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Food and Dairy

Brands respond to consumer
demand for healthier products
 
The six food and dairy brands included in the BrandZÔ Top 100 Most Valuable Chinese Brands produced a modest increase in category value, growing 2 percent compared with 3 percent a year ago. Among the dairy brands, Mengniu grew in value more than Yili, and Bright Dairy declined. Meat processor Shuanghui and Fortune, producer of cooking oil, increased in value. Frozen food brand Sanquan decreased.
 
China’s rebalancing economy influenced the pace of category expansion, cutting the spending power of industrial workers, while enhancing it for consumers with service sector jobs. In fast moving consumer goods (FMCG), sales growth slowed for basic food and beverage products but accelerated, even with premium pricing, for the home and personal preferences of the middle class, according to Kantar Worldpanel, in its shopper report, Dealing with Two-Speed China.
 
Kantar Worldpanel also found that some dairy products, such as yogurt, performed well because middle class Chinese consumers perceive them as essential for healthy living. However, because of lingering concerns about food quality and safety, Chinese consumers have favored imported milk over domestic brands. The Chinese government has increased category regulation, particularly for infant formula.
 
Chinese brands responded to these conditions with improved production, marketing, and new products, including yogurts and healthier, low-sugar options. Mengniu upgraded its production systems and control of milk sourcing from ranches and farms. It gained some of this expertise from Arla Foods, its Danish partner.
 
To strengthen its baby formula business, Mengniu acquired a baby food company from Danone Group, which owns almost 10 percent of Mengniu. And to publicize the brand and its improvements Mengniu became the official dairy product partner of the Shanghai Disney Resort.
 
Yili also improved product quality and safety, investing in its three overseas R&D centers to create and introduce new products, such as QQ Star, a flavored milk drink. And Yili expanded its infant milk powder facilities in New Zealand. According to the 2016 Kantar Worldpanel Brand Footprint Report, Yili is purchased by nine out of 10 Chinese households, making it China’s Number 1 brand in market penetration.
 
Meat producer Shuanghui, which linked with the US meat processor Smithfield in 2013, began production and distribution of American-style products in China. Both companies are owned by China’s WH Group Ltd. To meet the growing demand for food variety, Shuanghui continued to diversify its offering and included snacks and products with healthier ingredients. Marketing included a collaboration with JJ video games called, “Taste Shuanghui delicacies while playing JJ games.” Higher prices slowed pork consumption and impacted sales of packaged meat products.
 
Investment in developing and marketing new products negatively impacted the results of frozen food maker Sanquan, which specializes in products such as boiled dumplings and rice balls. Fortune, a leading cooking oil brand owned by COFCO, the giant state-owned conglomerate, continued to expand distribution and introduced large-size containers to meet the needs of China’s restaurant industry.