Jun 02, 2022
Monthly Digest: China Food Sector in May 2022
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Market events

1.       United Nations released World Economic Situation and Prospects as of mid-2022. The document shows that the world economy is projected to grow by 3.1 percent in 2022, marking a downward revision of 0.9 percentage points from the previous estimation. The broad-based slowdown of the global economy will undermine the full, inclusive, and sustainable recovery from the pandemic. This slowdown and the war in Ukraine triggered sharp increases in food and fertilizer prices.

2.       Multiple e-commerce platforms, including Tmall, Pinduoduo, JD, etc, started marketing campaigns for 618 shopping festival. The shopping festival is one of the most significant shopping festivals in China, which usually begins in mid-May and lasts for one month.

3.       Recently, JD Worldwide Fresh Food Supermarket was officially launched. The first batch of online products includes Belgian biscuit ice cream, British vegetarian convenience dishes, Japanese tempura king shrimp, and other overseas products.

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JD Wroldwide Fresh Food Supermarket

Company dynamics

1.       Chinese snack brand Three Squirrels closed over 300 offline stores in the recent two years and reduced 200 SKUs. As a brand rising from e-commerce, it used to achieve one billion yuan sales in 2019, but its sales recorded a rapid decline in recent years.

2.       China dairy giant Yili is nurturing a pet food brand named one on one. It seems that the Chinese pet food market will welcome another powerful competitor.

3.       Nestle China’s business activities in May:

It entered the oat milk market by releasing two oat milk products. "Nestle Oatmeal Barista Edition" supplies B-side catering merchants, and "Nestle Super Plus Oat Milk" mainly focuses on C-end channels. In 2020, China's oat milk’s market size reached 1.75 billion yuan, with a year-on-year growth rate of 153.6%. In 2021, the market size also doubled, with a year-on-year growth rate of 141.7%.

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Nestle's oat milk products

Nestle’s newly acquired plant-based nutrition company Orgain released a new oat milk protein powder product.

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Orgain's products

Nestle’s pet food brand Proplan launched a new product named PRO PLAN LiveClear. This product can reduce human allergic reactions to cats by adding natural antibodies to allergy-triggering components in cat saliva.

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Proplan's products

4.       The release of new GB standards for infant formula has triggered the Chinese infant formula industry reform. Higher standards and stricter requirements have further promoted healthy competition in this industry.

Chinese infant formula giant Feihe launched another two goat milk powder products and upgraded three old goat milk powder products, implying Feihe’s further expansion in the goat milk powder business.

Another Chinese infant formula giant Junlebao entered the ultra-high-end infant formula market by focusing on lactoferrin. It launched three new brands, Quanzhenai, Zhenweiai, and Lezhen, in this sector.

Another two Chinese infant formula brands pay more attention to the organic infant formula sector. Beingmate launched its first organic A2 infant formula product, and Synutra also launched its first organic infant formula product with two organic certificates from China and the EU.

5.       Chinese luxury Baijiu brand Maotai officially released its ice cream product with two tastes, original and vanilla, priced at 39 yuan/unit. This product was sold out within 51 minutes after being launched and achieved 2.5 million yuan sales.

According to China Green Food Association, the Chinese ice cream market is witnessing rapid growth, whose market size exceeded 160 billion yuan in 2021.

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Maotai's ice cream

6.       Danone concluded its partnership with Chinese dairy giant Mengniu by buying back Dumex. In the meantime, Mengniu will buy Danone’s 20 percent interest in joint ventures which primarily produce and sell chilled yogurt and dairy-based products in China and Danone’s 25% stake in milk powder maker Yashili.

7.       Oreo Biscuits announced the lifelong sponsorship of two giant pandas, Oreo and Little Oreo, in Chengdu Research Base of Giant Panda Breeding. This sponsorship aims to arouse young consumers' attention to rare animals such as giant pandas and their awareness of ecological environment protection and to pass on the brand spirit of "having fun together" to fans through giant pandas. In fact, many big brands sponsored giant pandas in China, including Coco-Cola (China), Microsoft (China), Fissler China, KFC China, etc.

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Pandas sponsored by Oreo

8.       Chinese coffee chain market welcomes another crossover competitor, LINING, China’s premier sports brand. It registered a trademark Ning Coffee. The competition in the coffee market is becoming severe.

9.       Two plant-based brands, v2food and Beyond Meat announced cooperating with the retail brand Lawson. Their plant-based products will enter over 2300 Lawson convenience stores in Jiangsu, Zhejiang, and Shanghai.

Another plant-based brand STARFIELD choose to work with high-end supermarket chain brand Sam’s Club. Two products have entered all Sam’s Club’s offline stores.

10.   Wine brand Wimo gained a new round of financing with millions of dollars. Founded in 2021, Wimo launched its first pull-can sparkling wine product in the same year. With a focus of providing convenient wine for young people, this brand is mainly distributed in offline channels and has entered more than thousands of restaurants, bars, and supermarkets.

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Wimo's products

Interesting & noteworthy new products

1.       Nongfu Spring released new packaging for its baby water products. The new packaging prints five classic Disney characters on the bottle, including Dalmations, Lion King, Dumbo, Bambi, and Mary. As a product designed for children, baby water with the new packaging has gained more attention from its target group.

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Nongfu Spring's baby water

2.       7UP launched six new limited edition can designs for its products. Using sports and the sun as inspiration, 7UP uses six fresh and cool illustrations to celebrate the summer vibe.

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7UP's new packaging

3.       Healthy food brand GNC launched a new product Daily Nutrition Bag. The new product is a box of 30 sachets, each containing five capsules, two capsules of basic nutrition and three capsules of advanced nutrition, customized for male and female users aged 30+,40+, and 50+.

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GNC's daily nutrition bag

4.       Chinese instant coffee brand Saturnbird released a new spring water product. Its pH value is in the range of 7.2-8.2. The coffee brewed with this water has a softer taste. Currently, this product can be only purchased with coffee.

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Saturnbird's spring water product

5.       Oat milk brand OATLY launched its ice cream product line, including oatmeal ice cream and popsicles. The brand focuses on promoting this plant-based product that it containing using imported ingredients and no lactose or no trans fatty acids.

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OATLY's ice cream

6.       Fit X Body, a brand from Chinese dairy giant Want Want Group, released its first oat milk products. This new product’s primary selling points are 0 lactose and 0 cholesterol.

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Fix X Body's oatly milk

Some impressive data

1.       According to Ningbo Customs, from January to April this year, Ningbo port imported a total of 19,000 tons of fruits with a value of 140 million yuan, a YoY increase of 438.6% and 81.9%. Especially in April, Ningbo port imported 14,000 tons of fruit, a year-on-year increase of 10.4 times.

The implementation of RCEP has lowered the tariff on imported Southeast Asian fruits from the original 10-20% to 0%. From January to April this year, a total of 14,000 tons of Vietnamese fruit entered the Ningbo port, accounting for 73.7% of the total imported fruit at the port.

2.       Oat milk brand OATLY released its 2022Q1 financial report. Its revenue in Q1 reached 669 million dollars. In China, it remained the No. 1 selling oat milk on Tmall and has entered over 21,500 offline retail stores, such as Lawson, FamilyMart, and Sam’s Club, and over 37,000 foodservice locations, such as KFC and Starbucks. Next, it will unlock the tea channel with its new tea master product.

Regulatory compliance

1.       On May 6, 2022, China National Forestry and Grassland Administration opened the draft of Administrative Measures of Special Marks for Wildlife Under National Major Conservation and Their Products for public comments. Health food containing ingredients from terrestrial wild animals subject to major national conservation must obtain production licenses and use special marks. More details on ChemLinked.

2.       On May 5, 2022, China National Health Commission (NHC) published a list of 36 newly approved substances, including three new food raw materials, 18 new food additives, and 15 food-related products. More details on ChemLinked.

3.       China Nutrition and Health Food Association released the group standard Specification for the Classification of Viable Bacteria in Probiotic Foods" (T/CNHFA 006-2022), implemented from May 28, 2022. This group standard is applicable to the classification of the viable bacteria rate of probiotic food in powder, granule, etc., and stipulates that only when the viable bacteria rate of products exceeds 50%, products can label "Viability Level 1".

4.       The General Administration of Customs of China and the Ministry of Agriculture of Brazil signed the revised version of the protocol on phytosanitary requirements for Brazilian corn exported to China, as well as the quarantine agreement for Brazilian peanut exports to China, and is proceeding the quarantine agreement for Brazilian soybean protein and Brazilian soybean meal.

Brazil and China had signed four agreements on Brazil's exports of cottonseed meal, thermally processed beef and melons to China, and China's exports of pears to Brazil, mentioned by Brazil's agriculture ministry in a separate statement. The two sides agreed to work to complete negotiations on Brazil's exports of sesame, sorghum, and grapes to China by the end of 2022. Future talks will also focus on allowing Brazil to export fish, poultry, and pork meal to China and China to export apples to Brazil.

Ye Chen
ChemLinked Research Analyst
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