INSIGHTS
Monthly Digest: China Food Sector in January 2022
BY Ye ChenJan 29, 2022

Market events

1.       On January 6, Douyin e-commerce announced a new policy that creators should file products three working days before launching marketing campaigns on Douyin.

2.       The Hurun Research Institute released the "2021 Hurun China Top 500", which lists China's top 500 non-state-owned enterprises and ranks them according to their market value or valuation. It is reported that the threshold to join the list of China has increased by 9 billion yuan (39%) to 32 billion yuan, a record high. Many food and beverage companies such as Haitian Flavor Industry and Nongfu Spring are on the list. Among them, the value of Genki Frost, the new-rising sparkling water company, is 95 billion yuan.

Company dynamics

1.       Sparkling wine brand Chuqi (初气) completed an A-round of financing, invested by Chinese snack giant LYFEN.             

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Chuqi’s product

2.       Multiple food brands announced to raise products’ prices in China, including coffee brand Tim Hortons, bubble tea brand Sexy Tea, instant noodle brand Nissin, etc.

3.       Bird’s nest brand Yan Palace (燕之屋) applied for an IPO on Shanghai Stock Exchange. If its application succeeds, it will become the first stock in bird’s nest industry. As a traditional health food, bird’s nest is always popular among Chinese female consumers, whose market size in 2020 reached 40 billion yuan with a YoY increase rate of 33%. Most bird’s nest consumed in China is imported from Southeastern countries, especially Indonesia.

4.       Plant-based food brand Starfield (星期零) completed B-round financing, securing 100 million dollars. It has cooperated with over 100 brands and entered more than 14,000 offline stores in China.

5.       McDonald’s China recently launched its Spring Festival marketing campaign. This campaign promoted 10 limited products for Spring Festival, cooperated with China Mail to launch a stamp for Year of the Tiger Zodiac, and released an electronic red envelope cover for the Year of the Tiger on WeChat.

6.       Chinese instant noodle giant Jinmailang (今麦郎) unveiled a new brand named Raven Style (拉面范). This new brand’s biggest selling point is 0 oil, low fat, low calorie, and no need for cooking. As low fat and low calorie became a new popular lifestyle among Chinese consumers, brands from different categories fall over each other to follow the trend to develop new products.

7.       Beverage brand NOD gained a new financing round, making its valuation exceed 100 million yuan. It was founded in 2021 and launched its first product, No Ordinary Water, in the same year. This brand also uses “0 sugar, 0 fat, and 0 calories” as the main selling point.

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NOD’s products

8.       Plant-based almond milk brand GLEANERS (即杏) gained a 10 million yuan investment. At present, GLENAERS is promoting its products by cooperating with coffee and bubble tea chain stores. Unlike oat milk and coconut milk, which are already popular in China, almond milk is still a niche category in the plant-based milk sector, so GLEANERS is a pioneer in this sector.

9.       Functional food and beverage brand OriLab (源究所) gained two rounds of investment within half a year, securing tens of millions of yuan. Founded in May 2021, OriLab focuses on researching and developing soft drink products targeting various sub-health problems. Last December, it officially launched its first product focusing on eye protection, blueberry anthocyanin juice.

10.   Peter Yu, chairman of Tim Hortons China's board of directors, said that the growth of the "pioneer" Burger King in China made Tims Coffee decide to explore the Chinese market. As the company expands, Tims Coffee will focus on four urban agglomerations - Beijing, Shanghai, Chengdu, and Shenzhen, and plans to increase the density of stores in these markets to reduce marketing and distribution costs as the number of stores increases. In addition, Tims Coffee launches new products in China every 14 days on average, many of which are limited-edition offers designed to promote the brand.

11.   Chinese cheese brand Milkground (妙可蓝多) started to build its Shanghai Cheese Innovation Factory. After the project is completed, Milkground will have the largest cheese production base in China. It is reported that the base targets to localize the application of cheese and will mainly do R&D of cheese products based on Chinese family’s dining habits, such as 0-added cheese sticks, high-calcium cheese slices, children's growing cheese cups, etc.

12.   The domestic mid-to-high-end egg brand Yellow Swan has completed the C-round of financing with a scale of 600 million yuan, setting a record for the largest amount of financing for egg brands in recent years. Yellow Swan has entered more than ten large and medium-sized cities such as Beijing, Shanghai, Guangzhou, Shenzhen, etc. It is also available in various channels, such as Freshippo, JD.com, Tmall, Dingdong, boutique supermarkets, KA, and community fresh food supermarkets.

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Yellow Swan’s products

Interesting & noteworthy new products

1.       Danish cookie brand Kjeldsens released a new gift box for the Chinese New Year. In the past two years, under the "Don’t travel during the Spring Festival" proposal, people compromised to have/organize small gatherings. Kjeldsens captured diversified consumption scenarios and thus expanded its product portfolio. In addition to the 908g gift box, there are also 125g small packages for small-scale gatherings.

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Kjeldsens’ Chinese New Year gift box

2.       KFC and POP MART jointly launched a set of fashion toys for KFC China's 35th-anniversary. Users can get a DIMOO blind box by purchasing a 99 yuan DIMOO family bucket package at KFC stores. Fashion toys in the blind box are all inspired by KFC’s food, with a total of 7 types, including 6 regular types and 1 hidden type. These new products were sold out within about an hour in some cities. On second-hand platforms, the price of the hidden type reached more than 300 yuan.

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KFC & POP MART’s blind box

3.       On January 12, Chinese dairy brand SATINE unveiled its golden zodiac bottle for the Year of the Tiger. Multi-layer PET technology is used for the packaging material of the bottle uses. To achieve a better visual effect, the bottle also specially uses a green gradient bottle embryo, and a tiger head embossed design.

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Satine Zodiac Bottle

4.       Ice cream brand Chicecream launched a limited-edition ice cream gift box for the Year of the Tiger, which contains four new flavors: Moshang Ma (sesame milk), Qingping cheese (sour cream cheese), Nuo Ru Nian (glutinous rice and red bean) and Qiao Le Ling (milk chocolate). These four names are also related to Chinese fashion.

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Chicecream’s new products

5.       In response to the lack of cherries yogurt on the market, Lepur has developed a cherry and dark chocolate flavored Greek yogurt. This new product has the sweet and sour taste of cherries, combined with the satisfaction of chewing the pulp. In addition, black chocolate is specially added to offer more nutrition and better flavor. At present, the new products are on the shelves of Lepur’s WeChat mini-program, with the initial discounted price of 15 yuan/cup.

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Lepur yogurt

6.       Coca-Cola launched a Golden Tiger Fortune Gift Box on its Annual Membership Day on January 19. The Gift Box contained six limited packaging cans for the Year of the Tiger, displaying the image of a tiger family.

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Coca-Cola Golden Tiger Fortune Gift Box

Some impressive data

1.       In 2021, China’s GDP reached 17.7 trillion US dollars, ranking the second globally, an increase of 8.1% over the previous year. The total retail sales of consumer goods for the year were 44,082.3 billion yuan, an increase of 12.5%. The total import and export of goods in the whole year were 39.1009 trillion yuan, increasing 21.4% yearly.

2.       At the end of 2021, the national population was 14126 million, an increase of 480,000 over the previous year. The net increase in population in 2021 is the lowest in the near 60 years (since 1962).

The population birth rate in 2021 was 7.18‰, falling below 10‰ (1%) for two consecutive years, a new low in the past 72 years (since 1950).

3.       Among the 842 investment and financing events in 2021, two major tracks are investors’ focuses: food-related track and beauty and personal care track. Among them, the financing amount of the food and beverage track accounted for almost 50% of the total.

4.       According to data from JD Supermarket, among low-sugar and low-calorie foods in 2021, cakes grew by nearly six times year on year. In the beverage market, "ingredients and efficacy" became the critical growth point. The following categories had the highest YoY growth rates in the turnover: active lactic acid bacteria beverages (205%), high dietary fiber oat drinks (155%), natural spring water brewed tea (108%), plant-based milk (77%), and chia seed brewed cereals (51%).

Regulatory compliance

1.       General Administration of Customs of China (GACC) has been implemented a quarantine system for entry-exit animal and plant on the basis of "Law on the Entry and Exit Animal and Plant Quarantine" and the "Implementation Rules", as well as other bilateral agreements. On December 29, 2021, GACC announced to solicit public opinions for the draft of "Administrative Measures for Entry Animal and Plant’s Quarantine Access". The Measures summarized and kept the current provisions on animal and plant quarantine with no substantial change, and proposed to introduce the legal concept of "quarantine access" and legalize the implementation of quarantine access.  More details on ChemLinked.

2.       On January 7, 2022, SAMR unveiled the announcement regarding strengthening the quality and safety supervision of solid beverage, which will be implemented on June 1, 2022.

Compared with the exposure draft issued on June 15, 2021, the major changes lie in that:

  • The final version clarified that protein solid beverage, plant solid beverage, solid beverage for special uses, flavored solid beverage, and the minimum sales unit of solid beverage containing edible fungus should additionally indicate the warning that “this product cannot replace special food including food for special medical purposes, infant formula food and health food”. The color of the word should be obviously different from its background.

  • Any message like “this product is suitable for certain groups including the minors, the elderly, the pregnant and maternal women, the patients and population having nutrition risks or suffering malnutrition through words or graphics” are not allowed to be shown or implied on the label and in the specification and promotional materials. Notably, “the pregnant and maternal women” is newly included in the latest announcement.

3.       As per Food Safety Law, China implemented the catalogue management system for health food functions, and released the corresponding Administrative Measures to regulate the formulation process, inclusion criteria and adjustment of health food functions in 2019. Later in 2020, China State Administration for Market Regulation (SAMR) released Health Function Catalogue Allowed for Health Food Claims Non-nutrient Supplement (2020 Draft) (hereafter referred to as the Catalogue) and a series of supporting documents for public comments. On January 13, 2022, SAMR opened the new drafts of the Catalogue and four supporting documents for public feedback. Any comments can be sent to baojiangongneng@cfe-samr.org.cn prior to February 12, 2022. More details on ChemLinked.

Ye Chen
ChemLinked Research Analyst
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