The evolving tastes of China's middle class
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I wrote late last year about the interesting dynamic of the changing food lifestyles of middle-class Chinese, with ready-to-eat meals in China becoming more popular given greater urbanization and fewer people able to shop at traditional wet markets.
However, it seems this trend has evolved even further, with many Chinese not just looking for fast and cheap food, but also discerning on the basis of quality now that their disposable incomes are rising.
The food industry in China is responding to these demands. Fast food restaurant chain McDonald’s is a good example of the business reponse to this trend. As a major sponsor of the London Olympic games, its consumer strategy is always going to create interest - this year, it embarked upon a new and innovative advertising strategy around the quality of its ingredients – differentiating from its main competitor, Yum Brands (KFC, Pizza Hut, Taco Bell).
With greater economic means, the ability to shop according to one’s values becomes more prominent (e.g. “I prefer to buy food with organic, clean ingredients”). McDonald’s is one example of this changing dynamic in China, as the developing middle class flexes its muscles. There are also great opportunities with local fast food brands which is a fast-growing and well-priced market in China.
McDonalds’ move follows heightened food quality and additive concerns in China. In a recent Wall Street Journal article, Kenneth Chan, CEO of McDonald’s China said: “We’re not out to have the most stores in China, but we want to have the highest quality.” In the next few years the retail battle to satisfy the stomachs of an increasingly discerning Chinese public will intensify.
Is this a game-changing development for food and non-food companies operating in China? I don’t believe so – it’s more of a market development. However, companies operating in China should still assess whether this changing dynamic will also create opportunities in today’s niche markets – those markets will be highly profitable tomorrow.
The food and agriculture industries in Thailand should also take note. Thailand has for years been a purveyor of high quality foods and natural produce, such as our world famous Thai Hom Mali rice. While many Thai companies are already doing well in the Chinese market, smaller businesses should look to establish links with local importers and distributors to gain valuable market access and advice. The Thai government should also do more to support businesses utilising technology to produce higher quality goods for export (food and non-food).
Annual sales of branded food products in China are projected to increase from $150 billion at the beginning of this decade to $650 billion by 2017, while we will also see this trend applying to non-food products. During this time, the quality of products will become an even bigger factor in the minds of individual consumers. To feed this market evolution, Thai businesses should focus on creating quality goods and establishing smart business and supply links into China.
