Consumers’ Maturing Tastes Present Huge Opportunities in Chinese Food Sectors

Nearly half (47%) of urban Chinese consumers report spending more year on year on food to be consumed inside the home, reports a new study by market research firm Mintel.

The segment experiencing the fastest growth was Western foods such as chocolate, which grew 20% between 2008-2013, the report continues. Similar growth in in-home spirits suggests consumption occasions are moving into the home as middle class Chinese urbanites spend more on themselves.

As lower-tier Chinese cities develop, Mintel expects higher-premium goods to lead the growth in this sector as Chinese consumers develop tastes for new products. Other western foods such as bread and bread products, sweet bakery, cheese, and pasta have grown at a rate of over 30% in the five years to 2013.

“Already, we are seeing increasing demand for products like cheese and coffee in second- and third-tier cities as more consumers are integrating them into their diets,” says Ruyi Xu, Head of Research China at Mintel. “Though the overall sizes of these sectors remain small, their recent rapid growth suggests that food and drink to be consumed in-home by middle class consumers are major sectors to watch in the coming years.”

“As in other sectors, first-tier consumers tend to be more worldly so the biggest opportunities for growth are in China’s fast-developing lower-tier cities,” Xu commented.

Eating Out Expenditures

Restaurant spending also grew at a rate of 12% between 2008-2013, however this growth can be directly attributed to urbanization, according to the report. The sector doubled in size between 2008 and 2013, reaching a total value of RMB 928.72 bn. Because consumers individually claim to spend roughly the same amount on restaurants year on year, this is due largely to urbanization as lifestyle changes and a greater variety of restaurant options cause new arrivals to eat out more. Within the sector, restaurants promoting healthy food are expanding the fastest, in line with consumer trends across the board.

Alcoholic drinks also continue to grow despite recent measures to curb spending in this sector. Whereas previously growth was driven by the high-end sector, it is now lower- and mid-range drinks driving the growth. Between 2008-2012, overall revenue growth was at a compound annual rate of 19.9% when fuelled largely by high-end spirits and wine; in 2013 it dropped to 2.6%, suggesting that current growth is coming from an increasing number of consumers who purchase these lower- and middle-tier drinks for their own consumption.

The report also takes a look at the opportunities in personal care products and online apparel sales, which suggest strong potential in the future.