The rapid emergence of the Chinese consumer class has been facilitated by the exceptional, unique and sustained strong economic growth in China over the past 30 years that for most of that period has hovered between 8-12% of GDP. This growth trajectory is amazing, and over the past fifteen years since I first visited China I have witnessed the rapid transition of the middle and consuming class in China. In recent years we have seen this growth demonstrated by demand for Australian food consumer goods such as milk powder, which has lead some Australian supermarkets to impose daily limits on the number of milk powder units that can be purchased in any single transaction. Similarly there have been great stories of the insatiable appetite for Australian wines in China, and particularly since the ratification of the China – Australia Free Trade Agreement in 2015. But does this apparent demand for Australian food and wine translate into huge market opportunities for our farmers, wine makers and premium food producers in China?
The answer to this seemingly simple question is essentially yes and no. There are large opportunities for many of Australia’s food exporters, and there has been a boom in exports of Australian wine to China over the past 2 years, similarly with many meat exporters, but these wins for Australian food and wine producers do not necessarily transfer to all food product categories......and I would argue that there is a strong likelihood that for many food producers the market opportunity in China will always be limited, restricted or niche. Why? Due to a range of factors but mostly due to the pervasive impact of Chinese culture upon food purchase decisions.
Its important to remember that China has an organised and cultural history stretching back some 4000 years, and culture is a representation of shared history, geography, symbols, beliefs, rituals and traditions. In China the shared heritage has the effect of reinforcing the symbols of Nationalism, and Chinese cultural identity. I have travelled from north to south and east to west in China and one of the strongly maintained cultural artefacts is the way food is consumed. In the west we often seem to ignore the relevance of culturally embedded behaviours upon the suitability of a particular product to a rapidly growing market such as China. We should ignore these factors to our peril.
Food in China is consumed as a group, any businessperson, or even tourist to China can attest to the communal nature of eating in China. The banquet is a ritualistic demonstration of this cultural tradition and ultimately informs the purchase decisions of the types of products that are going to appeal to Chinese consumers. Chinese consumers will often share food, which is picked from shared plates with chopsticks. This process necessitates that the food pieces generally be small, and bite sized. So for example there is a small mass market for a T-bone steak in China amongst Chinese nationals, because to put it bluntly it is not eaten with chopsticks. This is of course not to suggest that Chinese consumers do not enjoy a prime cut of steak from time to time, but it may only be a few times a year, instead of a weekly basis as is often the case in many western economies. Similarly there is a demand for honey in China, although it may not be consumed in the same way as is normal in the west. There will be consumers who put honey on toast, or have a honey sandwich, however the appeal of honey for many Chinese consumers is for its health benefits. In order to consume the honey, it is often diluted in hot water to create a honey “tea” or drink. This could give some pointers to how honey producers could adapted the product for Chinese cultural behaviours.
Similarly there are culturally embedded norms in the way alcohol is consumed in China. In countries like Australia an individual will enjoy a glass of wine, beer or spirit at their leisure, and generally at their own pace, irrespective of the behaviour of others at the table. In China, drinking alcohol is also highly ritualistic, andis not generally a form of satisfying thirst as in the case of Australia. In China you will often find a pot of green tea provided to every diner, with the purpose of satisfying thirst. Alcohol however will be consumed only when toasting other members of the table, and often (if not in most situations), the toast will require a “bottoms up” and finishing the glass. This doesn’t matter whether the drink is beer, wine or spirit. This drinking behaviour has a few consequences, firstly it means that beer is often served at room temperature (which in the heat of summer can mean the beer is practically warm!), and so the German style larger or pilsner style beer is most favoured as easier to drink and suitable for ganbei or “bottoms up” skolling. This is not to say that there is not aniche market for microbrews, or for other beer types (I have had some really good ales in Beijing and Shanghai for example), but it is unlikely to gain mass appeal.
The impact of the Ganbei style drinking has also had an impact on the types of wines that are in demand in China. If you speak with most wine exporters you will generally find there are two segments of the market in demand – the low end bulk wine segment, and then the super-premium/iconic wine segment. I would propose this is a consequence of the Ganbei drinking style, which obviously dampens the demand for higher quality wine. There is no real demand for incrementally better wine in that case as might be normal in more mature wine consumption markets. The higher price segments are probably related to status, and some of the western expat market, particularly in super premium food service restaurants in five star hotels.
These examples of how cultural traditions are informing Chinese consumer decision making should be noted by food exporters. Its important to remember that consumers will buy what they want to buy, and sometimes what works in one country, wont work in another, simile because of the cultural norms.
Dr Nathan Gray is Managing Partner of AsiaAustralis – a strategic management advisory firm that specialises in markets throughout Asia. Over the past three decades our consultants have assisted companies achieve their market objectives in Asia.