China Daily

Leading snack companies go upmarket

- By CHAI HUA in Shenzhen, Guangdong grace@chinadaily­hk.com

Leading Chinese snack firms are turning to high-end products, as a way not to become embroiled in a profit-hitting price war, or compete with imported products, and instead meet consumers’ more adventurou­s demands.

The Chinese snack industry has entered a fast lane of developmen­t. Its gross output value is expected to grow by about 20 percent a year, hitting 3 trillion yuan ($444 billion) by 2020, according to a report released in December by the Circulatio­n Industry Promotion Center, which is affiliated to the Ministry of Commerce.

However, there is still a lack of local brands with sales volume of above ten billion yuan at the highend of the market.

“The competitio­n in general categories is fierce, but the high-end market is almost vacant,” said Yang Hongchun, founder and chairman of the Chinese snack chain Bestore Group Co Ltd.

Establishe­d in 2006, the firm has already sold over 7 billion yuan of products by 2017, and has ranked first in the country’s snack market every year since 2015.

Sales of its seafood snack, one of its high-end products, have increased seven times from 2015 to 2017.

Seeing potential, on Jan 7 the firm launched its new strategy of focusing on the high-end. About 100 new high-quality products are expected to hit the market soon, most being traditiona­l Chinese snacks, such as spicy lotus root and dried jujube.

One example is a 398-yuan gift package, designed like a traditiona­l Chinese imperial cuisine box, and filled with nuts, jerky, dried fruit and seafood for the upcoming Chinese Spring Festival, when it is usually peak sales season for snacks.

On its first day in the market, more than 20,000 boxes were sold.

To help add to the premium feel, Bestore has enlisted singer Kris Wu, endorser of other luxury brands such as Louis Vuitton and Burberry, as its advertisin­g ambassador.

Yang said the strategy is to stand out among homogeneou­s competitio­n, avoid a price war, and more importantl­y, to meet consumers’ growing demand for healthy leisure food.

“We formulated detailed standards for each product and cooperate with universiti­es to jointly develop high-standard brands, process chains and consumer experience­s,” he added.

His target is to produce quality snacks like those made in Japan and South Korea. To meet the internatio­nal standard, the Hubei-based firm also purchases raw materials globally. So far, its 1,000 kinds of snacks use ingredient­s shipped in from 32 nations.

Sales are also internatio­nal. Its products have been sold to Chinese communitie­s in 37 countries and regions so far, including the United States, Australia and Europe.

Yang Yinfen, chief executive of Bestore, admitted the majority of Chinese consumers believe imported snacks are better. However, Yang is ambitious for Bestore to shrug off the misconcept­ion and become an ambassador of Chinese snacks both domestical­ly and overseas.

Another leading snack firm, Three Squirrels Inc, is also devoted to upgrading its products and overall brand image.

The internet-based brand had a record 682-million-yuan daily turnover during the Singles Day online shopping festival in 2018, but just a year before it was all very different.

For the 2017 event, sales stalled with almost no growth compared to 2016. Its founder and chief executive Zhang Liaoyuan blamed the diminishin­g demographi­c dividend.

Now the firm is shifting strategy, and focusing on a comprehens­ive upgrade. Zhang said Three Squirrels will innovate 20 to 30 percent of their products into distinctiv­e flavors.

Jerry Hua, senior manager of Food Supply and Integrity Service at PwC said that the primary consumer, buyers of snacks in China are middle-income females aged from 18 to 35, living in first and second-tier cities. They are more likely to be finicky and have stronger appetites compared with the last generation.

“That imposes accelerati­ng pressure on local brands to upgrade from price-centric to product differenti­ation-driven competitio­n,” he said, adding “and those who are left behind … will lose the game to attract the most desirable customer segments and improve profitabil­ity.”

However, he reminded snackmaker­s that “One of the key successful factors is digitaliza­tion and traceabili­ty throughout the entire supply chain, to ensure food safety and quality while enlarging production scale and expanding market coverage”.

“The sophistica­tion of suppliers’ sourcing and strategic management will be very critical to compete against multinatio­nal food companies as well,” he emphasized.

Internatio­nal food brands are expanding vigorously in China. The CIPC report shows the market value of China’s imported snacks in 2017 increased to more than $58 billion, with a year-on-year growth rate of 25 percent.

One of the key successful factors is digitaliza­tion and traceabili­ty throughout the entire supply chain, to ensure food safety and quality while enlarging production scale and expanding market coverage.” Jerry Hua, senior manager of Food Supply and Integrity Service at PwC

 ?? CHU LIN / FOR CHINA DAILY ?? A Bestore outlet is seen at a shopping mall in Wuhan, capital of Hubei province.
CHU LIN / FOR CHINA DAILY A Bestore outlet is seen at a shopping mall in Wuhan, capital of Hubei province.

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