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Mainland Consumers Go Snack Happy, with Dedicated Outlets Booming

The increased propensity of affluent mainlanders to snack on imported confectionery and regionally sourced items has seen dedicated outlets burgeon in many of the tier one cities, with opportunities now emerging for online partnerships.

Photo: The sweet spot: A hypermarket snack counter.
The sweet spot: A hypermarket snack counter.
Photo: The sweet spot: A hypermarket snack counter.
The sweet spot: A hypermarket snack counter.

The mainland snack market has been booming over recent years. According to some estimates, the market is now worth Rmb100 billion, with an annual growth rate of more than 20%.

In line with this, premium snack shops and service points are now a feature of many of the tier one mainland cities, notably Beijing, Shanghai and Guangzhou, with such outlets now ubiquitous on the streets and within supermarkets, malls and hypermarkets. This development has coincided with the widespread introduction of snack vending machines, with such systems now in place at many subway stations and cinemas. Typically, all of these snack outlets – whether staffed or mechanical – offer a range of both international snacks as well as delicacies sourced from across the mainland.

According to trade analysts, the mainland's snack consumers tend to fall into one of two distinct categories. Firstly, there are white-collar workers and students, who now account for over half the market. Secondly, there are young women, who tend to be the lead trendsetters when it comes to the consumption of particular snacks.

Branding is the Trend

Photo: A snack vending machine.
A snack vending machine.
Photo: A snack vending machine.
A snack vending machine.

Traditionally, the mainland's leisure food market has been dominated by four retail channels: hypermarkets; convenience store chains (such as 7-Eleven, Watson's and Haolinju); specialty snack stores; and vending machines.

Of late, those retail chain stores with a focus on commercial districts, residential communities and other target customer groups have been expanding rapidly. Although many of the specialty players within these sectors have all adopted distinct operational modes – and their product lines and market positioning also differ hugely – they all offer premium, upmarket products, reliable quality and an efficient service.

It is understood that a number of Hong Kong-backed chain stores are prospering on the mainland, following their initial cautious exploration of the market. Typically, these branded chain stores focus on selling imported foods. By adopting the collective sourcing mode, capitalising on Hong Kong's free port status and position as a global trade platform – as well as leveraging on the operational mode of the mainland's free trade zones – these industry players have demonstrated considerable advantages when it comes to resource integration, sourcing, distribution and the re-export of snack items.

The business model of these operators allows for intermediate links to be kept to a minimum, resulting in lower product prices at the point of sale. Compared with the mainstream imported products retailers active in the market, the prices at these Hong Kong-backed outlets are around 20% cheaper.

Photo: Preserved plums and dried fruit snacks.
Preserved plums and dried fruit snacks.
Photo: Preserved plums and dried fruit snacks.
Preserved plums and dried fruit snacks.

At one well-known branded snack shop in Beijing, a wide range of goods was for sale, despite the fact that the display space was somewhat limited (less than in a typical outlet of Hong Kong's Aji Ichiban chain stores). The items on offer were from a wide variety of international sources. They included flavoured coffee and milk from Korea, biscuits and seafood snacks from Japan, nuts from the US, dried fruit and vegetables from the Philippines, and instant noodles from Hong Kong. In total, more than 100 different snacks were available.

In addition, one-third of the shelf space was taken up by either imported household chemical products or quality red wine. The shop's owner says he aims to offer his customers a resource that is small in size, but comprehensive in product variety – in essence, a one-stop shop for all of his customers' needs. Commenting on this approach, he said: "Selling snacks is not only about food, but it also offers and promotes a lifestyle."

It is understood that these medium- to high-end snack shops usually favour a membership system. This allows them to keep their customers updated with regard to new offers via social media, notably WeChat. Such special offers, however, are rarely extended to certain items, notably red wine and household chemical products.

Niche Products

Photo: A supermarket’s specialty food counter.
A supermarket's specialty food counter.
Photo: A supermarket’s specialty food counter.
A supermarket's specialty food counter.

Apart from imported snack outlets catering to high-end consumers, specialty stores selling local and niche products, as well as general snack shops offering mainland brands, are also said to be trading profitably.

Visits to the Beijing market found that a large number of specialty snack shops have set up within the supermarket areas of a number of medium-range department stores. Such outlets are typically selling local branded products from Sichuan, the Northeast and Xinjiang. These specialty shops mainly offer meat and poultry products, nuts, deep-fried food, confectionery and bean products.

At one Sichuanese local snack shop, for instance, a range of traditional snacks, including hot and spicy beef and diced rabbit meat, was for sale in small vacuum-sealed packs. The store also offers potted pickled chilli, air freighted to Beijing in whole pots. Despite the fact that such items are priced far higher than they would be back in Sichuan, they sell well, mainly to migrants now resident in Beijing. For the shop owner, this clustering of regional brands can help build word-of-mouth rapidly, attracting new buyers, while also building a loyal customer base.

In and around Beijing's commercial districts, it is easy to identify a variety of snacks within many of these specialty stores. The snacks on sale include regional delicacies from across the country, such as dried coconut from Hainan, crispy fried dough from Tianjin, teacakes from Jiangxi, sweetened dried fruit from Beijing and chickens' feet from Chongqing.

According to a Mr Xiao who runs a general snack shop near Beijing's West 2nd Ring Road, apart from the Spring Festival period, summer is also a peak season for snack sales. As summer in northern China is hot, many office workers like to stay indoors in order to keep cool, with a substantial number of them enjoying snacks while they escape from the heat.

Photo: Imported wines: A snack shop staple.
Imported wines: A snack shop staple.
Photo: Imported wines: A snack shop staple.
Imported wines: A snack shop staple.
Photo: Small space, wide selection.
Small space, wide selection.
Photo: Small space, wide selection.
Small space, wide selection.

According to Xiao, young people now have distinct preferences when it comes to choosing snacks. Their favoured snacks not only have to be tasty, but must also have eye-catching packaging. Some young people also have more exotic tastes. The top-selling items in his shop are dried meat and poultry products, nuts and healthy cereals. He also said that many of his female customers favour items with cosmetically beneficial effects, such as gelatin dates (supposedly good for the skin), dried blueberries (good for the eyes) and low calorie slimming foods.

Leveraging on WeChat Marketing

As the leading consumers of snacks on the mainland are the "smartphone generation", online and mobile marketing has become very important. While different snack companies have different business objectives, making good use of new technology and innovative marketing tools has proved the key to success for many of them.

Photo: Digital delivery: A mobile snack app.
Digital delivery: A mobile snack app.
Photo: Digital delivery: A mobile snack app.
Digital delivery: A mobile snack app.

New entrants to the market could do worse than learn from the business model adopted by Ding Dong, a mobile snack shop operating via WeChat. This mobile outlet was established by a group of mainland university students at the end of last year. The shop's "snack meal" project attracted considerable attention at a business start-up competition earlier this year, partly thanks to its low market entry threshold. Overall, the main selling point of the service is its virtually instant door-to-door delivery offer, something that ensures busy students never run short of healthy snacks.

For investors looking at larger scale operations, it could be worth reviewing the marketing strategy adopted by Laiyifen, one of the mainland's more substantial snack store chains. The company is currently experimenting with an upgraded version of its all-channel retail strategy and has moved toward a more integrated business mode. This has included the launch of an online-to-offline (O2O) "click and collect" service, as well as an app that provides location-based services (LBS).

The increased use of smartphone and on-the-go internet access has also resulted in greater synergy across industry sectors. A number of traditional snack shops, for instance, are now working with logistics companies to deliver live and fresh gourmet foods. By leveraging on the logistics companies' platform and supply network, traditional shops can respond to customer needs quickly, improve their distribution reach and lower their costs.

In terms of future developments, there is seen as considerable scope for in-depth co-operation between retail chains and third-party logistics companies, especially with regard to sales projection, strategy formulation, sourcing, planning, inventory control and customer management. Such collaboration, it is believed, will allow both parties to capitalise on each other's specialisations.

Currently, in Beijing and Shanghai at least, companies adopting an O2O strategy are increasingly using crowdsourced logistics as their key delivery option, enabling them to offer "fast delivery within one hour". It is expected that this trend will be more widely adopted in the future.

Yuan Zhen, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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