According to Euromonitor, retail sales in the packaged food market in China had been estimated to reach US$332 billion in 2022. China is the 2nd largest packaged food market in the world. That represents a growth rate of 21.1% or US$57.9 billion
since 2018. The forecast for growth in this market is outstanding. By the year 2026, the retail sales in the packaged food market in China is expected to reach US$409.5 billion, a growth rate of 23.2% or US$77 billion from 2022.
High growth products in the forecast include:
- Cheese
- Breakfast cereals
- Baked goods
- Savory snacks
- Processed Fruit and Vegetables
- Sauces, Dressings & Condiments
- Processed Meat, Seafood & Alternatives to Meat
- Dairy (Ex. Cheese)
FAS China reports that after a slow down in 2020, the food retail industry picked up in 2021 with domestic sales of food, oil and grain reaching US$263 billion. Sales in the beverage industry increased by 20.4%. Online sales via grocery and
food delivery apps surged. In 2020, grocery e-commerce sales increased by 31% which led to a bumper 2021 where sales increased by a further 30%.Traditional off line only retail chain market share continued to erode due to pandemic-related movement
restrictions and consumer preferences for online grocery and food delivery.
In 2019, sales from the top 100 supermarket chains reached US$140 billion, and accounted for 18.1% of food retail sales. The number of stores for the top
100 supermarket chains reached 26,000. E-commerce companies have diverted customer traffic from many of the largest traditional supermarket chains. In addition, some international retailers have withdrawn from China or sold their stakes
to domestic firms given increasing labor and rental costs.
In June 2019, Carrefour sold its operations to a local retailer, Suning. In addition, Metro sold a majority stake in its China business to the domestic chain, Wu-Mart.
Tesco, the largest retailer in the United Kingdom sold its Chinese business to CR-Vanguard. Some international players remain optimistic about the market, including Costco from the United States, which opened its first store in August 2019 and
ALDI from Germany, which opened its first store in June 2019.
Euromonitor reports that proximity to residential areas is seen as a key factor amongst time-pressed urban Chinese consumers when shopping, especially in the wake of the COVID-19
pandemic. Consumers became more used to shopping close to their neighborhoods during the crisis. Many large modern grocery operators have therefore adopted a multi-format strategy and opened smaller format stores. Freshippo, Yonghui and
Carrefour are all opening small-format supermarkets closer to the community with a greater emphasis on fresh food. Some of these stores also serve as warehouses for e-commerce orders and provide quick home deliveries. Yonghui in particular
has rapidly opened Yonghui Mini Stores, as a supplement to its hypermarket and large supermarket business.
Euromonitor reports that supermarkets are expected to maintain solid current value growth in the forecast period (to 2026), with
slower growth in the number of outlets. O2O is expected to become increasingly important for supermarkets. The average percentage of sales with hyperlocal delivery within supermarkets is already above 10%, and is set to rise. In
fact, for supermarkets that are operated by e-commerce companies, such as Freshippo by Alibaba and SEVEN Fresh by JD.com, the percentage of sales with hyperlocal delivery is over 50%. The high share of sales through hyperlocal delivery can help
supermarkets to increase their operating efficiency, increasing sales without increasing their store sales area.
In 2019, the convenience store sector grew by 13% with sales of US$36.5 billion, and the number of stores reached 132,000.
Convenience stores in Japan, which offer an average of 30% private label products, private label products carried by Chinese convenience stores account for less than 5% of total SKUs. Industry contacts expect that convenience store operators
will increase their offerings of private label products in the future.
Euromonitor reports that Meiyijia maintained its leading position in convenience stores in 2021, accounting for a quarter of value sales. With its headquarters
in Dongguan, Guangdong Province, Meiyijia has expanded rapidly, opening 200-300 new stores every month over the past five years. Therefore, it accounted for more than a third of outlet numbers in 2021, with a huge gap from the second-placed
convenience stores brand Lawson, which held just a single-digit share of outlet numbers. The rapid expansion of Meiyijia lies in its franchise model, and the low initial investment for franchisees to set up a new store. International players
in convenience stores, such as Lawson and Family Mart, tend to target white collar workers in tier 1 cities. By contrast, Meiyijia outlets are normally located in residential and suburban areas where rents are low, and target the mass consumer
group.
Rising rents and labor costs have made it increasingly difficult for convenience stores to maintain their profit levels. Even Lawson only started to make a profit in 2020, 25 years after it entered China. However, it
considers there is huge room for growth in convenience stores in China, and has a goal of opening 10,000 outlets by 2025.
One convenience store chain which has bucked the trend and achieved profitability early on has done so though digitalization.
Convenience Bee stores require very few staff to run them, therefore saving on operating costs. Cameras and sensors detect what customers buy, electronic price tags update prices based on supply and demand in real time, and each store analyses
and constantly changes its product selection and prices based on market factors and user behavior. By the end of 2023, Convenience Bee plans to reach 10,000 stores. Meanwhile, in July 2020, the Ministry of Commerce released a notice to
promote the digital transformation of the retailing channel, encouraging companies to adopt digital technologies, such as the Internet of Things, big data and cloud computing. Moving forward, this is likely to ensure more players embrace digitalization
to ensure their success.
Best Product Prospects:
FAS China reports that there is a wide array of U.S. food products available in the marketplace, ranging from infant formula to seafood and everything in between.
Some of the top consumer-oriented product categories from the United States in 2020 meat and poultry, snack foods, pet foods, bakery ingredients and dairy products.
In 2020, the Phase One Agreement provided new or expanded access for a
number of products, including certain retail food items like beef, pork, chicken, seafood, rice, fresh blueberries, avocadoes, and pet food.
