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PACKAGED FOOD IN CHINA
Euromonitor International October 2011

PACKAGED FOOD IN CHINA

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LIST OF CONTENTS AND TABLES
Executive Summary ..................................................................................................................... 1 Dynamic Growth in 2011 .......................................................................................................... 1 Health and Wellness Manifest in New Ways ............................................................................ 1 Nestlé Seeks Growth Via Acquisition........................................................................................ 1 Supermarkets/hypermarkets Dominates Value Sales............................................................... 1 Constant Value Growth of Packaged Food Will Remain Healthy ............................................. 2 Key Trends and Developments .................................................................................................... 2 General Food Price Soars ........................................................................................................ 2 Mergers and Acquisitions Further Consolidate Market ............................................................. 3 Health and Wellness Becomes Focus for New Launches ........................................................ 5 New Marketing Methods ........................................................................................................... 6 Internet Retailing Booming ....................................................................................................... 7 Territory Key Trends and Developments ...................................................................................... 8 East China ................................................................................................................................ 8 Mid China ............................................................................................................................... 10 North and Northeast China ..................................................................................................... 12 Northwest China ..................................................................................................................... 14 South China ............................................................................................................................ 16 Southwest China..................................................................................................................... 19 Foodservice – Key Trends and Developments ........................................................................... 21 Headlines................................................................................................................................ 21 Trends .................................................................................................................................... 21 Competitive Landscape .......................................................................................................... 22 Prospects ................................................................................................................................ 23 Category Data ........................................................................................................................ 23 Table 1 Table 2 Table 3 Table 4 Foodservice Sales of Packaged Food by Category: Volume 20062011 ........................................................................................................... 23 Foodservice Sales of Packaged Food by Category: % Volume Growth 2006-2011 .................................................................................................. 24 Forecast Foodservice Sales of Packaged Food by Category: Volume 2011-2016 .................................................................................................. 24 Forecast Foodservice Sales of Packaged Food by Category: % Volume Growth 2011-2016 ........................................................................ 25

Impulse and Indulgence Products – Key Trends and Developments ......................................... 26 Headlines................................................................................................................................ 26 Trends .................................................................................................................................... 26 Competitive Landscape .......................................................................................................... 27 Prospects ................................................................................................................................ 28 Category Data ........................................................................................................................ 28 Table 5 Table 6 Table 7 Sales of Impulse and Indulgence Products by Category: Volume 2006-2011 .................................................................................................. 28 Sales of Impulse and Indulgence Products by Category: Value 20062011 ........................................................................................................... 29 Sales of Impulse and Indulgence Products by Category: % Volume Growth 2006-2011 ..................................................................................... 29

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Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14

Sales of Impulse and Indulgence Products by Category: % Value Growth 2006-2011 ..................................................................................... 29 Company Shares of Impulse and Indulgence Products 2006-2010 ........... 30 Brand Shares of Impulse and Indulgence Products 2007-2010 ................. 31 Forecast Sales of Impulse and Indulgence Products by Category: Volume 2011-2016 ..................................................................................... 32 Forecast Sales of Impulse and Indulgence Products by Category: Value 2011-2016 ........................................................................................ 32 Forecast Sales of Impulse and Indulgence Products by Category: % Volume Growth 2011-2016 ........................................................................ 32 Forecast Sales of Impulse and Indulgence Products by Category: % Value Growth 2011-2016 ........................................................................... 33

Nutrition/staples – Key Trends and Developments..................................................................... 33 Headlines................................................................................................................................ 33 Trends .................................................................................................................................... 33 Competitive Landscape .......................................................................................................... 34 Prospects ................................................................................................................................ 35 Category Data ........................................................................................................................ 35 Table 15 Table 16 Table 17 Table 18 Table 19 Table 20 Table 21 Table 22 Table 23 Table 24 Sales of Nutrition/Staples by Category: Volume 2006-2011....................... 35 Sales of Nutrition/Staples by Category: Value 2006-2011.......................... 36 Sales of Nutrition/Staples by Category: % Volume Growth 2006-2011 ...... 36 Sales of Nutrition/Staples by Category: % Value Growth 2006-2011 ......... 36 Company Shares of Nutrition/Staples 2006-2010 ...................................... 37 Brand Shares of Nutrition/Staples 2007-2010 ............................................ 38 Forecast Sales of Nutrition/Staples by Category: Volume 2011-2016 ........ 39 Forecast Sales of Nutrition/Staples by Category: Value 2011-2016 ........... 39 Forecast Sales of Nutrition/Staples by Category: % Volume Growth 2011-2016 .................................................................................................. 40 Forecast Sales of Nutrition/Staples by Category: % Value Growth 2011-2016 .................................................................................................. 40

Meal Solutions – Key Trends and Developments ....................................................................... 40 Headlines................................................................................................................................ 41 Trends .................................................................................................................................... 41 Competitive Landscape .......................................................................................................... 42 Prospects ................................................................................................................................ 43 Category Data ........................................................................................................................ 43 Table 25 Table 26 Table 27 Table 28 Table 29 Table 30 Table 31 Table 32 Table 33 Table 34 Sales of Meal Solutions by Category: Volume 2006-2011 ......................... 43 Sales of Meal Solutions by Category: Value 2006-2011 ............................ 43 Sales of Meal Solutions by Category: % Volume Growth 2006-2011 ......... 44 Sales of Meal Solutions by Category: % Value Growth 2006-2011 ............ 44 Company Shares of Meal Solutions 2006-2010 ......................................... 44 Brand Shares of Meal Solutions 2007-2010 ............................................... 45 Forecast Sales of Meal Solutions by Category: Volume 2011-2016 .......... 46 Forecast Sales of Meal Solutions by Category: Value 2011-2016 ............. 47 Forecast Sales of Meal Solutions by Category: % Volume Growth 2011-2016 .................................................................................................. 47 Forecast Sales of Meal Solutions by Category: % Value Growth 20112016 ........................................................................................................... 47

Market Data ................................................................................................................................ 48

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Table 35 Table 36 Table 37 Table 38 Table 39 Table 40 Table 41 Table 42 Table 43 Table 44 Table 45 Table 46 Table 47 Table 48 Table 49 Table 50

Sales of Packaged Food by Category: Volume 2006-2011 ........................ 48 Sales of Packaged Food by Category: Value 2006-2011 ........................... 49 Sales of Packaged Food by Category: % Volume Growth 2006-2011 ....... 49 Sales of Packaged Food by Category: % Value Growth 2006-2011 .......... 50 Sales of Packaged Food by Region: Value 2006-2011 .............................. 50 Sales of Packaged Food by Region: % Value Growth 2006-2011 ............. 51 GBO Shares of Packaged Food 2006-2010 ............................................... 51 NBO Shares of Packaged Food 2006-2010 ............................................... 52 NBO Brand Shares of Packaged Food 2007-2010 .................................... 53 Penetration of Private Label by Category 2006-2011 ................................. 54 Sales of Packaged Food by Distribution Format: % Analysis 20062011 ........................................................................................................... 54 Sales of Packaged Food by Category and Distribution Format: % Analysis 2011 ............................................................................................. 55 Forecast Sales of Packaged Food by Category: Volume 2011-2016 ......... 57 Forecast Sales of Packaged Food by Category: Value 2011-2016 ............ 58 Forecast Sales of Packaged Food by Category: % Volume Growth 2011-2016 .................................................................................................. 58 Forecast Sales of Packaged Food by Category: % Value Growth 2011-2016 .................................................................................................. 59 Research Sources ...................................................................................... 59

Source ........................................................................................................................................ 59 Summary 1

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PACKAGED FOOD IN CHINA
EXECUTIVE SUMMARY Dynamic Growth in 2011
In 2011 China’s packaged food sales witnessed dynamic double-digit value growth, slightly higher than the review period CAGR. This was mainly due to on-going food inflation across the country. The single largest recent development across the entire Chinese packaged food market was food inflation, with retail food prices rising well ahead of the overall CPI increase in 2011. Almost all packaged food categories saw significant price increases at the end of the review period.

Health and Wellness Manifest in New Ways
Despite rising food prices, the health and wellness trend continued to grow and evidence itself in new ways across many different product categories in 2011. For example, in instant noodles, Ting Hsin launched new soup noodles made from rice flour rather than wheat, which was considered a healthier alternative. The noodles are also non-fried, further adding to their health and wellness credentials. In sauces, dressings and condiments Lee Kum Kee was the first company to launch low-salt soy sauce. This was followed by Foshan Haitian in late 2010. Elsewhere, health and wellness was also impacting bakery products, with many consumers becoming very concerned with trans fats, constraining sales of cakes and pastries in particular. This trend also helped drive sales of wholegrain bread.

Nestlé Seeks Growth Via Acquisition
Nestlé was keen to invest more to increase sales in Mainland China as part of its strategy to further exploit growth opportunities in the dynamic Chinese food market. Apart from organic growth in packaged food categories such as chocolate confectionery, ice cream, dairy, baby food and sauces, dressing and condiments, the company was actively investing in complementary categories through merger and acquisition. The two most significant moves were the acquisition of a 60% stake in Xiamen Yinlu Group and Hsu-Fu-Chi Holdings Ltd. Both of these new assets gave Nestlé a wider growth platform in the attractive Chinese market in terms of both distribution network and a wider range of products. The company was able to achieve a better position in sugar confectionery through the takeover of Hsu-Fu-Chi, which was the number one player in Mainland China’s sugar confectionery environment. Meanwhile, its acquisition deal with regard to Yinlu enabled the company to tap into ready meals, where Yinlu ranked first in 2010.

Supermarkets/hypermarkets Dominates Value Sales
In 2011 supermarkets and hypermarkets continued to account for the greatest proportion of overall packaged food sales. Over 2010-2011 this channel gained ground from small independent grocers and other traditional formats such as wet markets, with consumer concerns regarding food safety driving this consolidation even further. Supermarkets/hypermarkets already lead in some categories, such as dairy products and baby food, and have further consolidated their position since the 2008 melamine crisis. Meanwhile, on-going expansion into lower-tier cities by key supermarket/hypermarket players also helped consumers gain easy access, which in turn encouraged packaged food sales as a whole.

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Constant Value Growth of Packaged Food Will Remain Healthy
Looking ahead, China is likely to maintain robust economic growth as well as see the further improvement of disposable income levels, which will drive value sales of packaged food. At the same time, retail unit prices should continue to rise in constant terms well above the general rate of inflation/CPI. However, the rate of real terms price increases is also expected to slow down over the forecast period, with only moderate increases expected from 2012 as speculative bubbles burst in some cases.

KEY TRENDS AND DEVELOPMENTS General Food Price Soars
Packaged food prices saw a smooth increase over the review period prior to 2010. However, prices soared in 2010 and 2011 due to several factors, the major one being high CPI in China. The annual CPI in 2010 reached 3.3%. In the first seven months in 2011, monthly CPI saw a continuous increase from 4.9% in January to 6.5% in July, except for a slight slowdown in May. Food CPI maintained double-digit growth from 10.3% in January to 14.8% in July, which underpinned the overall CPI increase. The main raw materials of packaged foods – cereals, meat, eggs, seafood, vegetables and fruit – are key to the overall production costs of manufacturers. Thus, continuous increases in food CPI led to rising raw materials’ costs for manufacturers, leading to increased retail prices of packaged food products. Besides high CPI leading to the retail price increases, other factors included continuous petrol price rises, the Chinese Government’s policies in personal benefits protection including raising the lowest salary standard, stricter control on employees’ payment on employers’ basic insurances all leaded to rising employment costs, which pressure packaged food manufacturers and cause the retail price rise to balance manufacturers’ higher costs. Current impact Manufacturers use several methods to increase retail prices to cover rising costs. For some leading players with dominant positions in certain categories and which also have loyal consumers, direct price increases are applied. For example, the dominant company in instant noodles, Ting Hsin, announced its intention to increase prices by an average of 15% in April 2011. Other manufacturers applied price increases indirectly, for example by reducing pack sizes and launching premium new products. This was evident in Kraft’s new biscuits product Mini Oreo, which has smaller packaging and is a premium offerings compared with the traditional Oreo biscuit. In categories with intense competition, manufacturers are reluctant to increase price too significantly, as this would possibly cause a decrease in share. As a result, these manufacturers pay greater attention to cost controls in order to minimise the pressure from increasing costs. For example, interviewee from China Confectionery Association indicated that the price of chocolate’s main ingredient, cocoa powder, increased by around 400% in 2011. As a result some chocolate players switched from using cocoa powder to cocoa substitute, which did not see such strong price increases as cocoa powder. Due to Chinese consumers’, especially the young generation’s, desire for improved lifestyles, consumption of packaged food is not restrained despite price hikes. Furthermore, due to concerns regarding food safety, premium packaged food products are often preferred. However, consumers are looking for better ways to purchase the same products at lower prices. As a result 2011 saw Internet retailing surge, albeit from a low base. Food sales increased notable

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via this channel, with an increasing number of business-to-consumer websites adding food products to their portfolios. Outlook The price increase of packaged food is expected to continue over the forecast period. However, it is not expected to see the same level of growth as 2011. Due to two years of high inflation in 2010 and 2011, Chinese consumers are complaining about the ineffective policies the Chinese Government has applied with regard to price controls. Hence, the Chinese Government is expected to issue and implement more effective and stricter policies in price control. For example, the action of manufacturers to ally as a group to increase price together is forbidden. Despite the Chinese Government’s willingness to implement price controls, this could only slow down price growth. Overall consumption of packaged food is not strongly affected by price increases, and manufacturers’ shares are not adversely affected. Ting Hsin, for example, despite continuous price increases over 2010-2011, saw its share of instant noodle sales continue rising. Synthesizing the above factors, packaged food prices are expected to increase less strongly over the forecast period. Future impact Due to the Chinese Government’s greater attention to price control, some packaged food manufacturers were punished due to improper price increases. This not only prevented their price increases but most importantly affected manufacturers’ reputations. Thus, manufacturers are not expected to take direct actions to increase selling prices, but are likely to launch more new products at higher prices and with smaller packaging to indirectly increase unit prices. Despite continuous price increases, consumers are still likely to choose major brands with good reputations regardless of their higher price compared with economy products. This is mainly due to the frequent exposés regarding food safety problems. However, private label products are still not expected to see dynamic growth over the forecast period. As most of the major foods manufacturers do not produce private label products for retailers, almost all are manufactured by small players under the license of retailers. Therefore, consumers are dubious regarding the safety and quality of these products, especially private label foods.

Mergers and Acquisitions Further Consolidate Market
Over 2010 and 2011, China’s packaged food industry saw more mergers and acquisition deals. With dynamic growth in value sales, an increasing number of enterprises realised the great development potential in China’s package food market, leading to their desire to increase investment. In order to consolidate their leading positions and further strengthen their competitive power, key players – both domestic and international – paid greater attention to extending their business coverage through acquisition. There were mainly four key activities that tended to have a remarkable impact on China’s packaged food industry. Firstly, in late 2010 Mengniu Group spent RMB470 million acquiring Shijiazhuang Junlebao Group’s 51% equity share. Secondly, in July 2011 HK$3.6 billion was further paid by China National Cereals, Oils & Foodstuffs (COFCO) to raise its own equity interest in Mengniu Group to over 28%. Two other takeovers were related to Nestlé Group. In April 2011 Nestlé acquired Yinlu Group’s 60% equity share. Three months later the company successfully acquired a 60% equity interest in Hsu-Fu-Chi Group.

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Current impact As the top player in China’s dairy industry, Mengniu Group took advantage of its acquisition of Junlebao to mainly accelerate its development of yoghurt categories. Junlebao Group – a wellknown national enterprise founded in 1995 – enjoyed not only the largest factory for yoghurt products in North China, but also a solid consumer base within the region. Through this acquisition, Mengniu and Junlebao turned their relationship from being competitors to partners, sharing high-quality milk sources, advanced technologies, as well as business networks to realise a “win-win” strategy in dairy sales. As a food and drinks conglomerate in China, COFCO had already successfully established itself as one of the top players in packaged food through oils and fats and confectionery. Its further investment in Mengniu in July 2011 indicated its clear ambition to venture into China’s dairy industry. The acquisition of Yinlu Group by Nestlé indicated leading international enterprises’ strategic focus on the Chinese market. As a renowned domestic family business with nearly 30 years’ development, Yinlu Group enjoys widespread recognition and a strong brand image among Chinese consumers. This acquisition helped Nestlé extended its portfolio, which can be regarded as a noticeable milestone in its entry into China’s ready meals industry. Furthermore, Nestlé continued with its extension strategy and successfully completed the acquisition of Hsu-Fu-Chi Group in July 2011. As a famous enterprise in China’s confectionery industry, listed in Singapore since 2006, Hsu-Fu-Chi Group enjoys a well-built production base and strong sales network, with double-digit annual profit growth. This acquisition enabled Nestlé to become more competitive in China’s confectionery and real meal categories. Outlook Mengniu Group is expected to witness more dynamic growth over the forecast period. With its current achievement in dairy and takeover of Junlebao, Mengniu is likely to gain more shares in China’s dairy environment. This is especially the case in yoghurt, due to Junlebao’s years of development in yoghurt production and its great distribution network, mainly in North China. With closer attention to product quality among consumers, it is forecast that this acquisition will lead not only to greater competitive advantages of Mengniu Group, but also further consolidation in dairy sales. China National Cereals, Oils & Foodstuffs (COFCO) is predicted to achieve better results and realise sustainable long-term development in packaged food. Relying on its cooperation with Mengniu Group in terms of business management and strategy, COFCO is likely to broaden its business scope and enhance its product diversity in coming years. After Nestlé’s takeover of Yinlu Group, these two companies are expected to make continuous efforts in terms of brand-building and production capacity improvement. This will give rise to much deeper penetration, especially in Mid and West China. The acquisition of Hsu-Fu-Chi by Nestlé demonstrated Nestlé’s strategic focus on China’s confectionery environment. Although Nestlé is a global leader in the packaged food industry, its performance in China’s confectionery environment, was relatively weak compared with rivals such as Mars and Kraft. However, after this acquisition Nestlé is expected to improve its performance in confectionery, particularly in sugar confectionery, where Hsu-Fu-Chi ranked first in 2010. Future impact Mergers and acquisitions will become one of the foremost strategies for both domestic and international enterprises to reinforce competitive power, as well as gain more resources to increase share. Since China’s packaged food industry is expected to see continued strong constant value growth with a CAGR of 8% expected over the forecast period, the great development potential is

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likely to be rather attractive to more enterprises, bringing about more mergers and acquisitions in the near future. Therefore, more share is predicted to be taken by the existing leading players, making China’s package food market increasingly consolidated.

Health and Wellness Becomes Focus for New Launches
With the overall improvement of living standards, consumers are paying greater attention to health and high-quality lifestyles, especially since the tainted milk scandal of late 2008. Thereby, health and wellness remained a very important trend in the development of China’s package food industry, with many product innovations across all categories focusing on healthier ingredients and functions. In confectionery, dark chocolate and breakfast cereals have been widely well received by health-conscious consumers, providing both balanced nutrition and good taste. In dairy products “old yoghurt” has become a new star launched by many key dairy products manufacturers. The unique selling point for old yoghurt is to boost the body’s high-quality protein intake, with purely natural nutrition and absolutely no additives. In sauces, Foshan Haitian’s newly-launched low-salt, soy-based sauce called Xiao Xiao Yan has been well received by many health-conscious consumers. The main selling point is lower salt content, while offering more tasty cuisine. In snacks, Orion (China) Co Ltd’s non-fried crisps registered a great achievement. Orion’s star brand “Shu Yuan” highlighted the non-fried concept to meet consumer demand for combining healthy ingredients with a high level of taste. Current impact In line with the Chinese Government’s closer attention to food safety issues, all the leading manufacturers have made efforts to enhance product quality, as well as investing in product research and development to cater to demand among more health-conscious consumer groups. Meanwhile, manufacturers were proactive in conducting marketing campaigns. Facing more fierce competition in China’s package food market, greater investments were made by leading players in TV advertisements, metro media and magazines to advocate healthy lifestyle concepts, as well as their health-oriented new products. For example, as the only specified superior dairy products sponsor of 2010, Shanghai World Expo, Inner Mongolia Yili Industrial Group Co Ltd not only provided global tourists with diversified world-class dairy products and allround service, but also supported the establishments of several pavilions inside the Expo garden. Through this it fully demonstrated Yili’s advanced production technologies and dairy products’ research and development achievements. Relying on such advocated products’ health and wellness characteristics, many package food manufacturers’ brand popularity and market recognition have been much reinforced. In order to conduct further in-depth research on product innovations to restructure portfolios, key manufacturers have introduced more advanced technologies. These not only stimulated the premiumisation trend, but also raised unit prices of package food products. Moreover, growing investments in marketing campaigns advocating products’ health and wellness concept have been made by enterprises with the hope of providing tailored products for a wider range of consumers, and to gain share. Therefore, unit price increases became a general trend in China’s package food industry. Outlook With the overall improvement in consumers’ standard of living, the pursuit of healthy and highquality lifestyles is increasing. An increasing number of Chinese consumers are well-educated and aware of the benefits offered by newly launched products which highlight health and wellness as their main selling point. It is forecast that health and wellness will not only become a lasting topic in packaged food market, but also the main selling point driving sales.

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In dairy products, for example, although for many leading dairy manufacturers in China longlife/UHT milk is the mainstay product, many consumers are tending to choose fresh/pasteurised milk due to its more natural and well-maintained nutritional value. Moreover, non-fried instant noodles and crisps, as well as dark chocolate are also performing strongly, and heavily driving sales in their corresponding segments. Future impact Health and wellness is expected to remain the general developing trend in China’s packaged food market in coming years. As improving consumer lifestyles is considered a priority by the government, quality of life is becoming a common pursuit of both manufacturers and consumers. For all competitors in packaged food relying on persistent product research and development and providing consumers with a rich, health-oriented portfolio is the consistent business strategy. Meanwhile, continuous input by manufacturers in terms of product innovations and marketing campaigns is likely to raise unit prices of packaged food. However, due to the larger percentage of high-income families in China, more consumers prefer products with higher prices, which means greater health benefits and value added. Nevertheless, the public are appealing for more strict management of health and wellness food. As health and wellness is considered the main selling point of packaged food, all manufacturers are realising this business opportunity and making efforts to take advantage of it. Therefore setting out clearer regulations and definitions regarding so-called health and wellness characteristics of packaged food is of great value for standardising competition and further consolidating consumer confidence.

New Marketing Methods
To stand out in the fiercely competitive environment, packaged food manufacturers have resorted to new marketing methods, which help them effectively carry out consumer education and drive sales accordingly. Unlike the traditional marketing activities relying on TV commercials, outdoor posters and advertising via newspaper or magazines, innovative marketing methods make use of new media. Current impact Dove-branded chocolate from Mars (China) Co Ltd has further enhanced its brand awareness, especially among white-collar workers, thanks to its successfully implanted advertisement in the popular movie Go Lala Go! in 2010. The leading character in the movie Lala, who ate a large amount of Dove chocolate when feeling depressed, resonated white-collar movie-goers. Furthermore, to make debut the new Dove product ‘Xinsheng’, Mars China cooperated with the modern drama pioneer in China, Mr Meng Jinghui, in launching a stage play, named ‘the Heart Voice of a Chocolate’ in Beijing in October 2010. This new marketing approach caused quite a stir in the packaged food industry, and was well-received especially among white-collar consumers. Online marketing is another new media adopted by packaged food manufacturers over the review period. In addition to advertising via the Internet or establishing official websites in popular portals such as kaixin001.com, some manufacturers went a step further. People’s Food Holding Ltd introduced Instant Noodle Companion in mid-2011 – a kind of meat sausages with special taste tailored for instant noodle. To promote this new product, the company sponsored the roadshow of the online game Legend of Immortal, popular among young consumers, to promote the brand and increase product awareness. The strategy proved successful, as many online game lovers consume instant noodles when playing games. Other new media used for marketing purposes include mobile TVs in taxis and subway.

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Outlook New marketing methods may draw more attention from consumers than the traditional approach, thanks to their novelty. In addition, new marketing methods help reach as many consumers as possible, as new media is carefully chosen. Due to their effectiveness in consumer education and increasing sales, more new marketing methods are likely to emerge over the forecast period. Meanwhile, new marketing methods need to be accompanied by consistent product quality and a wide product presence to achieve a long-lasting effect. Otherwise, new market methods may prove short-lived. Future impact Manufacturers have to be more creative in locating the new yet effective marketing media over the forecast period, to attract increasingly choosy and sophisticated consumers. Any newly emerged trend in media can be made use of, such as weibo.com, a micro-blogging website currently boasting over 200 million registered users in China. On the other hand, traditional marketing methods are still expected to continue to survive, thanks to a vast variety of consumer preferences.

Internet Retailing Booming
Over the review period Internet retailing saw rapid growth thanks to the growing Internet user base and strong promotion by key Internet B2C players. According to official statistics from China Internet Networking Information Centre (CNNIC), the online user population reached 485 million by June 2011, equivalent to 36% of the total population. Apart from the growing Internet user base, strong promotion by Internet B2C players is also a key driver for the dynamic growth of Internet shopping. According to Euromonitor 2011 retailing data, Internet retailing witnessed a CAGR of 71% during the review period. Varying from store-based retailing channels, Internet retailing has its competitiveness in offering products at lower prices and a high level of convenience. Current impact Even though packaged food distributed via the Internet remained minimal at the end of the review period, representing only 0.2% of total retail value sales in 2011, it enjoys explosive growth, especially in 2010 and 2011. The still small consumer base may be the major reason for the dynamic growth, but the increasing acceptance of food purchases via the Internet among consumers is the crucial factor underpinning growth. Consumers choose Internet retailing of packaged food for various reasons. Price-sensitive consumers are lured by the competitive prices offered by most products sold via the Internet, thanks to the streamlined distribution and logistics. Time-pressed consumers may also favour Internet retailing over other channels, as shopping can be purchased whenever it is convenient. Furthermore, door-to-door delivery services offered by Internet retailers also appeals to some consumers seeking convenience. Baby food ranked first among categories in packaged food, with sales via Internet retailing accounting for 2% of total baby food sales in 2011. Concern regarding the safety of milk formula after the Melamine scandal in 2008, that is, contaminated milk formula, resulted in many young parents purchasing imported milk formula, mostly from online shops that source their dairy products from abroad. Meanwhile, competitive prices and home delivery services for bulky items such as nappies are also attractive to young parents.

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Outlook With the further development of the Internet in China and the increasing popularity of broadband and mobile Internet services, as well as the increasing ownership of computers with Internet access, Internet retailing is expected to continue to see robust growth in coming years. This channel is estimated to enjoy total value growth of around 300% over 2011-2016, albeit from a relatively low base. Future impact More consumers are expected to make purchases of packaged food via the Internet, due to reasonable prices, convenience and the offer of home delivery. Consumers with increasing sophistication are likely to rely more on Internet retailing over the forecast period, which greatly complements their usual and conventional shopping experiences in supermarkets and hypermarkets, etc. Meanwhile, an increasing number of manufacturers and distributors are likely to take advantage of the Internet retailing boom by offering online shopping services on their official company websites, or running other independent websites. More manufacturers are likely to follow Shineway Group with an e-shop on their company website. COFCO established its own business-to-consumer online platform – www.womai.com – in August 2009, and directly sells food and beverage products to consumers. Manufacturers are also expected to open and run flagship stores in renowned B2C platforms, such as yihaodian.com, to cater to the soaring demand for Internet purchases among consumers.

TERRITORY KEY TRENDS AND DEVELOPMENTS East China
With the macro economy showing on-going healthy growth in 2011, the consumer confidence index continued to increase together with robust economic growth, East China, as the most developed region in the country, sees strong demand for packaged food products. These range from daily necessities such as rice and sauces, dressing and condiments, to impulse and indulgence products such as confectionery and ice cream. In 2011 consumers in East China actually paid more attention to health and wellness food. In East China, consumers enjoy a high standard of living and have more concern regarding the diet. At the beginning of 2011 the illegal use of clenbuterol by Shineway Group led to consumers increasing focus on food safety. Meanwhile, Japan’s nuclear leaks also cast a shadow on sales of frozen processed fish/seafood in East China, as they tended to believe that these products might be contaminated, given the relatively close proximity of the East China region and Japan. Therefore, consumers in places such as Shanghai chose to buy high-quality packaged food products with no harmful additives. High-end products performed well in East China in 2011. For consumers living in East China, particularly in cities such as Shanghai, white-collar workers and expatriates account for a large proportion of the total population. Both of these consumer segments are able to afford high-end products. In chocolate, for example, premium chocolate, mostly imported highquality products such as Meiji, sold well in Shanghai. Unit price movement in East China continued to rise against a background of high inflation over 2010-2011. The cost of labour and raw materials kept surging in East China, in line with the overall national inflation trend. In bakery products, for instance, the average price of most offerings increased due to high cost pressures related to raw materials such as sugar and

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eggs. Trade sources indicate that manufactures in East China were highly resistant to increasing prices, fearing this might lead to a loss of customers and thus share. However, due to high inflation in 2010 and 2011 they had no choice but to raise prices of bakery products in order to maintain profit margins. A similar situation was evident in other packaged food categories such as spreads, confectionery, ice cream and oils and fats. The ready meals category saw rapid growth in East China, as most people were living busy lifestyles with very long working days. Ready meals provide convenience and time-saving attributes for working professionals. For instance, chilled ready meals offered in many convenience stores such as FamilyMart and Alldays tend to be very popular among working professionals, who have little time to cook. Foodservice continued to grow healthily, although it held a smaller percentage of total sales compared with retail. As one of the most developed regions in the country, East China has a great number of restaurants and hotels, with a considerable number of luxury hotels. In addition, with many major tourist cities such as Hangzhou in Zhejiang province and Nanjing in Jiangsu province, East China’s foodservice industry continued to benefit from tourists visiting the region. Thus in many categories such as canned/preserved meat and frozen processed food, the foodservice channel was increasingly significant. Supermarkets/hypermarkets maintained the largest proportion of sales in packaged food in 2011. In East China there are more international supermarkets/hypermarkets with intensive layouts, remaining the first choice for local consumers. Another trend was the rapid development of Internet retailing, with its home-delivery convenience. For example, yihaodian.com gained popularity among consumers in East China by offering a quick delivery service to local consumers in locations such as Shanghai. Competitive landscape Mobile TV on public transport became a new emerging channel for advertising in East China. Mobile TV has extensive coverage and is particularly effective in reaching a large number of consumers. East China, especially places such as Shanghai, have intensive public transportation systems, and the time people spend on buses and the metro is increasing given the density of the local population, as well as shortage of public transportation vehicles. After Cadbury being acquired by Kraft Foods Inc in February 2010, together with its previous confectionery brand Halls, the sound reputation of Cadbury in the confectionery category helped the company to become the leading player in this industry in East China. Thus, Kraft obtained leading positions in both bakery, with the brands Tuc, Chips Ahoy, Tiki, Oreo and Prince, and in confectionery with Cadbury and Halls. In East China these brands are popular among consumers due to their good taste and high quality. In East China, due to the severe competition in Shanghai, where international brands dominate packaged food sales, domestic manufactures tried to gain share in low-tier cities. For example, domestic players such as Hsu-Fu-Chi, mainly targeted middle-income consumers, owned sound sales networks in lower-tier cities such as Nanjing and Suzhou in Jiangsu province, while Gold Monkey penetrated cities such as Linyi in Shandong province. Trade sources indicate that Gold Monkey achieved higher value growth in East China in 2010 than in previous years due to its expanded distribution network into lower-tier cities. In baked goods, Mankattan continued to be the leader in East China in 2010, especially in Shanghai and Suzhou. It kept high shares with a wide-ranging portfolio and marketing activities. In order to meet the needs of consumers in East China, Mankattan launched a new bread called Coronet, which saw a good response. However, trade sources indicate that packaged/industrial baked goods such as Mankattan faced intensified competition from those

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unpackaged/artisanal brands such as Christine and 85° both of which were expanding C, rapidly in East China. International brands dominated the biscuits environment in East China. This was partially driven by young consumers with high purchasing power in the east, especially in Shanghai and other cities such as Hangzhou in Zhejiang province, Nanjing in Jiangsu province, and Jinan in Shandong province. Furthermore, these consumers strongly prefer leisure foods. Thus, biscuit brands with leisure positioning such as Ritz and Haoduoyu witnessed strong growth in the region over 2009-2010. According to store checks in East China, bite-size biscuits mainly positioned for leisure consumption took more space than previously, together with ever-increasing demand among local consumers. Prospects Consumers in East China will continue to demonstrate increasing brand awareness compared with consumers in other regions in coming years, given that consumers in East China have better purchasing power to buy branded products. Moreover, food safety issues in the region encourage consumers to turn to trusted brands. Over the forecast period the foodservice channel of packaged food will see healthy growth in the region. East China consumers, particularly those living in large cities such as Shanghai or developed coastal cities such as Ningbo or Qingdao, are extensively exposed to western-life styles. Thus, they are more open to different product types in foodservice, such as Italian pizza or fresh coffee, which will in turn stimulate packaged food sales through foodservice. For instance, soft cheese, especially mozzarella, is likely to continue to see robust growth over the forecast period. This will be due to the popularity of pizza in restaurants, while longlife/UHT milk will continue to increase, as an increasing number of coffee shops in China demand greater volumes of milk to make products such as latte or cappuccino. Health and wellness will continue to gain momentum among consumers in East China over the forecast period. For instance, sugar-free gum is expected to perform better in East China compared with standard gum. Meanwhile, speciality baby milk formula for food intolerant babies sold in East China is likely to account for higher share of total sales by 2016, ranking first in overall speciality baby milk formula sales. The Internet channel is expected to see the fastest growth in East China over the forecast period. Except for some packaged food products with a short shelf life, such as artisanal baked goods, yoghurt and fresh milk etc, many products can be purchased online. This enables consumers to enjoy lower prices and home delivery, for instance, baby milk formula products and chocolate. Chilled processed food will become one of the key growth engines in East China in coming years. Convenience, as the main advantage of chilled processed food will match the accelerating pace of life pace in the region. As the only child of the family, many young people are not good at cooking, and when they live alone far from home, chilled processed food represents a convenient solution for their everyday cooking needs.

Mid China
Trends With the development of the leisure food industry and improving living standards among consumers, leisure food has started to enter consumers’ lives. However, obesity has attracted great attention, especially child obesity in urban areas. Consequently the relationship between leisure food and obesity has attracted increasing attention. Therefore, the leisure food category is expected to develop health and functional products in future. For these reasons

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customers in this area tend to buy leisure food products with low fat and calorie content and which is not fried, contributing to weight loss and a healthy eating plan. Organic green food develops rapidly. With the development of the economy, consumers’ disposable income in Mid-China increases continuously, with people paying increasing attention to quality of life. Consumers are attaching more importance to eating well and healthily. Furthermore, with frequent food safety issues such as poisonous steamed bread, rice and products cooked in contaminated oil, among others, consumers are increasingly interested in food safety, and are willing to spend more on products offering peace of mind. There are several important trends, including developing products in a high-tech way. Greater importance is attached to nutrition and health like adding more functional ingredients into sauces and condiments such as adding iron into soy sauces. With the progress of science and technology, different kinds of new technology have been widely applied to condiment production. These include biological enzymolysis technology, immobilized yeast technique, membrane technology, extraction technology and microcapsule techniques. Such innovations have greatly improved the quality of condiments. Consumers in Mid-China prefer well-known brands. With increasing food safety issues in recent years, lower quality brands found it difficult to survive, especial with regard to children’s food. For instance, in Wuhan it was rare to find lower quality brands of baby formula in retail outlets following the melamine problem. Even if such products were available, their presence was limited. The weather is wet in the Mid-China, and consumers prefer heavy-tasting and spicy food because such offerings are believed to help prevent rheumatic problems. The main food consumed for breakfast is noodles, such as wide rice noodle, narrow rice noodle, noodles with soup, hot and dry noodles, etc. Especially in the Hubei area, hot and dry noodles are a particular favourite, and the brand of Big Hankou and Wuhan is very popular. As a result it now plans to extend these characteristic brands of hot and dry noodles to the entire nation. In 2011 packaged food in Mid-China demonstrated a greater increase in value, but the profit margin of manufacturers weakened. Due to rapidly rising raw materials’ costs and frequently weather changing causing the low production of the foodstuff, the majority of food manufacturers were forced to increase retail prices. However, they did their utmost to reduce the losses resulting from the rising costs, such as changes to internal management mechanisms, product structure adjustments, etc. Although online shopping is very popular at present, and the major food manufacturers are developing their online presence, online sales value of packaged food products are quite limited. One factor contributing to this is that consumers usually focus on product freshness, and do not find food products that are unlikely to remain fresh for long appealing. A further factor is the limited price advantage. As a result online shopping is a form of advertising for the majority of food producers in Mid-China. Competitive landscape Ting Hsin is the leading company in Mid-China. Ting Hsin is principally engaged in the production and sale of instant noodles, beverages and cakes. Ting Hsin began to produce instant noodles from1992, and expanded its business to bakery products and beverages in 1996. Currently, Ting Hsin has three main product ranges. Ting Hsin’s Master Kong brand has higher consumer awareness than others in Mid-China. Baixiang Food Group increased rapidly in recent years in Mid-China. Baixiang Food Group launched Baixiang big bone noodles and non-fried instant noodles (wheat yield), which were very welcomed by consumers. The Baixiang big bone noodle is in line with the tastes of consumers in Mid-China. Due to the healthier positioning of non-fried noodles these products

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are very popular with consumers in Mid-China. These factors led to Baixiang Food Group achieving faster growth than other players. With the appearance of Yake V9, which initiated the classification of vitamin candy, Yake quickly became recognised as a first-class brand. Fujian Yake has become a strong local competitor and held a sure share through the concepts of “joyful, health, dynamic, fashionable and festive”. The diary environment also performed well in 2010. The pace of new product research from the major dairy manufacturers accelerated. Mengniu’s new milk drink product Yiyoute designed for the white collar with probiotics was launched in Mid China. Along with the appearance of Qinghai Lao Yoghurt, manufacturers nationwide developed Lao Yoghurt under their own brands. For example, Mengniu, Yili and Youzhiyou launched “Lao Yoghurt” in 2010. Uni-President invited a well-known local TV host – Wang Han, from Hunan TV in Mid-China – to be the spokesman for the Chinese sauerkraut noodles, thereby appealing to consumers. A lot of people are very fond of the Chinese sauerkraut noodles, and advertisements featuring local host Wang Han proved particularly successful. Prospects In response to the call to strengthen supervision on food safety by the Central Government, Hubei province food authority also formulated a package of rules. These included establishing a system of credibility and integrity for baby formula manufacturers, to supervise the products safety. This would be helpful to rebuild the confidence in food safety among consumers, boost the long-term development of qualified food manufacturers, and eliminate the small and medium-sized enterprises in the food industry. For packaged food, some categories are seeing an increase in the importance of high-end products. These include baby formula and ice cream. Low-price products will be cleared out step by step in developed cities in Mid-China, as players upgrade and optimise their portfolios. Packaging size appears in diversification, which means packaging sizes will vary to target different consumer segments. For example, in instant noodles a 110g pack is suitable for young people. Nowadays, companies are trying to introduce a variety of packaging formats to meet the needs of different consumers. Nissin launched a mix taste of cup noodles of 85g which is suitable for women and children. The product segmentation in packaging will continue in Mid China over the forecast period. Unit prices will continue to demonstrate an upward trend in Mid China. According to latest statistics by the national bureau, CPI rose by 5.7% in April compared with the same month of the previous year, but food prices increased by just over 11% in Hubei province. Vegetable prices have kept falling. For this reason, it is expected that prices of food products made with vegetables will not rise quickly. However, other food prices will maintain high growth, so food prices for the whole year are expected to increase by around 10%. The Chinese Government has issued a list of policies such as price supervision if prices increase too much. However, policies are just expected to control price growth but not stop the price increase trend ever after raw materials’ costs, labour costs and transportation costs stop soaring over the forecast period.

North and Northeast China

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Trends North and North-east China is one of the most affluent regions in the country, with political capital city Beijing, municipal city Tianjin, economically-developed provinces such as Liaoning, Jilin and Heilongjiang all included. More developed economic status within the region enabled local consumers to achieve better purchasing power compared with national levels of spending. This resulted in relatively higher value growth in North and North-east China for overall packaged food sales in 2011. Similar to many of the other regions of the country, baby food was the most dynamic category in North and North-east China. Young parents in the region prefer relatively premium lines in baby food. For instance, international brands such as Dumex and Enfapro continued to be well-received among local consumers. Domestic brand such as Yili also performed well, mainly thanks to its newly launched premium lines under Yili Pro-kido. Other domestic brands such as Shengyuan witnessed its brand ranking decline from fourth place in 2009 to fifth in 2010 due to a food scandal in 2010. In 2011, bakery represented another strong-growing category in packaged food in North and North-east China. This was a result of the growing popularity of conveniently-served artisanal bakery products across the region, particularly in developed cities such as Beijing and Tianjin. According to trade sources, local bakery chains Beijing Holiland Enterprise Investment Management Co Ltd expanded quickly in North and North-east China, with a total of over 1,000 outlets in 2011, mostly located in the North and North-east China region. The rapid development of bakery outlets in the region made fresh bakery products such as bread, pastries and cakes easily accessible to local consumers. Therefore, overall bakery sales witnessed healthy double-digit growth over 2010 to 2011. In line with overall national-level inflation, retail prices across packaged food categories almost all witnessed upward movement in 2011, due to ever-increasing raw materials’ and labour costs. To digest all rising costs many manufacturers, including both local and international, resorted to price increases in order to maintain profits. Spoonable yoghurt was more popular than drinking yoghurt among consumers in North and North-east China, with higher value growth witnessed over 2010 to 2011. Unlike consumers in South and East China, consumers in North and North-east China traditionally prefer sticky yoghurt products with a rich flavour. Generic yoghurt products naturally fermented from milk, packaged in glass bottles were widely seen in Beijing Hutong (a kind of alley in Beijing). Aware of consumers’ taste preferences, key players such as Mengniu offered branded spoonable yoghurt products “Mengniu Old Yoghurt” to compete with those generic lines, which was regarded as a key success new launch in Beijing in 2011. Competitive landscape Given the importance of North and North-east China in total packaged food sales, both international and domestic players were keen to explore the region in 2010. Many international players such as Kraft, Perfetti, Orion, Wrigley and Nestlé paid great attention to improving their sales in the region, through offering high-quality products with rich product lines targeting different consumer segments. Kraft, for instance, was undoubtedly the number one player in biscuits with Pacific, and acquired strong Danone lines in plain biscuits, Prince Cookies and Chips Ahoy! brands, dominant in cookies in North and North-east China in 2011. In 2010 international players also outperformed domestic ones in chocolate confectionery and gum. Mars (China) Co Ltd and Nestlé (China) Ltd were top two players within chocolate confectionery, while Wrigley brands Doublemint, Extra and Juicy Fruit, occupied the top three place in gum in North and North-east China.

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However, in most dairy categories domestic companies recorded better performances in flavoured milk drinks, milk and yoghurt sales. Relying on a local distribution network across the region, Mengniu ranked first within those categories in 2010. Moreover, the company also further strengthened its leadership in the region through the acquisition of Shijiazhuang Junlebao Milk Co Ltd in 2010, being able to offer local consumers in Beijing and Hebei province fresh dairy products. Due to its logistical advantage, Beijing San Yuan Foods Co Ltd was the number one player in fresh/pasteurised milk in 2010, particularly in Beijing. Local players also had a great advantage in categories such as sauces, dressing and condiments, as they tended to be more aware of the taste preferences among consumers in North and North-east China. In 2010, Beijing Liubiju Food Co Ltd was the number one player in pickled products sales in the region, as it provides rich product lines within pickled products, catering for different local consumer needs. Beijing Wangzhihe Food Group Co Ltd was another important local player, with a large proportion of its sales in the region coming from sauces, dressing and condiments under its flagship brand Wangzhihe. Prospects Over the forecast period it is expected that sales of packaged food will continue to outperform the national level in this region, with a constant value CAGR of 8%. With the continual improvement of consumers’ disposable incomes, expenditure on grocery products including packaged food will continue to increase in the region. Given the relatively higher disposable income level of local consumers in North and Northeast China, premium lines will gain importance over the forecast period, particularly in categories such as baby food. Most of the leading players, such as Mead Johnson and Yili, completed their product upgrading of milk formula over the review period, with more premium lines offered for young parents. This trend will continue, with ever-increasing demand for highquality baby food products, particularly in terms of the milk source to produce milk formula. Value growth of spoonable yoghurt will remain dynamic over the forecast period, as the traditional preference for denser yoghurt among local consumers is unlikely to change. With successful key new launches from Mengniu, other players may show stronger interest in launching similar products. Therefore an increasing number of local consumers are expected to switch from generic spoonable yoghurt products to those branded products with an indulgence taste. International players will continue to dominate sales within categories such as confectionary and baby food, due to their early entry advantage and stronger consumer loyalty in the region. However, domestic players are likely to be in a better position in sales of dairy products as well as sauces, dressing and condiments in North and North-east China, as they are more clear of local taste. They also have a geographical advantage to supply fresh packaged foods, particularly products such as fresh/pasteurised milk.

Northwest China
Trends As the economic and cultural centre of the North-west region, Xi’an has always been a famous tourist destination. From April to October 2011, Xi’an was the host city of the World Horticultural Exposition. With a large number of tourists visiting the city, Xi’an, including the surrounding area, faced a chance of rapid economic growth, encouraging local consumers to buy more packaged food as a whole in the retail channel in 2011. Moreover, the booming tourism industry in Xi’an also stimulated packaged food sales in the foodservice channel, such

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as sauces, dressing and condiments in the region, as tourists were interested in the local tastes offered by restaurants in Xi’an. The total Muslim population is approximately 20 million, most of whom live in North-west China. To the north and north-west the preferences of the local Muslim population, the Uyghurs, are responsible for the use of mutton, lamb and beef on menus, and the almost total absence of pork products. In 2011 many Muslim restaurants offered entirely halal dining. Packaged food with halal tastes accounted for a greater proportion in North-west China, and local companies had a competitive advantage in halal food. In April 2010 the government of Xi’an signed an agreement with the Muslim chamber of commerce on the project of Xi’an international halal food industrial park, which involved capital of approximately RMB4 billion. In 2010, there were also some food safety issues exposed to the public in North-east China, such as Qinghai Dongyuan Dairy factory contaminated dairy products. Therefore, local consumers tended to be extremely sensitive in terms of product safety, which in turn led to the rapid development of those well-established brands. Meanwhile, consumers increased awareness of food health and safety, so more of them were willing to choose brands with a high profile and offering security. For instance, Hsu-Fu-Chi, Dove, Le Conte, a series of brands under Kraft, Jinlongyu, Yili, Mengniu, Yinqiao and Mead Johnson were popular among consumers in North-west China. In 2011 corn oil was increasingly popular among consumers in North-west China, given the fact that a growing number of inland consumers were aware of its health benefits. For example, in Xi’an Longevity Flower corn oil was widely seen in supermarket/hypermarkets, costing around RMB122.60 per five litres – a price which tended to be acceptable among local consumers. Baby food sales in North-west China witnessed healthy growth over 2010-2011, but due to the impact of milk contamination over the review period, many local consumers place greater trust in high-quality brands with raw materials being imported. Meanwhile, consumers in cities such as Xi’an preferred to buy baby food from specialised baby stores offering a 1-stop shopping experience for babies’ products. In 2010 the dairy environment saw stable growth in North-west China. Old yogurt was the fastest growing, so it was produced by a variety of competing brands. Competitive landscape In 2010, Yinqiao, as a leading local brand, had a significant place in dairy and baby food sales in Xi’an. Compared with other domestic brands, Yinqiao saw a better sales performance due to its well-established brand name among local consumers in North-west China, as well as extensive coverage in the region. Alongside Yinqiao, other players such as Yili, Mengniu, Duoxian, Junlebao and Xiajin also recorded strong performances in local dairy sales, due to their regional advantage in terms of logistics and transportation costs. In terms of oils and fats, national brands such as Jinlongyu and Luhua and local brands such as Bayu, Bangqi competed head-to-head in 2010. Relying on their strong brand loyalty and established reputation, Jinlongyu and Luhua were selling well among relatively higher income owners in North-west China. Meanwhile, local brands such as Bayu and Bangqi offered their products at lower prices than their nationwide rivals, appealing to price-sensitive consumers. Despite a steady stream of new competitors entering the local market and volatile prices of raw materials in North-west China, the noodle and beverage giant Ting Hsin International Group saw strong growth. Initially the company was successful because it was one of the earliest entrants to the Chinese food market. Today, its success is due to economies of scale, rising efficiency and continuous transformation. In North-west China the company owns two

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production plants in Xi’an and Sinkiang, and can satisfy the needs of local consumers immediately. Rising average annual incomes, greater ownership of better home cooking facilities, increased exposure to western and international cuisine and a greater array of goods in supermarket are all combining to increase sales of condiments, herbs and spices in Northwest China. Regional brand Mutangxiang witnessed rapid development over 2009-2010. The company may consider making inroads into the country’s important first-tier cities such as Shanghai and Beijing having established a solid position in smaller cities. Market conditions in China’s first-tier cities have been extremely competitive, dominated by top brands that created barriers to new entries. It is necessary for local brands to enter second- and third-tier cities, which are more cost effective in terms of return on investment. For a company without a good distribution network and some brand awareness, it was hard to compete with multinational brands. Compared with multinational enterprises, the sales value/volume and share of domestic companies were still relatively small. Besides a few famous domestic brands, many regional brands are not particularly well known among local consumers, and these local brands hold a large share in the low-end segment. In instant noodles, for example, Master Kong and Hua Long performed well in North-west China. Prospects Over the forecast period value growth of packaged food sales in North-west China is expected to record the lowest constant value CAGR at 7% over the forecast period. Compared with developed regions such as North and North-east China, consumers in the north-west region still have a relatively lower disposable income level, thus being more likely to buy cheaper products. This will in turn lead to lower value growth in the region over the forecast period. Baby food is likely to be the most dynamic category over the forecast period, with a 14% constant value CAGR. Although young parents in North-west China have a lower-income level compared with more developed regions, many are willing to pay a premium for baby food products in order to give their children the best quality, particularly given numerous food scandals over the review period. The sauces, dressings and condiments category will register the lowest value growth of all packaged food categories in North-west China, with a 3% constant value CAGR over the forecast period. Considered daily necessities, many local consumers living in North-west China pay greater attention to price instead of brand when purchasing sauces, dressing and condiments. Local companies such as Yinqiao will continue to have a great advantage in dairy and baby food sales over the forecast period. Headquartered in Xi’an, Yinqiao is well-recognised as one of the top dairy players among local consumers. The leading status of Yinqiao is unlikely to change over the forecast period.

South China
Trends The improvement of consumers’ living standards in South China has increased consumer interest in high-quality food products. Consumers are paying more attention to food quality by examining three aspects: safety, healthiness and function. These could also be represented by three new trends in the food industry. First, food safety issues in 2011 accelerated the process of concentration. Consumers purchased more branded and trusted leading brands and less consumed the brands that are lack of safety insurance. The side effect is that small

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manufacturers are banished by consumers in diary market. The aim of this action is to create a more concentrated environment with transparency and legitimacy. The second trend is that an increasing number of people are willing to pay extra for healthier food products. Quite a few new products claiming health attributes were launched in 2010 and 2011. Finally, consumers increasingly expect more from their food. Thus, functional products were quite popular in 2011. For example, retail sales of functional drinking yoghurt is witnessing high growth in 2011, which is 21% in current value terms in South China. As a result of its climate, together with the influence of Hong Kong and Taiwan, consumers in South China have a sweet tooth. Sweet food is widely available not only for main meals but also for snacks. Traditional dessert shops (Tong Sui Po), which is quite popular generic dessert shop type in South China, which provides various traditional Chinese desserts, remain popular in South China, especially in Guangdong. This could be regarded as a longterm competitor for western-style baked goods. However, with quite a few immigrants from other regions, consumers in South China are more willing to accept new products. New launches are always attractive to them, and existing products may easily be impacted by new offerings. Baby food enjoys the fastest growth in South China, with a 22% current value terms increase in 2011. With increasing concern regarding infant feeding, a growing number of people are willing to spend money on high-quality baby food products. According to the latest Nationwide Census, Guangdong is the province with the largest population. Thus, despite continuous food safety problems in the Chinese milk formula category, demand arising from the high birth rate in South China underpins the strong growth of baby food. The unit price of overall package food in South China shows an upward trend in 2011. This is partially caused by inflation, which led to price increases of raw materials such as sugar and cereals, which is also a nationwide problem. Furthermore, the cost for logistics and labour sources was higher in 2011. Facing these pressures, many manufacturers adjusted or planned to adjust their prices. Competitive landscape In packaged food brands from Taiwan have advantages such as greater knowledge of Chinese consumers’ behaviour and preferences. Ting Hsin International Group is the leading enterprise, and holds the largest share in South China. Master Kong, one of its brands and also the best-known brand in 2011, competes in rural sales, and aims to acquire share from local manufacturers. To maintain its position Ting Hsin international Group constantly improves products and launches new offerings, and remains a great success. There was no major change in the competitive landscape for packaged food in South China. Most companies maintained their positions, such as Ting Hsin, Yili, Mengniu and Nestlé. However, there were some new entries showing an aggressive growth trend. For example, in baby food the performance of Wissun Group in South China was very remarkable in 2010. Wissun invited local celebrity Zhou Huajian to be brand advocator, enhancing the brand’s image of excellence, sincerity, responsibility and care. This also helped to improve the performance of the company. Advertising is important for suppliers to gain share. Ting Hsin is still one of the largest television advertisers, covering most channels. During the summer holidays more brands focus on children and teenagers, and boost sales through TV advertisements during cartoons and movies. For example, Orion cooperated with the movie KungFu Panda 2, aiming to reach the summer leisure food segment, and promotes sales vigorously in various supermarket. Furthermore, with increasing shopping via the Internet, more companies strengthen the advertising through internet like web news pages and entertaining webs such as video

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websites, to attract undergraduates and the white collar, who are gathering information more from internet than hard copies or even TVs. In developed cities such as Guangzhou, Shenzhen, Xiamen in South China, premium foreign brands have a unique advantage compared with domestic brands. This is mainly because in these cities there are more consumers with high purchasing power than in smaller cities and rural areas. Shenzhen, for example, as an international city, has a large number of expatriates, white-collar workers and other people with high disposable incomes. They pursue fashion, taste and a high quality of life. Therefore, premium products have more significant potential. Also, traditional brands such as Haday still share most of the traditional condiments category due to consumer awareness and traditional positioning. In July 2011 global food and beverage giant Nestlé announced acquisition of 60% stock equity of Dongguan Hsu-Fu-Chi Food Co Ltd. As a national confectionery leader based in South China, Hsu-Fu-Chi has a dominant position in South China, especially in Guangdong province. The acquisition will enhance Nestlé’s competitiveness in South China, especially in second- and third-tier cities in South China such as Dongguan. The strong capital support and experienced marketing team of Nestlé will also benefit Hsu-Fu-Chi to have a better performance in the national market over the forecast period. Prospects Over the forecast period an increasing number of brands will target the high-end segment, either by launching new products or upgrading existed lines. This is not only an opportunity for foreign brands but also for domestic offerings that have already accumulated years of experience and a good reputation. They are also ready to make inroads into the high-end segment. Biostime, Bright and Wahaha have all announced entry to this segment. In line with rising awareness of health and wellness among consumers, food additives are expected to be reduced, while healthy and natural food products will be buoyant over the forecast period. This is a general prospect in most regions. However, it will be most obvious in South China, as consumers in this region have higher levels of disposable income, as well as greater awareness of personal well-being. Hence, they are more likely to switch to healthier foods due to health concerns. Baby food will continue its strong growth over the forecast period in South China. With regional culture and tradition, more families in South China – especially in Guangdong – have more than one child, although this does not comply with the One Child policy in China. This tradition is not expected to change over the forecast period, which will lead to a continuous high birth rate in South China. As a result, demand for baby food will remain high and contribute to the rapid growth of baby food over the forecast period. Continuous food safety issues represent a threat to the packaged food industry. Strengthening control of food quality to ensure its safety is the duty of food companies. Manufacturers are expected to take some action to regain consumer trust. The trend suggests that price competition might be lower in coming years. An increasing number of companies will begin to notice quality, and brand image will play a more important role than price in coming years. This is a sign of a more mature market. It is also connected with more mature consumer awareness. Instead, companies prefer to implement other actions, for example advertising campaigns, charity activities and cooperating with authorities. Sheng Yuan supported the reconstruction of the earthquake-stricken Gansu province through donations. It invested RMB1.8 million in supporting nutrition research projects for children in Gansu province who suffered the earthquake in year 2010 initiated by National Working Committee on Children and Women (NWCCW). In 2010, Shuang Yuan relieved RMB4.2 million funds to re-educate families in earthquake zone to implement full coverage of child rescue. Authorities

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also adopt some methods to help domestic brands. China Dairy Association launched a “Monthly Sampling” programme to regulate the environment and rebuild the confidence.

Southwest China
Trends In South-west China food safety was of increasing concern in 2011. On 15 March 2011 Shineway Group was broadcasted using “lean meat powder”, which Shineway Group was reported to fed pigs chemical production to raise pigs much faster than normal. The pork was used to make canned meat and sausages, so the lean meat powder will do harm to personal health. The fact aroused customer attention to food safety, and they refused to buy Shineway products as a result. Customers in South-west China, especially developed cities, became more careful when making food choices, with many major brands no longer being considered trustworthy. To protect customer health, the government sought to control food safety. Health-orientated products are increasingly popular in South-west China, but only in some large cities such as Chengdu, Chongqing and Kunming. Thanks to increased consumer awareness of healthy eating in South-west China, consumers in large cities gradually favour healthy food products such as wholegrain crackers, vegetable biscuits, low-salt sauces, etc. This is particularly true of females who want to maintain a slim appearance. However, in small cities and rural areas, constrained by low disposable income and low awareness of the importance of healthy eating, consumers are still willing to choose standard packaged food products, which are cheaper and thus more affordable to them. Consumers in South-west China are willing to spend time on searching and eating delicious food and Chengdu has multiple national famous snacks in China. Therefore, taste is crucial for packaged food sales in South-west China. Spicy foods with a heavy taste are preferred, and consumers’ leisure lifestyles determine their preference for snacks. Thus, convenient packaged food products served with spicy sauce such as spicy beef jerky are popular in South-west China. Baby food was the fastest growing packaged food category in South-west China in 2011. Consumers are recovering from the melamine scandal from 2008, and thanks to the Chinese Government’s stricter controls on private imports of milk powder, consumption of baby food remains strong, especially mid- to high-end products. In large cities such as Chengdu, imported brands represented by Dumex and Wyeth witnessed rapid growth due to their high brand reputation. Furthermore, due to China’s one-child policy, most families in cities have no hesitation in spending money on their children. Moreover, 2010 was the “Tiger Year” in Chinese culture; Chinese families prefer to have babies born in this year because the tiger represents health and strength. As a result of the high birth rate in 2010, demand for baby food was stimulated in 2011, which also contributed to its strong performance. Prices of packaged food continued rising in 2011 in South-west China. This was underpinned by significant raw materials’ cost increases. Basic raw materials such as sugar, flour and pork all saw tremendous increases in 2011. This was in addition to soaring oil prices in South-west China, along with labour and transportation costs, which also contributed to packaged food price rises. Chained convenience stores becomes an increasing number of retail channels in South-west China, especially after the convenient store Seven-Eleven opened in Chengdu. The chained convenience store is particularly popular among young people with purchasing ability. They enjoy the varied products on offer and care little about price. The 24-hour service is also appealing, along with the convenient locations.

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Competitive landscape Ting Hsin was the largest player in South-west China in packaged food in 2011. Although dairy companies Yili and Mengniu have widespread coverage in South-west China, home delivery of fresh milk in South-west China threatens diaries offering packaged milk. For Ting Hsin high brand awareness and a wide product portfolio, including instant noodles, biscuits and diary products, reduces its risk and ensures its leadership in South-west China. The local meat processing manufacturer Chengdu Xiwang Food Co Ltd, under the control of New Hope Group, saw an outstanding performance in 2010. As a local company in Southwest China, Xiwang took advantage of local consumers’ high recognition of its Meihao brand, and it launched premium processed meat brand Yak to break through national brands’ domination of the low- to mid-price segments of the processed meat category. Furthermore, witnessing huge potential in children’s products the company also launched Xiyangyang Sausage Ham in 2011, using popular cartoon images to attract children. Another local company Chongqing Guangda Group, a famous regional dairy company, also posted a good performance in dairy products in South-west China. Its core brand, Cow Dream Works led in fresh/pasteurised milk in Chongqing. It benefits from its local raw milk base. It has sufficient and high-quality raw milk supply, and mainly focuses on fresh/pasteurised milk and high-end yoghurt production. In September 2010 Chongqing Guangda Group introduced its first soy drink – Cow Dream Works Soy Drinks – which was first listed in Chongqing. This product mainly targets family breakfast consumption, with 950ml Tetra-Pak packaging and a unit price of RMB9.80. It is mainly sold in supermarkets. Innovative flavours and appearance designs remain key competitive strategies in ice cream, represented by Inner Mongolia Mengniu Group, Inner Mongolia Yili Industrial Group Co Ltd and Nestlé (China) Ltd. Over 2010-2011 Yili Group innovatively introduced “chocolate and fruit” flavour, and launched a variety of packaging formats, such as cups and boxes for its core brand, Yili Qiaolezi, which greatly promoted sales. In 2011, Mengniu launched New Mengniu Suibian with a unique triangular shape and taste of chocolate, almonds and cheese. Nestlé (China) Ltd introduced new product Cui Cui Sha, in the flavours of chocolate and vanilla. On 15 March 2011 CCTV broadcast that Shineway (Jiyuan) Food Co Ltd, one of Shineway’s meat processing branches, purchased pigs fed with “lean meat powder” which is harmful to human health. Shineway Group faced a great loss as a result. Shineway products lost customer confidence, and Shineway Group did not implement an effective PR strategy after the event. Meanwhile manufacturers of other brands took the opportunity to implement mass marketing campaigns to expand share, causing great pressure for Shineway. In large cities such as Chengdu, foreign and imported brands led baby milk powder in 2011, represented by Enfamil of Mead Johnson (Guangzhou) Ltd, Dumex of International Nutrition Co Ltd and Wyeth of Shanghai Wyeth Nutritional Co Ltd. Due to the melamine incident in 2009 and the Shengyuan Sexual Precocity incident in 2010, which infants are leaded to sexual precocity after taking Shengyuan’s infant formula. Domestic brands faced a huge confidence crisis, which led to a significant share held by imported brands. However, in small cities and rural areas, due to lower purchasing power and lower health awareness, domestic brands with lower average unit prices still lead baby milk powder, represented by Yili, Feihe, Shengyuan and Yashili. Prospects The health and wellness trend is likely to be one of the main influences of new product developments in packaged food categories over the forecast period. Nowadays, benefiting from improved quality of life, consumers’ health consciousness is rising, which has led to

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manufacturers developing new products that cater to consumers’ consumption ideas. For instance, low-sugar and low-fat baked goods, organic milk, dairy products fortified with various vitamins, and so on. In South-west China, packaging style will become more important in marketing. Firstly, customers in South-west China enjoy leisure time, and focus more on product appearance. Secondly, although working people like to save time when eating, they do not simply seek convenience, but also an elegant appearance. Thirdly, product similarity is quite common in the market, either in taste or price. Therefore, special and pretty package style can attract more attention. Baby food is expected to remain the most dynamic category in South-west China, followed by chilled processed food. Competition in mid- and high-end infant milk formula will further intensify, and milk formula for pregnant women will become the new focus. According to the National Bureau of Statistics, the neonatal peak period will last from 2010 through to 2015, which means that demand for both infant and pregnant women milk formula will remain strong over this period. As a result more companies will offer products for pregnant women. For example, Ausnutria Dairy (Hunan) Co Ltd launched Ailida pregnant women milk formula in 2011. Rising costs will pressurise the packaged food industry in coming years, in turn pressurising prices. This will affect customers’ purchasing habits, which mean, consumers may no longer remain loyal to a single brand, but begin to choose products based on price, thereby intensifying competition. Manufacturers are likely to pay more attention to food safety in coming years. They are expected to be more careful in the selection of raw materials. More tests will also be conducted prior to products’ launch to ensure food safety. Moreover, manufacturers will aim to convey more concepts regarding food safety in advertisements to attract wary consumers.

FOODSERVICE – KEY TRENDS AND DEVELOPMENTS Headlines
Foodservice volume growth generally higher than retail volume growth except for categories of dried food and oil and fats Food safety continues to be the most important factor impacting foodservice sales in 2011 Horseradish sauces see strongest foodservice volume growth of 21% in 2011 Growing only 1%, powder milk and plain biscuits see weakest performance in terms of foodservice volume Foodservice environment still highly fragmented, while leading players gain shares against smaller companies Higher foodservice volume growth over retail volume growth still expected in most packaged food categories

Trends
Several food safety problems occurred in China over 2010/2011 such as the plasticizer scandal and the hot pot soup problem which hot pot restaurants sometimes use recycled soup base. These kinds of scandals have negative impact on foodservice industry. As a result, the Chinese Government and foodservice associations are increasing controls on food safety. For example, Sichuan Hot Pot Association promised to regulate Sichuan hot pot restaurants, forbidding the reuse of oils. Stricter controls on food safety is good news for

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leading packaged food manufacturers, who have a higher reputation regarding food safety and quality. To supply their products to more foodservice outlets, packaged food manufacturers are paying greater attention to developing the foodservice channel through actions such as developing foodservice recipes, value-for-money packaging for restaurants, etc. Except for dried food and oil and fats, other packaged food categories all witnessed faster foodservice volume growth over retail volume growth. The slower growth of dried food and oils and fats categories in foodservice channels is because the unpacked rice and bucket packed oil products which are not included by Euromonitor definition are mainly used in foodservice channels. While for other categories, thanks to the development of chained foodservice industry, a higher foodservice sales volume is witnessed over retail sales. For further expansion, more kitchen centres are built by foodservice chains, where packaged sauce packs, packaged frozen and chilled meat and poultry, etc are supplied to chained outlets, in order to supply consistence flavoured dishes to clients. Hence, the foodservice channel is growing faster than the retail channel in the packaged food industry. Due to the increasing penetration of Japanese restaurants, especially sashimi buffet restaurants in China, horseradish sauce, which is mainly wasabi sauce, saw the strongest growth in 2011. Japanese restaurants are spreading rapidly in first- and second-tier cities such as Beijing and Shanghai, and as a result wasabi sauce is seeing increased demand. Getting to know wasabi sauce from Japanese restaurants, Chinese people are innovatively use wasabi to cook Chinese dishes such as broccoli with wasabi sauce, which further stimulates sales to foodservice channels. Powder milk and plain biscuits both saw 1% growth, which is the slowest foodservice volume growth among all packaged food categories. Considering food safety and nutrition, fresh milk is taking the place of powder milk, especially following the melamine scandal in 2008. For plain biscuits, the slow growth is due to foodservice operators’ preference for fresh-baked cookies instead of plain biscuits to have their unique tastes.

Competitive Landscape
With brand awareness and product presentation not as important as for retail products, the foodservice packaged food market is even more fragmented than the retail market. However, Chinese consumers distinguish food by its ingredients. The foodservice outlets that use branded and reputable products as raw materials and ingredients in their dishes will be preferred. For foodservice operators cost is still a major consideration. As a result, brands with high awareness and reputation but offered at acceptable prices are preferred by foodservice operators, such as the sauce brand Haday and meat brand Yurun, which all recorded outstanding performances over 2010/2011. Nestlé’s strategy to develop foodservice channels is to think like foodservice operators and provide more expertise sauces packs for special dishes. Packaged food manufacturers are no longer just supply single sauces to foodservice operators, but are also involved in recipe innovation and creativity. Following Nestlé’s practice, more local foodservice manufacturers, especially sauce manufacturers, are developing towards mixed sauce packs suppliers, which made them unique and irreplaceable. Generally, domestic packaged products are more used instead of multinationals’ offerings in foodservice channels due to the advantage in pricing, which is the most important consideration from foodservice operators. However, for the multinational fast food chains to maintain consistent quality and flavours in their global chains, they tend to choose the same multinational brand they also use in different countries. In 2011, under conditions of soaring

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costs, foodservice operators are looking for value-for-money products supplied by reputable domestic manufacturers. In July 2010, Heinz announced its acquisition of soy-based sauce brand Master. As a major ketchup supplier to fast food chains, Heinz is an expert in supplying foodservice channels. As a result, its acquisition of the brand Master is also expected to supply chained foodservice outlets, which are mainly expected to be Asian fast food chains.

Prospects
The food safety scandals of 2011 were all about ingredients, increasing Chinese consumers’ attention to food ingredients. To convince consumers of food safety, foodservice chains are likely to list some of their major materials’ and ingredients’ suppliers to prove their high quality. If foodservice operators plan to make their suppliers public, it is expected to benefit named packaged food suppliers. Affected by the booming health trend, light flavoured dishes such as Cantonese dishes are likely to be more popular in China over the forecast period. This will negatively affect the growth of sauces in foodservice channels. Foodservice sales of chilled meat are expected to become stronger, along with the development of sandwich and burger chains, which use large amount of chilled meat. With higher requirement on fast service and consistence quality and flavour, more foodservice operators are going to use more packaged food ingredients such as small packaged rice, sauces packs, packaged meat, etc to take place of fresh food, especially in fast food restaurants. It is going to stimulate the sales growth of packaged food in foodservice channels in the forecast period.

Category Data
Table 1 Foodservice Sales of Packaged Food by Category: Volume 2006-2011 2006 Baby Food (Not calculable) Bakery ('000 tonnes) Canned/Preserved Food ('000 tonnes) Chilled Processed Food ('000 tonnes) Confectionery ('000 tonnes) Dairy (Not calculable) Dried Processed Food ('000 tonnes) Frozen Processed Food ('000 tonnes) Ice Cream (million litres) Meal Replacement ('000 tonnes) Noodles ('000 tonnes) Oils and Fats ('000 tonnes) Pasta ('000 tonnes) Ready Meals ('000 tonnes) 179.8 437.4 164.0 0.9 4,478.5 678.7 1.4 229.3 2,273.3 2.1 61.7 2007 195.0 467.0 175.6 1.0 4,725.4 769.2 1.5 246.7 2,432.4 2.2 67.5 2008 212.1 498.6 191.4 1.0 5,003.1 886.3 1.6 264.6 2,578.4 2.4 72.9 2009 229.3 528.6 207.7 1.1 5,280.7 978.8 1.7 281.5 2,681.7 2.5 77.2 2010 249.7 564.9 228.4 1.1 5,598.7 1,089.4 1.8 299.6 2,829.4 2.7 82.6 2011 271.9 605.2 253.6 1.2 5,951.1 1,219.9 1.9 318.1 2,993.8 2.8 88.0

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Sauces, Dressings and Condiments ('000 tonnes) Snack Bars ('000 tonnes) Soup ('000 tonnes) Spreads ('000 tonnes) Sweet and Savoury Snacks ('000 tonnes) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions ('000 tonnes) Packaged Food (Not calculable)
Source:

2,876.3 0.1 12.5 5.6 4,157.1 -

3,113.0 0.1 13.8 6.0 4,525.6 -

3,344.3 0.1 15.0 6.5 4,921.3 -

3,584.5 0.2 16.2 6.9 5,300.4 -

3,837.4 0.2 17.4 7.5 5,721.0 -

4,095.6 0.2 18.6 8.1 6,175.2 -

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 2

Foodservice Sales of Packaged Food by Category: % Volume Growth 20062011 2010/11 2006-11 CAGR 8.6 6.7 9.1 5.4 5.9 12.4 7.1 6.8 5.7 6.5 7.4 7.3 13.5 8.2 7.9 8.2 2006/11 TOTAL 51.2 38.3 54.7 30.2 32.9 79.7 40.8 38.8 31.7 37.0 42.6 42.4 88.3 48.5 46.5 48.5 -

Baby Food (Not calculable) Bakery (% volume growth) Canned/Preserved Food (% volume growth) Chilled Processed Food (% volume growth) Confectionery (% volume growth) Dairy (Not calculable) Dried Processed Food (% volume growth) Frozen Processed Food (% volume growth) Ice Cream (% volume growth) Meal Replacement (% volume growth) Noodles (% volume growth) Oils and Fats (% volume growth) Pasta (% volume growth) Ready Meals (% volume growth) Sauces, Dressings and Condiments (% volume growth) Snack Bars (% volume growth) Soup (% volume growth) Spreads (% volume growth) Sweet and Savoury Snacks (% volume growth) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions (% volume growth) Packaged Food (Not calculable)
Source:

8.9 7.1 11.0 5.0 6.3 12.0 6.3 6.2 5.8 6.0 6.5 6.7 14.0 7.0 8.5 7.9 -

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 3

Forecast Foodservice Sales of Packaged Food by Category: Volume 20112016 2011 2012 2013 2014 2015 2016

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Baby Food (Not calculable) Bakery ('000 tonnes) Canned/Preserved Food ('000 tonnes) Chilled Processed Food ('000 tonnes) Confectionery ('000 tonnes) Dairy (Not calculable) Dried Processed Food ('000 tonnes) Frozen Processed Food ('000 tonnes) Ice Cream (million litres) Meal Replacement ('000 tonnes) Noodles ('000 tonnes) Oils and Fats ('000 tonnes) Pasta ('000 tonnes) Ready Meals ('000 tonnes) Sauces, Dressings and Condiments ('000 tonnes) Snack Bars ('000 tonnes) Soup ('000 tonnes) Spreads ('000 tonnes) Sweet and Savoury Snacks ('000 tonnes) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions ('000 tonnes) Packaged Food (Not calculable)
Source:

271.9 605.2 253.6 1.2 5,951.1 1,219.9 1.9 318.1 2,993.8 2.8 88.0 4,095.6 0.2 18.6 8.1 6,175.2 -

295.7 650.3 282.7 1.2 6,346.6 1,360.2 2.0 336.2 3,143.7 3.0 93.3 4,328.0 0.2 19.8 8.8 6,622.1 -

322.2 700.7 316.6 1.3 6,784.6 1,510.6 2.2 353.5 3,269.8 3.2 98.6 4,587.5 0.3 21.1 9.5 7,116.4 -

352.1 756.8 356.2 1.3 7,270.5 1,673.2 2.3 370.0 3,368.2 3.5 103.9 4,845.8 0.3 22.4 10.3 7,633.2 -

385.7 819.0 402.5 1.3 7,803.5 1,848.7 2.4 385.4 3,452.7 3.8 109.2 5,101.3 0.4 23.5 11.1 8,172.8 -

422.5 889.5 458.9 1.4 8,411.0 2,040.9 2.5 399.5 3,532.5 4.1 114.5 5,348.5 0.4 24.6 11.9 8,739.1 -

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 4

Forecast Foodservice Sales of Packaged Food by Category: % Volume Growth 2011-2016 2015/16 2011-16 CAGR 9.2 8.0 12.6 2.7 7.2 10.8 5.6 4.7 3.4 7.5 2011/16 TOTAL 55.4 47.0 81.0 14.2 41.3 67.3 31.1 25.6 18.0 43.5

Baby Food (Not calculable) Bakery (% volume growth) Canned/Preserved Food (% volume growth) Chilled Processed Food (% volume growth) Confectionery (% volume growth) Dairy (Not calculable) Dried Processed Food (% volume growth) Frozen Processed Food (% volume growth) Ice Cream (% volume growth) Meal Replacement (% volume growth) Noodles (% volume growth) Oils and Fats (% volume growth) Pasta (% volume growth)

9.5 8.6 14.0 2.3 7.8 10.4 4.8 3.7 2.3 8.5

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Ready Meals (% volume growth) Sauces, Dressings and Condiments (% volume growth) Snack Bars (% volume growth) Soup (% volume growth) Spreads (% volume growth) Sweet and Savoury Snacks (% volume growth) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions (% volume growth) Packaged Food (Not calculable)
Source:

4.8 4.8 13.5 4.8 7.2 6.9 -

5.4 5.5 14.6 5.8 8.0 7.2 -

30.1 30.6 97.6 32.3 46.6 41.5 -

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

IMPULSE AND INDULGENCE PRODUCTS – KEY TRENDS AND DEVELOPMENTS Headlines
Steady value growth at 12% in 2011, to amount to RMB289.7 billion Health trend also helps to promote sales of impulse and indulgence products in 2011 Snack bar see highest value and volume growth at 21% and 14% respectively Unit prices on the rise in 2011 Want Want Group leads highly fragmented environment in 2010 with value share of 4% Forecast period constant value CAGR expected to reach 6%

Trends
Impulse and indulgence products do not seem to be highly affected by the global recession, while Chinese consumers are unwilling to cut their spending by a great extent on pampering products. This category registered an overall steady current value growth at 12% in 2011, even though they are not daily necessities. With the growing disposable income and the climbing consumer needs regarding pampering, impulse and indulgence products enjoyed a healthy current value CAGR of 9% over the review period, although most products are not perceived as very healthy if consumed too much. To change this perception, manufacturers made efforts to develop health-oriented impulse and indulgence products over the review period, introducing many new better-for-you offerings. New non-fried snacks represented by brands such as Pub Small Crisp and Qia Qia Kazhicui were a great success in 2010. In this sense, the prevailing health trend in the packaged food industry also helps promote sales of impulse and indulgence products. Meanwhile, manufacturers are also resorting to some naturally healthy impulse and indulgence products to woo health-conscious consumers. Dark chocolate, for example, saw robust growth in 2011 thanks to efforts by key players in 2010 and 2011. Such top players as Mars and Ferrero launched new dark chocolate products and invested in advertising over the review period. 2011 witnessed more launches of new dark chocolate products with even higher cocoa content, such as Dove Dark Chocolate with 66% cocoa content, and Meiji Extra Dark Chocolate with 56% cocoa content.

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Snack bar saw the most robust value and volume growth in China in 2011, at 21% and 14% respectively, thanks to its small base. Energy and nutrition bar, with its wider acceptance and availability, has gradually become popular for more consumer groups, not just for athletes. Besides, its smaller size and easy to carry nature have achieved higher acceptance from consumers. Confectionery, as the traditional impulse and indulgence product in China, boasted the largest value sales in 2011, amounting to RMB72.4 billion. Among all confectionery products, sugar confectionery may be the most conventional of impulse and indulgence products, with a much longer history of presence and sold at a much more affordable price than chocolate confectionery and gum. However, due to a lack of new product launches and consumer interest in other new impulse and indulgence product types, ice cream underperforms the whole category, registering the slowest value growth in 2011 at 8%. To cater to the rising need of on-the-go consumption, bite-size or single-portion impulse and indulgence products are increasingly popular. Single-portion dairy ice cream and stick impulse ice cream products still represent the most dynamic category in the ice cream niche, while bite-sized biscuits such as Haoduoyu and Moguli from Orion (China) Co Ltd are well-received by Chinese consumers. Bite-sized Oreo launched in 2011 by Kraft Foods China Inc is also a great hit. Unit price maintained an upward trend in 2011, mainly due to of rising cost pressures. In addition to raw materials’ price hikes, such as sugar and flour, labour and transportation costs are also rising.

Competitive Landscape
Want Want Group, with its signature products, varieties of Want Want-branded rice crackers, led the highly fragmented impulse and indulgence products category in China at the end of the review period with a value share of 4% in 2010, up slightly on 2009. Want Want Group has successfully executed its marketing strategy of sending Want Want products to rural areas since 2009, covering 70-75% of the total 2,000 county-level markets by the end of that year. Meanwhile, its rich product portfolio of rice crackers can cater to various consumers’ needs. However, Want Want Group is facing increasingly fierce competition from major players such as Guangdong Strong and PepsiCo in urban areas due to a lack of new product launches. Mars (China) Co Ltd experienced great share gain in 2010 over 2009, up by almost one percentage point. Ranked eighth in impulse and indulgence products in 2010 in terms of value sales, Mars (China) impresses Chinese consumers with a series of quality confectionery products, such as Dove, M&M’s and Skittles. The company wowed locals in 2010, especially white-collar workers, with its creative marketing of Dove-branded chocolate products via a popular movie named Go Lala Go! and a stage play – Heartfelt Wishes From A Piece of Chocolate. This innovative marketing approach further enhanced Dove’s product awareness among consumers and greatly boosted its sales in the same year. To address rising health concerns among consumers, manufacturers focusing on healthoriented impulse and indulgence products are more likely to achieve share gains. Orion (China) Co Ltd witnesses the second-largest share gain in 2010 over 2009 among the top 10 players, up by 0.3 percentage points. After the successful launch of Orion Shuyuan non-fried potato chips in 2009, the company introduced chips applying healthier camellia oil instead of palm oil in 2010, fortified with green tea powder. These healthier versions of potato chips are favoured by consumers seeking personal well-being. 2011 witnessed the acquisition of a 60% stake of Singapore-listed Hsu-Fu-Chi, the number one sugar confectionery player in China, by Nestlé SA in July. With Hsu-Fu-Chi’s presence in

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the snacks environment with its cup jelly products, Nestlé is now involved in competition following the acquisition, posing a potential threat to other players.

Prospects
Impulse and indulgence products are expected to experience a steady constant value CAGR of 6% over the forecast period. Despite a somewhat unhealthy image, impulse and indulgence products are likely to continue to demonstrate stable growth, out of the growing need for consumers to treat themselves amid the accelerating pace of life and mounting pressures from both home and work. Impulse and indulgence products are to most consumers an affordable and easily accessible luxury. However, the forecast performance of impulse and indulgence products is likely to be less dynamic that over the review period in CAGR value terms. The overall image of being less healthy may be the major reason for consumers’ reducing expenditure on impulse and indulgence products, despite manufacturers’ efforts in launching new health-oriented offerings. After all, overeating of such impulse and indulgence products as ice cream and sugar confectionery may bring about some health problems, such as obesity. With the rising consumer sophistication and the growing health awareness, consumers may develop a better lifestyle over the forecast period, trying to stay away from impulse and indulgence product as much as possible. Chocolate confectionery is likely to enjoy a constant value CAGR of 6% over the forecast period. This is mainly because chocolate confectionery, in addition to pampering, also makes a perfect gift on various occasions, such as Valentine’s Day, Children’s Day and Chinese Spring Festival. Unit price will continue its upward trend over the forecast period. In addition to the cost pressure consumers’ trading up to premium products, particularly in chocolate confectionery, is also likely to push up unit prices. New product launches over the forecast period are expected to centred around two themes: flavour extension and health. A wider variety of flavours are likely to be added to the existing product portfolio to spice up the market. Meanwhile, new launches of better-for-you and naturally healthy impulse and indulgence products are estimated to make more frequent debuts to attract consumers with rising health awareness.

Category Data
Table 5 Sales of Impulse and Indulgence Products by Category: Volume 2006-2011 2006 Confectionery ('000 tonnes) Pastries ('000 tonnes) Cakes ('000 tonnes) Biscuits ('000 tonnes) Ice Cream (million litres) Sweet and Savoury Snacks ('000 tonnes) Snack Bars ('000 tonnes) Impulse and Indulgence Products (Not calculable) 1,119.3 2,643.7 831.1 1,810.9 2,475.5 1,238.5 2007 1,194.7 2,853.0 895.5 2,069.1 2,627.6 1,293.0 0.1 2008 1,248.4 3,041.0 951.8 2,251.1 2,761.2 1,351.4 0.1 2009 1,306.0 3,205.8 997.1 2,416.9 2,721.6 1,399.6 0.1 2010 1,361.4 3,432.2 1,051.3 2,578.3 2,846.9 1,495.2 0.2 2011 1,417.8 3,724.6 1,123.4 2,743.2 2,964.1 1,597.2 0.2 -

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Source:

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 6 RMB million

Sales of Impulse and Indulgence Products by Category: Value 2006-2011

2006 Confectionery Pastries Cakes Biscuits Ice Cream Sweet and Savoury Snacks Snack Bars Impulse and Indulgence Products
Source:

2007 54,381.2 25,085.1 28,287.2 24,943.2 24,857.2 50,403.3 13.3 207,970.5

2008 57,817.4 27,229.9 30,377.4 28,225.6 27,041.1 54,211.0 15.4 224,917.8

2009 60,825.5 28,780.8 31,808.8 30,642.6 26,628.7 56,023.8 17.9 234,728.0

2010 66,165.0 32,709.0 35,335.1 34,070.7 28,403.9 62,695.4 21.5 259,400.4

2011 72,362.4 37,860.1 40,305.8 38,210.5 30,675.3 70,284.4 26.0 289,724.6

50,420.5 23,459.2 26,621.1 22,118.7 22,690.8 47,392.0 192,702.3

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 7

Sales of Impulse and Indulgence Products by Category: % Volume Growth 2006-2011

% volume growth 2010/11 Confectionery Pastries Cakes Biscuits Ice Cream Sweet and Savoury Snacks Snack Bars Impulse and Indulgence Products
Source:

2006-11 CAGR 4.8 7.1 6.2 8.7 3.7 5.2 -

2006/11 TOTAL 26.7 40.9 35.2 51.5 19.7 29.0 -

4.1 8.5 6.9 6.4 4.1 6.8 14.1 -

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 8

Sales of Impulse and Indulgence Products by Category: % Value Growth 2006-2011

% current value growth 2010/11 Confectionery Pastries Cakes Biscuits Ice Cream Sweet and Savoury Snacks Snack Bars Impulse and Indulgence Products
Source:

2006-11 CAGR 7.5 10.0 8.6 11.6 6.2 8.2 8.5

2006/11 TOTAL 43.5 61.4 51.4 72.8 35.2 48.3 50.3

9.4 15.7 14.1 12.2 8.0 12.1 21.3 11.7

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Table 9 % retail value rsp Company

Company Shares of Impulse and Indulgence Products 2006-2010

2006 2.8 2.5 1.5 1.7 1.6 0.9 1.3

2007 3.2 2.6 1.5 2.0 1.8 1.0 1.3

2008 3.9 2.6 1.6 2.0 2.0 1.7 1.6

2009 3.3 2.7 1.9 2.1 1.9 1.9 1.6

2010 3.6 2.6 2.0 2.0 1.9 1.8 1.7

Want Want Group Wrigley Confectionery (China) Ltd Guangdong Strong (Group) Co Ltd Dongguan Hsu-Fu-Chi Food Co Ltd Inner Mongolia Yili Industrial Group Co Ltd Kraft Foods China Inc Inner Mongolia Mengniu Dairy Industry (Group) Co Ltd Mars (China) Co Ltd Orion (China) Co Ltd Hefei Huatai Food Co Ltd Perfetti Van Melle Confectionery (China) Co Ltd Shanghai Liwayway Food Ind Ltd PepsiCo China Ltd Wall's (China) Co Ltd Nestlé (China) Ltd Fujian Qinqin Holding Co Ltd Ting Hsin International Group Fujian Yake Food Co Ltd Shanghai Tenwow Food Co Ltd Dongguan Huajia Food Co Ltd Lotte China Foods Co Ltd Shanghai Golden Monkey Food Co Fujian Dali Food Co Ltd Labixiaoxin ( Fujian) Foods Industrial Co Ltd Ferrero China Ltd COFCO Le Conté Food (Shenzhen) Co Ltd Cadbury (China) Food Co Kellogg (Qingdao) Food Co Ltd Zhejiang Wu Feng Frozen Food Co Ltd Guan Sheng Yuan Group Co Ltd Shanghai Danone Biscuits Foods Co Ltd Shandong Navigable Food Co Ltd Effem Foods (Beijing) Co Ltd

0.7 0.8 1.0

1.2 0.8 1.1 0.9

1.4 0.9 1.1 0.9

1.5 1.1 1.3 1.0

1.6 1.4 1.4 1.0

1.0 0.8 0.8 0.6 0.5 0.6 0.4 0.4 0.4 0.9 0.3 0.3 0.3 0.2 0.3 0.3 0.2 0.2 0.9 0.2 1.2

1.0 0.9 0.8 0.6 0.5 0.5 0.4 0.4 0.4 0.8 0.3 0.4 0.3 0.3 0.3 0.3 0.2 0.2 0.9 0.3 -

1.0 0.9 0.8 0.6 0.5 0.6 0.4 0.4 0.4 0.6 0.4 0.4 0.3 0.3 0.3 0.3 0.2 0.2 0.2 -

1.0 0.8 0.8 0.7 0.5 0.6 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.2 0.2 0.2 -

0.9 0.9 0.8 0.7 0.6 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.2 0.2 0.2 -

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Artisanal Private Label Generics Others Total
Source:

19.9 1.1 0.5 52.7 100.0

19.7 1.1 0.5 51.4 100.0

19.8 1.1 0.5 49.9 100.0

20.0 1.1 0.5 49.3 100.0

19.1 1.1 0.4 49.4 100.0

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Table 10 % retail value rsp Brand Want Want Hsu-Fu-Chi Yili Strong Mengniu

Brand Shares of Impulse and Indulgence Products 2007-2010

Company Want Want Group Dongguan Hsu-Fu-Chi Food Co Ltd Inner Mongolia Yili Industrial Group Co Ltd Guangdong Strong (Group) Co Ltd Inner Mongolia Mengniu Dairy Industry (Group) Co Ltd Orion (China) Co Ltd Hefei Huatai Food Co Ltd Mars (China) Co Ltd Shanghai Liwayway Food Ind Ltd Wrigley Confectionery (China) Ltd Wall's (China) Co Ltd Wrigley Confectionery (China) Ltd PepsiCo China Ltd Kraft Foods China Inc Perfetti Van Melle Confectionery (China) Co Ltd Fujian Qinqin Holding Co Ltd Ting Hsin International Group Shanghai Tenwow Food Co Ltd Dongguan Huajia Food Co Ltd Fujian Yake Food Co Ltd Kraft Foods China Inc Labixiaoxin ( Fujian) Foods Industrial Co Ltd Nestlé (China) Ltd Shanghai Golden Monkey Food Co Wrigley Confectionery (China) Ltd Want Want Group Guangdong Strong (Group) Co Ltd

2007 2.6 2.0 1.8 1.3 1.3

2008 3.2 2.0 2.0 1.4 1.6

2009 2.7 2.1 1.9 1.6 1.6

2010 3.0 2.0 1.9 1.7 1.7

Orion Qia Qia Dove Oishi Extra Wall's Doublemint Lay's Oreo Alpenliebe

0.8 1.1 1.0 1.0 0.9 0.8 0.6 0.8 0.5 0.6

0.9 1.1 1.1 1.0 0.9 0.8 0.7 0.8 0.6 0.6

1.1 1.3 1.3 1.0 0.9 0.8 0.8 0.7 0.7 0.7

1.4 1.4 1.3 0.9 0.9 0.8 0.8 0.8 0.7 0.6

Qinqin Master Kong Tenwow Garden Yake Pacific Generics Labixiaoxin Nestlé Wafer Golden Monkey Juicy Fruit Wang Zai QQ Strong Sweet Hour

0.5 0.5 0.4 0.4 0.3 0.4 0.5 0.3 0.3 0.3 0.4 0.4 0.1

0.5 0.6 0.4 0.4 0.4 0.4 0.5 0.3 0.3 0.3 0.4 0.4 0.2

0.5 0.6 0.5 0.4 0.4 0.4 0.5 0.4 0.3 0.3 0.3 0.3 0.2

0.6 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3

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Ferrero Rocher Xylitol Danone Milk Crispy TUC Artisanal Private label Others Total
Source:

Ferrero China Ltd Lotte China Foods Co Ltd Shanghai Danone Biscuits Foods Co Ltd Shanghai Danone Biscuits Foods Co Ltd Private Label

0.2 0.4 0.3 0.3 19.7 1.1 56.0 100.0

0.2 0.3 19.8 1.1 54.8 100.0

0.2 0.2 20.0 1.1 54.1 100.0

0.2 0.2 19.1 1.1 54.1 100.0

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Table 11

Forecast Sales of Impulse and Indulgence Products by Category: Volume 2011-2016 2011 2012 1,472.7 4,009.9 1,183.3 2,916.0 3,113.6 1,702.2 0.2 2013 1,522.1 4,296.1 1,240.2 3,078.3 3,286.1 1,812.6 0.2 2014 1,564.8 4,579.8 1,293.9 3,223.8 3,476.6 1,928.2 0.2 2015 1,599.7 4,855.9 1,342.1 3,350.4 3,655.5 2,039.8 0.3 2016 1,630.2 5,110.5 1,377.5 3,464.8 3,835.5 2,148.5 0.3 -

Confectionery ('000 tonnes) Pastries ('000 tonnes) Cakes ('000 tonnes) Biscuits ('000 tonnes) Ice Cream (million litres) Sweet and Savoury Snacks ('000 tonnes) Snack Bars ('000 tonnes) Impulse and Indulgence Products (Not calculable)
Source:

1,417.8 3,724.6 1,123.4 2,743.2 2,964.1 1,597.2 0.2 -

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Table 12

Forecast Sales of Impulse and Indulgence Products by Category: Value 20112016

RMB million 2011 Confectionery Pastries Cakes Biscuits Ice Cream Sweet and Savoury Snacks Snack Bars Impulse and Indulgence Products
Source:

2012 76,017.0 41,711.0 43,633.0 41,048.9 32,364.3 75,331.6 29.4 310,135.2

2013 79,383.3 45,668.9 46,823.8 43,716.9 34,354.4 80,594.6 32.6 330,574.4

2014 82,380.3 49,723.2 49,734.4 46,155.8 36,669.8 86,050.8 35.9 350,750.2

2015 84,952.1 53,781.7 52,368.2 48,322.0 38,919.1 91,411.1 39.3 369,793.5

2016 87,302.2 57,648.1 54,441.5 50,292.3 41,203.5 96,709.4 42.9 387,639.9

72,362.4 37,860.1 40,305.8 38,210.5 30,675.3 70,284.4 26.0 289,724.6

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Table 13

Forecast Sales of Impulse and Indulgence Products by Category: % Volume Growth 2011-2016

% volume growth

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2015/16 Confectionery Pastries Cakes Biscuits Ice Cream Sweet and Savoury Snacks Snack Bars Impulse and Indulgence Products
Source:

2011-16 CAGR 2.8 6.5 4.2 4.8 5.3 6.1 9.6 -

2011/16 TOTAL 15.0 37.2 22.6 26.3 29.4 34.5 58.5 -

1.9 5.2 2.6 3.4 4.9 5.3 8.5 -

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Table 14

Forecast Sales of Impulse and Indulgence Products by Category: % Value Growth 2011-2016

% constant value growth 2011-16 CAGR Confectionery Pastries Cakes Biscuits Ice Cream Sweet and Savoury Snacks Snack Bars Impulse and Indulgence Products
Source:

2011/16 TOTAL 20.6 52.3 35.1 31.6 34.3 37.6 64.9 33.8

3.8 8.8 6.2 5.6 6.1 6.6 10.5 6.0

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NUTRITION/STAPLES – KEY TRENDS AND DEVELOPMENTS Headlines
Nutrition/staples witnesses over 14% retail current value growth to reach RMB465 billion Greater public concerns regarding health and wellness food help stimulate value sales Rice posts strongest value growth of 27% in 2011 over previous year Over 2011 retail unit prices maintain upward trend Inner Mongolia Mengniu Dairy Industry (Group) ranks first with near 9% value share in 2010 Value sales of nutrition/staples are expected to rise by a CAGR of around 9% in constant value terms, reaching RMB711 billion by the end of 2016

Trends
During 2011, nutrition/staples saw a notable performance with 14% current value terms growth. Ever since the melamine scandal of late 2008, Chinese consumers have paid greater attentions to products’ health and wellness characteristics. By realising this business opportunity, key players increased investment in product research and development and new launches of green, healthy and high-quality products. On one hand these accelerated the overall development of this category, and on the other provided a great fillip to consumer confidence.

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Within all the segments in the nutrition/staples category, rice registered the most dynamic growth in 2011. Thanks to rice packaging innovation, switching from unpackaged loose rice products to small consumer packaged rice was evident. Ever since 2008 leading players such as COFCO have made great investments in product packaging innovations to meet consumers’ increasing demands. Relying on such continuous endeavours, small pack rice products drove overall sales of rice in China. Over 2011, baby food recorded the second-strongest growth within nutrition/staples. As more emphasis was placed on food safety by Chinese consumers following the tainted milk scandal, baby food has witnessed the same tendency. Great efforts made with regard to baby food quality control and improvements by manufacturers helped build Chinese parents’ confidence. Meanwhile, with more entries of international brands into China’s baby food environment, increasing competition was evident. This further stimulated the development of the local key players. Furthermore, as overall living standards and income levels have gradually improved, an increasing number of Chinese parents prefer high-end baby food products at premium prices. Over 2011, the category that underperformed nutrition/staples products as a whole was spreads. This category is relatively mature after years of development. As a result, limited product innovation brought about a low growth rate. Supermarkets/hypermarkets continued to be the major channel for sales of nutrition/staples products, thanks to the wide product range, including dairy products, baby food, oil and fats, rice, noodles and others. Meanwhile, in order to improve brand image many manufacturers tended to conduct marketing campaigns in supermarkets/hypermarkets, such as promotions, giving rise to the lower average selling price of nutrition/staples in supermarkets/hypermarkets compared with other distribution channels. Consequently, most Chinese consumers preferred to buy nutrition/staples in supermarkets/hypermarkets. Over 2010 to 2011, unit prices maintained growth. Due to continuous increases in raw materials’ costs, most manufacturers within nutrition/staples raised selling prices of their own products, which led to the overall unit price increasing.

Competitive Landscape
Over 2010, Inner Mongolia Mengniu Dairy Industry (Group) maintained its top position, enjoying a 9% value share of total nutrition/staples sales. As the top player in China’s dairy products market, Mengniu benefited from not only its rich product portfolios, including drinking milk products, yoghurt products, cheese and so on, but also its persistent efforts in terms of product line upgrading as well as innovations. Through heavy investments in product research, development and marketing campaigns, the brand image of Mengniu was further strengthened, which helped the group achieve slight share gains. During 2010, thanks to its key position in China’s dairy and baby food environment, Inner Mongolia Yili Industrial Group Co Ltd witnessed the largest increase in value share. As the only specified superior dairy products sponsor of the 2010 Shanghai World Expo, Yili took advantage of this valuable opportunity and demonstrated its advanced brand image to the world. Heavy investments in both upgrading of production techniques and market campaigns helped to stimulate the company’s performance over the review period. With more entries of multinational players into China’s nutrition/staples market, more fierce competition was evident in different territories. For example, domestic manufacturers such as Inner Mongolia Mengniu Dairy Industry (Group), Inner Mongolia Yili Industrial Group, Hangzhou Wahaha Group and Bright Dairy & Food took up leading positions in dairy category, while multinational players such as Mead Johnson (Guangzhou) Ltd registered pretty good performances in baby food.

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In November 2010 Mengniu Group became the largest shareholder of Shijiazhuang Junlebao Dairy Co Ltd, by successfully acquiring its 51% equity interest. With wide regional market recognition, Junlebao was the largest yoghurt manufacturer in Northern China. As an important milestone on Mengniu Group’s developmental path, this acquisition not only turned the former competitive relationship into a partnership, but also consolidated Mengniu’s leading position in the dairy industry. Meanwhile, for China National Cereals, Oils & Foodstuffs (COFCO), after buying a 20% equity interest of Mengniu Group in 2009, COFCO further consolidated its largest shareholder position in Mengniu Group by acquiring another 8% equity share in July 2011. Consequently, this acquisition made COFCO not only reach more agreements on a strategic business plan with Mengniu, but also realise its own development target in the dairy industry on the boarder platform provided by Mengniu.

Prospects
With greater attention being paid by Chinese consumers to the health and wellness concept, it is expected that overall retail sales of nutrition/staples will see a constant value CAGR of 9% over the forecast period. As an increasing number of manufacturers realise this business opportunity, China’s nutrition/staples environment is likely to witness more high-quality enriched product portfolios with health benefits, meeting increasing demands from Chinese consumers, especially those who are health-conscious. Over the forecast period, unit prices of nutrition/staples are likely to witness a continuous rise, mainly due to overall increasing raw materials’ costs. However, it is predicted that under the macro regulation and control on commodity prices by the Chinese Government, unit price increases within a reasonable range are acceptable to Chinese consumers, and will not have a negative impact on the performance of nutrition/staples products in coming years. Functionality and organic are considered as the two important factors for new product launches in the nutrition/staples category as a whole. For instance, in dairy, functional yoghurts featured with advanced probiotics, as well as eye protection or beauty benefits, are likely to be launched, mainly targeting white-collar workers or particularly health-conscious consumers. Similarly, in the overall nutrition/staples environment it is forecast that in the near future manufacturers will place greater emphasis on launching products with added healthvalue benefits, such as low-fat, sugar-free, lactose-free, and other functional and natural characteristics.

Category Data
Table 15 '000 tonnes 2006 Bread Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice Nutrition/Staples 1,040.8 18.6 0.3 3,242.6 127.1 0.9 3,838.5 1,662.1 2007 1,133.3 23.1 0.5 3,617.3 136.2 0.9 4,111.4 1,881.8 2008 1,221.1 26.5 0.7 4,004.1 143.3 1.0 4,218.3 2,127.6 2009 1,305.4 28.9 0.9 4,389.3 150.6 1.0 4,352.2 2,662.4 2010 1,412.6 31.5 1.0 4,766.0 157.9 1.1 4,531.8 3,267.2 2011 1,529.8 34.4 1.1 5,131.4 165.6 1.1 4,742.7 3,914.2 Sales of Nutrition/Staples by Category: Volume 2006-2011

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Source:

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Table 16 RMB bn

Sales of Nutrition/Staples by Category: Value 2006-2011

2006 Bread Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice Nutrition/Staples
Source:

2007 11.0 0.7 137.7 0.3 43.8 28.6 3.7 0.0 57.2 7.7 290.8

2008 12.2 0.9 143.8 0.5 51.5 36.2 4.0 0.0 63.1 9.2 321.3

2009 13.1 0.9 157.9 0.6 57.4 45.7 4.2 0.0 65.8 11.9 357.7

2010 14.8 1.1 175.2 0.7 64.8 56.1 4.6 0.0 75.5 15.1 407.9

2011 17.1 1.2 195.5 0.9 72.7 68.2 5.0 0.0 85.8 19.1 465.6

10.3 0.6 119.2 0.2 36.5 21.2 3.4 0.0 51.0 6.7 249.1

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Table 17 % volume growth

Sales of Nutrition/Staples by Category: % Volume Growth 2006-2011

2010/11 Bread Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice Nutrition/Staples
Source:

2006-11 CAGR 8.0 13.1 27.7 9.6 5.4 3.9 4.3 18.7 -

2006/11 TOTAL 47.0 84.8 239.6 58.3 30.2 21.2 23.6 135.5 -

8.3 9.1 8.6 7.7 4.8 4.4 4.7 19.8 -

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Table 18

Sales of Nutrition/Staples by Category: % Value Growth 2006-2011

% current value growth 2010/11 Bread Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice 15.1 15.2 11.6 19.1 12.3 21.7 10.1 9.9 13.6 27.0 2006-11 CAGR 10.7 15.9 10.4 37.3 14.7 26.3 8.2 7.0 11.0 23.3 2006/11 TOTAL 66.4 109.3 64.0 387.8 98.9 221.9 48.5 40.3 68.3 185.4

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Nutrition/Staples
Source:

14.1

13.3

87.0

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Table 19 % retail value rsp Company

Company Shares of Nutrition/Staples 2006-2010

2006 7.8

2007 8.9

2008 8.8

2009 8.6

2010 8.9

Inner Mongolia Mengniu Dairy Industry (Group) Co Ltd Inner Mongolia Yili Industrial Group Co Ltd Yihai Kerry Oils & Grains (China) Co Ltd Ting Hsin International Group Hangzhou Wahaha Group Bright Dairy & Food Co Ltd China National Cereals, Oils & Foodstuffs Imp & Exp Corp (COFCO) Jinmailang Food Co Ltd Want Want Group Baixiang Food Group Shandong Luhua Peanut Oil Ltd Mead Johnson (Guangzhou) Ltd Uni-President China Holdings Ltd Beingmate ScientificIndustry-Trade Share Co Ltd Nestlé (China) Ltd International Nutrition Co Ltd Wonder Sun Dairy Co Ltd Henan Si Mei Te Food Co Ltd Shanghai Wyeth Nutritional Co Ltd Beijing San Yuan Foods Co Ltd Yashili International Holdings Ltd Shanghai Liangyou Haishi Oils & Fats Industrial Co Ltd Abbott Nutrition International (China) Sichuan New Hope Agribusiness Co Ltd Jinan Jiabao Dairy Co Ltd Shenyang Dairy Co Ltd Xi'an Yinqiao Group Heilongjiang

7.5 5.9 5.0 2.4 2.5 0.9

7.5 6.3 5.3 3.2 2.5 1.6

7.2 6.8 6.1 3.5 2.6 2.2

7.7 7.0 5.9 4.3 2.6 2.1

8.7 7.3 6.4 4.3 2.7 2.6

0.9 2.0 1.3 0.8 0.2

2.2 1.1 1.9 1.3 0.9 1.3 0.2

2.3 1.2 2.0 1.4 1.1 1.1 0.8

2.2 1.7 1.7 1.5 1.3 0.9 1.2

2.1 2.0 1.7 1.5 1.5 1.4 1.3

1.7 0.8 0.5 1.1 0.4 0.5 0.8

1.6 0.8 0.5 1.1 0.5 0.5 0.9

1.6 1.1 1.0 1.1 0.6 0.6 0.9

1.4 1.2 1.2 1.0 0.8 0.9 0.7

1.3 1.2 1.2 1.0 0.9 0.9 0.8 0.7

0.4 0.6 0.5 0.6 0.5 0.3

0.5 0.6 0.5 0.6 0.5 0.3

0.6 0.6 0.5 0.6 0.5 0.2

0.6 0.6 0.5 0.6 0.6 0.4

0.7 0.6 0.6 0.6 0.5 0.5

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Agriculture Co Ltd Shijiazhuang Junlebao Milk Co Ltd Hebei Zhongwang Food Group Ltd Hunan Taizinai Biological Technology Co Ltd Shijiazhuang Sanlu Group Hebei Hua Long Food Group Co Ltd President Enterprises (China) Investment Co Ltd Artisanal Private Label Generics Others Total
Source:

0.8 0.8

0.7 0.6

0.6 0.2

0.4 0.5 0.0

0.5 0.4 -

4.2 2.3 1.4 2.2 0.3 0.2 41.8 100.0

4.1 2.1 0.4 0.2 39.0 100.0

1.4 2.1 0.4 0.2 38.1 100.0

2.0 0.4 0.2 37.2 100.0

1.9 0.4 0.2 32.9 100.0

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Table 20 % retail value rsp Brand Yili Mengniu

Brand Shares of Nutrition/Staples 2007-2010

Company Inner Mongolia Yili Industrial Group Co Ltd Inner Mongolia Mengniu Dairy Industry (Group) Co Ltd Ting Hsin International Group Yihai Kerry Oils & Grains (China) Co Ltd Hangzhou Wahaha Group China National Cereals, Oils & Foodstuffs Imp & Exp Corp (COFCO) Bright Dairy & Food Co Ltd Want Want Group Baixiang Food Group Shandong Luhua Peanut Oil Ltd Uni-President China Holdings Ltd Beingmate ScientificIndustry-Trade Share Co Ltd International Nutrition Co Ltd Wonder Sun Dairy Co Ltd Yihai Kerry Oils & Grains (China) Co Ltd Jinmailang Food Co Ltd Jinmailang Food Co Ltd Shanghai Wyeth Nutritional Co Ltd Henan Si Mei Te Food Co

2007 6.5 7.3

2008 6.1 7.2

2009 6.6 7.1

2010 7.5 7.4

Master Kong Jinlongyu Nutrition Express Fortune

5.1 4.6 1.2

5.8 5.0 1.7

5.7 5.2 2.4 1.7

6.3 5.5 2.4 2.2

Bright Want Zai Bai Xiang Luhua President Beingmate

2.2 1.1 1.9 1.3 1.3 0.2

2.2 1.2 2.0 1.4 1.1 0.8

2.1 1.7 1.7 1.5 0.9 1.2

2.2 2.0 1.7 1.5 1.4 1.3

Dumex Wonder Sun Yuan Bao Hua Long Jinmailang S-26 Si Mei Te

0.8 0.5 1.0 1.2 1.0 0.5 1.0

1.1 1.0 1.1 1.2 1.0 0.6 1.0

1.2 1.2 1.1 1.2 1.0 0.8 0.9

1.2 1.2 1.1 1.1 1.0 0.9 0.9

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Dulexe

Sanyuan Shuang Wai Wai Wahaha Haishi

Yashili Jiabao Hui Shan Bei Da Huang Junlebao Gain Taizinai

Sanlu Artisanal Private label Others Total
Source:

Ltd Inner Mongolia Mengniu Dairy Industry (Group) Co Ltd Beijing San Yuan Foods Co Ltd Hangzhou Wahaha Group Hangzhou Wahaha Group Shanghai Liangyou Haishi Oils & Fats Industrial Co Ltd Yashili International Holdings Ltd Jinan Jiabao Dairy Co Ltd Shenyang Dairy Co Ltd Heilongjiang Agriculture Co Ltd Shijiazhuang Junlebao Milk Co Ltd Abbott Nutrition International (China) Hunan Taizinai Biological Technology Co Ltd Shijiazhuang Sanlu Group Private Label

0.7

0.7

0.7

0.8

0.5 3.2 0.9

0.6 3.5 0.9

0.9 0.8 0.7 0.7

0.8 0.8 0.7 0.7

0.5 0.6 0.3 0.3 0.6

0.5 0.6 0.2 0.4 0.2

0.5 0.6 0.4 0.4 0.0

0.6 0.6 0.6 0.5 0.5 0.4 -

4.1 2.1 0.4 47.3 100.0

1.4 2.1 0.4 46.9 100.0

2.0 0.4 46.6 100.0

1.9 0.4 42.0 100.0

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Table 21 '000 tonnes

Forecast Sales of Nutrition/Staples by Category: Volume 2011-2016

2011 Bread Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice Nutrition/Staples
Source:

2012 1,653.2 37.1 1.2 5,479.9 173.0 1.2 4,928.6 4,620.6 -

2013 1,776.7 39.6 1.2 5,812.0 180.2 1.2 5,103.2 5,365.0 -

2014 1,900.1 41.8 1.3 6,137.0 186.6 1.3 5,256.3 6,146.1 -

2015 2,018.7 43.6 1.4 6,458.8 191.8 1.4 5,394.6 6,911.8 -

2016 2,127.7 45.2 1.5 6,781.8 196.6 1.5 5,508.6 7,671.8 -

1,529.8 34.4 1.1 5,131.4 165.6 1.1 4,742.7 3,914.2 -

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Table 22 RMB bn

Forecast Sales of Nutrition/Staples by Category: Value 2011-2016

2011 Bread 17.1

2012 18.8

2013 20.5

2014 22.3

2015 24.1

2016 25.7

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Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice Nutrition/Staples
Source:

1.2 195.5 0.9 72.7 68.2 5.0 0.0 85.8 19.1 465.6

1.3 213.5 1.0 78.6 80.1 5.3 0.0 89.5 23.0 511.2

1.4 232.4 1.1 84.5 93.1 5.6 0.0 92.9 27.2 558.8

1.5 252.0 1.2 90.4 107.3 5.8 0.0 95.9 31.5 608.0

1.6 271.9 1.3 96.4 123.1 6.0 0.1 98.7 35.7 658.8

1.7 292.3 1.4 102.5 140.2 6.2 0.1 101.0 39.9 710.9

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Table 23

Forecast Sales of Nutrition/Staples by Category: % Volume Growth 20112016

% volume growth 2015/16 Bread Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice Nutrition/Staples
Source:

2011-16 CAGR 6.8 5.6 6.4 5.7 3.5 6.0 3.0 14.4 -

2011/16 TOTAL 39.1 31.4 36.4 32.2 18.8 33.6 16.2 96.0 -

5.4 3.8 5.7 5.0 2.5 7.0 2.1 11.0 -

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Table 24

Forecast Sales of Nutrition/Staples by Category: % Value Growth 2011-2016

% constant value growth 2011-16 CAGR Bread Breakfast Cereals Dairy Meal Replacement Products Oils and Fats Baby Food Spreads Pasta Noodles Rice Nutrition/Staples
Source:

2011/16 TOTAL 50.8 38.2 49.5 56.5 41.1 105.5 22.6 36.7 17.7 108.7 52.7

8.6 6.7 8.4 9.4 7.1 15.5 4.2 6.4 3.3 15.9 8.8

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MEAL SOLUTIONS – KEY TRENDS AND DEVELOPMENTS

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Headlines
Retail value sales of meal solutions increase 12% to reach RMB224 billion in 2011 Growing number of chained delicatessens and semi-prepared foods threatens development of meal solutions Canned/preserved fish/seafood registers the highest value growth of 15% in 2011 Unit price sees continuous increase Shineway Group leads meal solutions with 13% value share in 2010 Higher constant value CAGR of 9% expected over forecast period

Trends
One of the major reasons for consumers purchasing meal solution products is convenience. However, the booming outlets of delicatessens and semi-prepared foods are providing more convenient choices for consumers. Delicatessen chains such as Jiujiuya and Liufu Heiya all serve multiple ready-to-eat foods such as braised chicken and duck, flavoured bean curd and vegetables. Semi-prepared food chains provide seasoned dishes such as seasoned beef and pork. The reason these delicatessen chains and semi-prepared food chains are even more convenient than meal solution products is that most of these outlets also provide a delivery service, which allows people to simply call and wait for free delivery. Other advantages such as tasty flavours, healthier offerings with no antiseptics also contributed to food chains’ success over packaged meal solutions. Therefore, the development of meal solutions is facing fierce competition from these food chains. Benefiting from smaller and younger households and the economic independence of women, the meal solutions category achieved faster growth in both volume and value terms. Not traditional housewives, young women mostly have their own careers and cannot spare a lot of time cooking – some do not even know how to cook – which spurs demand for meal solution products. On the other hand, the raw pork price increased significantly in 2011, while packaged meat price did not see such strong growth as fresh meat, which also stimulated processed meat sales in 2011. Canned/preserved fish/seafood witnesses the fastest value growth, stimulated by Chinese consumers’ greater preference for Western dishes. Western dishes made with canned fish products, such as tuna salad and tuna sandwiches, are served in most Western restaurants and fast food chains, and even cafés, which attract Chinese consumers, especially the younger generation. As a result, canned/preserved fish/seafood is growing strongly, with increasing demand from both retail and foodservice channels. The sauces, dressings and condiments category saw the slowest growth among meal solution products. As necessary and irreplaceable products to cooking in both the home and restaurants, sauces have a very large market base compared with other meal solution products. Therefore, the sauces category is more mature and thus offers less potential than other meal solution categories such as chilled processed food. Supermarkets represent the most important retail distribution channel for meal solutions. Besides weekends, people commonly purchase meal solution products after work, which is usually quite late. Therefore, the supermarket is a more convenient and time-saving choice compared with hypermarkets. And limited by cold storage conditions, frozen and chilled processed foods are commonly only available in supermarkets/hypermarkets instead of small grocery stores. Even higher inflation was evident in China in 2011. According to China National Bureau of Statistics, monthly CPI increased from 4.9% in January to 6.5% in July, and food CPI was the highest, at 10.3% in January, soaring to 14.8% in July. Affected by high inflation of fresh food

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in 2011, the average price of meal solutions also increased by 5%. The much lower price growth than food inflation comes from the fierce competition among meal solution industries. The price competition through discounting and promotions among the leading companies makes the selling price growth much milder than food inflation.

Competitive Landscape
As the largest national processed meat producer, Shineway is advantaged in terms of high brand awareness, wide distribution coverage in both urban and rural areas, as well as active marketing input. All of these advantages contributed to Shineway’s leadership of the meal solution category in 2010. However, the company share is expected to see a significant decrease in 2011 due to the lean meat powder scandal exposed by CCTV in March 2011. Shineway was exposed as using lean meat powder, which is a forbidden chemical ingredient useful in accelerating pigs’ muscle building. With the scandal exposed, consumers began to doubt Shineway products’ safety, and sales decreased sharply as a result. People’s Food Holding Ltd was the fastest growing company in meal solutions category in 2010 thanks to its obtaining of the meat sponsorship for the 2010 Guangzhou Asian Pacific Games. As one of the most influential sports event hosted by China in 2010, Guangzhou Asian Pacific Games has national impact and provided People’s Food with an extraordinary opportunity to advertise. People’s Food took this opportunity and advertised through both TV and below-the-line advertisements, which strongly spurred sales in 2010. Food speciality chains are developing rapidly in meal solutions. Meat suppliers such as Shineway and Yurun have a lot of fresh meat speciality chains throughout China, and more speciality chains are also supplying their own brands of canned meat, frozen and chilled meat. These speciality chains open in convenient locations which provide more convenient choices for consumers who are far from and supermarkets and hypermarkets. Besides meat chains, Nestlé also plans to expand its sauces chains to supply only its sauce brands, and also to save money on the on-board fees charged by retailers. Compared with other product categories, domestic companies have much stronger domination in the meal solutions environment over multinationals, with the top five companies all domestic. However, the food safety problems such as the lean meat powder scandal suffered by domestic companies are threating the leadership of domestic companies, and instead multinationals benefit from a greater ability to convince consumers regarding their product safety. In order to enhance Nestlé’s competitiveness in meal solutions, Nestlé acquired 60% equity of Xiamen Yinlu Food Co Ltd. As one of the major players producing canned congees, Yinlu competes neck-and-neck with another large player, Wahaha in ready meals market, and ranked first with a very slight ahead in share. With Nestlé’s engagement, Yinlu is expected to realise stronger capital support as well as improved distribution in cities, which will help Yinlu consolidate its leadership of the ready meals environment. As for Nestlé, the acquisition will enrich its portfolio and enlarge its coverage into ready meals. Besides, as a beverage OEM to Nestlé, Yinlu will also play its role as beverage producer for Nestlé, such as Nestlé’s RTD coffee products. Another merger and acquisition event in 2010 was COFCO’s acquisition of Maverick, a premium chilled meat brand. Although Maverick saw an outstanding performance in regional market such as in South China, it does not have national coverage but is mainly distributed in first-tier cities. After the acquisition by COFCO, one of the largest food and beverage companies in China, Maverick is expected to expand its distribution network and be more recognised by Chinese consumers.

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Prospects
A rising number of chained foodservice outlets are providing potential opportunities to meal solution manufacturers. Different from independent restaurants, chained foodservice outlets, especially fast food chains, are requiring standard food products which are also easy and convenient to prepare. For example, KFC and McDonald’s use frozen meat and poultry instead of fresh meat and poultry. As a result, with more foodservice chains available over the forecast period, meal solution products will see greater demand in foodservice channels. Total sales volume is expected to see higher growth over the forecast period due to continuous urbanisation, with more small households and rising levels of disposable income. Consumers will be more willing to pay extra for convenience in coming years, which will spur sales of meal solution products, which are considered alternatives to fresh food. The average price of meal solution products is expected to continue to rise over the forecast period. Raw materials’ costs soared in 2011. For example, raw meat and meat product prices increased 34% in July 2011 compared with the same month of the previous year, according to China National Bureau of Statistics. This pressured meal solution manufacturers, especially meat processing manufacturers, to implement cost control measures. As most meat processing manufacturers will have stocks of raw materials, the price increases in 2011 will continue to have an impact on retail price growth over the forecast period.

Category Data
Table 25 '000 tonnes 2006 Ready Meals Canned/Preserved Food Frozen Processed Food Dessert Mixes Dinner Mixes Chilled Processed Food Sauces, Dressings and Condiments Soup Meal Solutions
Source:

Sales of Meal Solutions by Category: Volume 2006-2011

2007 420.9 1,794.4 1,700.2 31.9 1,501.9 3,273.8 4.1 8,306.4

2008 461.9 1,900.1 1,836.9 34.0 1,646.4 3,396.8 4.4 8,818.6

2009 498.0 1,996.7 1,946.4 34.8 1,794.2 3,522.2 4.7 9,299.0

2010 530.1 2,104.8 2,103.8 36.9 1,967.0 3,649.8 5.1 9,867.5

2011 562.5 2,233.2 2,284.5 39.0 2,166.4 3,780.3 5.5 10,508.9

384.3 1,719.6 1,579.7 30.1 1,405.4 3,146.8 3.8 7,885.4

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Table 26 RMB million

Sales of Meal Solutions by Category: Value 2006-2011

2006 Ready Meals Canned/Preserved Food Frozen Processed Food Dessert Mixes Dinner Mixes Chilled Processed Food Sauces, Dressings and Condiments Soup 3,647.7 22,760.8 25,814.3 1,192.8 45,407.1 38,371.3 273.6

2007 4,054.3 25,448.5 28,903.7 1,255.4 52,169.3 41,774.4 306.7

2008 4,572.4 28,842.1 32,569.1 1,359.2 61,562.2 45,501.8 343.0

2009 4,925.4 30,169.3 34,129.6 1,384.5 67,493.8 47,683.1 370.7

2010 5,284.6 34,218.5 37,020.1 1,474.9 74,240.2 52,220.9 421.5

2011 5,823.6 38,054.1 41,671.8 1,616.7 84,932.1 57,231.6 477.4

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Meal Solutions
Source:

133,819.9

149,858.1

170,177.5

181,231.0

199,596.0

223,983.9

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Table 27 % volume growth

Sales of Meal Solutions by Category: % Volume Growth 2006-2011

2010/11 Ready Meals Canned/Preserved Food Frozen Processed Food Dessert Mixes Dinner Mixes Chilled Processed Food Sauces, Dressings and Condiments Soup Meal Solutions
Source:

2006-11 CAGR 7.9 5.4 7.7 5.3 9.0 3.7 7.8 5.9

2006/11 TOTAL 46.4 29.9 44.6 29.5 54.2 20.1 45.4 33.3

6.1 6.1 8.6 5.5 10.1 3.6 9.0 6.5

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Table 28

Sales of Meal Solutions by Category: % Value Growth 2006-2011

% current value growth 2010/11 Ready Meals Canned/Preserved Food Frozen Processed Food Dessert Mixes Dinner Mixes Chilled Processed Food Sauces, Dressings and Condiments Soup Meal Solutions
Source:

2006-11 CAGR 9.8 10.8 10.1 6.3 13.3 8.3 11.8 10.9

2006/11 TOTAL 59.7 67.2 61.4 35.5 87.0 49.2 74.5 67.4

10.2 11.2 12.6 9.6 14.4 9.6 13.3 12.2

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Table 29 % retail value rsp Company

Company Shares of Meal Solutions 2006-2010

2006 8.6 2.8 1.9 1.3 1.0 1.9 1.2

2007 10.3 2.7 2.1 1.7 1.2 2.0 1.2

2008 11.2 3.2 2.2 2.0 1.1 1.7 1.2

2009 12.0 2.6 2.6 2.1 1.1 1.4 1.2

2010 12.7 3.6 2.8 2.2 1.3 1.3 1.2

Shineway Group People's Food Holding Ltd Foshan Haitian Flavouring & Food Ltd China Yurun Food Industry Group Co Ltd Zhengzhou Sanquan Food Co Ltd Henan Synear Food Holdings Ltd Lee Kum Kee (Guangzhou) Food Co Ltd

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Unilever China Ltd Henan Lotus Monosodium Glutamate Group Co Ltd Shanghai Totole Flavouring Food Sales Co Long Fong Group Shandong Zhucheng Foreign Trade Group Co Ltd Xiamen Yinlu Food Co Ltd Hangzhou Wahaha Group Shandong Liuhe Group Shandong Qilu Monosodium Glutamate Co Ltd Guiyang Nanming Laoganma Flavouring Food Co Ltd General Mills (China) Co Ltd Yantai Xiwang Food Co Ltd Linghua Group Hai Pa Wang International Food Group Beijing Huadu Food Co Ltd Guangdong Meiweixian Flavoring Co Ltd Shanghai Maling Aquarius Group Jiajia Sauces (Changsha) Co Ltd Hebei Meihua Monosodium Glutamate Co Ltd Huashun Minsheng Food Group Chongqing Fuling Zhacai (Group) Co Ltd Yantai Shinho Weidamei Food Co Ltd Fujian Huayi Food Drink Co Ltd Private Label Others Total
Source:

0.7 0.7 0.7 0.6 0.8

0.8 0.8 0.7 0.6 0.8

0.8 0.7 0.7 0.7 0.7

0.8 0.7 0.7 0.7 0.7

0.8 0.8 0.7 0.7 0.7

0.4 0.5 0.6 0.6

0.6 0.6 0.6 0.6

0.6 0.6 0.5 0.5

0.6 0.6 0.5 0.6

0.6 0.6 0.6 0.6

0.7

0.7

0.7

0.6

0.6

0.4 0.4 0.9 0.4 0.4 0.4 0.3 0.3 0.5 0.4 0.4 0.3 0.2 0.2 69.3 100.0

0.4 0.5 0.7 0.4 0.5 0.4 0.4 0.3 0.5 0.3 0.4 0.3 0.3 0.2 66.8 100.0

0.5 0.5 0.6 0.4 0.4 0.4 0.4 0.3 0.4 0.3 0.3 0.3 0.3 0.2 65.5 100.0

0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.2 64.9 100.0

0.6 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 62.7 100.0

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Table 30 % retail value rsp Brand Shineway Jinluo Haday Yurun Sanquan

Brand Shares of Meal Solutions 2007-2010

Company Shineway Group People's Food Holding Ltd Foshan Haitian Flavouring & Food Ltd China Yurun Food Industry Group Co Ltd Zhengzhou Sanquan Food

2007 10.3 2.7 2.1 1.5 1.2

2008 11.2 3.2 2.2 1.8 1.1

2009 12.0 2.6 2.6 2.0 1.1

2010 12.7 3.6 2.8 2.0 1.3

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Synear Lee Kum Kee Lotus Totole Knorr Longfong Zhucheng Yinlu Wahaha Liuhe Horse

Laoganma

Wanchai Ferry Xiwang Linghua Huadu Maling Jia Jia Qi River Bridge Meihua Anjoy Wujiang Haiwang Hormel Dajiang Private label Others Total
Source:

Co Ltd Henan Synear Food Holdings Ltd Lee Kum Kee (Guangzhou) Food Co Ltd Henan Lotus Monosodium Glutamate Group Co Ltd Shanghai Totole Flavouring Food Sales Co Unilever China Ltd Long Fong Group Shandong Zhucheng Foreign Trade Group Co Ltd Xiamen Yinlu Food Co Ltd Hangzhou Wahaha Group Shandong Liuhe Group Shandong Qilu Monosodium Glutamate Co Ltd Guiyang Nanming Laoganma Flavouring Food Co Ltd General Mills (China) Co Ltd Yantai Xiwang Food Co Ltd Linghua Group Beijing Huadu Food Co Ltd Shanghai Maling Aquarius Group Jiajia Sauces (Changsha) Co Ltd Guangdong Meiweixian Flavoring Co Ltd Hebei Meihua Monosodium Glutamate Co Ltd Huashun Minsheng Food Group Chongqing Fuling Zhacai (Group) Co Ltd Fujian Huayi Food Drink Co Ltd Beijing Hormel Foods Co Ltd Shanghai Dajiang (Group) Co Ltd Private Label

2.0 1.2 0.8 0.7 0.7 0.6 0.8 0.6 0.6 0.6 0.6

1.7 1.2 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.5 0.5

1.4 1.2 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.5 0.6

1.3 1.2 0.8 0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.6

0.7

0.7

0.6

0.6

0.4 0.5 0.7 0.5 0.4 0.3 0.3 0.5 0.3 0.4 0.3 0.2 0.3 0.2 67.4 100.0

0.4 0.5 0.6 0.4 0.4 0.3 0.3 0.4 0.3 0.3 0.3 0.3 0.3 0.2 66.0 100.0

0.5 0.5 0.5 0.4 0.4 0.4 0.3 0.4 0.3 0.3 0.3 0.3 0.3 0.2 65.4 100.0

0.6 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 63.2 100.0

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Table 31 '000 tonnes

Forecast Sales of Meal Solutions by Category: Volume 2011-2016

2011 Ready Meals Canned/Preserved Food Frozen Processed Food 562.5 2,233.2 2,284.5

2012 594.1 2,365.6 2,490.0

2013 624.6 2,502.6 2,724.9

2014 653.6 2,642.1 2,994.5

2015 680.9 2,787.1 3,302.0

2016 706.4 2,934.8 3,653.9

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Dessert Mixes Dinner Mixes Chilled Processed Food Sauces, Dressings and Condiments Soup Meal Solutions
Source:

39.0 2,166.4 3,780.3 5.5 10,508.9

41.0 2,402.6 3,913.2 6.1 11,218.4

42.9 2,677.3 4,047.7 6.7 12,002.2

44.7 2,994.5 4,184.2 7.4 12,867.4

46.5 3,364.3 4,322.6 8.1 13,830.7

48.3 3,797.6 4,461.0 8.8 14,904.4

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Table 32 RMB million

Forecast Sales of Meal Solutions by Category: Value 2011-2016

2011 Ready Meals Canned/Preserved Food Frozen Processed Food Dessert Mixes Dinner Mixes Chilled Processed Food Sauces, Dressings and Condiments Soup Meal Solutions
Source:

2012 6,207.9 40,800.3 45,519.7 1,706.3 94,684.1 59,920.0 526.6 243,156.8

2013 6,585.9 43,636.4 49,874.4 1,793.2 105,970.6 62,562.0 583.5 264,420.2

2014 6,952.9 46,521.8 54,833.5 1,876.0 119,069.0 65,305.9 649.7 288,255.9

2015 7,309.5 49,472.1 60,474.9 1,957.1 134,399.1 68,144.9 717.0 315,165.1

2016 7,654.6 52,504.4 66,909.4 2,039.2 152,453.3 71,023.8 784.3 345,714.4

5,823.6 38,054.1 41,671.8 1,616.7 84,932.1 57,231.6 477.4 223,983.9

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Table 33 % volume growth

Forecast Sales of Meal Solutions by Category: % Volume Growth 2011-2016

2015/16 Ready Meals Canned/Preserved Food Frozen Processed Food Dessert Mixes Dinner Mixes Chilled Processed Food Sauces, Dressings and Condiments Soup Meal Solutions
Source:

2011-16 CAGR 4.7 5.6 9.8 4.4 11.9 3.4 9.7 7.2

2011/16 TOTAL 25.6 31.4 59.9 23.8 75.3 18.0 58.5 41.8

3.7 5.3 10.7 3.7 12.9 3.2 8.6 7.8

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Table 34

Forecast Sales of Meal Solutions by Category: % Value Growth 2011-2016

% constant value growth 2011-16 CAGR Ready Meals Canned/Preserved Food Frozen Processed Food Dessert Mixes Dinner Mixes 5.6 6.6 9.9 4.8 2011/16 TOTAL 31.4 38.0 60.6 26.1 -

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Chilled Processed Food Sauces, Dressings and Condiments Soup Meal Solutions
Source:

12.4 4.4 10.4 9.1

79.5 24.1 64.3 54.3

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MARKET DATA
Table 35 Sales of Packaged Food by Category: Volume 2006-2011 2006 Baby Food (Not calculable) Bakery ('000 tonnes) Canned/Preserved Food ('000 tonnes) Chilled Processed Food ('000 tonnes) Confectionery ('000 tonnes) Dairy (Not calculable) Dried Processed Food ('000 tonnes) Frozen Processed Food ('000 tonnes) Ice Cream (million litres) Meal Replacement ('000 tonnes) Noodles ('000 tonnes) Oils and Fats ('000 tonnes) Pasta ('000 tonnes) Ready Meals ('000 tonnes) Sauces, Dressings and Condiments ('000 tonnes) Snack Bars ('000 tonnes) Soup ('000 tonnes) Spreads ('000 tonnes) Sweet and Savoury Snacks ('000 tonnes) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions ('000 tonnes) Packaged Food (Not calculable)
Source: Notes:

2007 6,974.0 1,794.4 1,501.9 1,194.7 5,998.1 1,700.2 2,627.6 0.5 4,111.4 3,617.3 0.9 420.9 3,273.8 0.1 4.1 136.2 1,293.0 8,306.4 -

2008 7,491.7 1,900.1 1,646.4 1,248.4 6,351.6 1,836.9 2,761.2 0.7 4,218.3 4,004.1 1.0 461.9 3,396.8 0.1 4.4 143.3 1,351.4 8,818.6 -

2009 7,954.2 1,996.7 1,794.2 1,306.0 7,020.3 1,946.4 2,721.6 0.9 4,352.2 4,389.3 1.0 498.0 3,522.2 0.1 4.7 150.6 1,399.6 9,299.0 -

2010 8,506.0 2,104.8 1,967.0 1,361.4 7,806.0 2,103.8 2,846.9 1.0 4,531.8 4,766.0 1.1 530.1 3,649.8 0.2 5.1 157.9 1,495.2 9,867.5 -

2011 9,155.4 2,233.2 2,166.4 1,417.8 8,665.2 2,284.5 2,964.1 1.1 4,742.7 5,131.4 1.1 562.5 3,780.3 0.2 5.5 165.6 1,597.2 10,508.9 -

6,345.2 1,719.6 1,405.4 1,119.3 5,504.8 1,579.7 2,475.5 0.3 3,838.5 3,242.6 0.9 384.3 3,146.8 3.8 127.1 1,238.5 7,885.4 -

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Table 36 RMB bn

Sales of Packaged Food by Category: Value 2006-2011

2006 Baby Food Bakery Canned/Preserved Food Chilled Processed Food Confectionery Dairy Dried Processed Food Frozen Processed Food Ice Cream Meal Replacement Noodles Oils and Fats Pasta Ready Meals Sauces, Dressings and Condiments Snack Bars Soup Spreads Sweet and Savoury Snacks Impulse and Indulgence Products Nutrition/Staples Meal Solutions Packaged Food
Source: Notes:

2007 28.6 90.1 25.4 52.2 54.4 137.7 65.8 28.9 24.9 0.3 57.2 43.8 0.0 4.1 41.8 0.0 0.3 3.7 50.4 208.0 290.8 149.9 648.6

2008 36.2 98.8 28.8 61.6 57.8 143.8 73.2 32.6 27.0 0.5 63.1 51.5 0.0 4.6 45.5 0.0 0.3 4.0 54.2 224.9 321.3 170.2 716.4

2009 45.7 105.3 30.2 67.5 60.8 157.9 78.7 34.1 26.6 0.6 65.8 57.4 0.0 4.9 47.7 0.0 0.4 4.2 56.0 234.7 357.7 181.2 773.6

2010 56.1 118.0 34.2 74.2 66.2 175.2 91.6 37.0 28.4 0.7 75.5 64.8 0.0 5.3 52.2 0.0 0.4 4.6 62.7 259.4 407.9 199.6 866.9

2011 68.2 134.7 38.1 84.9 72.4 195.5 106.0 41.7 30.7 0.9 85.8 72.7 0.0 5.8 57.2 0.0 0.5 5.0 70.3 289.7 465.6 224.0 979.3

21.2 83.0 22.8 45.4 50.4 119.2 58.6 25.8 22.7 0.2 51.0 36.5 0.0 3.6 38.4 0.3 3.4 47.4 192.7 249.1 133.8 575.6

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources Sum of sectors does not equal total packaged food because of double counting (eg canned soup is included in soups and canned foods)

Table 37

Sales of Packaged Food by Category: % Volume Growth 2006-2011 2010/11 2006-11 CAGR 7.6 5.4 9.0 4.8 9.5 7.7 3.7 27.7 4.3 9.6 3.9 7.9 3.7 2006/11 TOTAL 44.3 29.9 54.2 26.7 57.4 44.6 19.7 239.6 23.6 58.3 21.2 46.4 20.1 -

Baby Food (Not calculable) Bakery (% volume growth) Canned/Preserved Food (% volume growth) Chilled Processed Food (% volume growth) Confectionery (% volume growth) Dairy (Not calculable) Dried Processed Food (% volume growth) Frozen Processed Food (% volume growth) Ice Cream (% volume growth) Meal Replacement (% volume growth) Noodles (% volume growth) Oils and Fats (% volume growth) Pasta (% volume growth) Ready Meals (% volume growth) Sauces, Dressings and Condiments (% volume growth) Snack Bars (% volume growth)

7.6 6.1 10.1 4.1 11.0 8.6 4.1 8.6 4.7 7.7 4.4 6.1 3.6 14.1

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Soup (% volume growth) Spreads (% volume growth) Sweet and Savoury Snacks (% volume growth) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions (% volume growth) Packaged Food (Not calculable)
Source: Notes:

9.0 4.8 6.8 6.5 -

7.8 5.4 5.2 5.9 -

45.4 30.2 29.0 33.3 -

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources Sum of sectors does not equal total packaged food because of double counting (eg canned soup is included in soups and canned foods) Volume sales cannot be consolidated due to different unit measurements (eg confectionery in tonnes and ice cream in litres)

Table 38

Sales of Packaged Food by Category: % Value Growth 2006-2011

% current value growth 2010/11 Baby Food Bakery Canned/Preserved Food Chilled Processed Food Confectionery Dairy Dried Processed Food Frozen Processed Food Ice Cream Meal Replacement Noodles Oils and Fats Pasta Ready Meals Sauces, Dressings and Condiments Snack Bars Soup Spreads Sweet and Savoury Snacks Impulse and Indulgence Products Nutrition/Staples Meal Solutions Packaged Food
Source: Notes:

2006-11 CAGR 26.3 10.2 10.8 13.3 7.5 10.4 12.6 10.1 6.2 37.3 11.0 14.7 7.0 9.8 8.3 11.8 8.2 8.2 8.5 13.3 10.9 11.2

2006/11 TOTAL 221.9 62.2 67.2 87.0 43.5 64.0 81.0 61.4 35.2 387.8 68.3 98.9 40.3 59.7 49.2 74.5 48.5 48.3 50.3 87.0 67.4 70.1

21.7 14.1 11.2 14.4 9.4 11.6 15.7 12.6 8.0 19.1 13.6 12.3 9.9 10.2 9.6 21.3 13.3 10.1 12.1 11.7 14.1 12.2 13.0

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources Sum of sectors does not equal total packaged food because of double counting (eg canned soup is included in soups and canned foods)

Table 39 RMB bn

Sales of Packaged Food by Region: Value 2006-2011

2006 East China Mid China North and Northeast China Northwest China 160.4 93.4 121.9 29.7

2007 181.4 104.6 137.0 33.3

2008 201.2 114.9 151.6 36.4

2009 217.6 123.8 163.6 39.2

2010 244.7 138.2 183.7 43.6

2011 277.6 155.4 208.2 48.7

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South China Southwest China TOTAL
Source:

104.1 66.1 575.6

118.0 74.3 648.6

130.8 81.4 716.4

142.3 87.2 773.6

160.0 96.8 866.9

181.2 108.2 979.3

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 40

Sales of Packaged Food by Region: % Value Growth 2006-2011

% current value growth 2010/11 East China Mid China North and Northeast China Northwest China South China Southwest China TOTAL
Source:

2006-11 CAGR 11.6 10.7 11.3 10.4 11.7 10.4 11.2

2006/11 TOTAL 73.1 66.3 70.8 64.2 74.2 63.8 70.1

13.5 12.4 13.3 11.8 13.3 11.8 13.0

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 41 % retail value rsp Company

GBO Shares of Packaged Food 2006-2010

2006 3.8 3.8 2.6 2.4 2.0 1.3 1.4 0.5

2007 4.4 4.0 2.8 2.6 2.4 1.5 1.5 0.8

2008 4.5 3.9 3.0 2.8 2.7 1.8 1.6 1.1

2009 4.5 4.1 3.2 2.8 2.8 2.1 1.8 1.6 1.1

2010 4.9 4.7 3.5 3.1 2.9 2.2 2.0 1.6 1.4

China Mengniu Dairy Co Ltd Inner Mongolia Yili Industrial Group Co Ltd Kuok Oils & Grains Pte Ltd (KOG) Ting Hsin International Group Shineway Group Hangzhou Wahaha Group Want Want Group Bright Food (Group) Co Ltd China National Cereals, Oils & Foodstuffs Imp & Exp Corp (COFCO) Mars Inc Nestlé SA Jinmailang Food Co Ltd People's Food Holding Ltd Baixiang Food Group Shandong Luhua Group Co Ltd Mead Johnson Nutrition Co Kraft Foods Inc Uni-President Enterprises Corp Danone, Groupe BVI Hsu-Fu-Chi Holdings Ltd Foshan Haitian

0.4 1.2 0.7 0.9 0.6 0.3 0.6 1.8 0.6 0.5

0.4 1.1 1.0 0.6 0.9 0.6 0.6 0.6 2.1 0.7 0.5

1.2 1.1 1.0 0.8 0.9 0.6 0.6 0.5 2.3 0.7 0.5

1.3 1.1 1.0 0.6 0.8 0.7 0.6 0.6 0.4 0.7 0.7 0.6

1.3 1.0 1.0 0.8 0.8 0.7 0.7 0.7 0.7 0.6 0.6 0.6

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Flavouring & Food Ltd Hangzhou Beingmate Group Co Ltd Guangdong Strong (Group) Co Ltd Wonder Sun Dairy Co Ltd China Yurun Food Industry Group Co Ltd Henan Si Mei Te Food Co Ltd Unilever Group Pfizer Inc Orion Group Hefei Huatai Food Co Ltd Artisanal Private Label Generics Others Total
Source:

0.1 0.5 0.2 0.3 0.5 0.5 0.2 0.3 7.6 0.5 0.3 63.7 100.0

0.1 0.5 0.2 0.4 0.5 0.5 0.2 0.4 7.3 0.6 0.2 60.0 100.0

0.4 0.5 0.4 0.5 0.5 0.5 0.3 0.4 7.1 0.6 0.2 57.1 100.0

0.6 0.6 0.6 0.5 0.5 0.5 0.4 0.3 0.4 7.0 0.6 0.2 54.9 100.0

0.6 0.6 0.5 0.5 0.5 0.5 0.4 0.4 0.4 6.6 0.6 0.2 52.3 100.0

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 42 % retail value rsp Company

NBO Shares of Packaged Food 2006-2010

2006 3.8

2007 4.4

2008 4.5

2009 4.5

2010 4.7

Inner Mongolia Mengniu Dairy Industry (Group) Co Ltd Inner Mongolia Yili Industrial Group Co Ltd Yihai Kerry Oils & Grains (China) Co Ltd Ting Hsin International Group Shineway Group Hangzhou Wahaha Group Want Want Group Bright Dairy & Food Co Ltd China National Cereals, Oils & Foodstuffs Imp & Exp Corp (COFCO) Jinmailang Food Co Ltd Nestlé (China) Ltd People's Food Holding Ltd Baixiang Food Group Wrigley Confectionery (China) Ltd Shandong Luhua Peanut Oil Ltd Mead Johnson (Guangzhou) Ltd Uni-President China Holdings Ltd Foshan Haitian Flavouring & Food Ltd Beingmate Scientific-

3.8 2.6 2.3 2.0 1.1 1.3 1.1 0.4

4.0 2.8 2.5 2.4 1.6 1.5 1.1 0.7

3.9 3.0 2.9 2.7 1.7 1.8 1.2 1.0

4.1 3.2 2.9 2.8 2.1 1.8 1.2 1.0

4.7 3.5 3.2 2.9 2.2 2.0 1.3 1.2

1.0 0.7 0.9 0.8 0.6 0.4 0.5 0.1

1.0 0.9 0.6 0.9 0.8 0.6 0.4 0.6 0.5 0.1

1.0 0.9 0.8 0.9 0.8 0.6 0.5 0.5 0.5 0.4

1.0 0.9 0.6 0.8 0.8 0.7 0.6 0.4 0.6 0.6

1.0 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.6 0.6

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Industry-Trade Share Co Ltd Guangdong Strong (Group) Co Ltd Dongguan Hsu-Fu-Chi Food Co Ltd International Nutrition Co Ltd Kraft Foods China Inc Wonder Sun Dairy Co Ltd China Yurun Food Industry Group Co Ltd Mars (China) Co Ltd Henan Si Mei Te Food Co Ltd Shanghai Wyeth Nutritional Co Ltd Orion (China) Co Ltd Hefei Huatai Food Co Ltd Shijiazhuang Sanlu Group Hebei Hua Long Food Group Co Ltd President Enterprises (China) Investment Co Ltd Artisanal Private Label Generics Others Total
Source:

0.5 0.6 0.4 0.3 0.2 0.3 0.5 0.2 0.2 0.3 1.8 1.0 0.6 7.6 0.5 0.3 61.5 100.0

0.5 0.6 0.4 0.3 0.2 0.4 0.4 0.5 0.2 0.2 0.4 1.8 7.3 0.6 0.2 58.5 100.0

0.5 0.6 0.5 0.5 0.4 0.5 0.4 0.5 0.3 0.3 0.4 0.6 7.1 0.6 0.2 57.0 100.0

0.6 0.6 0.5 0.6 0.6 0.5 0.5 0.5 0.4 0.3 0.4 7.0 0.6 0.2 56.2 100.0

0.6 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.4 0.4 0.4 6.6 0.6 0.2 53.9 100.0

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 43 % retail value rsp Brand Yili Mengniu

NBO Brand Shares of Packaged Food 2007-2010

Company Inner Mongolia Yili Industrial Group Co Ltd Inner Mongolia Mengniu Dairy Industry (Group) Co Ltd Ting Hsin International Group Shineway Group Yihai Kerry Oils & Grains (China) Co Ltd Hangzhou Wahaha Group China National Cereals, Oils & Foodstuffs Imp & Exp Corp (COFCO) Bright Dairy & Food Co Ltd Want Want Group Want Want Group People's Food Holding Ltd Baixiang Food Group Shandong Luhua Peanut Oil Ltd Uni-President China

2007 3.5 3.7

2008 3.4 3.8

2009 3.6 3.8

2010 4.1 4.0

Master Kong Shineway Jinlongyu Nutrition Express Fortune

2.4 2.4 2.1 0.5

2.8 2.7 2.2 0.8

2.8 2.8 2.4 1.1 0.8

3.1 2.9 2.6 1.1 1.0

Bright Want Zai Want Want Jinluo Bai Xiang Luhua President

1.0 0.5 0.8 0.6 0.9 0.6 0.6

1.0 0.5 1.0 0.8 0.9 0.6 0.5

1.0 0.8 0.8 0.6 0.8 0.7 0.4

1.0 0.9 0.9 0.8 0.8 0.7 0.6

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Haday Beingmate

Hsu-Fu-Chi Dumex Wonder Sun Yuan Bao Hua Long Strong Yurun Wahaha Jinmailang S-26 Orion Si Mei Te Qia Qia Dove Sanlu Artisanal Private label Others Total
Source:

Holdings Ltd Foshan Haitian Flavouring & Food Ltd Beingmate ScientificIndustry-Trade Share Co Ltd Dongguan Hsu-Fu-Chi Food Co Ltd International Nutrition Co Ltd Wonder Sun Dairy Co Ltd Yihai Kerry Oils & Grains (China) Co Ltd Jinmailang Food Co Ltd Guangdong Strong (Group) Co Ltd China Yurun Food Industry Group Co Ltd Hangzhou Wahaha Group Jinmailang Food Co Ltd Shanghai Wyeth Nutritional Co Ltd Orion (China) Co Ltd Henan Si Mei Te Food Co Ltd Hefei Huatai Food Co Ltd Mars (China) Co Ltd Shijiazhuang Sanlu Group Private Label

0.5 0.1

0.5 0.4

0.6 0.6

0.6 0.6

0.6 0.4 0.2 0.4 0.6 0.4 0.3 1.6 0.4 0.2 0.2 0.4 0.4 0.3 1.8 7.3 0.6 63.6 100.0

0.6 0.5 0.4 0.5 0.6 0.4 0.4 1.7 0.5 0.3 0.3 0.5 0.4 0.4 0.6 7.1 0.6 62.5 100.0

0.6 0.5 0.6 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.3 0.4 0.4 0.4 7.0 0.6 62.2 100.0

0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 6.6 0.6 60.1 100.0

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 44 % retail value rsp

Penetration of Private Label by Category 2006-2011

2006 Bakery Canned/Preserved Food Chilled Processed Food Impulse and Indulgence Products Meal Solutions Nutrition/Staples Packaged Food Pasta Ready Meals Sauces, Dressings and Condiments Sweet and Savoury Snacks
Source:

2007 3.4 0.3 0.4 1.1 0.2 0.4 0.6 26.0 6.3 0.1 0.7

2008 3.4 0.2 0.4 1.1 0.2 0.4 0.6 26.0 6.8 0.1 0.8

2009 3.4 0.2 0.5 1.1 0.2 0.4 0.6 25.8 7.6 0.1 0.8

2010 3.5 0.2 0.6 1.1 0.3 0.4 0.6 25.4 9.1 0.1 0.8

2011 -

3.0 0.3 0.3 1.1 0.2 0.3 0.5 26.5 5.3 0.1 0.7

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 45

Sales of Packaged Food by Distribution Format: % Analysis 2006-2011

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% retail value rsp 2006 Store-Based Retailing - Grocery Retailers - - Supermarkets/ Hypermarkets - - Discounters - - Small Grocery Retailers - - - Convenience Stores - - - Independent Small Grocers - - - Forecourt Retailers - - Other Grocery Retailers - Non-Grocery Retailers - - Health and Beauty Retailers - - Other Non-Grocery Retailers Non-Store Retailing - Vending - Homeshopping - Internet Retailing - Direct Selling Total
Source:

2007 99.7 98.6 59.2 0.1 24.3 2.5 21.5 0.2 14.9 1.1 0.3 0.9 0.3 0.2 0.0 0.0 100.0

2008 99.7 98.4 61.0 0.2 23.2 2.6 20.3 0.3 14.0 1.3 0.3 1.0 0.3 0.2 0.0 0.1 100.0

2009 99.7 98.2 62.0 0.2 22.2 2.6 19.3 0.3 13.8 1.5 0.3 1.2 0.3 0.2 0.0 0.1 100.0

2010 99.6 98.0 62.5 0.2 21.8 2.7 18.8 0.3 13.6 1.6 0.3 1.3 0.4 0.2 0.1 0.1 100.0

2011 99.5 97.9 62.8 0.2 21.5 2.8 18.4 0.3 13.5 1.7 0.3 1.3 0.5 0.2 0.2 0.1 100.0

99.7 98.7 57.6 0.1 25.7 2.5 23.0 0.2 15.3 1.0 0.2 0.8 0.3 0.2 0.0 0.0 100.0

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 46

Sales of Packaged Food by Category and Distribution Format: % Analysis 2011

% retail value rsp BF Store-Based Retailing Grocery Retailers Supermarkets/Hypermarkets Discounters Small Grocery Retailers Convenience Stores Independent Small Grocers Forecourt Retailers Confectionery specialists Other Grocery Retailers Non-Grocery Retailers Health and Beauty Retailers Other Non-Grocery Retailers Non-Store Retailing Vending Homeshopping Internet Retailing Direct Selling Total 98.5 78.1 71.3 0.0 6.8 3.1 3.7 0.0 0.0 20.5 1.6 18.9 1.5 0.0 0.0 1.5 0.0 100.0 B 100.0 100.0 47.1 0.1 9.0 1.5 5.9 1.6 43.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 CPF 100.0 100.0 68.1 0.1 31.8 3.9 27.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 CHP 100.0 100.0 80.6 0.1 18.4 2.8 15.6 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 C 97.5 94.8 53.9 0.2 32.7 2.2 29.4 1.1 2.8 5.2 2.6 2.5 0.1 2.5 2.5 0.0 0.1 0.0 100.0 D 100.0 100.0 53.8 0.3 24.9 2.8 22.1 0.0 21.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0

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DPF Store-Based Retailing Grocery Retailers Supermarkets/Hypermarkets Discounters Small Grocery Retailers Convenience Stores Independent Small Grocers Forecourt Retailers Confectionery specialists Other Grocery Retailers Non-Grocery Retailers Health and Beauty Retailers Other Non-Grocery Retailers Non-Store Retailing Vending Homeshopping Internet Retailing Direct Selling Total 100.0 100.0 64.1 0.1 30.9 2.4 28.5 0.0 4.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 P Store-Based Retailing Grocery Retailers Supermarkets/Hypermarkets Discounters Small Grocery Retailers Convenience Stores Independent Small Grocers Forecourt Retailers Confectionery specialists Other Grocery Retailers Non-Grocery Retailers Health and Beauty Retailers Other Non-Grocery Retailers Non-Store Retailing Vending Homeshopping Internet Retailing Direct Selling Total 99.8 99.8 95.3 0.0 4.2 1.7 2.5 0.0 0.3 0.0 0.0 0.0 0.2 0.0 0.0 0.2 0.0 100.0 SSS Store-Based Retailing Grocery Retailers Supermarkets/Hypermarkets Discounters Small Grocery Retailers Convenience Stores Independent Small Grocers Forecourt Retailers Confectionery specialists Other Grocery Retailers Non-Grocery Retailers 99.4 99.0 79.2 0.1 19.3 4.7 14.5 0.1 0.5 0.4

FPF 100.0 100.0 86.3 0.5 13.2 1.4 11.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 RM 100.0 100.0 62.3 0.3 37.4 9.3 28.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0

IC 100.0 100.0 36.1 0.1 59.6 6.1 53.6 0.0 4.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 SDC 100.0 100.0 70.6 0.2 26.6 2.6 24.0 0.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0

MR 1.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.4 1.4 0.0 98.6 0.0 0.0 0.0 98.6 100.0 SB 90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 90.0 3.8 86.2 10.0 0.0 0.0 10.0 0.0 100.0

NOO 100.0 100.0 63.5 0.1 32.9 2.9 30.0 0.0 3.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 SOU 99.8 99.8 86.5 0.8 12.5 9.0 3.5 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.2 0.0 100.0

OF 99.6 99.6 66.7 0.2 10.0 3.1 6.9 0.0 22.9 0.0 0.0 0.0 0.4 0.0 0.0 0.4 0.0 100.0 SPR 100.0 100.0 74.7 0.0 11.3 1.3 10.0 0.0 14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0

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Health and Beauty Retailers Other Non-Grocery Retailers Non-Store Retailing Vending Homeshopping Internet Retailing Direct Selling Total
Source: Key:

0.4 0.0 0.6 0.3 0.0 0.3 0.0 100.0

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources BF = baby food; B = bakery; CPF = canned/preserved food; CHP = chilled processed food; C = confectionery; D = dairy; DPF = dried processed food; FPF = frozen processed food; IC = ice cream; MR = meal replacement; NOO = noodles; OF = oils and fats; P = pasta; RM = ready meals; SDC = sauces, dressings and condiments; SB = snack bars; SOU = soup; SPR = spreads; SSS = sweet and savoury snacks

Table 47

Forecast Sales of Packaged Food by Category: Volume 2011-2016 2011 2012 9,799.4 2,365.6 2,402.6 1,472.7 9,558.9 2,490.0 3,113.6 1.2 4,928.6 5,479.9 1.2 594.1 3,913.2 0.2 6.1 173.0 1,702.2 11,218.4 2013 10,430.9 2,502.6 2,677.3 1,522.1 10,479.4 2,724.9 3,286.1 1.2 5,103.2 5,812.0 1.2 624.6 4,047.7 0.2 6.7 180.2 1,812.6 12,002.2 2014 11,039.4 2,642.1 2,994.5 1,564.8 11,415.3 2,994.5 3,476.6 1.3 5,256.3 6,137.0 1.3 653.6 4,184.2 0.2 7.4 186.6 1,928.2 12,867.4 2015 11,610.7 2,787.1 3,364.3 1,599.7 12,321.0 3,302.0 3,655.5 1.4 5,394.6 6,458.8 1.4 680.9 4,322.6 0.3 8.1 191.8 2,039.8 13,830.7 2016 12,125.7 2,934.8 3,797.6 1,630.2 13,196.8 3,653.9 3,835.5 1.5 5,508.6 6,781.8 1.5 706.4 4,461.0 0.3 8.8 196.6 2,148.5 14,904.4 -

Baby Food (Not calculable) Bakery ('000 tonnes) Canned/Preserved Food ('000 tonnes) Chilled Processed Food ('000 tonnes) Confectionery ('000 tonnes) Dairy (Not calculable) Dried Processed Food ('000 tonnes) Frozen Processed Food ('000 tonnes) Ice Cream (million litres) Meal Replacement ('000 tonnes) Noodles ('000 tonnes) Oils and Fats ('000 tonnes) Pasta ('000 tonnes) Ready Meals ('000 tonnes) Sauces, Dressings and Condiments ('000 tonnes) Snack Bars ('000 tonnes) Soup ('000 tonnes) Spreads ('000 tonnes) Sweet and Savoury Snacks ('000 tonnes) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions ('000 tonnes) Packaged Food (Not calculable)

9,155.4 2,233.2 2,166.4 1,417.8 8,665.2 2,284.5 2,964.1 1.1 4,742.7 5,131.4 1.1 562.5 3,780.3 0.2 5.5 165.6 1,597.2 10,508.9 -

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Source:

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 48 RMB bn

Forecast Sales of Packaged Food by Category: Value 2011-2016

2011 Baby Food Bakery Canned/Preserved Food Chilled Processed Food Confectionery Dairy Dried Processed Food Frozen Processed Food Ice Cream Meal Replacement Noodles Oils and Fats Pasta Ready Meals Sauces, Dressings and Condiments Snack Bars Soup Spreads Sweet and Savoury Snacks Impulse and Indulgence Products Nutrition/Staples Meal Solutions Packaged Food
Source:

2012 80.1 146.5 40.8 94.7 76.0 213.5 113.7 45.5 32.4 1.0 89.5 78.6 0.0 6.2 59.9 0.0 0.5 5.3 75.3 310.1 511.2 243.2 1,064.5

2013 93.1 158.2 43.6 106.0 79.4 232.4 121.4 49.9 34.4 1.1 92.9 84.5 0.0 6.6 62.6 0.0 0.6 5.6 80.6 330.6 558.8 264.4 1,153.8

2014 107.3 169.5 46.5 119.1 82.4 252.0 128.8 54.8 36.7 1.2 95.9 90.4 0.0 7.0 65.3 0.0 0.6 5.8 86.1 350.8 608.0 288.3 1,247.0

2015 123.1 180.2 49.5 134.4 85.0 271.9 135.9 60.5 38.9 1.3 98.7 96.4 0.1 7.3 68.1 0.0 0.7 6.0 91.4 369.8 658.8 315.2 1,343.7

2016 140.2 189.8 52.5 152.5 87.3 292.3 142.6 66.9 41.2 1.4 101.0 102.5 0.1 7.7 71.0 0.0 0.8 6.2 96.7 387.6 710.9 345.7 1,444.3

68.2 134.7 38.1 84.9 72.4 195.5 106.0 41.7 30.7 0.9 85.8 72.7 0.0 5.8 57.2 0.0 0.5 5.0 70.3 289.7 465.6 224.0 979.3

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 49

Forecast Sales of Packaged Food by Category: % Volume Growth 2011-2016 2015/16 2011-16 CAGR 5.8 5.6 11.9 2.8 8.8 9.8 5.3 6.4 3.0 5.7 6.0 4.7 3.4 9.6 2011/16 TOTAL 32.4 31.4 75.3 15.0 52.3 59.9 29.4 36.4 16.2 32.2 33.6 25.6 18.0 58.5

Baby Food (Not calculable) Bakery (% volume growth) Canned/Preserved Food (% volume growth) Chilled Processed Food (% volume growth) Confectionery (% volume growth) Dairy (Not calculable) Dried Processed Food (% volume growth) Frozen Processed Food (% volume growth) Ice Cream (% volume growth) Meal Replacement (% volume growth) Noodles (% volume growth) Oils and Fats (% volume growth) Pasta (% volume growth) Ready Meals (% volume growth) Sauces, Dressings and Condiments (% volume growth) Snack Bars (% volume growth)

4.4 5.3 12.9 1.9 7.1 10.7 4.9 5.7 2.1 5.0 7.0 3.7 3.2 8.5

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Soup (% volume growth) Spreads (% volume growth) Sweet and Savoury Snacks (% volume growth) Impulse and Indulgence Products (Not calculable) Nutrition/Staples (Not calculable) Meal Solutions (% volume growth) Packaged Food (Not calculable)
Source:

8.6 2.5 5.3 7.8 -

9.7 3.5 6.1 7.2 -

58.5 18.8 34.5 41.8 -

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 50

Forecast Sales of Packaged Food by Category: % Value Growth 2011-2016

% constant value growth 2011-16 CAGR Baby Food Bakery Canned/Preserved Food Chilled Processed Food Confectionery Dairy Dried Processed Food Frozen Processed Food Ice Cream Meal Replacement Noodles Oils and Fats Pasta Ready Meals Sauces, Dressings and Condiments Snack Bars Soup Spreads Sweet and Savoury Snacks Impulse and Indulgence Products Nutrition/Staples Meal Solutions Packaged Food
Source:

2011/16 TOTAL 105.5 40.9 38.0 79.5 20.6 49.5 34.5 60.6 34.3 56.5 17.7 41.1 36.7 31.4 24.1 64.9 64.3 22.6 37.6 33.8 52.7 54.3 47.5

15.5 7.1 6.6 12.4 3.8 8.4 6.1 9.9 6.1 9.4 3.3 7.1 6.4 5.6 4.4 10.5 10.4 4.2 6.6 6.0 8.8 9.1 8.1

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

SOURCE
Sources used during research include the following: Summary 1 Research Sources Official Sources

China Bee Association China Dairy Food Association Shanghai Rice Ministry

Trade Associations

Beijing Cold Drinks Association Beijing Frozen Foods Association

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PASSPORT

60

Beijing Ice Cream Association Canned Food Association China Association of Bakery & Confectionery Industry China Bee Products Association China Candy Association China Canned Food Industry Association China Condiment Organisation China Dairy Association China Dairy Industry Association China Flavoring Association China Food Industry Association China Food Science&Technology Association China Frozen Food Web China Grain & Oil Association China Ice Cream Association China Meat Association China National Vegetable Oils Association China Oils Association Chinese Cereals & Oils Association CNCA—china national candy association Dairy Association of China Fujian Dairy Association Fujian Food Association Guangdong Dairy Industry Association Guangdong Food Association Guangdong Fruit Snacks Industry Association Guangzhou Dairy Association Guangzhou Food Industry Association Heilongjiang Rice Trade Association Hubei Food Industry Association Jiangshu Province Dairy Association Meat association Raise Bee Association Shanghai Meat Trade Association Shanghai Seed & Nut Roasters Association Shanxi Dairy Food Association Supermarket Chain Association Xibu Dairy Association

? Euromonitor International

PACKAGED FOOD IN CHINA

PASSPORT

61

Trade Press

Beijing & the Bohai Rim retail food market share report (November 2009) Beijing & the Bohai Rim retail food market share report of November 2009 Beijing Business Daily Beijing Business Today Beijing Daily Beijing Modern Business caixun.com CBS China China Business China Business News China Economic China Enterprise News China Female China Food China Food & Technology News China Food Magazine China Food Quality Newspaper China Intelligence Property Paper China Quality Newspaper China Securities China Stock Raising China Youth Newspaper cnad.com COFCO COFCO covet 25% share of Chinese rice market Economic Reference Economy Daily FMCG Report 2008 2009 FMCG Report 2009 2010 Food Industry Development Food Quality Newspaper foodqs.cn Frozen food topped the list by the fell of 2568% of production Health Daily Heilongjiang Daily Henan Daily

? Euromonitor International

PACKAGED FOOD IN CHINA

PASSPORT

62

Henan rice balls occupy the market share of 60% Involved in upstream industry-COFCO wants to intergrate the rice industry Jiangxi Economic Evening News Liberation Daily Market Daily Market share-sanquan Marketing China New & Quick New Food Chongq Branch New Fortune Newspaper Of Beijing Modern Business, The Newspaper Of Economy Monitor Newspaper Of Economy Observe Newspaper Of Food Quality People's Daily Perspective on China's future frozen tradewho will be the frozen food oligarch? Rice from Heilongjiang occupy nealy 80% of Beijing rice market riseon.cn Sales & Market Shengzhen News Network Shenzhen Special Zone Daily South China Daily South City News Sugar & Wine Supermarket Taking up 90% of Guangdong market,Taichi will build the largest eight-treasure porridge Fty Tangjiu Kuaixun Western China News www.govyi.com www.news.cn www.usunsoft.com www.zjt.com.cn Xian Juxue Chilled Food Co Ltd Yangcheng Evening News

? Euromonitor International

PACKAGED FOOD IN CHINA

PASSPORT

63

Source:

Euromonitor International

? Euromonitor International


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