Unlocking China's Next Snack Food Decade

18 JUNE 2024

The next 10 years for snacks, where are the opportunities?
By examining the historical trajectory of the snack category in China, tracking shifts in distribution channels, and drawing insights from the evolution of snack markets in developed countries, we can anticipate the forthcoming trends in China’s snack industry over the next decade.
We predict the following for the Chinese snack market in the next 10 years:

1. The snack market size will increase by 200 billion.


2. Health, functionality, and high-end trends will dominate the entire snack category.


3. Confectionery, nuts, and meat snacks will show a clear trend towards high-end products.


4. Offline channels, represented by bulk snacks, will enhance cost-effectiveness.


5. The online channel dividend will shift towards live-streaming e-commerce and instant retail.


6. Snack exports will embrace opportunities.

1. The Chinese snack market is poised for substantial growth, with an estimated nearly 40% increase, reaching 682.2 billion yuan by 2033. Categories aligning with health, functionality, and high-end trends, like nuts, meat snacks, flavored snacks, and protein bars, will drive this expansion. Traditional segments like candies and chips might see slower growth while emerging segments within these categories will thrive. New distribution channels, including bulk snacks and live-streaming e-commerce, are expected to outpace traditional platforms. Overall, the next decade presents significant opportunities for innovative snacks catering to evolving consumer preferences.

2) Key Trends

2.1. Snackification of Meals: Small Bites, Big Meals

Snackification of meals, a leading trend recognized by Innova Market Insights, sees consumers increasingly replacing regular meals with snacks. Mondelez International’s 2022 report reveals 71 % of consumers snack twice daily, and 60% are open to meal substitution. Popular among millennials, around 70% prefer snacks, and 90% replace at least one meal weekly. Notably, nuts, protein/energy bars, and meat snacks have emerged as meal replacement products. Daily portioned nuts create a 6 to 7 billion yuan market, while the Chinese protein/energy bar market anticipates 12.99 % CAGR, reaching 451 million yuan by 2028. Meat snacks predict over 9% CAGR from 2022 to 2027.

2.2. Healthification: Addition and Subtraction

 

The global food market emphasizes healthification, with governments and agencies promoting healthier food choices. Healthy snacks had a 90.62 billion USD market size in 2022, projecting a 6.4% CAGR from 2023 to 2032. In China, the health food market is expected to reach 1.14 trillion yuan in 2025, with 5.6% YoY growth, particularly in healthy snacks. Chinese consumers prioritize health, evident in their 80% habit of checking snack nutritional labels. Healthification involves both “addition” and “subtraction.” “Addition” includes incorporating ingredients like chia seeds and kale, observed in products like Haomaiduo’s Black Gold Cheese Crackers and Weilong’s Whole Wheat Kale Biscuits. “Subtraction” focuses on reducing sugar, low GI, salt, and saturated fats. Brands like Daily Black Chocolate and Mars Arrow offer zero-sugar products, contributing to the rise of healthier alternatives. Low GI snacks cater to diabetes patients and weight-conscious consumers, while efforts to reduce salt and saturated fats are notable in brands like Lay’s and Ritz, aligning with the trend of “healthy subtraction.”

2.3. Functionalization: Catering to Specific Consumer Segments

 

China’s functional food market surged from 137 billion to 196.1 billion yuan (2016-2021), ranking as the world’s largest. Functional snacks present growth potential, with trends like adding functional elements to candies. BuffX and Minayo achieved notable sales in functional candies. The “Food as Medicine ” concept, surpassing 20 billion yuan on Taobao and Tmall in 2022, features ingredients like bird’s nest and black sesame. Globally, Enlightened herbal tea-infused ice cream showcases innovation. Functionalized potato chips and ice cream hold promise in China. Developing products for specific segments, like snacks for the elderly or addressing health issues, aligns with consumer concerns. Methuselah and Sugar Mate Bao Bao’s success in customizing snacks for specific health needs indicates market opportunities.

Brands can also develop snacks tailored to specific health issues. According to Ipsos research, digestive issues, sleep disturbances, and immunity are major health concerns. Probiotics, GABA, and vitamin gummies have emerged in response to these challenges. Additionally, the weight management market in China is currently focused on fat-reducing products. In an era of “body anxiety,” taking inspiration from Japan, lowering cholesterol is also an innovative direction.

2.4. High-endization: From 1.0 to 2.0

 

High-end ice cream brand Zhongxue Gao faced a PR crisis, and Liangpinpuzi implemented its largest price reduction in 17 years due to the rise of bulk snacks. Despite a perceived downgrade, it’s a “price” downgrade, not affecting the high-end focus on quality. The global high-end snack market is predicted to grow at a 4.8% CAGR (2022-2027). In the 1.0 stage of Chinese snack high-endization, brands like Three Squirrels covered various categories. In the 2.0 stage, a greater focus on single categories or specific consumer segments is observed, exemplified by brands like Dr. Cheese, Mr. Daishu, and Methuselah, emphasizing quality, health, and specific consumer needs.

3) Growth Opportunities in Diversified Channels

 

Snack brands’ destinies are closely tied to distribution channels. While Dove, Lay’s, and Qia Qia excelled in supermarkets, Liangpinpuzi, Laiyifen, and Three Squirrels thrived through chains and e-commerce. However, the latter trio faced declining sales in traditional channels recently, impacting their performance. In H1 2023, Three Squirrels saw a 29.67% YoY revenue decrease, Liangpinpuzi dropped by 14.33%, and Laiyifen by 7.61%. Despite these challenges, Three Squirrels experienced growth in Douyin, where revenue increased by 28.61%. Brands embracing change early, like Yanjin Shop, seizing the bulk snacks and Douyin opportunity, achieved high-speed growth, nearing Laiyifen’s estimated 2023 revenue. Early adopters of change will reap dividends.

3.1. Offline Formats: Bulk Snack Stores Boost Ultimate Cost Performance


Bulk snack stores and other offline formats continuously compete on the cost performance of Bulk snack stores, with over 22,000 in China by October 2023, presenting growth opportunities for brands, led by Busy for You with 6,500+ stores. The popularity of bulk snacks lies in hard discounts, lowering average prices, and attracting customers. This trend contributed to Yanjin Store’s 52.54% YoY revenue growth in Q1-Q3 2023 and boosted net profits for Ganyuan Food and Jinzai Food. Forecasts suggest China’s snack collection stores will exceed 120 billion in the next two years, with a potential 116,000 or 50,000 mass-selling snack stores nationwide, doubling growth. Warehouse membership stores like Sam’s and Costco offer opportunities for cost-effective large-package snacks. Bestore and Three Squirrels are adapting to the discounting trend, launching mass-selling snacks and adjusting prices, respectively.

3.2. Live streaming e-commerce: Undertake online dividends, brand self-broadcasting welcomes opportunities

 

Live streaming e-commerce is challenging traditional platforms; Nielsen IQ data indicates a decline in snack sales share on Tmall but an 80%+ growth on Douyin. In 2023, Douyin surpassed Tmall and JD.com in market share for meat snacks. The surge in live-streaming e-commerce is driven by short video consumption habits, with nearly 30% of China’s mobile internet users spending time on short videos. Celebrity-driven live broadcasts peaked, leading to a surge in corporate self-broadcasts, growing from 30.5% in 2019 to 49.8% in 2022. Platforms like Douyin and Kuaishou focus on shelf e-commerce, offering growth opportunities for snack brands. In December 2023, Douyin’s “Fun Snacks Festival” featured 2,300+ videos, with a 66% increase in GMV for new mall entrances and searches outside the mall.

3.3. Instant Retail: Igniting New Vitality in Immediate Needs


Instant retail is a thriving sector in the leisure snack market, with a projected market size of 82.6 billion yuan by 2025, growing at a CAGR of 46.6%. Unlike food delivery, instant retail covers a broad range of SKUs, involving platforms and physical stores. It aligns well with snack consumption habits, exhibiting all-day consumption characteristics. The impulsive nature of snack buying is encouraged through daily promotional mechanisms, with 21% of purchases driven by promotions. Categories like marinated snacks, pastries, nuts, dried meat, puffed/fried snacks, and candies excel in instant retail. Brands, like Liangpinpuzi, witnessed a 72% YoY sales growth on platforms like Meituan and Pinduoduo in H1 2023. Leveraging consumer preferences for new, diverse, and trendy items positions snack brands strategically in this growing trend.

3.4. Opportunities in Going Global


Instant retail is a thriving sector in the leisure snack market, with a projected market size of 82.6 billion yuan by 2025, growing at a CAGR of 46.6%. Unlike food delivery, instant retail covers a broad range of SKUs, involving platforms and physical stores. It aligns well with snack consumption habits, exhibiting all-day consumption characteristics. The impulsive nature of snack buying is encouraged through daily promotional mechanisms, with 21% of purchases driven by promotions. Categories like marinated snacks, pastries, nuts, dried meat, puffed/fried snacks, and candies excel in instant retail. Brands, like Liangpinpuzi, witnessed a 72% YoY sales growth on platforms like Meituan and Pinduoduo in H1 2023. Leveraging consumer preferences for new, diverse, and trendy items positions snack brands strategically in this growing trend.

Summary

In the next 10 years, the Chinese snack market will have vast growth potential. Apart from catering to demands for health, functionality, and the snack consumption trends of meals, snacks will also integrate with outdoor activities and experiential eating, and cater to the personalized needs of specific consumer groups, giving rise to new categories and forms.

Different snack channels have their respective focuses, and there is a clear trend toward an omnichannel approach. Fueled by the “catfish effect” in bulk snack retailing, offline snack channels are optimizing their supply chains and engaging in fierce competition on price. Live streaming e-commerce and instant retailing leverage platform advantages to provide online growth opportunities.

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