Monthly Digest: China Food Sector Review | Nov 2024

Contents
Market Condition
Company Dynamics
E-commerce
Regulatory Compliance

Market Condition

1. According to the 2024 China Import Development Report, China’s food import scale reached $217.13 billion in 2023, marking a 22.18-fold increase from $9.37 billion in 2001. China's share in global food imports grew from 2.06% in 2001 to 12.87% in 2023. Brazil, the United States, Thailand, Canada, Australia, Indonesia, and Russia are the main sources of China’s food imports.

2. On November 5, the 7th China International Import Expo (CIIE) opened in Shanghai. International and Chinese domestic food and beverage products were showcased, with a focus on health, sustainability, and localized innovation. For example, the a2® Milk Company introduced three new milk powders targeting consumers aged 50+, expanding its a2® family nutrition offering.

3. According to Nielsen IQ, China's fast-moving consumer goods (FMCG) market saw positive growth in Q3 2024. Online channels grew 14.3% YoY, and offline channels experienced a recovery of 0.7% YoY, driving overall channel growth of 5% YoY. Particularly, in the beverage category, online sales grew 11.3% YoY, and offline sales grew 7.4% YoY, leading to a 7.8% YoY increase in total channel growth.

4. Winwin Network, an offline retail data provider, reported that in Q3 2024, only refrigerated yogurt saw a 1.5% increase in sales across dairy products, while other dairy segments experienced varying degrees of decline. UHT white milk retained the largest market share at 36.81%, though it showed a slight decrease compared to the same period last year. Refrigerated yogurt and ice cream showed notable growth in market share.

5. Diglyceride has gained traction in the food sector due to its attributes of reducing post-meal fatty acid levels and preventing fat accumulation. Beyond being an ideal alternative to traditional edible oils, diglycerides can be incorporated into various food products that use large quantities of fats, such as baked goods and confections. For example, Jinlongyu has launched cooking oils featuring diglyceride as a key ingredient; NOWWA Coffee has launched a product combining diglyceride and low-fat milk to reduce 100 kcal per cup while maintaining good taste.

Company Dynamics

1. Coca-Cola has announced a restructuring of the reporting lines for its Costa Coffee and Innocent brands, moving them from Coca-Cola's Global Ventures division to its European division. In China, Costa’s coffee shop business will report to the European division, while its ready-to-drink (RTD) coffee business will report to the local operation division. According to Coca-Cola’s Q3 financial report, the company recorded revenue of $11.9 billion, a 1% YoY decline, but exceeding market expectations of $11.6 billion. Net profit reached $2.85 billion, down 8% YoY.

2. Nestlé has announced that its water and premium beverages business will be spun off into a separate unit starting January 1, 2025. This includes brands like Perrier, S.Pellegrino, Acqua Panna, and Nestlé Pure Life. The specific impact on Nestlé’s water business in China remains unclear. According to Nestlé’s Q3 2024 financial report, the company recorded sales of CHF 67.1 billion for the first nine months of the year, a 2.4% YoY decline, with organic growth at 2% YoY. The internal growth rate was 0.5% YoY, as a result of weaker consumer demand and inventory reduction measures in Q3.

3. The a2 Milk Company has signed a strategic cooperation agreement with CSFA Holdings Shanghai Co., Ltd. to establish a global R&D center in Shanghai, focusing on a2 protein-related scientific research and product innovation, and exploring the potential for localized production in China.

4. PepsiCo has entered into a long-term strategic framework agreement with Sinopec Star (Beijing) New Energy Development Co., Ltd. for the procurement of biogas and future collaboration in renewable energy. In August 2024, PepsiCo secured 15 million cubic meters of biogas through the Shanghai Petroleum and Gas Exchange. It is also reported that all of PepsiCo's food factories in China now operate on 100% green electricity.

5. China has become one of Samyang Foods' key overseas markets, accounting for 30% of the group's global business volume. In 2023, sales of Samyang Buldak Ramyeon in China surpassed 257 million units. As of October 2024, sales of this product line have grown by 30% YoY in China, exceeding 300 million units. It is expected that sales in China will exceed 400 million units by the end of 2024.

6. Chi Forest has launched its sleep aid functional beverage, which features Nagqu 4580 (probiotics) and 99% high-purity GABA (gamma-aminobutyric acid). The products come in convenient small-sized packaging, targeting business trips, travel, and home use. According to the China Sleep Association’s 2024 China Resident Sleep Health White Paper, 59% of Chinese people suffer from insomnia. Given the large unmet demand, the sleep aid sector presents significant growth opportunities.

7. Fresh Hippo has launched prune juice which features Xnjiang fresh prune flavor and nutrition through high-pressure processing (HPP) technology. In recent years, prune juice has gained popularity as a functional beverage due to its digestive benefits, and is highly sought after by consumers suffering from irregular diets and constipation.

8. Luckin Coffee has signed a new Memorandum of Understanding (MOU) with APEX-Brasil, significantly expanding its coffee bean procurement. Following a June 2024 agreement to purchase 120,000 tons of Brazilian coffee beans over two years, Luckin plans to increase its purchases by an additional 120,000 tons. From 2025 to 2029, Luckin is set to procure a total of 240,000 tons of coffee beans from Brazil, valued at RMB 10 billion, marking Luckin’s largest coffee bean procurement plan.

E-commerce

According to Syntun, the Gross Merchandise Volume (GMV) for the 2024 Double Eleven Shopping Festival reached an impressive 1.44 trillion yuan, with a 26.6% YoY increase. Comprehensive e-commerce (excluding Taobao Live) GMV totaled 1.11 trillion yuan, up by 20.1% YoY. The top three platforms by GMV were Tmall, JD.com, and Pinduoduo. Live-streaming e-commerce maintained its strong growth, surging 54.6% YoY to 332.5 billion yuan, with Douyin leading the pack, followed by Kuaishou and Taobao Live.

Regulatory Compliance

1. On November 11, 2024, China State Administration for Market Regulation released the Key Points and Determination Principle of Clinical Trial On-Site Inspection for Food for Special Medical Purposes (FSMP) Registration, which specifies the examination details of on-site inspection for FSMP clinical trial and situations where the inspection will be failed. More information on ChemLinked.

2. On November 12, 2024, General Administration of Customs of China (GACC) issued a notice announcing further adjustments to the catalog of imported foods subject to pre-import quarantine approval. According to the notice, quarantine approval is no longer required for cured meat products, casings, dairy products, aquatic products, and edible bird's nests intended for human consumption, effective November 12, 2024. More information on ChemLinked.

Disclaimer: All images used in the article are from the Internet.