May 16, 2022
Monthly Digest: China Food Sector in April 2022
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Market events

1.       On April 24, Tmall released its coffee merchant support plan, which expects to nurture more than 50 new coffee brands valued at more than 10 million yuan respectively. 90,000 offline cafes, coffee roasters, coffee importers are potential participants of this plan.

Company dynamics

1.       On March 29, Unilever held an online press conference to officially unveil the privilege of WALL’S Taicang factory being selected as a “Lighthouse Factory” in Taicang. It is the first “Lighthouse Factory” in the ice cream industry worldwide. The concept of "Lighthouse Factory" is jointly launched by the World Economic Forum and McKinsey & Company. The purpose is to select companies that have achieved fruitful results in the application and integration of cutting-edge technologies in the fourth industrial revolution and shape the future development of intelligent manufacturing.

Also, Unilever has invested in building another manufacturing site in Guangzhou, China. All these actions imply that Unilever has confidence in the Chinese market.

2.       In April, Korean coffee brand TWOSOME COFFEE closed its last three stores in China and withdrew from the Chinese market.

3.       On April 14, Chinese sparkling water brand Genki Frost signed an agreement with China Forestry Group to jointlybuild Genki Frost’s first carbon-neutral factory.

4.       Hyproca, a brand of Ausnutria, released its first infant formula for special medical purpose in China. This product is a lactose-free infant formula named Zhishu. There are few players focusing on infant formula for special medical purpose in the Chinese market, but the demand is quite great, making it a good opportunity for all nutrition companies.

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Zhishu

5.       Pet brand robin(肉垫) has gained its Angel round of financing. Founded in 2021, robin has released over 20 products, covering cat food, cat snack, cat litter box, etc. In terms of channels, it has entered Tmall and JD and over 3000 offline stores.

6.       Chinese domestic pet food brand singen was involved in a food safety scandal. Hundreds of cats were dead after feeding on their products. Before the scandal, this local brand had a good reputation and had 310,000 followers on Tmall. But now, it has lost over 60,000 followers within a week.

7.       Sparkling soda alcohol brand ZEYA gained an investment from Camus Yuanliu, a French Camus Wine Group subsidiary. Its products apply a gluten-free blending process to blend soda and vodka. Also, it uses a unique mixture of erythritol and stevia to replace sugar.

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ZEYA's products

8.       Chinese hyaluronic acid giant Bloomage BIOTECH acquired 51% market share of Beijing YEK Biotech. The latter is a high-tech company focusing on the development of collagen. The acquisition implies that Bloomage officially enters the collagen market.

9.       Health instant food brand LIHAOJI released its first batch of products, including one ramen noodles and two types of porridge. Positioning itself as health instant food, LIHAOJI targets young people who are too busy to cook for themselves. As most Chinese regard instant food as unhealthy food, LIHAOJI wants to change this stereotype.

10.   Frozen instant food brand Pengpengdai completed a Pre-A round of financing. Founded in 2020, Pengpengdai uses “microwave heating, ready-to-eat in the food packaging” as its biggest selling point. Its products are popular among generation Z for its convenience.

11.   Chinese snack giant Three Squirrels announced to stop the expansion of offline stores and will focus on improving the profitability of single stores. As a new consumer brand rising through online channels, Three Squirrels now is suffering from traffic loss and sales decline because consumers no longer consider it as a novel brand.

Interesting & noteworthy new products

1.       Coffee brand Luckin cooperated with traditional Chinese coconut milk brand YeShu to launch a coconut milk latte. This product soon went viral online and sold over 660,000 cups on the first day.

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Luckin & Yeshu's IP cooperation product

2.       Health food brand WonderLab released two collagen related products:

The first one is a fish collagen tripeptide drink, which contains innovative and revolutionary ingredient collagen tripeptide, the most minor unit structure of collagen, equivalent to 1/1000 of the molecular weight of ordinary collagen.

The second one is collagen milk shake as meal replacement. The milk shake contains milk protein MPC70, whey protein WPC80, soybean protein SPI90, and 5 g collagen peptides.未标题-1.jpg

Left: fish collagen tripeptide drink  Right: collagen milk shake

3.       Chinese dairy giant Guangming released high calcium freeze-dried cheese cubes. The new product has two flavors, the original flavor and the blackcurrant flavor, and its calcium content is about 2.6 times that of the pure milk of the same weight.

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Guangming's cheese product

4.       Chocolate giant Dove released its first biscuit product in China. Chinese chocolate market recorded a decline in recent years as people tend to choose a healthy snack, which means their demand for high-calorie snacks declines. However, people still have great interest in chocolate-flavored products, so many chocolate brands have crossed the border to enter other sectors, such as snack, bubble tea, etc.

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Dove's chocolate biscuit

5.       Canadian coffee brand Tim Hortons released a new product, freeze-dried coffee powder packaged in mini coffee cups and doughnuts-like cups. The packaging design is quite innovative and impressive.

image008-2.jpgTim Hortons' new product

6.       KFC launched a new drink named oil citrus and three lemons tea, which contains oil citrus and three kinds of lemon. Oil citrus is a new popular ingredient in the fruit tea market as many bubble brands are using it to develop new products.

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KFC's new product

7.       Freshippo cooperated with oat milk brand Oatly to launch a plant-based milk ice cream on International Earth Day to promote environmental protection.

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Freshippo & OATLY's IP cooperation product

8.       Chinese dairy giant Mengniu released a new functional food brand NOPA, with the first two products, low-fat milkshake and “good night” milk. The milkshake contains high dietary fiber and CLA glycerides, which can regulate lipid metabolism and is without sucrose. The milk contains GABA, a popular ingredient that can help people sleep.

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NOPA's products

9.       Coca-Cola released a limited edition of coke, Zero Sugar Byte. The new product has a "flavor of pixels". Inspired by the games Fortnite and the Metaverse, Zero Sugar Byte, designed to appeal to a younger generation of tech-savvy consumers, will be available in limited quantities in select countries in Latin America first and will be available in China on May 23.

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Coca Cola's new product

Some impressive data

1.       According to the latest report from Million Insights, the global instant coffee market is expected to reach US$ 98.7 billion by 2028, with a CAGR of 6.1% from 2021 to 2028. The Asia-Pacific region will have the highest growth rate, with a compound annual growth rate of 6.4%, mainly attributed to the growing demand for instant coffee and the significant growth of the beverage industry in the Asia Pacific region.

2.       Tmall New Product Innovation Center released the "2022 Electrolyte Beverage Trend Report". According to the sales data of various beverage categories on the Tmall from April 2021 to March 2022, functional beverages surpassed ready-to-drink coffee as well as fruit and vegetable juices with a growth rate of 38%, becoming the fastest-growing category.

Financial results

Nestle 2022Q1

1.       Sales reached CHF 22.2 billion, with 5.4% reported sales growth.

2.       Zone Greater China recorded 3.4% organic growth and 7.6% reported sales growth, supported by innovation, with market share gains in culinary, ready-to-drink coffee, and confectionery. Strong sales developments in most categories were partly offset by a sales decline in infant nutrition.

Danone 2022Q1

1.       Net sales reached €6,236 million in the first quarter, up 7.1% on a like-for-like basis.

2.       + 15.3% in China and North Asia led by Specialized Nutrition benefiting from a low base of comparison.

3.       In China, Infant Milk Nutrition posted mid-teens growth, benefiting from a low base of comparison, with good market share performance on both Domestic and International labels. By channel, domestic channels selling Chinese Labels grew mid-teens; International Labels sold in cross-border eCommerce platforms delivered very strong growth, largely offsetting the further decline of International Labels in indirect channels (Daigous, Friends & Family). Special Pediatric solutions and Adult Nutrition delivered strong double-digit growth, while Mizone registered a slight decline in the quarter, penalized by city-lockdowns recently implemented.

Yili 2021

1.       In 2021, the company achieved a total operating income of 110.595 billion yuan, a year-on-year increase of 14.15%, and a net profit of 8.732 billion yuan, a year-on-year increase of 23%.

In 2022Q1, the total operating income reached 31.047 billion yuan, a year-on-year increase of 13.47%, and the net profit was 3.508 billion yuan, a year-on-year increase of 24.08%.

2.       The infant formula business achieved 16.21 billion yuan sales, increasing by 25.08%. Its market share also improved by 1.4%.

Regulatory compliance

1.       On April 7, the Protocol to Upgrade the Free Trade Agreement between New Zealand and China came into effect. After that, the "fast customs clearance of perishable goods" clause will help reduce the deterioration and loss of fresh and live products, which greatly benefits New Zealand's seafood exports; by 2024, New Zealand's dairy exports to China will enjoy zero tariffs.

2.       On April 11, Ferrero China responded to the news reports about the recall of Ferrero’s chocolate product Kinder Tricky Eggs, suspected of being linked to salmonella. Ferrero China reiterates that the recall scope only involves products made by the factory in Arlon, Belgium. All Kinder Tricky Eggs sold in China are manufactured by Ferrero’s local factories in China, thus not affected by the Salmonella-linked recall.

3.       On March 31, 2022, China National Center for Food Safety Risk Assessment (CFSA) opened 17 food-related national standards for public feedback, involving food additives, heavy metals and microbial testing methods. More details on ChemLinked.

4.       On April 15, 2022, China National Center for Food Safety Risk Assessment (CFSA) issued a notice to open three new food additives for public consultation, including one enzyme preparation, one nutritional fortifier and one food additive with expanded application scope. More details on ChemLinked.

5.       On April 22, 2022, China National Center for Food Safety Risk Assessment (CFSA) released a notice to open three food-related products for public comments, including one food contact material (FCM) additive with expanded usage scope and two new varieties of FCM resins. More details on ChemLinked.

Ye Chen
ChemLinked Research Analyst
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