China’s pivot towards premiumisation provides a good opening for New Zealand F&B brands to enter the market, writes Christina Zhu, Fonterra’s President for Greater China.
OPINION: Much has been said and written about the depth and pace of change in China.
The cards are always shuffling here, with new ideas, products and technology rolling out at speeds seldom seen elsewhere. This poses some unique challenges for New Zealand exporters and brands.
But despite – and sometimes because of – all the change and challenges, China remains the most exciting market in the world with the greatest potential.
The risk of not being in China outweighs that of missing out. And right now, the prevailing market trends of premiumisation and ‘new retail’ provide a good opening for New Zealand brands to cut through, particularly in the food and beverage space.
Fonterra is keenly focused on these trends to unlock potential and accelerate our growth, all while adopting a localised, fit-for-purpose approach to China.
China’s pivot towards premiumisation
Premiumisation is a word that has been on just about everybody’s lips in recent months in China, and for good reason – it typifies the current consumer economy.
As incomes rise, Chinese consumers are trading up from mass-market purchases to more premium product choices.
Affluent households are the fastest-growing segment in the Chinese economy today. By 2020, it’s expected there will be 137 million affluent households, compared with around 82 million in 2015.
These affluent shoppers are increasingly aware of their health, nutrition and lifestyle choices, making them much more discerning when it comes to brand selection.
Our New Zealand provenance story puts us in good stead with this pivot towards premium. It goes beyond our environmental credentials – we have built a well-rounded reputation for uncompromising quality, world-class food safety, and innovative agricultural practices.
Whether its wine, meat, fruit or dairy, the combination of these traits gives Kiwi products a strong premium foothold. And these premium products have a real part to play in the world of ‘new retail’.
What is ‘new retail’?
The phrase, coined by Alibaba founder Jack Ma, refers to the integration of online, offline, logistics and data across a single value chain.
The rise of ‘new retail’, together with the continual growth of e-commerce, is changing the game for Kiwi brands. In the past, having an extensive offline distribution network has been an essential component in launching and growing a brand in China. But with new retail, the game now revolves around creating an outstanding brand experience and forming strong partnerships with key digital and retail partners.
That’s where our focus lies, and in the past few months Fonterra has been working closely with Hema Xiansheng – a company that typifies the new retail concept.
Backed by Alibaba, Hema is part-supermarket, part-high-tech delivery warehouse, and is growing rapidly in Shanghai, Beijing and neighbouring cities.
Consumers can either shop in-store using their mobile phones to browse product information and purchase, or order online for a 30-minute delivery within a 3km radius. Hema then utilises the wealth of data it gathers to provide a tailored, personalised shopping experience for each customer each time they return.
With a strict focus on high-quality brands that offer outstanding experiences for consumers, Hema is looking for partner companies that can step up to the plate with premium products and branding, which bodes well for New Zealand exporters.
One of the ways Fonterra has partnered with Hema is through in-store cooking classes, where Michelin chefs are brought in to demonstrate how our range of Anchor products can be applied in kitchens at home. This is just an early step and we’re excited to do more.
New retail is set to become a major part of the consumer landscape in the coming years, so Kiwi brands and exporters should be positioning themselves to ride the wave and capture the growth opportunities.
Thinking local: A recipe for success
At all points, exporters need to think and act locally, rather than attempting to re-create their home market approach.
This is vital when it comes to food and beverage, as distinct and diverse local tastes and preferences need to be accounted for.
Our co-op would be missing the mark if we had the expectation that consumers in China want to eat or drink their dairy products in the same way as their Western counterparts.
Dairy is not considered a traditional staple in China, meaning there are fewer pre-conceived notions around how it should be consumed. So for example, instead of having a spread of cheeses with our wine, we’ve got salted cream cheese toppings on our tea.
Spending time digging up deep insights on what Chinese consumers want has been a major focus point for Fonterra's food service business in China. Our Anchor Food Professionals team keeps a close watch on the trends and in many cases helps to set them – to ensure that we’re exploring every avenue.
Fonterra's products are used in a range of unique ways, from said cream cheese topping on tea drinks, to our mozzarella being paired with crab meat in rice dumplings or spread atop durian-flavoured pizza.
This strong focus on identifying changing consumer behaviours and insights is an investment worth making for any exporter and brand pushing into China.
The idiom "the only constant is change" was coined in Ancient Greece around 2,500 years ago, but it stands today as a very fitting description of China. As the cards keep shuffling, you’ve got to stay alert and open-minded to identify the trends that will work in your favour, and firmly adopt a local mindset.
Views expressed are personal to the author.
– Asia Media Centre