In the next four years China’s bakery and cereals market will soar to an estimated $47bn – catapulting into second place in value terms globally, just behind the US, Canadean data indicates.
Ronan Stafford, senior analyst at the firm, said manufacturers looking to capitalize on this needed to truly understand Chinese lifestyles.
“What makes China different is bakery is it is a lot less functional. It’s more about wanting something nice, therefore eating a cake,” Stafford told BakeryandSnacks.com.
Hunger-filling categories like bread and rolls that were huge in Europe were relatively underdeveloped in China, compared to sweet treat segments like cakes, pastries, sweet pies and cookies, he said. Cakes, pastries and sweet pies currently accounted for 43.9% of China’s bakery and cereals market.
“When you’re looking for a route to market in China, you almost need to shift your priorities. It’s a lot less about having that basic hunger-fill and more about something special. That’s what really makes cakes such an interesting category,” he said.
Getting boots on the ground
Targeting these ‘treat’ categories was a clever strategy for international manufacturers entering the country for the first time, Stafford said.
“With these more mature categories, you’ve got a way in where you can establish your brand, get into the market and start shifting large volumes. With lots of brands tackling China, it’s a mountain to conquer just understanding consumer motivations, but if you’re in a category where you can shift large volumes, it gives you a chance to do more on-the-ground research,” he said.
“…For every big brand that goes into China, the most important thing now is getting boots on the ground.”
Getting into the country and understanding consumer motivations was “absolutely critical”, he said.
Asked if international companies had a competitive edge over domestic players, Stafford said: “If they [international manufacturers] do their work, get boots on the ground, and do truly understand local consumers – that’s easier than it is for local players to get the capital they need to expand to large scale production while still maintaining and communicating the quality of their product.”
Urban dwellers: Think on-the-go, public transport, budgets
Rapid urbanization in China presented huge opportunities for bakery and cereals growth, Stafford said. But it came back to a true understanding of how these consumers lived: Knowing their lifestyle, because consumers wanted products that matched their lifestyle, he said.
“With Chinese consumers in urban areas, there is an emerging middle-class but they don’t have lots of disposable income and transport is still limited. Yes, car ownership is increasing, but if you look at Chinese shopping habits - they’re taking public transport or walking,” he said.
Knowing this would be critical in new product development projects, he said, because keeping products affordable and small enough to carry home, for example, would be important practical factors for consumers.
“If you’re used to targeting mum driving her estate car to a large retailer, that’s not going to work in China. You’re looking at single households and limited transport and availability – it’s a very different market,” Stafford said.