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Southeast Asia Holds Growth Potential for Chinese Food Firms

5/27/2024
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The Chinese food industry’s sales totalled USD328.7 billion in 2023, a whopping 40% of the Asia Pacific region’s total. This was particularly buoyed by staple foods which in China grew by a 5% CAGR in retail value sales terms between 2018 and 2023. Dairy products and alternatives sales are a contrast, where China is losing share of Asia Pacific’s, albeit gradually: slipping from 52% in 2018 to 48% in 2023.Chart showing Packaged Food: China Proportion of Total Asia Pacific 2023Opportunity beyond borders

In order to grow their success, Chinese players must focus on driving value sales on home turf and seek out new regional opportunities, possibly even beyond the retail channel or packaged food industries.

Asia Pacific’s growth drivers are other emerging markets, with Indonesia expected to lead the region with growth at a 6.7% CAGR for packaged food

Source: Euromonitor International

Exploring new territories beyond China might be a challenge, however, as Southeast Asian markets have typically been led by local giants, unique to each country and holding both knowledge and partnership advantages over newcomers.Chart showing Packaged Food Industries CAGR 2023-2028Chinese firms must differentiate themselves to gain an advantage over these local players, in order to gain pace and draw growth from beyond China – and to compete with players from other regional powerhouses, such as South Korea and Japan.

Eyes on Southeast Asia’s dairy market

Given the challenging market in China, especially in dairy, growth strategies saw polarisation in 2023. Brands were innovating into niche, often more premium segments of the market (offering speciality milk formula and functional milk products, for instance), but many of them also started to venture into , leveraging their strong reputations in major cities. As such, the top players in China held a greater competitive advantage, extending their lead from smaller brands and companies that lack nationwide distribution and R&D capabilities.

In total, the top 10 brands in China’s dairy products and alternatives market gained an extra 13% of market share over 2018-2023, squeezing out smaller brands and resulting in a more tightly competitive landscape

Source: Euromonitor International 

Major players like Yili (Inner Mongolia Yili Industrial Group Co Ltd) also focused on gaining footprint in the wider Asia Pacific region, tapping into fast-growing categories and markets. For instance, Yili successfully gained an extra 12% of market share in Thailand’s ice cream market with its Cremo brand. This allowed it to impressively beat out long-time brands like Cornetto and Paddle Pop (both owned by Unilever) to emerge as the category leader in 2023.

Chart showing Top Five Players in Thailand Ice Cream 2018-2023Differentiate through authenticity and value

Japanese and South Korean firms are also eyeing Southeast Asia as a potential source of growth, with their respective domestic markets facing similar growth challenges to China. As Japanese and Korean products hold strong reputations for quality and novelty, Chinese brands must carve out a positioning that can win over customers at competitive prices.

An exemplary case study is the emergence of beverage and dessert brand Mixue Ice Cream and Tea (owned by Mixue Bingcheng Co Ltd) as a key competitor in Malaysia to more established brands like Chatime (La Kaffa International Co Ltd) and Gong Cha (Gong Cha Korea Co Ltd). This came within several years since its entry into street stalls/kiosks. The brand’s halal certification and franchise business model eased its outlet expansion, opening over 100 outlets across Malaysia in three years. In addition, aggressive marketing campaigns together with low price offerings for signature beverages have attracted consumers during economically challenging periods.

Chart showing Top Five Beverage/Dessert Chained Street Stalls/Kiosks in Malaysia 2018-2023Authenticity of flavour linked to cultural heritage could also be an attractive positioning, as demonstrated by Haidilao in full-service restaurants in Singapore and Chagee in street stalls/kiosks in Malaysia. Haidilao introduced new menu varieties for its family-styled food concepts at affordable prices, which included a BBQ grill range. This accommodated varying spending capacities in what is traditionally a premium dine-in experience. This price and option flexibility is set to boost the potential of Asian full-service restaurants in Singapore, with an 8% CAGR in sales terms (constant 2023 prices) forecast for 2023-2028, the strongest type of full-service growth expected over that period. Meanwhile, Chagee touted an authentic Chinese tea house image through a modern oriental tea house in-store design that accompanies a menu range utilising premium fruit, tea leaves and fresh milk.

Identify unique habits, but stay affordable

Innovations by leading brands in China are known for their use of distinctive technology in terms of producing unique textures and offering immersive experiences. However, with the preference for low prices in Southeast Asian markets, Chinese brands must stay within an affordable range to effectively win over consumers – a strategy that is perhaps at odds with the trend in its home market where premium innovations help brands stand out (especially in first-tier cities).

For 69% of respondents in the Philippines and 48% of those in Malaysia, low prices are the top influencing feature in food and beverage choices in 2024

Source: Euromonitor International Voice of the Consumer: Lifestyles Survey, fielded January to February 2024)

Chinese firms could also offer unique experiences by leveraging lifestyle habits and encouraging inclusion in a variety of daily eating occasions. In 2024, 61% of Indonesian respondents reported that they eat snacks while watching TV or streaming video content, the highest percentage among respondents surveyed across 40 markets globally (source: Euromonitor International Voice of the Consumer: Lifestyles Survey, fielded January to February 2024). This opens not only the potential of packaged snack products but also lighter meals that could be consumed as a snack, such as instant noodles, which in local culture is considered a type of food suitable throughout the day.

Read Euromonitor’s report, Top Opportunities in Asia’s Packaged Food: 2024 and Beyond, to further understand key trends and potential opportunities in the region.

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