13 June 2014
China's packaged food market: consumer preferences and spending patterns (Executive summary)
Urbanised lifestyles and rising incomes are fuelling the growth of China’s packaged food market. The drop in confidence of some consumers in mainland brands may offer opportunities for Hong Kong and international brands in expanding into the mainland market. The current survey aims at gauging the changes in consumer behaviour, concepts and trends of the mainland packaged food market. In so doing, it will serve as a reference for Hong Kong companies setting their sights on the mainland market.
The survey was conducted by questionnaire in November 2013 on 1,600 consumers in eight mainland cities, namely Beijing, Shanghai, Guangzhou, Chengdu, Wuhan, Shenyang, Nanjing and Changsha. In addition to the questionnaire, six focus group sessions were carried out, two each in Guangzhou, Shanghai and Changsha. The results of the survey are summarised as follows:
With the growing incomes of mainland consumers and a quickening in the tempo of life resulting from urbanisation, consumer demand for packaged food has been increasing. 81% of the respondents in the survey agree that “I am now buying more packaged food than before.”
Mainland consumers’ concerns over food safety and quality are rising rapidly and they tend to use brand to judge quality. 62% of the respondents say they “prefer buying packaged food of famous brands even if prices are higher.”
Consumer concern over health is growing continuously, with 70% of the respondents agreeing that they “are now buying more than before food that is advertised as healthy even if prices are higher”, while 75% say that they will read package information carefully when buying packaged food.
Consumers are increasingly “sophisticated” and more demanding on packaged food. They are trying out a lot more new products. 60% of the respondents like to try out packaged food of different types/flavours. Some consumers would also buy exotic or novel food to reward themselves or please their family and friends, or use such experiences as talking points or to show off at social functions.
Brand halo effects are apparent among consumers. In other words, because a famous brand is from a certain place, consumers tend to have greater awareness and positive perception towards products of the same category from that place. 60% of the respondents agree that they “will be influenced by certain famous imported brands and become more interested in buying products of the same category from the same place.”
The pursuit of food safety is driving people to buy more imported packaged food. 58% of the respondents agree that “I am now buying more imported packaged food than before,” with the percentages of respondents from Shanghai and Guangzhou agreeing with this statement significantly higher than in other cities.
As far as packaged food meant for children and social functions is concerned, the majority of respondents are willing to pay a premium to get higher quality products. 78% of the respondents agree that “I am more concerned with quality when buying food for my children, even if prices are higher than those of similar products”, while 72% of them agree that “for packaged food for consumption at social functions, I am more inclined to buy high-quality or distinctive products even if prices are higher than those of similar products.”
67% of the respondents agree that “I am easily attracted by exquisite packaging to buy food that I have never tried before.” It is worth noting that “piggyback branding” by imitating the packaging of famous brands will be resented by consumers. Some consumers may even be skeptical about the quality.
Supermarkets/hypermarkets are the main retail channels for packaged food. In buying packaged food for regular meals, 99% of the respondents usually do so in supermarkets/hypermarkets.
Among cereals, oils and dried produce, olive oils have posted the biggest gain in sales. Among the higher-income groups, the mention rates of consuming non-Chinese cereals and oils (such as spaghetti) are higher; the same is true for younger age groups.
For convenience food, 68% of the respondents agree with the statement “I am easily attracted by the new flavours of convenience food”. Though the proportion of those buying Western/exotic food is not very high, the growth in sales is the highest.
As for condiments and sauces, there are indications that the consumption of organic condiments, exotic condiments and sauces and high-end condiments and sauces is growing faster. 76% of the respondents agree that “as I don’t often cook at home, I prefer buying condiments and sauces in small packets”.
Among snack foods, biscuits and cakes are bought most often. 83% of the respondents agree with the statement “I love to try out and buy snacks of new flavours.” The price sensitivity of snack foods is relatively low, with 70% of the respondents agreeing that “as long as they are delicious, I will keep on buying even if they are more expensive than similar products.”
Among dairy products, the sales of yogurts/lactic acid drink products have seen the highest growth. Though the buying rate of cheese and butter products is relatively low, sales are trending up. In addition, 45% of the respondents agree that “I am now buying more imported UHT milk than before.”
Mouthfeel and taste, brand reputation and ingredients are the main considerations when respondents shop for different types of packaged food. The three main channels through which respondents obtain information of new products include advertising (such as TV, internet, newspaper, magazine, outdoor, bus, subway, escalator, direct mail), shelf displays in supermarkets as well as in-store promotions in supermarkets (such as free tasting, LCD video advertising display, promoters’ recommendation).
34% of the respondents have shopped for packaged food online. Among them, the average frequency of online shopping for food is 1.52 times per month, and 79% of them say that they have bought snacks. 78% of them spend Rmb51-200 in a single purchase of packaged food online, with an average single purchase amount of Rmb128.
84% of the respondents have bought packaged food as gifts. Giving gifts to friends and relatives is mostly done at private occasions, the average budget being Rmb299 for each gift. By comparison, giving gifts at business occasions is much less frequent, but with an average spending of Rmb576 for each gift, the budget is higher.
Although many Hong Kong manufacturers have moved their production bases to the mainland, 57% of the respondents have more confidence in Hong Kong brands. Moreover, 72% of the respondents agree that Hong Kong is a cosmopolitan city that offers both Eastern and Western cuisines. Hence, the Hong Kong platform can be better leveraged for launching and promoting packaged food in the mainland market. In addition, the following key points will help towards expanding into the mainland market:
As the market for imported food for self-consumption continues to grow, other than famous brands, attention can also be paid to opportunities for new, mid-range brands;
To address consumer concern over health, one can consider launching products with different health elements and provide detailed information on the products;
Make good use of Hong Kong’s advantages in having better quality/service management standards so as to build brand image in the minds of mainland consumers;
For packaged food types which are frequently consumed, there is a need to periodically introduce new flavours in order to reinforce brand stickiness;
Leverage the brand halo effects in introducing new foreign brands. A famous brand from a certain place can bring about consumers’ greater awareness and positive perception towards products of the same category originating from the same place;
In price positioning, price premium should not be excessive even for high- quality products. This is particularly so for packaged food of high consumption rates because of its relatively high degree of price sensitivity. Consumers’ willingness to pay a premium would be higher though for food targeted at children or food consumed at social functions;
Small packets and packaging accompanied by cooking instructions or food pairing guides are well received by consumers. “Piggyback branding” by imitating the packaging of famous brands is to be avoided at all costs;
Advertising is an important channel to establish brand image and attract first-time customers. However, from a cost-effectiveness perspective, attention should be paid to in-store demonstrations and sales promotions in supermarkets, as well as word-of-mouth among friends, relatives and colleagues.