One of the questions we are most frequently asked at ADN is ‘What’s the value chain like for putting my product on shelf in China, and can I really compete against Chinese brands?
With regards to price alone, only under really exceptional circumstances is it possible to compete with Chinese food and drink brands on shelf in China. Similar domestic Chinese products will often be priced on shelf cheaper than your manufacturing costs. After adding on your margin, shipping , tariffs, clearance, distributor margins and retailer margins it’s not unusual to see like for like products on shelf with the imported one six times the price of the domestic.
Thankfully, unlike the West, China has two very distinct markets for food and drink products, domestic and imported, and a number of factors allow for the market to absorb this vast price difference. Fundamentally China sees imported product as premium and quality almost by definition of it being imported.
途游斗地主The clear divide between imported food and drink and domestic is not only apparent through price point. For retail, the most premium supermarkets such as Ole, City Super, City Shop and Fresh Mart stock almost exclusively imported food and drink, with only a select few Chinese brands. Top Chinese e-commerce channels have specific categories on their site, dedicated to imported food and drink and the mid-level supermarkets, including Yonghui, Auchan, Walmart, Carrefour and RT-Mart also have imported food and drink sections of their store, with price labels often sitting next to an image of a flag of the country of origin.
途游斗地主Some brands play on both sides of the the market, Red Bull and Twinings Tea for example both have a domestic China range alongside the imported premium range. Almost identical in design with the main differences being country of origin and the price point.
The fast growing consumer class 途游斗地主in China, and wealthier-classes have far more expendable income and are happy to part with their cash for a quality imported product the for the following reasons:
Concerns of domestic product safety
China has had a number of scandals with regards to domestic food safety over the years. Perhaps the most famous was with baby milk powder which impacted the market so greatly that even now, a number of years later, imported milk formula still has approximately a 70% market share in China. Other less well known incidents include pork that glows blue, exploding watermelons and ‘gutter oil’ – oil that has been taken back out of sewers , filtered through and sold back to the market.
Cleaner environmental conditions
途游斗地主As we would check the weather report before heading out for the day, across many regions of China, citizens check the AQI (air quality index) levels for pollution. The same environment that has been the factory for the world for generations also grows China’s domestic food. These two do not go well hand in hand and consumers worry about pollutants, dangerous pesticides and soil laden with heavy metals .
Prestige and face
Chinese people use brands and products to differentiate themselves within society. In the same way the latest phone, new car and branded handbag are all used for ‘face’ or status, eating imported food from around the world and now sharing these moments on social media are all important for building and maintaining position in social circles.
It is steeped in Chinese tradition to give gifts, and to give food as gifts (gifting is usually done pairs, always good for rate of sale!) Consumers are more likely to spend more money on gifted food and drink, and imported goods make fantastic gifts as a product of quality and/or something novel and exotic.
Innovation and variety
Imported products are usually designed for their domestic market and not the Chinese market, so it’s not unusual for taste and packaging to be completely off what the Chinese would usually consume or go for. But this exactly what gives some products enough of an exotic or novel factor that it can in it’s own right appeal to certain customer base in China. Usually the younger more explorative generations who as they age are becoming a huge part of the consumer market.