Trends and Opportunities in Chinese Food and Drinks

Consumption upgrade is being seen over the entire alcoholic drinks industry. At this year’s Fair, the leading beer companies showed off their new products, such as Super X released by China Resources, and Wusu Weissbier by Carlsberg, to target the high-end beer market. Meanwhile, based on the feedback from baijiu manufacturers and distributors, mid-and-high-end baijiu clearly outperformed low-and mid-end products due to consumers trading up. The baijiu products with a price range of between CNY500 and CNY 700 were mostly promoted to underpin the premiumisation trend.

The various beverage manufacturers highlighted the growing number of new consumption occasions as a boost for sales. For example, plant-based protein drinks mainly target the breakfast occasion, rather than the traditional refreshment occasions. Likewise, while soy milk drinks are mostly promoted in foodservice channels, suppliers are actively exploring new opportunities in the on-premise setting, promoting the beverage as an ideal pairing with spicy food. Bottled water players are targeting new occasions by expanding into larger sizes that are more suitable for households and offices.

Due to the growing consumer focus on fitness all over China, and in response to the call for general health by the Chinese government, a number of pharmaceutical and dietary supplement companies such as North China Pharmaceutical, Beijing Tongrentang Pharmaceutical, and By-Health Corp., tapped into the beverage market by introducing health-relevant drinks. These products include energy drinks, sports drinks, and plant-based drinks, etc. The participation of these counterparts will further intensify competition in the beverage industry and also bring out new sub-categories in the beverages market, such as glucose drinks, for example.

In response to the individual needs of younger generations, innovations in beer and baijiu are emerging and booming. The 100-150ml pack size baijiu products, with their elegant package design, are being released to target consumers between 20 and 30 years old who seek personalised products. On the other hand, domestic craft brewers seek to cultivate young people’s drinking habits by launching a series of craft beers, embodied with localised elements and innovative flavours to fulfill these personalisation requirements.

New retail concepts, developed by leading e-commerce players such as JD and Tmall, as well as by large retailers like Suning, aim to blur the boundaries between online and offline. They are making inroads into physical stores by seeking business partners and transforming existing independent outlets into digitised chains. The innovation in online-to-offline distribution strategy may make the two retail channels much more integrated in the future.

Offshore M&A opportunities

Local craft beer and baijiu companies (especially mini baijiu brands) experienced dynamic growth in the last three to five years and will continue to expand their current territorial foothold. This presents immense opportunities for international brewers and liquor companies planning to enter the Chinese alcoholic drinks market and gain a foothold.

ECA financing opportunities

The entry of pharmaceutical and dietary supplement companies into beverage industry will generate huge demand for imported equipment and advanced bottling and packaging technology.

International business opportunities

In light of the premiumisation trend, the demand for high-quality and import products is greatly increasing. This provides opportunities for import companies to tap into the Chinese market. For instance, the increase in domestic craft microbrewers represents the growing demand for imported craft/speciality malts.

Packaging & logistics industry opportunities

New retail accelerates the integration of online and offline and stimulates consumption. It will bring about increased demand for packaging and logistics in China. Packaging and logistics companies are expected to quickly and efficiently expand current capacity through acquisitions and financing, to cater for the changing demand from downstream industries.

Author: Stacie Wan