China: The new global food and grocery giant

By Kacey Culliney

- Last updated on GMT

Related tags Supermarket Us China

China's food and grocery market - set to fire, according to IGD
China's food and grocery market - set to fire, according to IGD
China’s food and grocery market has outgrown the US market and is now the biggest in the world and forecast to hit US$1.46 trillion by 2015, according to a report.

The research, compiled by UK-based researchers IGD, pegged China’s food and grocery market at US$971bn at the end of 2011 compared to the US at US$915bn.

Between 2011 and 2015, China’s market is set to reach a compound annual growth rate (CAGR) of 10.9%, more than double the US growth forecast of 4.2%.

This forecast has been made even with a slowing Chinese economy and strengthening US economy, Cécile Riverain, international research manager at IGD, said.

“Despite the slowdown [in China], measures to stimulate Chinese domestic consumption present an opportunity for retailers. For example, higher wages could boost disposable income and increase the number of potential customers,”​ Riverain told FoodNavigator-Asia.

“Looking ahead, almost the entire population of the US, nearly 300 million people, will be added to the urban areas of China by 2025,”​ she said.

Expansion should be done with care…

“Retailers need to focus on using their resources efficiently to get the best out of China’s growing grocery market,”​ she said, as, “growing labour costs and rental rates could have an impact on businesses costs.”

Shaun Rein, founder of China Market Research (CMR), said such rises are causing food price spikes as manufacturers are forced to push end-product prices.

For food and beverage manufacturers to operate profitably in the Chinese market, ‘premium’ is a direction they should consider, Rein added.

Riverain agreed noting that Chinese consumers are experiencing shifts in lifestyle, and this is causing consumers to assert their status by buying premium products.

Manufacturers must ensure products meet these market demands, she said, and this may involve “adapting product ranges and pricing structures from city to city as well as understanding key demographic groups so marketing techniques can be adjusted.”

Driving spend – the opportunity

“There is a significant gap between the US and China in terms of spend per capita,”​ with US citizens spending four times more than Chinese consumers in retail outlets, Riverain said.

Rising wages are driving consumer spending power across China, she noted, and the spend gap between the US is thus narrowing, “but Chinese retailers, both domestic and international, need the right strategy in place to take advantage of the scale of the opportunity.”

Riverain said that over the next four years, international grocery retailers will employ heavy expansion techniques across China, and estimated that over 2,700 stores will be built across the country in this time.

IGD data showed that in 2011, China was the largest food and grocery market, followed by the US and then Japan. But by 2015, the research group estimated that India will displace Japan as the third largest market, worth US$611.8bn.

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