Given the recent surge in the popularity of healthier snacks within China, market researchers predict sales of yogurt, nut snacks and snack bars will continue to grow in upcoming years.
The market for chilled yogurt sales in China is expected to jump 91% to CNY70.7bn (US$9.9bn) in 2023 from CNY36.9bn in 2018, thanks to anticipated improvements in cold chain technology across China, according to market researchers Frost & Sullivan.
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By GlobalDataSales of heat-treated ambient yogurt products are projected by Frost & Sullivan to grow even faster, with sales more than quadrupling from CNY31bn in 2018 to CNY139.3bn in 2023.
Meanwhile, competition will certainly grow more intense, Wu Hongtao, head of the fresh dairy marketing centre business unit at Inner Mongolia-based dairy major Mengniu. argues.
“We expect to see new products and brands especially in the premium sector. We will also have to cope with rising costs as well as explore new distribution channels,” he says. ‘Clean label’ claims highlighting processed food products with fewer to zero artificial ingredients, he adds, will continue to draw Chinese consumers to yogurt.
According to French consultants Ipsos, Chinese consumers regard healthy foods as being lines with fewer artificial additives, low fat, subject to less processing and including natural ingredients.
“After the Covid-19 pandemic, I think healthy, safe food will be more valued, so we expect to see more consumers going after [products with] clean labels,” Wu asserts.
Rushi, from Shanghai-based Bright Dairy, and Meiji, from the Japanese dairy manufacturer Meiji Holdings, are examples of two chilled yogurt brands purporting to have clean labels with strong sales in China. They are both sold as sugar-free items with few additives, with their average price being CNY5.30/100g, compared to about CNY3.9/100g for mass-market yogurts.
These products were joined within the nascent segment in 2018 by a yogurt line called Simple Love, made by Guangzhou Honest Dairy, claiming it is free of sugar and additives. The product is sold in slightly larger packaging at CNY10 a bottle (135g).
Guangzhou Honest Dairy has since launched other yogurt products, including a 4% sugar line, also under its Simple Love brand, and a yogurt targeted at small children available in sugar-free, 2% sugar and 4% sugar variants under the brand Father’s Love Formula. All three have clean labels. At Guangzhou Honest Dairy’s Tmall store, more than 15,000 cases (at 12 bottles a case) of its sugar-free yogurt were sold from 21 February to 21 March, for home delivery, as movement restrictions continued as a result of the Covid-19 crisis.
Lv Chi, an analyst at Mental Marketing Consulting, a Shanghai-based dairy products research firm, predicts yogurt manufacturers will continue to innovate on flavours and ingredients, predicting consumers would become increasingly demanding regarding quality: “There will be little tolerance for a mediocre product,” Lv tells just-food.
Elsewhere, sales of nut snacks will also surge, according to Frost & Sullivan, which projects category sales will grow 60% from CNY159.5bn in 2018 to CNY255.2bn in 2023.
Mixed nuts will continue to attract consumers, while nut snacks targeting specific groups of consumers will also be in demand, Zhang Muli, an analyst at Shenzhen-based research firm Zhongwei Intelligent, forecasts.
For example, walnut snacks will probably be targeted at pregnant women and mothers of young children as many Chinese people believe walnuts are good for brain development. Meanwhile, manufacturers will probably target nuts particularly rich in proteins, such as hazelnuts and cashews, at “consumers who like to exercise,” she predicts.
Food safety will continue to be a challenge for nut snacks suppliers, however. Zhang says as Chinese consumers become more health-conscious, they will be more demanding regarding ingredient quality.
Three Squirrels, the Wuhu, Anhui province-based major nut snacks supplier, is one company preparing for such an increasingly competitive market. “New products and brands will emerge and we have to get ready for it,” says company spokesperson Yin Xiang.
One strategy being pursued by Three Squirrels is setting up its own retail stores. Before the Covid-19 outbreak, the company had been expanding steadily offline sales by building Three Squirrels outlets selling snacks in selected areas of China. By 1 March 1, it had 304 stores nationwide.
“We believe the pandemic will eventually be subdued, but businesses across industries will feel the sting for a while,” Yin says, adding the outbreak had put the brakes on Three Squirrels’ retail expansion. “Right now our more urgent task is to deal with the losses in the existing chain stores during the lockdown,” he says.
China imposed a nationwide lockdown during the Chinese lunar new year in late January to prevent the virus spreading. Draconian movement restrictions were kept in place nationwide until in early March, when Beijing allowed businesses in less infected areas to reopen.
That said, Yin hopes Covid-19 will not harm the companies’ long-term expansion. “Our plan to open 10,000 chain stores in five years is unchanged,” he adds.
Looking at other healthy-snack categories in China, the Chinese snack bar market, although still small by comparison to nuts and yogurt, shows so much potential that Mars is spending US$45m on building a factory in Jiaxing, Zhejiang province, south of Shanghai, to manufacture Kind bars later this year.
Mars, which acquired a minority stake in US business Kind in 2017, started to sell Kind bars in China in 2019. Currently, all Kind bars sold in China are imported. According to Zhongwei, the size of China’s mainland snack bar market is expected to reach CNY9.8bn in 2023, rising from CNY3.9bn in 2018.
“Snack bars is a niche market in China and will continue to be so in upcoming years, and that’s why I think companies will have to invest in market education to tell consumers about snack bars and their brands,” Zhongwei analyst Song Tao says.
Song says that the market does not lack snack bar brands, but Chinese consumers currently think of Snickers when asked about snack bar. “This actually leaves other snack bar providers a great marketing opportunity,” if they manage to breakthrough into the consumer consciousness, he argues.
This will take research and development, notably into developing flavours and texture. “Crispy textures, creative flavours with less sweetness, are favoured by Chinese consumers,” Song suggests, giving the US protein bar Power Crunch as an example.
US manufacturer Power Crunch’s protein bars have yet to officially enter China but can be purchased at the popular consumer-to-consumer (C2C) platform Taobao. Its international reputation as a tasty protein bar, because of its wafer texture and variety of flavors, has already attracted a small group of consumers in China.
Song also suggests companies should think of ways to grow snack bars’ niche markets into a mass market item. For example, a snack bar with brown sugar and ginseng could target young women with low blood sugar. A bar with rich nutrition could be a good fit for teenagers. Given China’s huge population, a well-targeted product could become a big seller.
Aaron Gong, general manager at the Shanghai-based sports supplements supplier Alandv agrees. “In the following years, we will have to think about how to attract more customers. Working with partners in other industries might be a way,” he says.
In the US, Gong adds, it is common to see snack bars provided at conference rooms, for instance, so a tie up with a hospitality major could pay dividends. “I think China’s snack bar market will develop very fast in the next two to three years, and it will not be a flash-in-the-pan kind of thing.”
Part one of this deep dive can be read here.
