumer of both brands covers teenagers, young people and middle-aged people. As a low-calorie diet and healthy lifestyle become more and more popular, both brands put more efforts on sugar-free products such as Coca-Cola Zero and Pepsi Zero Sugar.

For online retailing, both of them have official stores in JD and YHD. While sales data are not available on JD.com, Coca-Cola has by far more product reviews than Pepsi. Product reviews are usually in line with sales volume since we estimate the review-per-sales ratio at 10 to 20% depending on the products. Coca-Cola is ranked 2^nd and Coca-Cola Zero is ranked 19^th on JD Best-selling RTD list, in which Pepsi does not enter.

However, neither of them focuses on Tmall platform. Pepsi does not have an official Tmall store, and Coca-Cola only sells small quantities of special edition products related to sports events or celebrity endorsement on its Tmall official store. It might because that Tmall has its own centralized store called Tmall Supermarket, which covers both brands’ products with favorable discount and cheap shipment.

As for advertising, both have a presence on overall channels, though there might be a different emphasis. Coca-cola focuses on localization marketing, since the beginning of 2018, it launched a series of specially designed packaging called “Slim Bottle City Design”, which contains the landmark building of 16 different cities and a single word to show the city features. Pepsi chose to build serial advertising combining celebrity endorsement and daily life scenes like cooking and holding parties, to establish a youthful and viable brand image.

Video advertisement of Coca-Cola

Video advertisement of Pepsi

As Baidu Index shows, the index of “Coca-Cola” rose significantly in February, the same month “Slim Bottle City Design” came out.

On social media platforms, Coca-Cola provides more functions on WeChat public account, where they offer a direct link to Coca-Cola JD official store, an advertisement with celebrity endorsement and latest products information. The main function of Pepsi public account is membership service, including point redemption and purchase of joint fashion clothing. Pepsi also pushes advertisement video of celebrity endorsement.

Both of them opened their accounts on Weibo in 2010, and they have similar amounts of fans. Coca-Cola seems to follow current affairs such as the World Cup, Asia’s Lights Out Day and Chinese Dragon Boat Festival with a corresponding poster or video advertisement. Pepsi’s posts are more about sponsored variety show and relevant celebrities. With huge star power, Pepsi’s post attracted more likes than Coca-Cola on Weibo.

17% of total RTD consumer have a preference towards energy drinks, which means a broad prospect for energy drink market in China. The market size in 2016 reached 43.9 billion RMB, the second largest market in the world, right after the USA. The energy drink market in China is an oligopoly market: RedBull accounted for 63% of the total market share in 2016, and still accounted for 59% in 2017.

RedBull entered into China in 1995, it is the pathfinder for energy drink segment, thus for a long time RedBull was synonymous with ‘energy drink’. However, since 2014 there has been a dispute over licensing of registered trademark between China RedBull products and imported Austrian RedBull since they share the same brand name in both Chinese and English. This dispute gave opportunities to its competitors, such as Eastroc Super Drink, which accounted for 9% of market share in 2017.

Under the market pressure of RedBull, Eastroc chose to focus on working class and students as their target consumers. The retail price of Eastroc is 3.5 RMB, while RedBull is 6 RMB, and imported Austrian RedBull even reaches 17 RMB. With pricing differentiation strategy, Eastroc has been growing fast during recent years.

Both RedBull and Eastroc have official stores on JD and YHD. Eastroc also has Tmall store and Weidian (store in WeChat) while RedBull does not. The sales volume of RedBull is generally much higher than Eastroc.

For video advertising, China RedBull emphasizes the feature of energy boosting, while Austrian RedBull always focuses on extreme sports sponsored by them in order to show the spirit of adventure and guide consumers to link RedBull to energy that is needed by extreme sports. Eastroc, as Chinese local brand, puts more efforts on the daily life picking-up of its target consumer, e.g. it shows the function of keeping people awake and helping people to focus on their study or work by a scene of students reviewing for an exam in the video ad.

Video advertisement of China Red Bull

Video advertisement of Austria Red Bull

Video advertisement of Eastroc

Both of them have official accounts on social media, WeChat and Weibo. On WeChat, both provide the direct purchase link on the dashboard, RedBull also introduces the sports events sponsored by them, while Eastroc offers lottery activities for free drinks. On Weibo, RedBull only post promotion information while Eastroc provides similar information and lottery activity with WeChat, therefore though RedBull has more followers, Eastroc attracts more likes (as they have lotteries).

Chinese alcopop market was born in 2000, with the appearance of Breezer and Rio is the first local alcopop brand which started in 2003. From 2000 to 2012, the alcopop market remained tepid, since consumers preferred foreign distilled spirit. After the anti-corruption campaign broke out in 2012, both spirits and wine market suffered the decline. Taking advantage of this opportunity, the alcopop industry walked into the public eye from 2012 due to the intense competition between Rio and Breezer through embedded advertisement in the hot variety shows and TV series. Attracted by the low market access and high-profit margin, many traditional white spirit manufacturers like Maotai and Wuliangye entered the market with homogeneous products and similar pricing strategy since 2015.

With large investment in marketing and relatively small investment in improving product quality and innovation, consumers attracted by the advertisement would be disappointed and would lose the trust of brand, thus the primary brands such as Breezer and Rio has been experiencing a severe sales winter and most of the following new entrants have been eliminated by the market.

The target consumers of both brands are the same since they have similar marketing and pricing strategy. The low alcohol content, rich colors, soft-drink-type taste, and stylish packaging, all those elements are tailored to younger consumers, especially for the home party scene and entertainment venues like KTV and club.

Both of Rio and Breezer have official stores on JD and YHD platforms, while Rio also has a presence on Tmall. Rio has obviously higher sales volume (indicated by the number of reviews), almost 8 times than Breezer’s. In the case of offline channels, Rio is the only brand which could still be found in the supermarket and convenience store. In fact, the manufacturer of Rio has realized profitable again in 2017, after two years of being in the red. The main reason for its profitability might not be product innovation, but the elimination of its main competitors from distribution channels, reducing advertisement and culling staff.

Video advertising is always the core marketing method of Rio. From embedded Ads in hot TV programs to the short films with the theme of city life of younger people, Rio tries to emphasize the characteristic of its low alcohol content and its suitability for parties. Breezer has ceased to push new marketing activity in recent years, thus the Baidu Index of Rio is higher than Breezer.

Video advertisement of Rio

Rio (blue) versus Breezer (green) on Baidu index

For social media, both brands have official accounts, but Breezer has no longer updated any content since 2016. Rio puts more effort on Weibo than WeChat, it might because the network community character of Weibo makes it more suitable for watching and reposting video ads, especially short films. The number of likes of its top post is 112,527, even much higher than Pepsi, although the number of fans of Pepsi is more than double Rio’s.

Premium RTD Products

The total sales volume of the coffee industry in China has reached 70 Billion RMB in 2015 and is expected to reach 300 Billion RMB in 2020. Even though the instant coffee still dominates the whole coffee market (71.8% in 2016), both global giants like Coca-Cola, Suntory and Local brands like Wahaha and Uni-President have participated into the battle of RTD coffee. As the disposable income per capita in China rises every year, the consumption upgrade of coffee is expected to happen in the future.

Among main RTD coffee products, the common price is from 4 to 7 RMB, which is cheaper than freshly brewed coffee offered by a convenience store (usually 10~15 RMB per cup) and a little more expensive than instant coffee (usually 1~3 RMB per package).

Starbucks has established its premium brand positioning since its entrance into China in 1999, it imported Frappuccino to start their first step in Chinese RTD coffee market. The retail price range of this glass-bottled coffee is from 15 to 22 RMB, which avoids direct competition with other RTD brands and targets the brand follower with high loyalty and strong spending power as their consumers.

In 2018 Starbucks launched a new series of canned RTD coffee with a lower retail price (about 12 RMB), and local RTD giant producer, Tingyi, will be responsible for production and share the distribution channels with Starbucks. This is considered an intermediate complement for its premium Frappuccino, also an attempt at expanding its target consumers.

Starbucks has official stores on overall distribution channels. Just like Coca-Cola, the RTD products of Starbucks are not available in Tmall official store. They could be found on Tmall Supermarket, JD and YHD official store instead.

Starbucks has never made a video advertisement on TV or other channels, though it is active on social media platforms. On WeChat, it posts 20 messages in recent 30 days, which is a fairly high frequency compared with other brands’. It provides the latest product information, and customer club service on WeChat, while on Weibo it provides only the former information. It might sound incredible that Starbucks received so much positive feedback on social media without conducting some typical marketing activities which are common for other brands, but brand recognition truly determines its success.

Another premium RTD product which emerged in recent years along with citizens’ health awareness is NFC (Not From Concentrate) juice, though the current market share of NFC in total juice market is less than 1 %. Ingredients and the necessity of low-temperature delivery and storage determine that NFC juice would be positioned as a high-end product and the main distribution channel is offline convenience stores. However, the limited distribution of convenience store in first- and second-tier cities hinders the expansion of NFC juice.

Zero Fruit Square is considered the largest player in NFC juice area, founded in 2012, its monthly sales volume has broken 1 million bottles in 2014, and it has entered the distribution channel in Starbucks since 2017.

Due to its focus on offline distribution and high-end positioning, Zero Fruit Square has no official stores on main online marketplaces except Weidian (on WeChat). On Tmall, JD and YHD consumers could purchase it on third-party store and juice would be delivered through cold chain delivery.

Zero Fruit Square has no video advertising, neither active operation on social media. The WeChat and Weibo official accounts have post only few information about products. The official Weidian store is integrated into WeChat account.

Chinese RTD Products

Among all RTD segments in China market, RTD tea is the segment that has many specific “Chinese” products which are local brands or adapted to Chinese taste and even culture. RTD tea in China market has entered maturity stage in which the brand concentration trend is getting more and more obvious. The top 10 RTD tea brands in China (ranking by sales volume) take more than 96% of the RTD tea market share. Uni Present, Masterkong, WLJ etc. 6 brands take about 90% market share and Uni Present, Masterkong each take 40%. The turnover of China RTD market is expected to reach 70 billion RMB by 2020.

Herbal tea, a traditional Chinese drink, has two dominant brands, WLJ and JDB. WLJ is a historical herbal tea brand derived from Guangdong Province since 1828 and JDB was founded in 1995. Their competition history is a long story due to complicated trademark and red packaging fight. As the result of famous lawsuits between them, they have similar popularity in China, which could also be indicated by Baidu Index where their brand names have similar search times.

The revenue of China herbal tea market was 56.1 billion RMB in 2016 and JDB took 52.6% market share in it and 70.7% in RTD herbal tea market. However, recent data from Tmall sales volume shows that though JDB has more accumulated sales volume than WLJ, WLJ’s sales volume in the recent 30 days is 16 times JDB’s. Facing fierce competition, WLJ launched new products, sugar-free herbal tea and low sugar herbal tea, to adapt to modern Chinese’s healthier lifestyle and it opened its Tmall official store, while JDB does neither launched new products nor opened a Tmall official store.

Ads of both WLJ and JDB the function of herbal tea, clearing intern heat and they even have similar wording in their ads. For other marketing activities, both of them operate WeChat official account and Weibo account. Unlike their ads, their strategies on social media are different and therefore get different effects. On WeChat, besides the introduction of company history and culture, WLJ also push articles about current affair and lottery activities while JDB pushes mainly company news. On Weibo, WLJ post cooperation with hot stars with hashtag of this cooperation and @ these stars to attract more likes and retweets, besides, it also posts company awards such as “Top 50 enterprise in China food industry” and current affairs such as world cup with hashtags of this award or affair and its slogan. On the contrary, JDB post mainly company news and culture, rarely current affairs compared with WLJ. In terms of content diversity, WLJ performs better than JDB.

The RTD milk tea market in China has entered multi-brands steadily developing stage. Well-known RTD brands, such as Uni Present, Masterkong, Nongfuspring, Suntory, Wahaha and Kirin all launched RTD milk tea. Urban consumers of milk tea are a quarter billion, and 71% are 15 – 25-year-old females.

Assam RTD milk tea (Uni Present) and Lan Fong Yuen RTD milk tea are top products perform well according to sales volume on Tmall supermarket. Uni Present took 70% of RTD milk tea market share in 2016 and Assam is its leading product. Lan Fong Yuen is relatively new, but its popularity is comparable to Assam according to Baidu Index. No matter accumulated or monthly sales volume on big E-commerce platforms, Assam performs much better than Lan Fong Yuen. (However, the fact that Assam’s accumulated sales volume is better than Lan Fong Yuen’s, has limited reference value due to Assam was launched in 2009 but Lan Fong Yuan was 2015.)

For marketing, both of them have opened WeChat official account and Weibo account. On WeChat, Assam is more active than Lan Fong Yuen and its highest likes in recent 30 days are about 150 times of Lan Fong Yuens. Assam pushes the link to its official JD store and posts video ads with celebrities in them. Lan Fong Yuen holds lottery activities and posts release of new product. On Weibo, Assam has 6 times Lan Fong Yuen’s fans and 2 times of Lan Fong Yuen’s posts. As the result, Assam’s highest likes are near 2 times of Lan Fong Yuen’s. Though Assam does not put emphasis on lottery activities on WeChat, on its Weibo, it does. Assam differentiates WeChat and Weibo marketing by focusing on different contents, which is WeChat for direct traffic to an online store while Weibo for interaction with fans (consumers) by lottery activities. However, Lan Fong Yuen operates its Weibo the same way as its WeChat, mainly lottery and product release.

Daxue Consulting can help strategize your China market entry:

Daxue Consulting assists overseas clients by designing comprehensive and data-driven strategic action portfolios, business models as well as business projections.

If you want to know more about the RTD industry in China, or about market strategy do not hesitate to contact us at dx@daxueconsulting.com

This article From soda to tea to alcohol, how ready-to-drink (RTD) brands compete in China’s expanding market is the first one to appear on Daxue Consulting - Market Research China.

Market of Cheese in China

Brand 1: Président

The brand of Président was founded by André Besnier, a leading figure in French dairy industry, in 1962. At present, Président is owned by the Laval based Lactalis company, a multi-national dairy products corporation in France. It is becoming the largest dairy products group in the world, and is the second largest food products group in France, following Danone. Apart from Président, it also owns the brands include Sorrento, Société Bridel, Rachel’s Organic and Valmont.

Brand 2: La Vache qui rit (乐芝牛)

As the first cheese brand in the whole world, the most popular La Vache qui Rit was born in France, having a history of more than 90 years. Now she is all over the world, with recognition and preference of consumers from over 100 countries and regions: Globally, there are over 10 million “La Vache qui Rit” cheeses being purchased every day, that is, over 115 cheeses every second on average. La Vache qui Rit has its members all around the globe right now, such as “The Laughing Cow” in English-speaking countries, “Vessiolaia bourionka” in Russian-speaking areas, and it has already become a legend brand. The red cow who laughs, high-quality cheese, Unique packaging, these all became typical symbols of La Vache qui Rit in the heart of consumers everywhere.

Brand 3: Kiri

Kiri is a cheese brand owned by Bel Group or Groupe Bel (in French), which is a multinational cheese marketer centered in France. The Bel Group is a cheese manufacturer and distributes processed and semi-processed cheese to over 120 countries. Apart from Kiri, Bel Group also holds the usage right of the brand includes “The Laughing Cow”, “Babybel”, “Leerdammer”, and “Boursin”. All these five brands consist of Bel’s five core brands that are distributed on five continents. In 2008, Bel Group and its shareholder, Unibel created Bel’s Corporate Foundation which aims at promoting a balanced diet and preserve the environment.

Brand 4: Milkana (百吉福)

Milkana opened a specialty market of cheese since Alex Bongrain, the creator of Bongrain Group, developed Caprice des Dieux. Bongrain Group focuses on cheese manufacturing and distributing, and has already been the largest supplier of dairy product all around the world. As for now, it becomes the leader of retail market in butter and long-time preserved cream industry in France and Belgium, the pioneer of cheese and dairy product selling channel in France, and the largest service supplier of high-end banquet hospitality in France, New York, Moscow, and St.Petersburg.

Amy Wang, consultancy in China

To know more about the Cheese market in China.

Bloomberg / MarketingtoChina 

Related articles

• Lactalis strikes price deal with French milk producers

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Main Brands and Products of Baby Food owned by Nestle in China

Nestle has made quite a lot of acquisition of other baby nutrition companies so as to ensure its dominance in the global baby nutrition market. The most well-known ones include Wyeth and Gerber. It is also said by some critics that Nestle’s world food empire is established by acquisition.

Wyeth, one of the global top 500 enterprises, was founded in 1926 and headquartered in Collegeville, Pennsylvania, USA. Wyeth is the world’s largest research-based pharmaceutical and health care products companies, having a leading advantage in prescription pharmaceuticals, non-prescription health care products and nutritional fields. Nestle acquired Wyeth in April, 2012.

Gerber, from America, having over 80 years of professional experience, is a brand who has withstood the test of time and people. Its raw materials are from global high-quality farms whose soil has passed strict safety tests, and ensured no harmful pesticide residues. Gerber was acquired with 5.5 billion U.S. dollars by Nestle in 2007.

Recent trouble in Brand image

Recently, some of Nestle’s milk powder was “downsizing”, with the prices remaining the same. Hence a great number of consumers questioned Nestle milk powder “disguised price rise”.

Nestle China official responded by claiming “Nestle downsized in order to put a spoon in the milk powder box to facilitate the consumers.” To justify the cost, the direction added: “The improved milk powder craft and quality had their corresponding cost.”

However, facing the situation of imported milk powder price rises and regarding to the quality and safety perceived of Nestle’s products, we can expect to not see any true consequence on Nestle’s performance. Finally, in order to compete with other international Brands, Nestle announced willing to slighlty reduce its price.

What is the influence of recent year incident for Nestle in China

Before the event of excessive iodine, the company’s performance was very good, especially the middle and low level products. At that time Nestle was one of the most Cost-effective domestic milk powder brands. This scandal could impact this leading position in China. Therefore, Nestle develop relevant product and communication strategy to gain advantage of this situation in the customer’s mind.

Nestle milk powder technology and R & D technology are of great advantage. Nestle promised to not use any genetically modified ingredients in their products in Europe, not in Asia. Nestle now mainly produces in Heilongjiang. Though the company uses domestic milk source, its production management is very stringent hence many consumers still find it trustworthy.

Amy Wang

http://www.bbc.com/news/business-23176085

http://www.scmp.com/news/china/article/1275122/nestle-danone-cut-chinese-infant-milk-prices-amid-probe

This article How Nestle reacts to the events on Baby food market in China is the first one to appear on Daxue Consulting - Market Research China.

Karicare is a leading infant formula brand of the global maternal and child nutrition experts Nutricia.

Karicare has been founded in 1896, developed by Dr. Truby King with the incentive of “Help fatigued mothers, protect cute babies”. After a hundred years of development, Karicare has now become the market leading brand in New Zealand and Australia, and the most preferred brand for mothers in New Zealand and Australia.

After the scandal on infant formula in China, Australia’s and New Zealand’s milk was quite popular in the Middle Kingdom. However, 2013’s scandale let the brand drop to disapear from China’s market. It is a good example of the difficulty to etablish in China when it comes to baby safety.

Why New Zealand and Australia’s milk was popular in China

New Zealand’s climate is pleasant, with enough sunshine and very lush plantation. The forest area accounts for about 29% of the country’s entire area, and consequently the ecological environment is very satisfying. Under the situation of fertile land and the government supported natural protection, New Zealand is a country emphasizing industries like agriculture, animal husbandry, tourism and education. The New Zealand government strictly controls industry, resulting in very little air pollution.

At present, New Zealand is the only country that produces milk where epidemic of avian influenza, foot-and-mouth disease, and mad cow disease has not yet appeared. Moreover, animal husbandry adopt complete stocking way, unlike the United States and other countries feeding with provender, resulting probable containing of hormones or genetically modified particules in the milk. Therefore the undoubted quality of the New Zealand animal husbandry is world-famous, renowned in Europe, the United States and other countries.

In China, as the safety of food industry’s product, in particular baby food, has become such a sensitive topics, this milk is going to be very attractive. Majority of China’s imports came from New Zealand, which counted for 25% of its exports.

Market Research China on Karicare’s development

Karicare is a sub-brand of NUTRICIA under infant formula company Danone, owning an astounding 72% market share in New Zealand. In August, 2011, Karicare officially entered China market, and set up sales channels on Taobao, u1baby, 360buy and other well-known online shopping websites in China, enjoying an average 80% sales growth per month. It was said that, after entering Guangdong, Karicare will soon open stores in Fujian, Guangxi, with an objective of reaching the scale of over 3000 shops in China.

Troubles of Karicare’s brand strategy

The troubles started with a micro blogger recently broke the news that she had bought fake Karicare milk powder. This blogger claimed that she thought that what she had bought was Karicare milk powder with new packaging after it localized in China. But she found it to be completely different with those Karicare ones she had bought before and realized that she was kind of hoodwinked.

Another blogger on the Internet also warned consumers by uploading relative photos, saying that there was some company in Shanghai claiming to be incorporation with Karicare released “Karicare” infant formula, which turned out to be fake ones called similar pronounced name in Chinese. Karicare’s high quality products has always been it greatest advantage and thus it is more likely to be copied. To treasure its precious reputation and to maintain its brand strategy, Karicare probably should consider seriously its strategy in China for anti-counterfeit mission.

However, in 2013, new Zealand milk powder has been banned from the China’s market as a bacteria which can cause serious disease to baby has been found in imported production. Thus, all the effort done by the brand Karicare for many year to build a relevant and efficient brand strategy and commercial development in China has been wasted.

Amy Wang

http://www.abc.net.au/news/2013-08-04/an-china-bans-nz-milk/4863858

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10890692

This article The difficulty of infant formula market in China : the example of Karicare is the first one to appear on Daxue Consulting - Market Research China.

Established in 2001 and based in New Zealand (HQ), Fonterra (恒天然) Co-operative Group was set up by the merge of two largest dairy product co-operatives and New Zealand Dairy Board. As for now, Fonterra is becoming the largest company of New Zealand with annual revenue of more than 8 billion dollars per year. Key brands generated and owned by Fonterra mainly are Anchor (milk), TipTop (ice-cream), Mainland (cheese), and others in New Zealand, and in Australia, the brands are Brownes Calcium Plus, Bega Cheese, Peters and Brownes, and Riverina Fresh.

Strategy & Opportunity Fonterra Is Facing in China:

China is a crucial and important market for Fonterra. Firstly, overall dairy sales rose by 8.5 percent in 2011 to 28 billion dollars from the previous year. Secondly, this world’s dairy giant has always been  keeping its eyes on the Chinese market for a long time, and now China’s market accounts for half of Fonterra’s revenues from emerging markets.

According to the report from Farmer’s Daily, Fonterra recently reached and signed an agreement with Yu Tian County government, a county located in northeast province of Hebei, to invest 557 million rmb to open its second new farm in China. Mr. Spierings, the CEO of Fonterra, said that Fonterra is planning to establish a total of five farms in China in the next five years with a herd size of 15,000 cows, which is able to produce 150 million liters per year. It marks Fonterra’s attempt to re-rise in China after the setback caused by the relationship with Sanlu and its role in the contaminated formula scandal in 2008. After the scandal, China’s market was critical to Fonterra and showed distrust to its damaged image. For Fonterra, the strategy in China for next decades can be summarized into two aspects – quality and quantity. To ensure a safe supply of dairy products, Fonterra set a goal that “From grass to glass, it will be safe” quoted from Mr. Spierings. Secondly, Fonterra’s ultimate goal is to produce up to one billion liters of milk in China every year by 2020, which means that Fonterra will be investing more money to open new farms in the future.

Edited by Amy Wang from Daxue Consultant China

Credit Photo: Hudong

This article Focus on: Fonterra is the first one to appear on Daxue Consulting - Market Research China.

According to market research ran by Daxue Consulting (contact us for more information), New Zealand is the largest supplier of cream cheese to China’s market. During the period of 2005 and 2007, New Zealand exported fresh cheese, processed cheese, and other cheese related product with 3453.71 ton, 3907.73ton, and 4092.1 ton respectively. That figure had already taken up 1/3 trade of cheese between New Zealand and China. The reason why Chinese companies and customers prefer New Zealand cheese is because the good reputation of quality, even the price is much higher than other suppliers. The main function of cheese imported from New Zealand is for China’s food companies to make pastry, biscuit, and others.

American Cheese on China’s Market:

As the largest producer of cheese among the world, the United States provides the amount of cheese that has already exceeded more than 30 percent of global yield to consumers. At present, the demand of cheese within the United States reaches a state of saturation, which stimulates it to enter China’s market for developing. The U.S.A is eager, optimistic, and active to look for partners in China for collaboration and the potential competitiveness of China’s market. According to the data issued by United States Department of Agriculture, China is one of the most important importers of whey for the U.S.A., which shows in the trade record in 2011 that a great export growth of cheese from the U.S.A. to China significantly speed up and accelerate in a consecutive 3 months.

French Cheese on China’s Market:

From the sales performance of French cheese from 2009 to 2011 to see, the total sales of French cheese in China increased from 400 ton to 800 ton, which was an encouraging and satisfactory result. However, from the total volume of cheese importation in China to see, French cheese fell behind New Zealand, the United States and other countries.

German Cheese on China’s Market:

Germany has a long tradition of cheese-making and because of its varying landscapes, methods of production and regional traditions; it boasts more than 600 different types of cheese. While 75% of Germany’s cheeses are produced in Bavaria, the areas of Schleswig-Holstein, Mecklenburg-West Pomerania and Saxony-Anhalt in the northern part of Germany also produce some of Germany’s more famous cheeses such as Wilstermarsch, Tilsit and Altenburger Ziegenkäse (goat cheese).

Various Brands of Cheese in China:

Cheese Brands From France:

• La Vache qui rit
• Babybel
• Président
• Kiri
• Milkana

Cheese Brands From New Zealand & Australia:

• Bega
• Anchor
• Dairylands
• Mianland

Cheese Brands From the United States:

• Suki
• Kraft
• Crystal Farms
• Swiss valley
• Borden

Edited by Amy Wang from Daxue China consultants.

Picture source: Google Image

This article Cream cheese market in China is the first one to appear on Daxue Consulting - Market Research China.