Incomes, consumption spark snacks boom

Innovative products set to expand more than $100 billion market toward US, Japanese scenarios

With disposable incomes rising and more consumption scenarios appearing, China's snack consumption market is expected to embrace rapid growth.

Data from market consultancy Shanghai Ourui Supply Chain Management Co Ltd showed that China's snack market has been growing steadily in recent years. In 2022, the market totaled 734.2 billion yuan ($106.64 billion). Between 2022 and 2027, the compound annual growth rate of the market is expected to be 5.9 percent and sales revenue is estimated to reach 976.5 billion yuan by 2027.

According to Ourui, compared with developed countries such as the United States and Japan, China's snack consumption level is relatively low. In the future, with the increase in residents' disposable incomes, diverse consumption scenarios and emerging innovative products, China's snack market is estimated to maintain steady growth.

The report from Ourui showed that in 2022, among all snacks consumed by Chinese consumers, flavored snacks — including meat, salty and fried nuts — were the most popular categories taking up 38 percent, while pastries took up 34 percent.

In terms of the market pattern, as international brands entered the market early and took a major share, the position of homegrown brands has been gradually rising.

Specifically, chocolates, biscuits, potato chips and puffed snacks are mainly dominated by international brands, with Mars, Mondelez International, Pepsi and Oishi taking leading positions. In terms of candy, pastries, fruit and meat snacks, Chinese brands are gradually developing and taking considerable market shares.

Dongguan, Guangdong province-based snack maker Hsu Fu Chi, whose parent is Swiss firm Nestle, is a perfect example of domestic snack companies achieving success in China. Starting with new year's candies, the company now produces over 1,400 types of snacks. By 2022, the company had more than 140 branches and offices and over 250,000 outlets nationwide. From first-tier cities to the countryside, the company's products are found everywhere.

Speaking of the current snack consumption trend in China, Gao Weidong, director of the department of corporate affairs of Hsu Fu Chi, said that with the normalization of the pandemic, healthy snacks have become increasingly popular among consumers.

According to a recent report from United States-based consumer research platform ADM Outdoor Voice, more than 37 percent of global consumers hope that the snacks they eat may improve their psychological condition.

To adapt to the healthy trend, Hsu Fu Chi launched products with less sugar, oil and salt, and developed a series of sugar-free products, such as sachima — the Chinese equivalent of the American Rice Krispies treat — soda crackers and lollipops. Meanwhile, it launched products with enhanced nutrition, such as freshly made milk lollipops with dietary fiber, pear syrup lollipops and sugar plums containing wolfberry from Ningxia Hui autonomous region.

To embrace the health trend, domestic snack company Liangpinpuzi launched a healthy sub-brand Liangpin Feiyang, while fresh nuts manufacturer ChaCha Food Co Ltd launched a high-end sub-brand Kuizhen featuring healthiness, with the price of its products surpassing 100 yuan.

"In the past, consumers focused on the packages or the advertisements of snacks. Now, their consumption tends to be more rational and consumers pursue more healthy snacks," said Su Siyu, a national primary nutritionist.

Consumers grasping youth is another trend. Gao from Hsu Fu Chi said that currently the post-'80s, post-'90s and even the post-'00s generations have become the backbone of consumption, and it is crucial for snack brands to attract the attention of these consumer groups.

"The increasingly diverse and personalized consumer demand has also gradually made fun and uniqueness consumption keywords. Novelty and uniqueness in product appearance are becoming the social currency of young consumers," he said.

To cater to the trend, Hsu Fu Chi launched lollipops with fun decorations, cartoon-shaped marshmallows and animal-themed chocolate bars. It also launched snacks that are made of raw materials offered in certain regions and with flavors that are only offered for a limited time, to offer consumers a sense of uniqueness.

According to the white paper 2022 China's Snack Consumption Trend issued by Netease, the periods between 2 pm and 4 pm, and 6 pm and 8 pm are the most popular times for Chinese consumers to snack, with respondents taking up 39.3 percent and 24.9 percent, respectively.

As for activities consumers engage in while eating snacks, according to the white paper, 80.7 percent of the surveyed choose to watch TV or play video games, while others eat snacks while working, studying or during gatherings with friends.

In addition, consumers tend to share snacks with others. Up to 60.9 percent of respondents share snacks with friends, 49.5 percent enjoy snacks with their families, and 26.4 percent and 21.7 percent eat snacks with lovers and colleagues, respectively, according to the white paper.

In terms of consumption frequency, half of the surveyed consumers eat snacks at least three times a week, while 7.7 percent have snacks every day. For those who eat snacks frequently, 27.1 percent think their affordable price per pack is below 10 yuan, 18.4 percent are okay with prices below 20 yuan per pack, and 10.6 percent are willing to spend any price for snacks. As a result, nearly half of the respondents spend around 50 yuan on snacks every week, while 29.5 percent spend between 50 yuan and 100 yuan every week, said the white paper.

Speaking of the key factors for choosing snacks, apart from taste, 61.4 percent of the interviewees said they choose snacks because of a novel flavor, 59.1 percent pay attention to whether the ingredients are healthy, 45.7 percent focus on whether the raw materials are of high quality, and 14.9 percent care about the additional functions, such as protein replenishment and skin care.

To cater to consumers' rising demands, the research and development capability of snack companies is crucial. For example, Hsu Fu Chi has its R&D center in Dongguan, which is also one of the three global R&D centers of its parent company Nestle.

With nearly 100 local R&D personnel, the center combines domestic and international R&D experience, has in-depth insights into consumer dietary changes, focuses on product innovation and improvement, and injects vitality into the snacks market.

Mauro De Felip, general manager of Ferrero China, said that he is optimistic about the country's snack consumption market.

"During the Spring Festival holidays, we witnessed strong momentum in consumption recovery as reflected by our outstanding business performance. The robust consumption boom during Chinese New Year suggests a promising 2023."

Data from Ferrero showed that most of the company's market sales in China had gradually bounced back since December, with the gap between the same period in 2021 showing a week-on-week narrowing.

He said: "Consumption serves as a key for the recovery of the Chinese economy. Furthermore, as China is transitioning to a more services-oriented economy, we believe boosting domestic demand by prioritizing expansion of consumption will not only be a topic this year but also in the long run.

"Looking ahead, with China's optimized COVID-19 response and further opening-up measures, we're optimistic about China's consumer market and confectionery industry in 2023 and beyond, thus more confident about our business in China for 2023."