Which countries have an advantage in China's food market

Which countries have an advantage in the China food market and why
A DDMA China Market Snapshot Report
Data Driven Marketing Asia (DDMA) was founded in 2001 and is a full service market research company based in Shanghai, China
March 11th
2014
DATA DRIVEN MARKETING ASIA WWW.DDM-ASIA.COM
M arc h 11th, 2014
About this study and DDMA

About Data Driven Marketing Asia (DDMA)
Founded in 2002 Data Driven Marketing Asia (DDMA) is an independent, full service agency providing qualitative and quantitative market research. Headquartered in Shanghai with coverage across 28 cities in China the company conducts consumer market research across the Chinese market for many leading food and beverage companies as well as leading technology, fashion and financial brands. A full list of our clients are provided for reference later in this report. Secondary research conducted by DDMA from DDMA conducted an online survey of 500 respondents in Shanghai, using its own propriety panel of respondents, during Q4, 2013. The respondents selected are representative of middle class consumers. They are aged between 26 and 45, are employed in either a full or part time capacity and earn a net income of at least RMB4,000 (US$ 680) per month. Eight qualitative focus groups with target consumers in Shanghai. These focus groups were conducted by DDMAs qualitative market research team.
Data collection and methodology

This DDMA report is based on quantitative market research, qualitative market research and secondary research. These are:
which
a database of up to 3,000 media reports
on food safety incidents since mid-2004 has been constructed. In general for one incident only one media report is selected and maintained in the database to avoid duplication.
DongLong AIA Building, Office 401, 223 Xikang Road, Jing An District, Shanghai 200040 People's Republic of China www.ddm-asia.com E: info@ddm-asia.com
M arc h 11th, 2014
Foreword
Data Driven Marketing Asia (DDMA) provides consumer and trade market research to many international and domestic companies in relation to China market. One area of our business that has grown considerably over the past 24 months is with foreign food companies wishing to market and sell their food produce to the rapidly developing Chinese middle class. DDMA assists these companies in identifying the most favorable brand positioning, in establishing pricing, the development of complete marketing strategies, retail evaluation and in assisting with product launches, particularly via leading online sales platforms. The opportunities for foreign food companies in China have been boosted further by the recurring food scandals that have plagued the domestic food producers. The result of these food scandals has been a complete erosion of consumer confidence in the credibility of domestic food companies. The opportunities for foreign food companies in China are vast. The poor performance of the domestic food companies is only one of the contributing factors to the opportunity for foreign food companies in China. Other factors include:

continues to develop and it plays a very important role in the sale of imported food. A strong currency has meant that imported foods are more affordable. This report provides an overview of Chinese consumer perceptions of domestic food companies and of foreign food companies from ten pre-selected countries. The perceptions of these countries are derived from consumer interviews with 500 middle to high income respondents in Shanghai. The findings are relatively straightforward. Today, 48% of this higher income Chinese consumer group actively seek out foreign food brands when shopping. There are also clear opportunities in the catering industry as this higher income group displays a strong preference for restaurants that serve foreign food produce. The perceptions of food brands from the countries included in this study provide an insight into how Chinese consumers access foreign food brands. New Zealand and Australian food brands are considered very appealing, with much of this appeal being driven by positive impressions of the clean, natural environment in each country. However, smaller countries, such as Norway, have more positive perceptions among the respondents that are familiar with that country. Food brands from other countries, such as Germany, are also considered highly favorable but the dynamic and the preference is driven by different factors. I hope that you find this report of interest. If there are any questions on this report or on services that we could provide to your company, please do not hesitate to contact us.
A rapidly developing middle class that are more internationally exposed than ever before. This group tends to travel regularly overseas, are exposed to foreign media and are gradually becoming more knowledgeable on foreign food brands.
A highly developed transport infrastructure has led to increasingly efficient distribution of foreign foods. More cities across Chinas 650 cities are now easily accessible, especially the developing second, third and fourth tier cities that are driving much of the continued retail expansion.
A developing quality to high end retail segment, especially in the emergence of high end/boutique supermarkets and the improvement of the domestic retail experience.
The boom in online sales and changing consumer purchase behavior. Online shopping in China
M arc h 11th, 2014
1. The impact of Chinese food scandals and the resulting opportunity for foreign food brands and producers in China
Repeated food scandals in China have undermined the confidence that Chinese consumers have in Chinese food companies. This report introduces how Chinese food companies are currently perceived relative to their international competitors. It also introduces the categories that are of greatest concern, the perception of food from a wide selection of countries and the growing acceptance of imported food as a healthier and safer alternative to domestically produced food. The history of food scandals in China is relatively well documented. These scandals have played a key role in undermining the confidence in local food production. The key areas of mistrust revolves around poor legislation and corporate governance. The lack of trust in Chinese food producers is being driven by the perception that these companies do not get punished when they break food laws, are not strictly supervised and are only interested in
Healthcare protection The outlook for the Chinese economy
Top ranked concern 2nd ranked concern 3nd ranked concern
profits. Growing concerns about the levels of pollution in the Chinese environment are also fueling mistrust and concerns.
What are the biggest concerns in your life?

Food safety in China 94%
Air quality where I live
74%
Water quality
46%
42%
21%
Base: Shanghai: All respondents : n= 500
Major food scandals reported in Chinese media 2004 Q4, 2013

710
Why are there so many food scandals in China?

Dishonest companies are not punished Companies are not strictly supervised Companies are dishonest & only care about profit 94% 92% 92% 77% 69% 34% 20%
425
390 290 180 190 180 210 170
Food standards are too low Environment is polluted so food is unsafe Do not have advanced technology Not experienced at producing quality food
65 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: DDMA Secondary Research. Q4 - 2013
Source: DDMA Secondary Research. Q4 - 2013
M arc h 11th, 2014
2. Chinas growing middle class and the growing preference for foreign food brands
The opportunity for foreign food producers is very clear. This study, while only conducted in Shanghai, highlights the shift in preference for foreign food produce, almost 50% of consumers interviewed state that when they shop, they actively seek out foreign food brands. With a rapidly developing middle class in China, the opportunity is vast. The most favorable attitudes are held among higher income producers.
1. Food from foreign countries is perceived to be of higher quality than Chinese food. This belief is very much ingrained in the minds of Chinese consumers, in particular the wealthier consumers from higher income groups. The perceptions of food from different countries is introduced later in this report.
Foreign food brands are better % Strongly Agree

69% 65% 70% 80%
Total Sample
Low lncome Medium lncome High lncome
2. A clear opportunity for restaurants in China to promote the foreign food on their menus. There is a developing preference for restaurants that serve foreign food, the chart shows that 60% of respondents of this survey stated that they frequent restaurants that serve imported food.
I prefer restaurants that serve foreign food % Strongly Agree

60% 57% 59% 71%
Total Sample
Base: Shanghai: All respondents: n= 500
3. Chinese consumers actively research and collect information on foreign foods and brands. The importance of a strong online presence is clear with almost 50% of consumers stating that they actively collect data on foreign food brands. The incidence of this data collection increases as income rises with wealthier consumers being the most prolific in their research activities.
I actively research foreign food brands before purchase % Strongly Agree

48% 41% 51% 63%
Total Sample
4. The result: 46% of consumers actively seek out foreign food brands when shopping. The preference for foreign food brands grows with income with almost 60% of the highest income group stating that their preference is for foreign food brands when shopping.
I seek out foreign food brands when shopping % Strongly Agree

46% 43% 45% 59%
Total Sample
M arc h 11th, 2014
3. Most favored food producing countries for Chinese consumers and the power of perception
New Zealand and Australia top the list of most favored food producing countries with Chinese consumers. Germany follows in third place. The preference for Australia and New Zealand is not surprising. These two countries are perceived in a very favorable light by Chinese consumers due to the perceptions of wide open spaces and both having a clean, unpolluted environment. In many ways, New Zealand and Australia are the exact opposite of living in China. The power of the Food from New Zealand and Food from Australia brands is evident in the adjacent charts. While only 33% of respondents claim to be familiar or very familiar with Australia, 72% of all respondents are very comfortable and will consider buying food and food brands from Australia. This indicates that in the general population both countries are strongly associated with very high food quality. Countries that respondents are more familiar with, such as Japan and the USA, do not score as highly in terms of favorability for food purchase.
Germary France Sweden Norway 15% 11%
Very familiar
Level of familiarity with the following countries Top ten countries

Japan Korea USA Australia England New Zealand 39% 38% 33% 27% 24% 24% 24% 46%
Somewhat familiar
Which country are you most comfortable buying food from?

New Zealand Australia Germary USA Japan England France Sweden Norway Korea 73% 72% 64% 55% 48% 40% 38% 38% 30% 19%
M arc h 11th, 2014
4. Perceptions of selected food producing countries

Correspondence analysis of which food producing attributes are associated with which countries has generated the perceptual map below. This map introduces how Chinese consumers perceive the foreign food producers. What it indicates is as follows:

New Zealand and Australia. Norway is also strongly associated with having high food safety standards. The countries most associated with strong corporate governance and advanced food technology are Japan and Germany. These countries are not associated with having a particularly clean environment.
That over 80% of perceptions are expressed on the horizontal x-axis. This access runs between natural clean environment at one extreme and advanced technology at the other extreme.
The United States is more closely associated with having advanced food technology as opposed to having strong corporate governance strong food safety regulations.
The vertical y-axis ranges does not express much of the data but reflects relative differences between perceived levels of corporate governance of food companies and food safety standards.
Sweden is not clearly defined on this map, but as all positions are relative to the strengths and weaknesses of other countries, the following slides will demonstrate that Sweden is perceived as being very similar to Germany but with a cleaner environment.
The countries that are most associated with clean environment and high quality foodstuffs are Norway,
Perceptions of selected food producing countries Based on responses of respondents that are familiar or very familiar with each country
Symmetric plot (axes F1 and F2: 96.82%) Weaker governance Advanced food technology USA High quality foodstuff F2 (3.99%) Australia New Zealand Environment Japan Strong Govt. Supervision Germany High standards in food safety Food producers value quality over profit Sweden Clean & natural environment
Advanced Technology
Norway Strong governance F1 (92.84%)
M arc h 11th, 2014
4. Perceived strengths and weaknesses of food brands from ten most preferred countries 1
1. New Zealand
New Zealand tops the list and the strength of the New Zealand brand is reflected in the high level of purchase preference for foods from New Zealand versus the relatively low levels of familiarity about the country. The appeal for New Zealand food brands is being driven primarily by above average ratings on the cleanliness of the environment. New Zealand companies are considered to be slightly below average on governance and are not strongly associated with having advanced food technology.
Governance
Environment
Trust
Technology
Will consider to buy food brands from this country High familiarity with country overall
73%
Rank 1 81% 75% 81% 84% 78% 70% 67%
24%
Rank 6
Base for ratings: All Shanghai respondents: n= 500
High standards Strong Govt in food safety Supervision
High quality Clean & natural Trustworthy Food producers Advanced food foodstuff environment food producers value quality technology over profit
Average rating for each attribute across all countries
Base for ratings: All consumers that are familiar/very familiar with New Zealand: n= 105
2. Australia
Foreign food brands and food produce from Australia have a very similar perception to those from New Zealand. The appeal of Australian food brands is driven by positive
perceptions of the Australian environment. The Australian food industry is considered to be slightly below average in terms of corporate governance, average in terms of trust and below average in terms of the use of advanced food technology.
Governance
Environment
Trust
Technology
72%
Rank 4 74% 73% 78% 80% 76% 66% 62%
33%
Rank 4
Base for ratings: All consumers that are familiar/very familiar with Australia: n= 130
M arc h 11th, 2014
3. Germany
The attraction and appeal of German food brands is not driven by perceptions of a clean environment, rather, appeal is driven by perceptions of strong corporate governance, advanced technology and trustworthy food producers that are honest and have integrity. The Made in Germany brand is well established in China and Chinese-German commercial co-operation has a longer history than with most other non-Asian countries. The familiarity with Germany is relatively low, but the perceptions of the made in Germany brand creates very positive perceptions of German food producers.
Governance
Environment
Trust
Technology
64%
Rank 3 85% 83% 76% 56% 83% 68% 82%
24%
Rank 7
Base for ratings: All consumers that are familiar/very familiar with Germany: n= 92
4. USA
The familiarity with the USA is relatively high. For those that are familiar with the USA, the country is perceived to be average for food safety, not strong in terms of having a clean environment, slightly below average in terms of trust and integrity of producers but strong in terms
Governance
of advanced food technology. America is probably the non-Asian country that Chinese consumers have most exposure to, America has always been strong associated with lifestyle, freedom and wealth. American food producers need to tell a stronger story on the quality of their environment to win over more Chinese consumers to American food brands.
Environment Trust Technology
55%
Rank 4 76% 72% 72% 51% 69% 79% 59%
38%
Rank 3
Base for ratings: All consumers that are familiar/very familiar with USA: n= 123
M arc h 11th, 2014
5. Japan
Japan is the country which Chinese consumers are most familiar with. Aside from current and historical geo-political tensions, Japan is widely seen as an attractive destination and an appealing society. Food brands from Japan are strongly associated with strong governance, high levels of food safety and advanced food technology. The ongoing nuclear issue at Fukushima is playing a role in undermining ratings for the perceptions of the Japanese environment. Japanese food brands are already well established in China, but they can grow further if they can allay fears over the environment.
Governance
Environment
Trust
Technology
48%
Rank 5 81% 87% 75% 57% 76% 85% 66%
46%
Rank 1
Base for ratings: All consumers that are familiar/very familiar with Japan: n= 133
6. England
England is also a country which Chinese consumers are relatively familiar with. However, the perceptions of England do not currently play a strong role in supporting the appeal of Made in England food
brands. England is rated below average on governance, environment and technology. The outcome is not surprising as England is more closely associated with being an attractive holiday destination, a country that is suitable to conduct third level studies in or as a shopping trip location.
Governance
Environment
Trust
Technology
40%
Rank 6 66% 70% 68% 48% 73% 61% 67%
27%
Rank 5
Base for ratings: All consumers that are familiar/very familiar with England: n= 70
10
M arc h 11th, 2014
7. France
The profile of France and food brands from France is interesting in that it is relatively weak, especially when considered in the context of the relative popularity and positive perceptions of French wine in China. Currently the perceptions of France do not strongly support French food brands. The country is perceived as being slightly below average on all core dimensions measured with respondents that are familiar with the country. This fits with the general perception of France that is held by Chinese consumers. That is, a country that is a good holiday destination and strongly associated with fashion.
Governance
Environment
Trust
Technology
38%
Rank 7 67% 71% 64% 60% 61% 62% 66%
24%
Rank 8
Base for ratings: All consumers that are familiar/very familiar with France: n= 60
8. Sweden
Overall preference and purchase consideration for Swedish food brands is undermined by a lack of familiarity with the country. However, among the respondents of this survey that are familiar with Sweden, the country is perceived as having
strong corporate governance, a very clean environment, above average levels of trust and integrity within the food industry and a food industry that has advanced technology. In many ways, the perceptions of Sweden are very similar to those of Germany, with the difference being much stronger ratings on the cleanliness of the environment.
Governance
Environment
Trust
Technology
38%
Rank 7 85% 82% 89% 81% 76% 76% 82%
24%
Rank 8
Base for ratings: All consumers that are familiar/very familiar with Sweden: n= 46
11
M arc h 11th, 2014
9. Norway
Norway is another country where overall preference as a source for food brands is undermined by low levels of familiarity with the country. Among re sponde nt s in th i s s tu d y th a t a re fa m i l i a r wi th Norway, the country is rated very highly on perceived corporate governance, environment and trust. The relative weakness is in an average rating on advanced food technology in the food industry. Overall, Norway holds similar perceptions to Germany and Sweden, except that it is stronger in terms of corporate governance and environment and weaker in terms of use of advanced technology.
Governance
Environment
Trust
Technology
Will consider to buy food brands from this country
30%
Rank 9 93% 84% 90% 87% 80% 77% 70%
High familiarity with 11% country overall Rank 10

Base for ratings: All consumers that are familiar/very familiar with Norway: n= 30
10. Korea
The levels of familiarity with Korea are naturally very high, however, this does not convert into high levels of consideration of purchase for Korean food brands. Korea as a food producing
nation does not score strongly on any of the key dimensions measured in this study. The image of Korea in China is relatively positive. It is closely associated with fashion and young, contemporary Asian fashion, style and popular culture. It is also a very popular location for holidays and shopping.
Governance
Environment
Trust
Technology
Will consider to buy 19% food brands from Rank 10 this country 66% High familiarity with country overall
39%
Rank 2
60%
59%
67% 47% 53% 55%
Base for ratings: All consumers that are familiar/very familiar with Korea: n= 58
12
M arc h 11th, 2014
5. The vast gaps between perceptions of Chinese food companies and foreign food companies
The vast gap between the perceptions that respondents held of Chinese food brands versus their foreign counterparts is revealed in the table below. The lack of confidence in Chinese food standards and extreme doubts as to the capability of the government to regulate and supervise the Chinese food industry are clearly seen in the survey results. The damage of poor environmental protection over the years in China and the mistrust of Chinese food companies is also reflected. In contrast, the table also highlights the positive perceptions of Norway and food brands from Norway that are held by those familiar with the country. Overall, Norway, Japan and Germany attained the highest ratings on the core image dimensions measured.
Difference in perceptions of Chinese food companies and foreign food companies based on responses of respondents that are familiar or very familiar with each country
Score for Chinese Attribute Food Companies % strongly agree (n=500) The country has a high standard of food safety The government strictly supervises the food industry The country has high quality raw materials to produce food The food from this country is trustworthy Advanced food technology Food producers put priority in quality as opposed to profit Has a natural and clean environment Average score for top 10 foreign countries(n=500) Difference between Chinese companies and foreign companies Highest rated country with those familiar with each country Familiar with country & strongly agree %
6%
77%
71%
Norway
93%
4%
76%
72%
Japan
87%
3%
75%
72%
Norway
90%
3%
74%
71%
Germany
83%
11%
72%
61%
Japan
85%
3%
66%
63%
Norway
77%
4%
65%
61%
Norway
87%
13
M arc h 11th, 2014
Conclusions & Future Reports

This report has outlined the opportunities for foreign food companies in the China market, how food brands from selected countries are perceived by higher income Chinese consumers and the key reasons why these opportunities exist. Future reports on the opportunities in the food market in China will introduce the following: Most suitable retail channels for foreign food companies and brands in China The online sales opportunity for foreign food brands in China An overview of the opportunities in specific food categories, such as meat, dairy, seafood, fruit and beverages. These reports will be released in the near future. These reports will be released in the near future.
About DDMA
DDMA is a full service market research company based in Shanghai, China. Our clients include:
14

Which countries have an advantage in China's food market

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Which countries have an advantage in China's food market

Uploaded by

Copyright:

Available Formats

Which countries have an advantage in the China food market and why

A DDMA China Market Snapshot Report

DATA DRIVEN MARKETING ASIA WWW.DDM-ASIA.COM

M arc h 11th, 2014

About this study and DDMA

Data collection and methodology

a database of up to 3,000 media reports

M arc h 11th, 2014

M arc h 11th, 2014

What are the biggest concerns in your life?

Air quality where I live

Base: Shanghai: All respondents : n= 500

Major food scandals reported in Chinese media 2004 Q4, 2013

Why are there so many food scandals in China?

390 290 180 190 180 210 170

Source: DDMA Secondary Research. Q4 - 2013

M arc h 11th, 2014

Foreign food brands are better % Strongly Agree

Low lncome Medium lncome High lncome

Base: Shanghai: All respondents : n= 500

I prefer restaurants that serve foreign food % Strongly Agree

Low lncome Medium lncome High lncome

Base: Shanghai: All respondents: n= 500

I actively research foreign food brands before purchase % Strongly Agree

Low lncome Medium lncome High lncome

Base: Shanghai: All respondents: n= 500

I seek out foreign food brands when shopping % Strongly Agree

Low lncome Medium lncome High lncome

Base: Shanghai: All respondents: n= 500

M arc h 11th, 2014

Level of familiarity with the following countries Top ten countries

Which country are you most comfortable buying food from?

Base: Shanghai: All respondents: n= 500

M arc h 11th, 2014

4. Perceptions of selected food producing countries

Norway Strong governance F1 (92.84%)

Base: Shanghai: All respondents : n= 500

M arc h 11th, 2014

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

M arc h 11th, 2014

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

M arc h 11th, 2014

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

M arc h 11th, 2014

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

Base for ratings: All Shanghai respondents: n= 500

High standards Strong Govt in food safety Supervision

M arc h 11th, 2014

Will consider to buy food brands from this country

High familiarity with 11% country overall Rank 10

High standards Strong Govt in food safety Supervision

67% 47% 53% 55%