Food and Beverage

The COVID-19 pandemic caused lockdowns and travel restrictions across China that devastated food supply chains and restaurants, but the food and beverage industry has begun to recover and adapt to new trends. The rise in Chinese consumers’ disposable income has bolstered the industry in recent years and annual revenue is projected to reach near double-digit growth in coming years.

 

Following COVID-19 lockdowns and a greater emphasis on stay-at-home consumption, e-commerce has become a much more important channel for food and beverage purchases. Consumers are increasingly relying on delivery services and take-out options, putting pressure on brick-and-mortar retailers to adjust their models. In addition, Chinese consumers are increasingly prioritizing food hygiene and safety. As a result, products like vegetables, salads, eggs, meat and fruits, are seeing greater demand as they are considered natural and free of chemicals. Consumers also want brands to be transparent about how food is produced and desire more state-of-the-art processing technologies to be applied in product packaging and storage. The 14th Five-Year Plan reflects many of these trends, emphasizing China’s commitment to tightening regulations over food and drug safety. Addressing these concerns will lead to higher production and labeling costs for manufacturers in the future. 

 

Chinese consumers are also prioritizing leading a healthy lifestyle, resulting in greater demand for products in this category. Food and beverage companies are being pushed to reduce the amount of sugar in their products and use higher quality ingredients.

 

For grocers, retail expansion is becoming a challenge due to high real estate prices, competition in urban centers, and underdeveloped infrastructure in segments of the market. In China, rural poor still make up a significant portion of the country, inhibiting the sale of packaged food and mass grocery retail in these areas. On the other hand, in major cities, supermarkets and hypermarkets dominate the market and offer limited growth opportunities for grocery retailers. In second and third-tier cities, there remains potential for growth as incomes are increasing and the market remains relatively undersaturated.