Monthly Digest: China Food Sector in May 2020

Industry Focus

• Sparkling water

In May, many companies launched new sparkling drinks products in China.

Related article: Sparkling Water, a Booming Segment in China's Beverage Market

• Children's leisure food

After the first General Standard for Children Snack Food issued on May 17, two of China's largest snack food brands launched new products designed for children.

Related article: Snack Foods for Children in China: Market Scale and Investment Potential

• Co-branding

Company Dynamics

• Financial Issues

1. Ausnutria disclosed its performance in the first quarter of 2020, the company's revenue was 1.93brillion RMB ($288million), up nearly 27% year on year.

2. On May 14, Canadian coffee brand Tim Hortons received an investment from Tencent (腾讯), raising funds to accelerate its market expansion. Tim Hortons will open offline stores in Beijing later this year and plans to open more than 1,500 stores across China in the next few years.

3. Luckin Coffee announced on May 19 that it had received a delisting notice from the Nasdaq stock exchange and decided to quit the stock market. On May 20, Luckin resumed trading, and it plunged 50% in premarket trading. The stock was down 22.32% to $4.39 at 19:14 (GMT+8). After a three-day decline following the resumption of trading, on May 26, the shares of Luckin rose 20% in premarket trading. Shares rose more than 60% in early trading, rebounding to a market capitalization of $580 million.

4. On May 20, Nestlé announced its plan to invest CHF 100 million ($103.7 million) in its factories in Tianjin, China, which aims to strengthen its footprint in China further and enhance its product portfolio.

   Related article: Nestlé to Invest CHF 100 million in China, Targeting Plant-based Sector and Pet Foods

• Market Layout

1. NesQino, developed by nestle, is a smart personal healthy light meal solution. It aims to bring consumers a personalized, healthy, and delicious light meal choice. Garden of Life, another high-end organic dietary supplement brand owned by Nestle, also launched a new probiotics product this month.

2. As revealed by an IKEA notice released on May 11, 2020, consumers who bought its Muesli mixed fruit dry cereal after March 2019 can get a full refund in any offline Ikea store. The product recall started on May 8, 2020, and will last for a month.

   Related article: IKEA's Product Recall Sparks Wave of Complaints

3. Burger King opened its official flagship store on Pinduoduo. During the Pinduoduo food festival on May 17, Burger King offered a special promotion for 1,000 hamburgers, which sold for only 1 RMB (approx. $0.15).

4. On May 19, Danone announced that its plant-based sports nutrition brand VEGA ONE officially entered China. The products introduced include VEGA ONE Sport and VEGA ONE plant protein powder series.

   Related article: Danone has Ambitions for Chinese Plant-based Protein Drinks Market.

5. Coca-Cola and Mengniu are engaging in a joint venture on low-temperature milk products in China. The newly established joint venture will utilize the strengths of both parties in dairy product research and development, dairy processing technology, brand influence, and distribution channels. The JV will bring a new brand of low-temperature milk to Chinese consumers and promote dairy consumption in China.

   Related article: Coca-Cola Teams up with Mengniu to Establish Low-Temperature Milk Company.

6. On May 20, Yili JinLingGuan* (金领冠, hereinafter JLG) held a Brand Upgrading Conference. The upgraded products will be rolled out in the second half of this year. JLG announced its new product development would focus on breast milk research, and the next step is to roll out the A2 protein infant formula.

   Related article: China's A2 Infant Formula Market Welcomes New Entrants.

   Leveraging the Breast is Best Principle: Yili's Infant Formula Product Development Strategy

7. On May 20, Meituan takeout and McDonald's launched a member points system. It means that more than 120 million McDonald's members can accumulate membership points when they buy McDonald's from the Meituan platform. Also, users can enjoy McDonald's credits exchange benefits in Meituan.

8. On May 24, Starbucks launched a Wechat applet, which allows users to search nearby Starbucks offline stores or order from the platform to enjoy a coffee delivery service.

Products Launched

Regulatory Updates

1. On May 6, the State Council of China announced newly established CBEC (cross border e-commerce) comprehensive pilot zones in 46 cities and regions, pushing the total pilot zones to 105. Qualified cities and regions are expected to join the list of CBEC pilot cities in the future.

   Related article: China Newly Establishes CBEC Comprehensive Pilot Zones in 46 Cities and Regions.

2. On May 11, China GAC updated The List of Imported Meat Products from Approved Countries or Regions. In this update, GAC announced an immediate ban on the importation of beef from four of Australia's major exporters, which began on May 12.

   Related article: China Bans Australian Beef.

3. On May 11, 2020, a Chinese maternity & baby store called “Love Baby (爱婴坊)” sold a protein solid beverage named “Bei An Min (倍氨敏)." The product is an amino acid-based solid beverage falsely advertised as an alternative to infant formula for infants allergic to ordinary milk powder. Consumption of the product led to serious complications in 5 children. On May 13, 2020, SAMR issued a notice beginning an investigation into the case which involved false advertising and sales fraud.

   Related article: False Advertisement of Solid Beverage Sold as FSMP Linked to Bone Deformity in Children

4. On May 17, China Non-staple Food Circulation Association (CNFCA) released Association Standard for Children Snack Food (Non-mandatory standard), which will take effect on June 15. It is the first standard for children's snack food in China.

   Related article: China Releases First Association Standard for Children Snack Food

5. On May 21, 2020, China SAMR opened the draft of sampling quality test implementation rules for 131 types of products. These rules cover 20 types of food-related products in 9 categories, most of which are food contact materials.

   Related article: SAMR Consults on Draft of Quality Sampling Test Implementation Rules for Food Related Products

6. The Two Sessions, the annual meeting of China’s two largest parliamentary bodies, the National People's Congress and the Chinese Political Consultative Conference (NPC&CPPCC) started on May 21 this year. During these meetings, NPC members raised their proposals to facilitate the development of the dairy sector with the overriding goal of increasing dairy consumption.

   Related article: NPC Deputies Earmark Increased Dairy Consumption as Key National Target.

7. On May 25, three FSMP products were granted registration approval in China, including:

1. infant formula FSMP-lactoprotein partial hydrolysis (from Beingmate);

2. FSMP complete nutrition formula powder (from Yabao Pharmaceutical);

3. infant formula FSMP-amino acid-based formulae (from Nestle).

   Related link: ChemLinked News Ticker