Discover more from Following the yuan
Week #25: Pre-made food faces cultural battle 🍲, Milestone in China's streetwear market 🏆, Consumer brands' ESG efforts ♻️ | Following the yuan
A hot, hot, hot sector post-Covid, can pre-made food win the cultural war and the public's respect in China?
I’m very proud of my latest consumption decision this week — in essence, I chose not to go down a rabbit hole but instead invested.
Last week, a subscriber informed me about this exciting deal of 3,399 yuan from Spring Airlines (China’s Southwest/Ryanair) that includes short-range international trips. It first looked great; it allows customers to take unlimited domestic and international flights (to certain cities in Japan, South Korea, and Thailand) for over four months. However, upon further investigation, I discovered that it doesn’t cover taxes or luggage, which could end up costing more than airfares. I also reminded myself that I only plan to take one more outbound trip before the year ends. That was the deciding factor.
And, by ‘invested’, I mean I paid for a beginner Cantonese class that costs around 2,400 yuan. I don’t have a strong reason for it — I'm not relocating to Hong Kong, nor do I specifically need it. But at least I can prolong my gratification for 10 weeks until Christmas.
Wow, I'm really adulting. I have a theory about the change in consumer behavior being driven by three major factors: age, significant events like Covid, and economic outlook. I feel I'm experiencing all three.
1. Pre-made food faces cultural battle 🍲
What happened: Based on my observations from earlier this year, pre-made food has emerged as a highly sought-after sector within the food, beverage, and hospitality industry. This popularity stems from its cost-saving nature for both businesses and consumers, and is further propelled by central policies that promote this category as a core component of the state's 'rural revitalization' agenda.
According to a 2023 Kearny China report, this 30 billion yuan market (by narrow definition with the scope of retail and restaurants) is expanding at a 15% CAGR. Such growth is particularly notable in a post-Covid China. Key products within this category range from stir fry and fried rice to meat dishes, including fish and lamb chops.
However, consumer sentiment took a sharp downturn when several schools announced their intentions to utilize pre-made products in school meals earlier this month. This decision was met with widespread protests from parents and netizens alike. For instance, a concerned parent in Wuxi, Jiangsu province, even left their job to make lunch for the child due to these fears. Past criticisms of pre-made meals re-emerged, with experts likening them to "pig and dog feed."
A top-voted Weibo user commented, "It's one thing if you choose to consume additives daily, but don't force it upon other families' children." Another user connected this issue to China's third-child policy, remarking, "It's counterproductive to encourage childbirth and then risk their well-being."
Dig deeper: it’s not impossible, but super difficult to bend stereotypes, it’s especially difficult when it’s ingrained in consumers perception about certain categories. Pre-made food as a category is suffering from this stereotype, similar to canned goods, which are all considered to contain a harmful amount of additives. Despite technological advancements in the food sector negating the need for such additives, these biases persist.
However, people’s concerns are not entirely unreasonable. Given the utilitarian mindset of many Chinese entrepreneurs, the new startups — the majority of the 69,000 such companies on business intelligence site Tianyancha — may not have much expertise or care much about food safety. Now, that’s another bias that many believe in.
2. A milestone in China’s streetwear market 🏆
What happened: Founded by Singer and Actor Edison Chen in 2003, CLOT pioneered the celebrity-founded streetwear trend in Greater China, and has worked with internationally famed brands including Nike, Supreme, Dr. Martens and McDonald’s.
This past week, a three-story exhibition named CLOT20 opened in Shanghai, showcasing over 100 iconic products and designs through the concept of Five Elements of gold, wood, water, fire, and earth. The exhibition runs until Oct. 29.
China’s streetwear market was valued at nearly 100 billion yuan (US$13.7 billion) in 2020, according to a report by domestic brokerage CITIC Securities. Over the last decade, the market has expanded beyond just fashion and accessories, with the emergence of platforms like Poizon, media outlet Nowre, boutique store and lifestyle brand DOE. However, recent data and insights regarding the market are scarce.
Dig deeper: Following Chen’a footsteps, Hong Kong actor Shawn Yue launched both Common Sense and Madness in 2010 and 2014. Similarly, TV host Nic Li teamed up with Singer Will Pan in 2009 to create New Project Center. And more recently, in 2020, Jackson Wang, once a member of a Kpop boyband GOT7, unveiled his fashion label, Team Wang Design, in 2020. Yet, many of these ventures have faltered, and none have achieved the sustained momentum seen with CLOT.
One theory suggests that Chen could devote more time and energy to his business after announcing to leave the entertainment industry in 2008 after “Asia’s biggest sex scandal (CNN)” that implicated numerous female celebrities. For him, this might have been a welcome shift in his life's focus.
Having said that, there’s also a lot of talks about whether the momentum of streetwear has gone weaker due to Covid and the economic distress. The aforementioned Poizon has a whopping number of over 166,000 items of complaints on the complaint resolution platform Black Cat Complaint. YOHO!, a media-turned-e-commerce platform, went bankrupt in 2021. Perhaps more events could revive our good memories of buying exclusive drops? I’m thinking of Innersect, the annual streetwear convention in Shanghai founded by Chen in 2017, perhaps it's the right moment for a comeback.
3. consumer brands' ESG efforts in China ♻️
In a coordinated effort to meet both investors' and the Chinese government’s expectations, numerous domestic and international brands have recently showcased their commitments to Environmental, Social, and Governance initiatives to a growing number of climate-focused Chinese media outlets.
There is no consensus yet with regards to a specific code of conduct, and traditionally, the eight energy-intensive industries including building materials and petrochemical and have the highest disclosure rate among corporate bond issuers., ranging from 30% to 75%, according to a 2023 white paper by China Central Depository & Clearing Co., Ltd. (CCDC) and the International Capital Market Association (ICMA). [Read about Chinese companies’ practices Pg 15-26]
Adidas recently unveiled its Suzhou Automated Distribution Center “X”. This 1 billion yuan venture represents the group's most significant investment in China over the past five years. The center can process over one million items daily, and approximately 40% of its electricity is sourced from renewable energy.
Among them, popular drink brand Chi Forest set up one of its six factories in Sichuan province achieved 100% carbon neutral last year. Global snack brand Mars jointly launched the “Soft Plastic Rebirth” project with industry stakeholders last year to set up a waste recycling system for China’s plastic soft packaging, which usually ends up in the landfill. This project has been piloted in Beijing, Shanghai and Hangzhou, and is expected to collect nearly 5,000 tons of soft plastic packaging waste in 2023.
Dig deeper: Similar to sustainability, China’ ESG move largely depend on government policy. China’s pledge of “peaking carbon emission by 2030 and achieving carbon neutrality before 2060,” or else known as “dual carbon” goals, are as big of an incentive as that from investors.
In the absence of government pressure, it's easy for foreign brands to argue that both consumers and local markets lack significant awareness or expectations.
From the set of above examples, it’s obvious that these efforts are deeply integrated into supply chains, that is a good thing. The harder thing, though, is to match every action with promise.
That is essential, especially for consumer companies that are publicly held accountable by its customers and non-customers. A recent example must be Prada’s lipsticks, which were criticized for excessive packaging from boxes to crinkling paper. This over-packaging prompted many Chinese customers to voice their frustrations across different platforms including Xiaohongshu and Tmall. 🔚