Monthly Digest: China Food Sector in April 2020

Industry Focus

Takeaway Service

April 12, iiMedia released a report on the Chinese takeout market during the peak period of the COVID-19 pandemic in China. The data showed that Meituan takeout (美团外卖) became the highest-rated takeout platform for catering merchants, with an overall score of 82.1 (full mark of 100). Ele.me scored 74.6 (饿了么). In addition, more than 70% of restaurants surveyed believe Meituan takeout can bring more traffic.

Plant-based Food

April 20, KFC announced the launch of its new product plant-based golden chicken nuggets in China, which uses high-quality soybean protein, wheat protein, and pea protein as raw materials.

April 21, Starbucks China launched plant-based catering products, as well as products made from biodegradable boxes and recyclable materials. Additionally, it announced five plant-based products would be available in most offline stores in China, as well as three oatmeal drinks.
April 22, the 2019 annual report released by Shuangta food (the main supplier of plant-based meat in China), data showed that the revenue in 2019 was 2.12 billion yuan (approx. $316.4m), down 10.82% year on year, whilst the net profit reached 187 million yuan (approx. $27.9m), up 103.56% YoY.

Low Sugar Products

April 15, Mengniu Youyi C (优益C) launched a low sugar product range. There are two new flavors: oolong and grapefruit. This series of beverages have 25% less sugar, contains 30 billion active probiotics, and has zero fat. At present, it only sells in offline stores, and online channels are not available yet.
After an eight-year hiatus from the mainland Chinese market, this month, Nestlé’s returned with a new take on its ready to drink tea, NESTEA. It is a fruit tea with three flavors, two of which are low sugar. Currently, the product is not yet available on e-commerce platforms. On April 19, Nestle also launched a light sweet black coffee product (黑的咖啡), aimed at young consumers. It is low fat and zero sugar.
April 23, Jianlibao (健力宝) official Tmall flagship store introduced "Microbubble" (微泡), which is a kind of sugar-free bubble water, featuring three features: "intensive bubble," "zero sugar & fat" and "dietary fiber." It also created two flavors: white peach cherry and mojito.

Company Dynamics

Wahaha set up its first e-commerce company in late March. In April, it set up a new cross-border e-commerce company in Hangzhou.
April 7, Sanquan Food (三全食品) released a forecast for the first quarter of 2020, showing that the expected range for net profit would be 249 million yuan to 261 million yuan (approx. $37.16m-38.96m), up 520% to 550% YoY. Sanquan Food's main products are frozen food and convenience food, which performed extremely well during the peak of China’s covid19 outbreak.
According to the performance report, the primary business revenue of Wong Lo Kat health industry Co., Ltd. reached 10.30 billion yuan (approx. $1.54b) in 2019, and the net profit reached 1.38 billion yuan (approx. $206m).
April 8, Yum China announced that it formally completed the acquisition of a controlling stake in Huang Ji Huang (黄记煌), which became the third Chinese food brand owned by Yum China, after East Dawning (东方既白) and Little Sheep (小肥羊).
April 8, McDonald's reported that its global stores’ sales fell 3.4% in the first quarter, with a 22% drop in sales in March. Besides, McDonald's also withdrew its 2020 outlook and long-term forecast, which was released in Feb.
April 9, Three Squirrels released a forecast for the first quarter of 2020, showing that the net profit is expected to be in the range from 178 million yuan to 210 million yuan (down 15.76% from the previous year to 28.6% YoY) As of April 23, Three Squirrels has set up ten new subsidiaries costing it 300 million yuan (approx. $44.78m). The new companies include international trade retail, supply chain management, logistics, transportation, technology, etc.
Nestle China has developed a new meal replacement brand on Tmall platform called NesQino (诺萃怡刻), which has opened a separate official flagship store on Tmall.
April 10, the Nasdaq stock exchange issued a notice requiring Luckin Coffee to disclose more information. Until then, trading on Luckin shares will remain suspended.
April 10, Treasury Wine Estate (TWE) finally got the Chinese trademark "奔富" (Ben Fu) registered for its wine brand "Penfolds" after ten years of litigation. In the fiscal year 2019, the net sales of TWE rose 17% to 2.83billion Australian dollars.
April 14, Danone announced that it had officially resumed production at its Wuhan factory, with more than 99% of its workers back on the job and running at full capacity by the end of Apr.
April 15, 2020, Danone announced the upgrade of its vitamin beverage Mizone, involving new brand positioning, new packaging design, new product formula, a new taste, and many other aspects, aiming to gain more traction among the young generation.
April 21, Danone reported that in the first quarter of 2020, due to the COVID-19 epidemic, its market performance in China declined.
April 21, according to China Securities Regulatory Commission (CSRC), EASTROC (东鹏) Beverage Group issued the Initial Public Offering Prospectus (Declaration Draft), which is planned to be listed with a 1.49 billion yuan fundraising goal on the Shanghai Stock Exchange.
April 24, Xiangpiaopiao (香飘飘, a ready-to-drink milk tea brand) issued its 2019 annual performance report, showing that it once again realized growth in both its revenue and net profit. The revenue of 2019 was 3.98 billion yuan (approx. $594m), up 22.36% year on year, and the net profit was 347 million yuan (approx. $51.79m), up 10.39% YoY.

Products Launched

April 6, Mondelēz's biscuit brand Oreo launched two new spring limited offerings available in cherry & matcha flavor and white peach & oolong flavor. The move is indicative of snack giant Mondelēz's prioritization of O2O channels in China.
April 7, New Hope (新希望) launched a new yogurt. This product contains a variety of probiotics, such as bifidobacterium lactis BL-4, HN019, etc. Also, New Hope adds its proprietary strain lactobacillus rhamnosus GRX10. The amount of probiotics added per 100g cup exceeds 1.6 billion CFU.

To commemorate the removal of the Wuhan lockdown, Coca-Cola has designed four special cans, which connect different cities to Wuhan with the shape of a heart. The bottles are printed with local foods and scenic spots, and a message of blessing is added to convey good wishes for Wuhan.

Besides, Coca-Cola is to launch a high-end plant-based drink in China, which consists of collagen peptide and GABA (γ-aminobutyric acid). It meets demands in the beauty and sleep-enhancing market.

On April 14, chocolate candy brand Hershey officially announced its first salty chocolate in China. The brand introduced sour and spicy chocolate products in 2019.

Regulatory Compliance

On April 1, 2020, the Food Evaluation Center subordinated to SAMR released the FAQ (Frequently Asked Question) and points for attention regarding health food registration in China. The notice guides production technology, sensory requirements, etc.
As revealed by the CFSA Notice released on April 8, 2020, six national food safety standards are open for public feedback. They are GB 19644 Milk Powder, GB 13102 Concentrated Milk, GB 5009.17 Determination of Total Mercury and Organic-mercury in Food, etc.
On April 10, China GAC released the list of non-compliant food products in Feb. 2020. A total number of 76 batches of food from 15 different countries and regions were rejected.
On April 17, 2020, the Executive Council of Macao SAR finalized the draft of “Maximum Residue Level of Pesticides in Food,” which will come into effect on the second day after promulgation.