Packaged food sees slowing but still healthy growth
In 2013, packaged food is expected to continue to see healthy growth thanks to premium products and health and wellness products being focused on by manufacturers. Overall sales were negatively impacted by slowing macroeconomic growth in China in 2012. However, packaged food is expected to continue to see strong growth in 2013, with sales being boosted by healthier products with reduced sugar, fortification and organic ingredients, while products offering high levels of convenience will also drive sales growth for packaged food in 2013.
Slowing economic growth and quality problems impact packaged food
In 2012 and 2013, Chinese economic growth slowed, which negatively impacted current value growth for packaged food, although its impact was softened by the ongoing premiumisation trend. In 2013, quality problems continue to be the key consideration for Chinese consumers, however, with a series of quality scandals linked to leading companies like Inner Mongolia Mengniu Dairy. Premium products, especially premium dairy products, are thus increasingly popular among Chinese consumers due to quality concerns. Premium products are also increasing popular as gifts. Consumers were also increasingly attracted to specialised packaged food such as products targeting children or the elderly.
Strong competition in packaged food
Due to consumers' strong focus on quality, manufacturers are seeking to boost consumer confidence by promoting premium products such as U Best. There was also a growing use of endorsements by celebrities with a healthy image, with such celebrities for example opening or visiting factories. Leading companies such as Inner Mongolia Mengniu Dairy were reported to be facing quality problems, which resulted in their value shares declining during the review period. In addition, there were more new entrants into packaged food in China, with Mondelez's Stride for example being introduced sugar free gum in August 2012, and targeting young consumers with flavours such as mint and watermelon. Brand Nutrilon under Nutricia Nutritionals also entered China’s baby food from March 2013.
Impressive performance for internet retailing
Store-based retailing channels such as supermarkets and hypermarkets continue to dominate the distribution of packaged food. However, internet retailing is seeing dynamic growth thanks to offering low price and improved logistics across China. Leading business-to-customer internet retailing players such as Tmall and Yihaodian increasingly began to offer promotions in close cooperation with manufacturers. Thanks to the popularity of such promotions, such as Tmall's 11.11 promotion, internet retailing is continuing to increase sales dynamically.
Healthy forecast period growth expected
In the forecast period, thanks to the ongoing premiumisation trend and new products being launched by manufacturers, packaged food is expected to see dynamic constant value growth. Many niche products are expected to see widening distribution and growing consumer interest, such as cheese. Consumers will also become more interested in trading up in line with increasing disposable incomes. Constant value growth will also be linked to higher unit prices for many product areas, due to the premiumisation trend and the increasing cost of many raw materials such as raw milk and sugar, as well as rising logistics costs.
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The Packaged Food in China market research report includes:
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- As economic prospects slowly improve, are consumers starting to eat out more and spending less time cooking at home?
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This industry report originates from Passport, our Packaged Food market research database.