BREAKFAST CEREALS IN CHINA
The cereals market in China continue to see double-digit value growth in 2015, underpinned by the increasing popularity of light meal and western habits for breakfast. Due to hectic lifestyles and the health trend, a rising number of young Chinese consumers are opting for healthy light breakfasts instead of traditional Chinese-style options such as rice porridge.
Big player including Kellogg, PepsiCo, and Weetabix have all targeted the market in some way. Breakfast cereals market benefited both from the increase of hectic lifestyles and rising health awareness among consumers. A rising number of consumers are opting for breakfast cereals as a convenient and healthy morning meal, enabling them to save more time when eating breakfast quickly on busy mornings. Most breakfast cereals contain vitamins and have a high quantity of fiber. This is the reason why, Breakfast cereals are thus increasingly popular alternatives to traditional breakfast choices such as rice porridge, noodles, baozi (steamed buns) and other baked goods. The extensive range of breakfast that is available in China is also supporting a rising growth; breakfast cereals are predicted to see 6% value CAGR at constant 2014 prices. Multinationals will continue to center their strategy on well-tailored consumer targeting by offering products to meet the different demands of a niche market. For example, to provide the needs of older adults, manufacturers will take their inspiration from traditional Chinese medication by offering products containing Chinese ingredients such as red dates, goji berries, and black sesame. Sugar-free products is also a huge rising trend regarding the focus on consumers’ changing eating habits, focusing more on healthy and nutritious food. Manufacturers will meanwhile emphasize high calcium and vitamin contents for the Chinese children’s breakfast, encouraging parents to opt for fortified and healthy products. Breakfast cereal market players are responding to the health and wellness trend and are keen to add innovative and healthier ingredients to gain share.
Cereals Market in China
The breakfast cereals market consists of the sale of hot cereals and ready-to-eat cereals. The Chinese breakfast cereals market grew with enough healthy annual growth rates over the last years. The market is expected to keep the momentum for the approaching period up to 2017.
The Chinese breakfast market had total revenues of $ 135.5 m in 2012, representing a compound annual growth rate (CAGR) of 6.8% between 2008 and 2012. Market consumption volumes increased with a CAGR of 6.9% between 2008-2012, to reach a total of 37.4 million kg in 2012. The market’s volume is expected to rise to 52.5 million kg by the end of 2017, representing a CAGR of 7% for the 2012-2017 period.
The ready-to-eat cereals segment was the market’s most lucrative in 2012, with total revenues of $80.2m, equivalent to 59.2% of the market’s overall value. The hot cereals segment contributed revenues of $55.3m in 2012, equating to 40.8% of the market’s aggregate value.
The performance of the market is forecast to decelerate, with a CAGR of 6.2% for the five-year period 2012-2017, which is expected to drive the market to a value of $182.8m by the end of 2017.
Cereal Partners Worldwide are the leading player in the cereals market in China, generating a 27.9% share of the market’s value. We also have Standard Food Corporation accounts for a further 8.3% of the market, PepsiCo, Inc 5.1%, Kellogg Company 4.5% and Other 54.1%.
Cereal Partners Worldwide
Cereal Partners Worldwide is a joint venture company between General Mills and Nestle. The company manufactures breakfast cereals from uncooked ingredients grown naturally. CPW markets cereals in more than 130 countries. It is headquartered in Lausanne, Switzerland and employs 4,000 people. CPW operates through seven different regions covering Latin America, Europe, Middle East, Asia and Oceania & Africa, with a strong presence in emerging markets such as Russia and Brazil. The company markets products under brands such as Cheerios, Fitness, Shreddies, Golden, Grahams, Clusters, Golden Nuggets, Shreddies Wheat, Oats & More, Curiously Cinnamon, Cookie Crisp and Nesquik in the children’s market and the family sector. It offers a portfolio of over 50 brands.
Standard Food Corporation
Standard Foods Corporation is engaged in the production and distribution of nutrition food, edible oil, dairy products, and beverage. The company’s products include milk powders, oat products, adult nutrition foods, Chinese herbal healthcare products, health beverages and edible oil. The company markets its product under the brand name Quaker. The company’s operations are carried out in Taiwan, China and the United States of America. Standard Foods operates its business in China through the name Shanghai Standard Foods Co., Ltd.
Kellogg, along with its subsidiaries, is engaged in marketing and manufacturing of ready-to-eat cereals and convenience foods, such as Cookies, Crackers, Savory Snacks, Toaster Pastries, Cereals Bars, Fruit-Flavored Snacks, Frozen Waffles and Veggies Foods. The company manufactured These products in more than 16 countries and marketed in more than 180 countries in the world.
Kellogg operates through seven business sections, which classification is based on product category or geographic location: US morning foods and Kashi, US specialty, US snacks, Latin America and Asia Pacific, North America other Europe.
Pepsi is the world’s second largest F&B company, which mainly operates in the snacks and beverages manufacturing space. The company has a presence in over 200 countries globally and has an essential presence in North America.
Pepsi’s operations are organized into four business units: PepsiCo America Beverage (PAB), America Foods (PAF), Middle East and Africa (AMEA) PepsiCo Europe, and PepsiCo Asia, These four business units comprise six reportable segments: Latin America Foods (LAF), Frito-Lay North America, PAB, Quaker Foods North America (QFNA) Europe and AMEA.
Supermarkets/hypermarkets form the leading distribution channel in the Chinese breakfast cereals market, accounting for a 53.1% share of the total market’s value. Some other independent retailers account for 27.5% of the market.
A strong potential for the Cereals market in China
There are good reasons for having a bet on China’s breakfast market, according to a Seamild executive who points the growth of the middle class who embrace the Western lifestyle with its eating habits such as its growing fondness for dairy products, often associated with cereal consumption. Sales are growing at 15% a year.
Taking some of China’s demand’s share certainly matters to the company Kellogg, which has entered into a joint venture with Yihai Kerry, the Chinese company focusing on grains trading and milling subsidiary of agri-trading conglomerate Wilmar. This will be Kellogg’s second effort in the Chinese market, having last year offloaded Zhenghang, a local snack maker. Among the multinationals, the best-placed would appear to be Nestle, which has a 28% market share, according to Euromonitor. Nestle has been adept at appealing to different consumer groups, partnering with US-based General Mills, to develop child-focused brands like Cheerios into the Chinese market.
In marketing and distribution, local Chinese brands appear to be unable to compete with big brands such as Nestle which is also targeting the elderly market for instance, with its gift boxes of “Nesvita,” the Chinese cereal milk drink expected for the upcoming Chinese New Year gift season. At Jingkelong stores, Nestle has also launched a local craving for protein powders with ‘Swiss’ branded 300g box selling at 349 RMB, a premium on similar-sized local offering by the Hong Fu Loi brand at 208 RMB.
Guilin Sea Mild Biology Technology Development led breakfast cereals and accounted for a value share of almost 20% last year, in 2014. Unlike most other leading players, Guilin Sea Mild specializes in hot cereals, with its overall leadership mainly thanks to its well-established brands and strong distribution network. Guilin Sea Mild is also positioned as mid-priced and thus benefits from a broad potential customer base. The company mainly targets elderly consumers with strong products such as Seamild Nutrition Cereal for the Elderly, High Iron Red Dates Cereal, and High Calcium Walnut Cereal. The company gained almost half a percentage point value share in 2014 over the previous year thanks to their reasonable selling price strategy and their strong reputation for quality.
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