A commercial oatmeal producer in Ireland recently sought my opinion regarding China market potential for gluten-free food products.
Before answering, in addition to our own secondary research, I reached out to four China and Hong food procurement experts whose inputs I attach weight to: The procurement directors of both the largest food retailer in the province of Zhejiang and a leading online food platform in China, as well as an established Irish food importer in Hong Kong, and the procurement manager of a leading food retailer in Hong Kong.
The verdict: As always, China is a very tough nut to crack. To arrive at an in-depth understanding of the market potential would require a full investigation into the growing instance of coeliac in China brought about as Chinese consumers adopt a more Western lifestyle, with increased consumption of wheat and gluten-containing products. Even so as it stands there is no significant demand for gluten-free products in China.
Until there is large pool of coeliac patients, increasing consumer awareness about coeliac disease and the benefits of a gluten free diet in controlling the symptoms, and rising government funding in the China this position will likely remain unchanged over the next three years, at a minimum.
- Consumer awareness of gluten-free products in China is low, with most gluten-free products being consumed by either the expatriate population or by Chinese High Net Worth Individuals.
- Its incidence and distribution being largely unknown, officially, rates of coeliac disease in China are also low. As already noted, this lack of evidence indicating the existence, or extent, of coeliac among the Chinese population makes it a challenge to draw objective conclusions regarding the market size of gluten-free food products.
- On the whole China media have been dismissive of the benefits and need for gluten-free products in China. An example of such sentiment is highlighted in one such article that refers to gluten-free as “an American obsession providing psychological comfort…” openly questioning “are gluten-free foods really better for the body?”
- Typically, in terms of tackling coeliac as a public health issue, the central government and local authorities would be expected to take the initial lead in directing strategies for coeliac prevention thus raising public awareness and opening the market to local and international manufacturers / brands.
- There is little doubt a major rise in the prevalence of coeliac is less than a decade away, especially in urban environments where the risk of is becoming a common disease would be higher.
- With future insight and food allergies becoming more common, a shift in the mindset of Chinese consumers will ultimately push food exporters to phase out gluten and nut products.
- Direct consequences of the numerous safety scandals that have hitherto plagued China’s food industry have been stronger consumer awareness of harmful food ingredients and more stringent labelling requirements. In this context for the consumer becoming gluten free may be about more the inclusions in a specific food product, not the food product itself.
- At the most basic level, and this point is worth bearing in mind regarding a potential ‘toe in the water’ Taobao (https://world.taobao.com/) or daigou D2C (http://www.daigousales.com/) cross-border ecommerce play, the main factors driving consumer purchasing decisions will continue to be quality and price, rather than following a gluten free diet.
Current gluten-free food / channels in China
- Tmall http://www.tmall.com[Tmall is the largest business-to-consumer (B2C) retail platform in Asia, and most visited B2C online platform in China]
The following link is in Chinese.
The results from a search for “Gluten Free” in Chinese. Scroll up and down to review the images and pricing, which is in RMB or CNY [FYI 1 RMB = Euro 0.13 -date 3rd November 2017]. The sales volumes are particularly small given that the fee for setting up a shop-front on Tmall, or selling via such a shop are very high. The market is embryonic.
- Taobao [Taobao is the biggest consumer-to-consumer (C2C) e-commerce platform based in China]. The following link is in Chinese
The results from a search for “gluten free” in Chinese. Scroll up and down to review the images and pricing, which is in RMB or CNY [FYI 1 RMB = Euro 0.13 -date 3rd November 2017] The sales volumes are somewhat higher given that its only November 3rd… Yet, most of these foreign brands are airmailed from the source directly to the customer once an order has been placed. This maybe a low-cost option for testing the market. There are other daigou, mobile apps and social network shopping apps that may also be useful for toe dipping. However, gluten-free food producers are not going to generate significant revenue streams from such cross-border channels until knowledge of gluten-free food benefits is much more widespread
Beyond the expat community there is “little demand” for gluten-free food products, and that’s from two trusted sources who are my first ports of call for all Hong Kong-related food matters.