Consumer confidence in China, like most markets, has been shaken as a result of Covid-19. China is at least two months ahead of most of Europe in the re-opening phase and can provide valuable learnings on how consumer behaviour may change.
In big cities such as Shanghai, we are seeing a return to normal in many foodservice outlets and bars. Most food service outlets and food courts are operating without social distancing measures and in some cases, social distancing appears to be a distant memory. This FoodAlert will share examples of how the post-Covid-19 “new normal” is emerging in both the retail and foodservice channels in China and conclude with the implications for “Brand Ireland”.
In a Mintel study of 1,200 consumers, consumer confidence improved considerably between February and May but 71% of respondents were still somewhat or moderately worried about the impact of Covid-19 on their lifestyles, which would support what Bord Bia were observing in the market (Mintel, 2020).
By late March, up to 90% of foodservice outlets in big cities had returned to normal service, but industry contacts were reporting to Bord Bia that most of those that had re-opened were operating at approximately 30% of capacity as a result of low customer confidence.
Consumers’ financial situation has been improving as the lockdown has eased and eating out has been experiencing positive growth. There was a steady decline in the amount of money spent on eating at home from March to May and money spent eating out seeing the joint biggest month on month increase as can be seen in the graph below. Having said that, a contracting economy is likely to slow consumer spending over the course of the coming months.
Retail – shift to online
Online retail was one of the big winners to come out of the lockdown in China. HAVAS China reported that the year-on-year rise in daily average users on Hema grew 128% and JD.com saw a 215% of growth in their online fresh food business over periods during the course of Chinese New Year and the lockdown that followed. (FoodNavigator, 2020)
As China emerged from lockdown, traditional retail saw double digit recovery between March and May but online retail has remained consistent and is expected to retain a higher share of the overall retail market. (Mintel 2020)
Freshippo CEO Hou Yi in an interview with Food Navigator Asia said:
“We believe there will be a further acceleration in the digital transformation of the retail sector, with the pandemic encouraging more people, especially the older generation, to try and experience online shopping.” (FoodNavigator, 2020).
Research from the University College London found that it takes 66 days to develop a habit. Younger people are expected to adapt to online retail quickly but we also saw a trend of older people embracing online retail for the first time during the lockdown. Early in the lockdown China Skinny, a Shanghai based marketing and research agency, found that more consumers than ever over 30 have started to shop online and that this usage was penetrating into tier 3 and lower cities. Middle-aged users and above grew 237% on the MissFresh platform (ChinaSkinny, 2020).
As part of Bord Bia’s Covid-19 Future Proofing work, the team at Bord Bia’s Thinking House have been tracking “early indicators”, or changes in consumer behaviour that become 'sticky' - permanent changes in the way consumers we eat, drink and shop post Covid-19. A new habit.
Early indicators that were identified in the Bord Bia research suggest that “protective health management” will emerge as a trend and that foods that can protect our defence systems are likely to grow in popularity. Mintel’s China research supported this assertion and identified that Chinese consumers’ priorities had changed dramatically with healthy eating becoming a higher priority of 70% of respondents (Mintel, 2020).
This is positive for Irish exports to China. It has been widely reported by Bord Bia and others that Chinese consumers’ confidence of the food safety standards of domestic products is poor and imported dairy, meat and seafood are generally considered to be healthy, safe sources of protein with the European Union being seen as a trusted food source (Science Direct 2019).
Short term future
Foodservice across China has now fully re-opened and consumer confidence is increasing but with many industry contacts still reporting revenue levels anywhere between 50% and 80%, there is still some way to go until we see a return to 2019 levels. Rabobank have predicted that the foodservice industry is less likely to recover to pre-virus growth levels prior to Q4 2020 (Rabobank, 2020).
By the time Bord Bia exhibits at SIAL China in Shanghai from 28-30 September, therefore foodservice should be almost back to 2019 levels. But the journey is unlikely to be without incident. In recent weeks we have seen a fresh outbreak of Covid-19 in Beijing. According to the Chinese authorities, the strain of the virus is more likely to be a European strain of the virus and it was found on cutting boards that had been used for imported salmon. Yang Peng a member of Beijing’s Center for Disease Control, told CCTV, China’s state-run broadcaster that the outbreak could have been caused by imported seafood or meat. This will impact on consumer confidence towards imported protein.
The WHO and other experts have cast doubt on the virus being caused by the import or packaging of salmon. According to this report from Time, “although the virus was found on a filleting board at the market, supplies of the fish itself tested negative, as did other foodstuffs at the market, meaning a worker was more likely the source of contamination.” (Time, 2020). But demand for salmon at retail and foodservice level was practically wiped out overnight. There has been talk if all imported food products should be tested for Covid-19, which would slow down customs clearance significantly and effect demand at foodservice and retail level. On June 20th the National Food Safety Risk Assessment Center said that imported food such as beef or seafood can be purchased and consumed normally, but precautions must be taken (Meat Stock Exchange 2020). Regardless of the accuracy of the initial reports or the June 20th announcement, the damage has been done.
Mintel found that 68% of respondents in their study identified restaurants as the most concerned place for contracting Covid-19 during travel (Mintel, 2020), so consumer confidence in this space could be fragile.
Implications for “Brand Ireland”:
The trend of “protective health management” and the preference for imported protein is an obvious advantage for Irish exporters. In recent years foodservice has been the main channel for the majority of Irish meat and seafood exports to China, with it becoming increasingly important for dairy exports. Many importers are now selling to online retailers which represents an opportunity for Irish exporters to build awareness for Irish produce at consumer level across this huge country. JD Fresh is visited by 1m shoppers daily which illustrates the vast reach of these platforms. In the past few years Bord Bia has run a number of promotions with online retailers such as JD.com, Tmall.com and online influencers covering a range of meat, seafood, dairy, alcohol and packaged consumer food products. There is a further series of promotions planned for the rest of 2020.
Covid-19 has sharpened the focus of many consumers on the source of and nutritional benefit of their food and drink. Aligned to this, Bord Bia’s dairy, beef and seafood marketing strategies for China are focused around messaging on food safety, health, science and sustainability. The current situation presents a further opportunity to build “Brand Ireland” to trade and consumers by promoting Ireland as a source of safe, healthy food and drink produced in harmony with nature.
Irish suppliers who are interested in engaging on opportunities in the Chinese market should contact Kieran.Fitzgerald@bordbia.ie to learn more.
- Mintel 2020 - COVID-19's impact on Chinese consumers: 26 Apr-2 May www.mintel.com
- Top of Form Food Navigator 2020: Bottom of Form ·‘Consumption evolution’: Further boom predicted for China’s fresh food e-commerce platforms post-COVID-19 https://www.foodnavigatorasia.com/Article/2020/05/25/Consumption-evolution-Further-boom-predicted-for-China-s-fresh-food-e-commerce-platforms-post-COVID-19
- Food Navigator 2020: Digital Transformation: Alibaba predicts boom in China retail digitisation and healthy foods due to Covid-19.
- China Skinny 2020: The Coronavirus’ Impact on the Retail Industry
- Bord Bia 2020: Future Proofing Toolkits
- Science Direct 2019: Chinese consumer's attitudes, perceptions and behavioural responses towards food fraud
- Meat Stock Exchange 2020: CCTV reports: Imported beef and seafood can be purchased and eaten normally!
Click here for link in Chinese
- Rabobank 2020: China's Gradual Recovery from Coronavirus
- Time.com 2020: Should the World Be Worried About the 'Explosive' New Outbreak of Coronavirus in Beijing?
- University College London 2009: How long does it take to form a habit?