As China emerges from COVID-19, food and beverage manufacturers worldwide can learn from the country’s recovery efforts and changing consumer landscape
As one of the world’s largest manufacturers of ingredients and commodities, China’s lockdown from the COVID-19 pandemic delivered a major hit to every aspect of life, from the economy to day-to-day tasks. In the food and beverage industry, the long arm of disruption tightened its lock around the global supply chain, foodservice sector, commodity prices and demand for essential and non-essential items as China’s major cities shut down for several months.
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China is now entering the recovery phase of post-COVID-19 life, with the food and beverage industry beginning to resume some normal activity. As COVID-19 continues to spread and impact other locations, food and beverage manufacturers from around the globe can look to China for lessons on how plan for the future.
"What we knew before will certainly be different post-COVID-19", says Shane Bracken, Regional Chief Operating Officer of Manufacturing for Kerry Asia Pacific, Middle East and Africa. "How we prepare for that is how we help our customers and consumers."
A brief recap of China’s COVID-19 outbreak
China was the epicentre of the COVID-19 outbreak which gained global attention in mid-January 2020. The first patient known to the Chinese Center for Disease Control and Prevention (CDC) experienced symptoms on December 1, 2019. The situation escalated rapidly and by January 23, Wuhan, the capital of Hubei province, went under lockdown. By January 29, provincial regions had activated first-level emergency responses to the epidemic and the majority of China's residents remained home to avoid infection. By March 9, though China reported a total of 80,754 infection cases, the day's increase of new cases was just 19, signalling that efforts to contain the epidemic were gaining ground. Much of China lifted its lockdown on March 25, with Wuhan following on April 8.
China’s food and beverage sector during COVID-19
With the COVID-19 situation evolving at unprecedented levels, it was not business as usual for China's food and beverage industry. Just as quickly as the virus spread, by February, both manufacturing and non-manufacturing sectors bore the brunt of the pandemic fallout, with the non-manufacturing sector taking the biggest blow. During the lunar new year period, which was extended to last from January 25 to February 9, the Chinese Cuisine Association reports that 93% of foodservice companies ceased operations, while BCG data saw the retail sector (including grocery stores, ecommerce and department stores) taking an overall drop of 50%. A Kantar report revealed that food and beverage fell 46% between January 25 and February 7 alone.
More recent insights from the Streetbees COVID-19 Human Impact Tracker indicate that 80% of Chinese citizens have changed their consumption and shopping habits. In early February, Kantar market research showed people were stocking up on ‘necessity foods’ and non-perishables like instant noodles, instant soups and frozen foods as these are long-lasting and easy-to-store, minimising frequency of grocery purchases and thereby the risk of infection. Meanwhile, demand for liquid dairy, confectionary, beverage and alcohol, regarded as unnecessary foods, saw a sharp decline for that same period.
Food and beverage in China after COVID-19
Today, even with the trajectory of COVID-19 shifting heavily to western nations and the situation gradually improving in China, the country’s GDP growth rate for 2020 is projected at below 6%. The outcome will depend on how other major economies including the U.S. and Europe manage the epidemic.
Business in China is gradually resuming, but we’re seeing a different tack across the value chain. From expanded group purchases for corporations; the launch of automated, contactless coffee machines to address food safety concerns; packaged products to meet the rise of in-home consumption; safe online purchasing and offline food delivery involving ‘no touch’ technology to the surge in immune health foods and products, the food and beverage industry is rolling out new initiatives and offerings to meet the seismic shift in consumer mindset and purchasing behaviour.
"At Kerry, we're continuing to look to the future and the new state of the markets", says Bracken. "Given what we're seeing and hearing, we predict more localised supply, a shift to functional and value-added ingredients and, most importantly, a shift in value propositions as the economy recovers."
Here's a look at how COVID-19 has changed shopping habits in the Chinese market, what and where people are choosing to eat and the implications for the food and beverage sector and consumers everywhere.
Outcome 1: Opportunity for tasty, convenient and nutritious DIY home meals
Despite the spike in instant foods, the tide appears to be turning as people start to explore more nutritious meals beyond canned or frozen. To avoid crowds and control what goes into their food, consumers are spending more time in the kitchen cooking from scratch. A Mintel survey of Chinese consumers who are grocery shoppers found 69% are spending more on in-home food and 49% are spending less on eating out. In addition, with more people working from home, 40% of that segment are now cooking dinner from scratch, compared to just 26% pre-COVID-19, as highlighted in Streetbees.
This shift has led to the increasing popularity of online cooking videos as consumers rediscover the pleasures of whipping up wholesome meals at home, according to Ipsos ‘Insight of consumer purchase behavior on daily necessities during coronavirus outbreak’. Couple that with 58% saying they ‘care more about daily life’, and the implication is that while dining out may be still enjoyed, the balance will continue to tilt as consumers gravitate increasingly towards preparing home-cooked meals and place greater stock in simple joys like dining in with family and friends.
This changing consumption landscape can be viewed as an opportunity for the industry. Food manufacturers and brands can help consumers enjoy better-for-you home meals, whether it’s providing healthy yet delicious and easy-to-prep meal solutions or devising nutritious menus, which would come as a boon to consumers new to cooking and looking for guidance. Even companies specialising in frozen meals can educate consumers on the nutritional value of frozen fruits, vegetables and fish.
Outcome 2: Demand for visibility on product sourcing and safety
With consumers keenly aware of the importance of strict hygiene and food safety, technologies like blockchain in supply chain processes are critical in allowing better visibility and transparency on product sourcing and manufacturing. This dovetails with 62% of Chinese consumers saying that they are now more rational in their purchases, preferring to take a long-term view and putting more thought into what goes into their to-buy list.
Outcome 3: Potential growth in plant-based protein as a clean and safe meat alternative
The fear that animal products are the root cause of the virus has made consumers in China wary of fresh meat and fish. With the COVID-19 outbreak threatening consumers’ trust in meat, the spotlight may well turn to plant-based protein sources like soy, mushroom and rice. This is not a new concept to the Chinese palate, which has been familiar with mock meat ever since the Tang dynasty, some 1,400 years ago, when an imperial official served vegetarian mutton and pork at a banquet. Also popular among consumers in China are protein bars as a meatless and convenient protein source.
Outcome 4: Health and foods supporting wellness and immunity are priority
With so much at stake, a fact that cannot be overlooked in the Ipsos report is that health and wellness rank high for 75% of consumers in China today. People are paying more attention to their nutrition and what they eat, looking at supplements that support wellbeing and immunity, and underlining all that is the paramount importance of food safety. Consumers are also seeking out natural ingredients believed to enhance health and fight infections such as ginger and lemon. Products recently launched include drinks with functional ingredients, for example milk with immune globulin and vitamin C fruit tea.
Pre-COVID-19, the importance of good health was already evident in the Chinese market. According to a 2019 Kerry global consumer survey on immune health, 90% of respondents in China identified themselves as “health conscious”, with supplements, sports nutrition and yoghurt products with immunity benefits seeing the highest interest. A key factor motivating consumers to buy healthy foods and products was transparent information on ingredients—around half of people want to see the benefits and efficacy explained and supported clearly on the packaging.
The focus on health extends beyond China to other countries in Asia Pacific, Middle East and Africa as well. “Consumers are turning to home remedies and health supplements, ordering food online, dining more at home, trading down but at the same time spending more on indulgence, with an increased focus on clean label products”, says Avinash Lal, Director of Market Research and Consumer Insights at Kerry Asia Pacific, Middle East and Africa.
Outcome 5: Seniors are catching on to online buying
Previously ambivalent about online purchasing, more Chinese elderly have discovered how quick, easy and convenient shopping can be with apps and social media. What this means for manufacturers is that clear images and easy-to-read product names and descriptions are crucial to ensure a smooth buying experience, especially as more easy ordering apps become available and the popularity of food delivery continues to rise.
Outcome 6: Comfort food and premium products on the upswing
In uncertain times, consumers in China reach for treats for a quick uplift and indulgence categories including ice cream, chocolate, snacks and dairy are seeing fresh relevance. According to Kantar, the 2020 lunar new year holiday week in China saw a 30% increase in ice cream sales compared to the same period in 2019, with North China topping 48%. Puffed snacks sales at convenience stores saw a 17% hike between January 25 and February 7 compared to February 2 and 15 in 2019.
Disrupted plans, a sense of missed opportunities such as fun and travel and the realisation that life is fragile have also spurred Chinese consumers to be adventurous and open to new experiences and premium products including innovative food and beverages that appeal to the new mindset of ‘embracing life to the fullest’.
Life in China and the world over has changed forever in just a few short months. As the outbreak continues to develop, more countries are looking to China for learnings on how to future-proof their people’s health, livelihoods and economy. An impetus, if ever there was one, for the food and beverage sector to step up by responding nimbly to the fast-changing landscape and render the support their customers and consumers need.
To learn more about how COVID-19 is affecting the food and beverage industry, including changes in consumer preferences and purchasing behaviours, visit Kerry’s COVID-19 resource page.