Ddma China Food Import 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

2014 March 11th

DATA DRIVEN MARKETING ASIA WWW.DDM-ASIA.COM

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

March 11th, 2014

About this study and DDMA About Data Driven Marketing Asia (DDMA)

Eight qualitative focus groups with target consumers in Shanghai. These focus groups were conducted by DDMA’s qualitative market research team.

Founded in 2002 Data Driven Marketing Asia (DDMA) is an independent, full service agency providing qualitative and

DDMA conducted an online survey of 500 respondents in

quantitative market research. Headquartered in Shanghai

Shanghai, using its own propriety panel of respondents,

with coverage across 28 cities in China the company

during Q4, 2013.

conducts consumer market research across the Chinese

representative of middle class consumers. They are aged

market for many leading food and beverage companies as

between 26 and 45, are employed in either a full or part

well as leading technology, fashion and �nancial brands. A

time capacity and earn a net income of at least RMB4,000

full list of our clients are provided for reference later in this

(US$ 680) per month.

The respondents selected are

report. Secondary research conducted by DDMA from

Data collection and methodology

which a database of up to 3,000 media reports on food safety incidents since mid-2004 has been

This DDMA report is based on quantitative market

constructed. In general for one incident only one

research, qualitative market research and secondary

media report is selected and maintained in the

research. These are:

database to avoid duplication.

2

DongLong AIA Building, Of�ce 401, 223 Xikang Road, Jing An District, Shanghai 200040 People's Republic of China www.ddm-asia.com E: [email protected]


March 11th, 2014

Foreword Data Driven Marketing Asia (DDMA) provides consumer

continues to develop and it plays a very important

and trade market research to many international and

role in the sale of imported food.

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



A strong currency has meant that imported foods are more affordable.

market and sell their food produce to the rapidly developing

This report provides an overview of Chinese consumer

Chinese middle class. DDMA assists these companies

perceptions of domestic food companies and of foreign

in identifying the most favorable brand positioning, in

food companies from ten pre-selected countries. The

establishing pricing, the development of complete marketing

perceptions of these countries are derived from consumer

strategies, retail evaluation and in assisting with product

interviews with 500 middle to high income respondents

launches, particularly via leading online sales platforms.

in Shanghai.

The opportunities for foreign food companies in China have

The �ndings are relatively straightforward. Today, 48% of

been boosted further by the recurring food scandals that have

this higher income Chinese consumer group actively seek

plagued the domestic food producers. The result of these food

out foreign food brands when shopping. There are also

scandals has been a complete erosion of consumer con�dence

clear opportunities in the catering industry as this higher

in the credibility of domestic food companies.

income group displays a strong preference for

The opportunities for foreign food companies in China are

produce.

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: 





The perceptions of food brands from the countries included in this study provide an insight into

A rapidly developi ng middle class that are more

how Chinese consumers

internationally exposed than ever before. This

access foreign food

gr ou p te nd s to tr av el re gu la rl y ov er se as , ar e

brands. New Zealand

exposed to foreign media and are gradually

and Australian food

becoming more knowledgeable on foreign food

brands are considered very

brands.

appealing, with much of this

A highly developed transport infrastructure has led

appeal being driven by positive

to increasingly efficient distribution of foreign foods.

impressions of the clean, natural

More cities across China’s 650 cities are now easily

environment in each country. However,

accessible, especially the developing second, third and

smaller countries, such as Norway, have more positive

fourth tier cities that are driving much of the continued

perceptions among the respondents that are familiar with

retail expansion.

that country. Food brands from other countries, such as

A developi ng quality to high end retail segment, especially in the emergence of high end/boutique



restaurants that serve foreign food

Germany, are also considered highly favorable but the dynamic and the preference is driven by different factors.

supermarkets and the improvement of the domestic

I hope that you find this report of interest. If there

retail experience.

are any questions on this report or on services that

The boom in online sales and changing consumer pu rc ha se be ha vi or . On li ne sh op pi ng in Ch in a

we could provide to your company, please do not hesitate to contact us.


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March 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

profits. Growing concerns about the levels of pollution

the confidence that Chinese consumers

in the Chinese environment are also fueling mistrust and

have in Chinese food companies. This report

concerns.

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

What are the biggest concerns in your life?

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.

94%

Food safety in China

Air quality where I live

The history of food scandals in China is relatively well

74%

Water quality

46%

Healthcare protection

42%

documented. These scandals have played a key role in undermining the con�dence 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

Major food scandals reported in Chinese media

Base: Shanghai: All respondents : n= 500

Dishonest companies are not punished

710

390

94%

Companies are not strictly supervised

92%

Companies are dishonest & only care about pro�t

92%

Food standards are too low 290 180

190 180

210 170

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: DDMA Secondary Research. Q4 - 2013

77%

Environment is polluted so food is unsafe

69%

Do not have advanced technology

65

4

Top ranked concern 2nd ranked concern 3nd ranked concern

21%

Why are there so many food scandals in China?

2004 – Q4, 2013

425

The outlook for the Chinese economy

Not experienced at producing quality food

34% 20%

Source: DDMA Secondary Research. Q4 - 2013



March 11th, 2014

2. China’s 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

Foreign food brands are better % Strongly Agree

ingrained in the minds of Chinese consumers, in particular the wealthier consumers from higher income groups. The

69%

65%

70%

80%

perceptions of food from different countries is introduced later in this report. 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

I prefer restaurants that serve foreign food % Strongly Agree

preference for restaurants that serve foreign food, the chart shows that 60% of respondents of this survey stated

60%

57%

59%

71%

that they frequent restaurants that serve imported food. 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

I actively research foreign food brands before purchase % Strongly Agree

consumers stating that they actively collect data on foreign food brands. The incidence of this data collection increases

48%

41%

51%

63%

as income rises with wealthier consumers being the most proli�c in their research activities.

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

I seek out foreign food brands when shopping % Strongly Agree

highest income group stating that their preference is for foreign food brands when shopping.

46%

Total Sample

43%

45%

59%




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March 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

Level of familiarity with the following countries – Top ten countries

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

46%

Japan Korea

39%

USA

38%

ways, New Zealand and Australia are the exact opposite of Australia

living in China.

33%

England

The power of the “Food from New Zealand” and “Food

27%

New Zealand

24%

While only 33% of respondents claim to be familiar or

Germary

24%

very familiar with Australia, 72% of all respondents are

France

24%

from Australia” brands is evident in the adjacent charts.

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

Sweden Norway

15% 11%

Somewhat familiar

Very familiar


highly in terms of favorability for food purchase.

Which country are you most comfortable buying food from? New Zealand

73%

Australia

72%

Germary

64%

USA

55%

Japan

48% 40%

England France

38%

Sweden

38%

Norway Korea

30% 19%


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March 11th, 2014

4. Perceptions of selected food producing countries Correspondence analysis of which food producing

New Zealand and Australia. Norway is also strongly

attributes are associated with which countries has

associated with having high food safety standards.

generated the perceptual map below. This map introduces 

how Chinese consumers perceive the foreign food

governance and advanced food technology are Japan

producers. What it indicates is as follows: 

and Germany. These countries are not associated

That over 80% of perceptions are expressed on the

with having a particularly clean environment.

horizontal x-axis. This access runs between natural 

clean environment at one extreme and advanced

having strong corporate governance strong food

The vertical y-axis ranges does not express much of

safety regul ations.

the data but reflects relative differences between 

pe rc ei ve d le ve ls of co rp or at e go ve rn an ce of fo od companies and food safety standards. 

The United States is more closely associated with having advanced food technology as opposed to

technology at the other extreme. 

The countries most associated with strong corporate

Sweden is not clearly defined on this map, but as all positions are relative to the strengths a nd weaknesses of other countries, the following slides will

The countries that are most associated with clean

demonstrate that Sweden is perceived as being very

environment and high quality foodstuffs are Norway,

simi lar to Germany but with a cleaner environme nt.

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

Sweden

USA

Clean & natural environment High quality foodstuff

) %Advanced Technology 9 9 . 3 ( 2 F Japan

Australia New Zealand Environment Food producers value quality over pro�t Strong Govt. Supervision

Germany

High standards in food safety

Norway Strong governance F1 (92.84%)



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March 11th, 2014

4. Perceived strengths and weaknesses of food brands from ten most preferred countries – 1 appeal for New Zealand food brands is being driven

1. New Zealand

primarily by above average ratings on the cleanliness of New Zealand tops the list and the strength of the New

the environment. New Zealand companies are considered

Zealand brand is reflected in the high level of purchase

to be slightly below average on governance and are

preference for foods from New Zealand versus the

not strongly associated with having advanced food

relatively low levels of familiarity about the country. The

technology.

Governance

Will consider to buy food brands from this country High familiarity with country overall

Environment

Trust

Technology

73% Rank 1 81%

81%

75%

84%

78%

70%

67%

24% Rank 6

Base for ratings: All Shanghai respondents: n= 500


Strong Govt Supervision

High quality Clean & natural Trustworthy Food producers Advanced food foodstuff environment food producers value quality technology over pro�t

Base for rat ings: All consum ers that are familiar /ve ry familiar with New Zealand: n= 105

Av erage r ating for eac h attr ibute across all c ountries

perceptions of the Australian environment. The Australian

2. Australia

food industry is considered to be slightly below average in Foreign food brands and food produce from Australia

terms of corporate governance, average in terms of trust

have a very similar perception to those from New Zealand.

and below average in terms of the use of advanced food

The appeal of Australian food brands is driven by positive

technology.

Governance

Will consider to buy food brands from this country

Environment

Trust

Technology

72% Rank 4 74%

80%

73%

78%

High familiarity with 33% country overall Rank 4

76%

66%

62%





Base for ratings: All consumers that are familiar/very familiar with Australia: n= 130

8

Average rating for each attribute across all countries



March 11th, 2014

4. Perceived strengths and weaknesses of food brands from ten most preferred countries – 2 have integrity. The “Made in Germany” brand is

3. Germany

well established in China and Chinese-German The attraction and appeal of German food brands is

commercial co-operation has a longer history than

not driven by perceptions of a clean environment,

with most other non-Asian countries. The familiarity

rather, appeal is driven by perceptions of strong

with Germany is relatively low, but the perceptions

corporate governance, advanced technology and

of the made in Germany brand creates very positive

trustworthy food producers that are honest and

perceptions of German food producers.

Governance


Environment

Trust

Technology

64% Rank 3 85%

83%

83%

76%


68%

56%

82%





Base for ratings: All consumers that are familiar/very familiar with Germany: n= 92


of advanced food technology. America is probably the

4. USA

non-Asian country that Chinese consumers have most The familiarity with the USA is relatively high. For those

exposure to, America has always been strong associated

that are familiar with the USA, the country is perceived to

with lifestyle, freedom and wealth. American food

be average for food safety, not strong in terms of having

producers need to tell a stronger story on the quality of

a clean environment, slightly below average in terms

their environment to win over more Chinese consumers

of trust and integrity of producers but strong in terms

to American food brands.

Governance


Environment

Trust

Technology

55% Rank 4 76%

72%

72%


69% 51%

79% 59%





Base for ratings: All consumers that are familiar/very familiar with USA: n= 123



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March 11th, 2014

4. Perceived strengths and weaknesses of food brands from ten most preferred countries – 3 associated with strong governance, high levels of food safety

5. Japan

and advanced food technology. The ongoing nuclear issue Japan is the country which Chinese consumers are most

at Fukushima is playing a role in undermining ratings for the

familiar with. Aside from current and historical geo-political

perceptions of the Japanese environment. Japanese food

tensions, Japan is widely seen as an attractive destination and

brands are already well established in China, but they can

an appealing society. Food brands from Japan are strongly

grow further if they can allay fears over the environment.

Governance


Environment

Trust

Technology

48% Rank 5 81%

87%

85%

76%

75%

66%

57%

High familiarity with 46% country overall Rank 1 Base for ratings: All Shanghai respondents: n= 500




Base for ratings: All consumers that are familiar/very familiar with Japan: n= 133


brands. England is rated below average on governance,

6. England

environment and technology. The outcome is not England is also a country which Chinese consumers

surprising as England is more closely associated with

are relatively familiar with. However, the perceptions

being an attractive holiday destination, a country that

of England do not currently play a strong role in

is suitable to conduct third level studies in or as a

supporting the appeal of “Made in England” food

shopping trip location.

Governance


Trust

Technology

40% Rank 6 66%

High familiarity with country overall

Environment

70%

73%

68%

27%

61%

67%

48%

Rank 5





Base for ratings: All consumers that are familiar/very familiar with England: n= 70

10




March 11th, 2014

4. Perceived strengths and weaknesses of food brands from ten most preferred countries – 4 of France do not strongly support French food brands. The

7. France

country is perceived as being slightly below average on all core The profile of France and food brands from France is

dimensions measured with respondents that are familiar with

interesting in that it is relatively weak, especially when

the country. This fits with the general perception of France

considered in the context of the relative popularity and positive

that is held by Chinese consumers. That is, a country that is a

perceptions of French wine in China. Currently the perceptions

good holiday destination and strongly associated with fashion.

Governance


Environment

Trust

Technology

38% Rank 7 67%

71%



64%

24%

60%

62%

61%

66%

Rank 8



Base for ratings: All consumers that are familiar/very familiar with France: n= 60


strong corporate governance, a very clean environment, above

8. Sweden

average levels of trust and integrity within the food industry Overall preference and purchase consideration for Swedish

and a food industry that has advanced technology. In many

food brands is undermined by a lack of familiarity with the

ways, the perceptions of Sweden are very similar to those of

country. However, among the respondents of this survey that

Germany, with the difference being much stronger ratings on

are familiar with Sweden, the country is perceived as having

the cleanliness of the environment.

Governance


Environment

Trust

Technology

38% Rank 7

85%

82%



89%

81%

76%

76%

82%

High familiarity with 24% country overall Rank 8 Base for ratings: All Shanghai respondents: n= 500


Base for ratings: All consumers that are familiar/very familiar with Sweden: n= 46



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March 11th, 2014

4. Perceived strengths and weaknesses of food brands from ten most preferred countries – 5 perceived corporate governance, environment

9. Norway

and trust. The relative weakness is in an average Norway is another country where overall preference

rating on advanced food technology in the food

as a source for food brands is undermined by

industry. Overall, Norway holds similar perceptions

low levels of familiarity with the country. Among

to Germany and Sweden, except that it is stronger in

respondents in this study that are familiar with

terms of corporate governance and environment and

Norway, the country is rated very highly on

weaker in terms of use of advanced technology.

Governance


Environment

Trust

Technology

30% Rank 9

93%

90%

84%

87%

80%

77%

70%

11% Rank 10





Base for ratings: All consumers that are familiar/very familiar with Norway: n= 30


nation does not score strongly on any of the key dimensions

10. Korea

measured in this study. The image of Korea in China is relatively The levels of familiarity with Korea are naturally very high,

positive. It is closely associated with fashion and young,

however, this does not convert into high levels of consideration

contemporary Asian fashion, style and popular culture. It is also

of purchase for Korean food brands. Korea as a food producing

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 39% country overall Rank 2

60%

67%

59% 47%

53%

55%





Base for ratings: All consumers that are familiar/very familiar with Korea: n= 58

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March 11th, 2014

5. The vast gaps between perceptions of Chinese food companies and foreign food companies The vast gap between the perceptions that

Overall, Norway, Japan and Germany attained

respondents held of Chinese food brands versus their

the highest ratings on the core image dimensions

foreign counterparts is revealed in the table below.

measured.

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.

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 pro�t 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

Familiar with

with those familiar

country & strongly

with each country

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%


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March 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 speci�c 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:

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Ddma China Food Import Market

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