This was a major conclusion reached by a panel discussion on Global Market Updates held as part of the recent virtually-held Food South Australia (Food SA) Summit. The panel comprised of the Australian government’s trade and investment arm Austrade’s Assistant General Manager (State Operations) and State Director for SA Patrick Kearins, and Australia’s National Centre for Asia Capability Asialink Business’ Director China Practice Nick Henderson.
The panel was moderated by Food SA Chief Executive Catherine Sayer, who led the discussion on eight of Australia’s key international food and beverage export markets and how these are faring in dealing with the impact of the global COVID-19 pandemic.
These eight markets were: China, Japan, South Korea, Vietnam, Malaysia, Singapore, the United Arab Emirates and the United States.
Across all eight markets, a key trend that emerged across the board was the huge consumer shift towards e-commerce and online shopping – one which Kearins said is likely here to stay even post-crisis, making it ever more important for firms to have a strong online presence.
He highlighted that with regard to current growth opportunities, Australian products are ‘in good stead’ due to existing provenance and branding, but the challenge is very much centred around good presentation to consumers.
“With this increase of online shopping and the trend looking likely to be here to stay, Australian firms need to take a closer look at our social media engagement,” he said.
“Various platforms have told us that we are not as competitive as compared to other countries in how we present our products, especially in terms of [multimedia usage] and showing how we consume our products.
“We have historically been more focused on talking to our customers and not the end-consumers, and that is something that, with this trend being cemented, we really have to address. It will take hard work, creativity, and some investment from companies to be able to present themselves the way they want to consumers, but right now is the time for companies that need to bolster their social media marketing [to do this].”
Henderson added that there are multiple underlying factors across consumer behaviour which could mean good opportunities for Australian firms.
“For example, in China there is an increased demand for food quality due to generally lower trust in domestically produced products. There is also the rise in health awareness, which will drive demand for quality premium products – a trend which also translates to Japan and South Korea,” he said.
“There’s also rising diversification of diets in countries such as Vietnam and China due to emerging consumer classes, which means we are going to see greater demand across the range of different export products from processed to fresh foods, and especially dairy for which there is great demand already.”
Read on to find out more specific updates from the eight markets, by region:
China’s economy shrank by 6.8% during Q1 2020, demonstrating that it was hit hard by COVID-19. Overall retail sales were down by 7% year-on-year in April, though a lot of this consumption shifted to online.
This was demonstrated by massive increases in online fresh food and grocery purchases, where some 40% of consumers in the country increased their frequency of buying online, and overall e-commerce grocery sales increased by 26%.
“In terms of consumer behaviour shifts, ones expected to sustain are: greater focus on health and functional food benefits which translated into increases of fresh food, vitamin supplements and healthy food purchases during that period. The same goes for home cooking,” said Henderson.
“More older-generation Chinese are also purchasing online as are Tier 3 consumers and onwards.”
Despite current ongoing trade tensions between Australia and China, Henderson said that things for F&B are basically still ‘business as usual’.
“At this stage, all indications are that there are no issues with food exports going into China. There is robust consumer demand for imported products especially fresh produce, dairy, processed food and so on – We have a lot of strong value propositions going into that market,” he said.
“There is a growing demand for premium food exports into China, e.g. cherries used for family consumption and gifting, and those trends will continue. The demographics are in place for this in China too – upper middle class consumers in Tier 1 and Tier 2 cities are looking for those premium produce, and this is going to be an area of growth in the next three to five years.”
Economic growth for Japan contracted 3.4% in Q1 2020, and South Korea’s economy is expected to shrink by 1.2% in 2020.
For Japan, one of the most significantly impacted sectors for Australia was seafood, with volumes falling by 22% year-on-year due to a fall in demand from foodservice as well as logistical challenges.
“Anectodal indications from food exporters to Japan indicate that demand for dairy (butter and protein) remains strong, as does fresh fruits and vegetable exports, and frozen beef and sheep,” said Henderson.
South Korea saw some of the most dramatic F&B e-commerce increases in the world – physical retail sales dropped by 7.5% year-on-year, but all this was transitioned online which saw a 90% rise in February as the outbreak hit, and again by another 11% in March.
“[For Korea], what we’re seeing is that product categories like premium fruit have remained stable due to demand from smaller retail supermarkets and hypermarkets. Food safety has also been given more priority by consumers, hence there has also been a uptake in demand for organic and health-enhancing products,” he added.
South East Asia
The home cooking and e-commerce transitioning trend continued into South East Asia, with Vietnam as one of the key markets highlighted here.
According to Henderson, traditional food retail in Vietnam declined by 35% in Q1, with this shortfall switched to online which saw a 30% increase, driving many local businesses to change their business models to work with delivery apps to sell online.
“Vietnam has also seen increased demand for home-cooking ingredients more sold, [and what is interesting here is that] more urban Vietnamese are looking to use more Western ingredients in their home-cooked food,” he said.
“Dairy demand has increased too, especially infant formula (13%), milk (34%,) and drinking yoghurt (36%), whereas distributors have also reported that high-interest items such as sliced cheese and butter are fast running out.”
Over in Malaysia, caution is the name of the game in addition to increased e-commerce.
“People in Malaysia have been cautious, looking for fresh and organic, being cautious about provenance and origin, and also looking for tamper-proof and who’s handled food products before getting to them – this is going to have a major impact on practices moving forth, [especially in a country where food samples are such a major thing,” Kearins said.
“Again, online shopping has increased significantly, with some 93% of brick-and-mortar retailers saying they would be moving to bolster online presence.”
Produce exports to Singapore are expected to take a while for some commodities, due to ‘buildups’ of various types of items that have been staying in storage due to the pandemic.
“Any product with a strong focus for food service sector such as oysters, and live abalone are seeing a big buildup of stock in the country right now, as people are cautious, and it will take time to move these through the market,” said Kearins.
“There’s opportunity for retail though: Local big retailers are interested in diversifying supply to ensure the security of supply even through such challenges, especially freight-related shocks like they just went through.”
Singapore has also eased some restrictions for products to ensure market diversification from supply point of view, though Kearins stressed that these are temporary.
“For the first time, Australian fresh and chilled poultry is being allowed into Singapore, with concessions for red meat and eggs too, but the government has put a timeframe on it (for this calendar year) so is only temporary,” he said.
“There is of course the opportunity to extend this if we perform well, and to do this we need to fdo things like guaranteeing surety of supply and being an assured partner in terms of provenance and certification.”
UAE and United States
As for the United Arab Emirates, Kearins predicted that the overall economic impact from COVID-19 still has some months to run through before stabilising.
“The food service sector is struggling, the premium end of the market is struggling is struggling, expatriates are either switching jobs or going home – it’s in a difficult spot right now,” he said.
“Retail is doing okay, and there’s been an increase in organic food sales by 155% year-on-year and fresh fruit and vegetables by 55%, but the overall economic impact in the Middle East still has a way to go.”
An interesting trend in the United States has been where foodservice channels have pivoted to retail and are trying to gain a piece of this market, for better or worse.
“The US is opening up states even with its COVID-19 curve going up, and many of its foodservice firms have pivoted to supply to retailers – this means increased competition and difficult logistics, but the market has embraced freedom and liberty, so are doing it differently than anywhere else in the world,” said Kearins.