China has been gradually opening up its trade market to the world since the 1970s, but in the recent years since the COVID-19 pandemic, progress has been particularly rapid in the food and beverage sector.
This has been clear both in terms of Chinese grocery stores such as MIX and Scarlett as well as foodserice brands like Mixue and Haidilao, all of which have seen nationwide expansion in various South East Asian markets.
According to local industry experts, there are multiple major factors driving this shift, not least a ‘void’ left in various Asian markets after multinational brands such as Carl’s Jr and Tesco either reduced or retired operations in these markets.
“On the one hand, Chinese food brands are very keen on global expansion today because domestic competition is rapidly intensifying, and many of these brands see going and growing overseas as their next growth curve,” China’s Food and Beverage Innovation Forum (FBIF) Founder Isabella Hsu told FoodNavigator-Asia.
“On the other hand, the time is also right - China’s advantage in terms of supply chain and product innovation are increasingly gaining recognition all over the world.
“There are also a number of international brands which have been shrinking their operations or layout in [markets such as Asia], which has essentially opened up ‘brand space’ for Chinese companies to take advantage of.
“We are also definitely seeing many examples of collaboration and partnership efforts blooming between Chinese enterprises and Interntaional firms, building successful business ecosystems overseas, so the time is right.”
That said, in terms of innovation, Hsu also believes that a lot more elements need to be considered for the China market to ensure that local consumers are receptive to new products, given the wide variety of innovations they are already exposed to locally.
“”The three most important factors driving new consumption locally are flavours, packaging and content communication, within which there is a strong emphasis on sensory experiences and emotional connections,” she added,
“What this also means is that the influence of social media on brand awareness and purchasing decisions is more important than ever before, so content seeding strategies are a core essential pathway for brands to reach consumers.
“At the same time, consumer demand for healthier and more diversified products is also continuing to rise, with categories such as sugar-free, functionality and plant-based all gaining traction.”
Main challenges for China’s food firms
In addition to the trade war going on between China and the United States, Hsu highlighted that there are many basic challenges that local firms need to overcome in order to become truly global institutions.
“The main one would be cost pressures for raw materials, labour and supply chain continuity, weak consumption in certain categories, and international trade uncertainty,” she said.
“The only way to survive in this rapidly evolving Chinese market today is to be proactive and versatile, willing to step out of the local comfort zone to develop cohesive strategies to explore the international food market.
“Moving forward, we see that the edge lies with product brands which are ‘deep and specialised’ in a certain area, which have an advantage over brands that are ‘big and generalised’- meaning that there is now a real window of opportunity for the specialists in various food categories to stand out both on the local and global stage,”
