Did you know that the ice cream market in China is the largest in the world? And how about the answer to that other mystery: did ice cream come from China? Let’s dive into the world of the Chinese ice cream market & see what you need to know.
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Changes in consumer taste drive demand up
Whilst we tend to think about China as a market for savoury foods that may be really salty or spicy, in recent years the Chinese love affair with both chocolate and ice cream has been growing. And when a market the size of China takes interest in a product category then the numbers can be huge!
According to forecasts by Euromonitor and Mintel, the market will reach a value of around 28 billion euros by 2025 (calculated at the exchange rate from July 2023), and whilst that’s an awful lot of ice cream, the Chinese are still far from being the world’s leader in per capita consumption. I’d also add, as I’ve mentioned in the past, that whenever we talk about market size statistics for anything which isn’t purely sold online in China, you can ask 5 people and get 7 wildly differing opinions about what the ACTUAL size of the market is.
The forecast CAGR (combined annual growth rate) is forecast to be 5-8%, depending on who you ask, for the next 5 years. So if this is your industry, then understanding the ice cream consumers in China should be a key concern. Even if you don’t want to expand into the market itself, then it can be expected that there will be a huge wave of Chinese tourists from late 2023 onwards into Europe and perhaps also North America, so understanding their taste could give you a key advantage.
Did Ice Cream come from China?
Now there’s a million dollar question… Much as there are legends about this being the case it’s really hard to prove what the origins of ice cream actually are. Chances are that no, it wasn’t Marco Polo who brought it back from China – in his rucksack, next to the pasta ???? – and there are tales of the Persians (even back in 550BC) and ancient Greeks having frozen desserts, as well as the Romans in the first century.
Apparently according to records, around 3,000 years ago, wealthy families in China served crushed ice and juice to their guests. One of the first documented recipes originates from the Tang Dynasty (618-970 AD) though so I guess you could say that to some extent the answer to the question “did ice cream come from China” should be yes. That certainly wasn’t in the present creamy and sweet form though!
Who are the Players in the Chinese Ice Cream Market?
As in many other categories, at the mass market level the huge volumes are driven by 2 domestic dairy giants, Yili & Mengniu (蒙牛) with Yili having around 19% market share & Mengniu estimated at around 10%. Most of those mass market ice creams have typically cost less than 10RMB in the past and have been sold in convenience stores & supermarkets (ie typical offline channels) around the country.
Leading foreign companies include Nestle (has a strong brand image across many food categories as well as a reputation for reliable quality) and luxury brands such as Häagen-Dazs.
As in other categories, the ice cream market in China is HUGELY fragmented, with literally thousands of other small brands, attracted by the opportunities that such a giant market can offer. That doesn’t mean that a niche player with a clever marketing strategy doesn’t still have opportunities to gain market share in the country. It has to be said, that amongst so many participants, you’re unlikely to be perceived immediately as a threat so you can hopefully get a footing before you’re noticed.
Case Study Häagen-Dazs
The brand has almost become synonymous for premium quality frozen desserts in the ice cream market in China, despite prices being around 10 times higher than the average price. Häagen-Dazs has a reputation for using high-quality ingredients and has opened high-end ice cream stores in prime locations around Chinese cities (whilst actively deciding NOT to sell in regular supermarkets). This plays right into the Chinese taste for premiumisation as I mentioned in my previous post on consumer trends.
Whilst the economic situation in China in summer 2023 is really tough compared to in the past, then ice cream (even expensive ones) still counts as an affordable treat.
Other factors that Häagen-Dazs have got right to appeal to young Chinese consumers include:
- localisation of the product range. When the brand introduced green tea flavour to the market, this was specific for China and Asia, although it’s now been rolled out to other markets. They also introduced a “chocolate hot pot” (basically what in Europe would be called a chocolate fondue) as a sharing item in their shops
- collaborations with airlines such as China Eastern to serve strawberry ice-cream on domestic flights
- selling online
- collaborations with restaurants and other brand collaborations, to project image as a “romantic” brand” focusing on couples
- working together with KOLs. This summer (2023) they’ve teamed up with world famous pastry chef Pierre Herme for a macaron ice cream range
- only sells in convenience stores etc when can be placed in a dedicated fridge to make the differentiation clear
Innovate to Win in the Ice Cream Market in China
Whilst many food and beverage categories suffered a lot during the pandemic, ice cream rather surprisingly perhaps, wasn’t one of them. The last 3 years have witnessed a huge surge of innovation though in terms of what’s offered. If you still think that plain old vanilla, strawberry and chocolate are enough to be a hit in China, then think again!
2020 & Savoury flavours
Flavours such as seaweed, chives, meat floss (bleugh at the best of times) and onions sprang up during 2020. Meat floss anything is a no go in my book, but I could imagine some of the herby combinations such as traditional medicinal teas would work quite well as an ice pop (= popsicle for anyone in N.America)
There were even squid or hotpot flavoured ice creams (& yes, we’re talking a savoury version here, not anything like a chocolate fondue).
In 2022, black garlic was even added to the mix…
China’s Ice Cream Market includes REALLY bright colours
In Europe this isn’t that common apart from berry reds, but during my recent visit to China I saw bright green (made with spirulina), bright blue (from butterfly pea) and even black (stinky tofu maybe?).
Ice Cream Consumers in China like Unusual Shapes
2021 was the year where it seemed that ALL the tourist attractions suddenly had ice creams in the shape of their iconic sights. It was all about the colours and the shape rather than the flavours – you know, main thing the social media photos look good – and some were more successful than others. Go check out a photo of Chongqing’s Liberation Memorial monument to see what I mean – imagine that made in ice cream but in a peachy pink colour… ????
I had one the other week in Hangzhou shaped like a lotus blossom but typically it didn’t occur to me to take a photo until it was almost gone…
2022 and Guochao in China’s Ice Cream Market
You may have heard of this ongoing trend. As a reaction to both the country’s isolation during covid combined with the geopolitical situation many Chinese citizens became increasingly interested in traditional Chinese values and other things culturally Chinese. In the food and beverage sector, this can be seen in the launching of foods in traditional shapes, with traditional flavours, or packaging inspired by legends, etc.
The premium ice cream brand Chicecream (Zhongxuegao) was founded in 2018. The company positions its products as competitors to Häagen-Dazs and achieved tremendous success due to its social media campaigns.
The biodegradable lolly sticks have Chinese proverbs on them, with the first half beneath the ice cream.
All about the experience
Marketers have invested a lot into moving China away from being a purely seasonal ice cream market, to a more experience based or situational market. This happens to also coincide with the post-pandemic trend towards focusing on experiences rather than owning “stuff”.
Collaborations with various online shows or film franchises are also becoming more popular here, as well as with restaurant brands. For example, new retail brand Hema has also jointly launched ice cream products with coffee house Tim Hortons and plant-based drink brand Oatly.
Premiumisation is all well & good, but consumers are wary of “price assassins” (雪糕刺客)
Whilst on the one hand, consumers are prepared to pay more for premium quality ice cream, the hashtag “ice cream assassins” trended last year when some convenience store owners mixed expensive and regular ice creams in the freezers without clearly marking the prices. That led to a few shocks at the till where consumers were too embarrassed to go put the product back, even though it cost considerably more than they had expected. In the end, the authorities intervened making clear that prices have to be marked.
This year Chicecream has developed Sa’Saa, a series of AI-related ice cream and ice pop products, priced at just 3.5 yuan (less than €0.50). There are 4 flavours (red bean, green bean, milk and cocoa) and the products are marketed to younger consumers as well as those in lower tier cities. A prime example of simultaneous premiumisation within a brand, whilst also providing a price sensitive option.
Healthier, more natural ingredients are also on trend
Post Covid healthier more natural ingredients are on trend across all categories in China, with ice cream being no exception. For example, frozen yoghurt, containing natural probiotics that can support digestion are a popular choice.
It’s pay to play in the Chinese ice cream market
Right now, almost regardless of the kind of product, you can’t expect to make an impact in the market without investing some marketing money. This isn’t just for advertising either – a huge amount of ice cream is also sold online, so you need to be present in as many sales and marketing channels as your budgets will run to.
There are not only a lot of brands on the market, there are also an increasing number of sales and marketing options. Gone are the days when foreign brands could get away with simply having a Tmall flagship store and a bit of almost organic marketing.
Choosing to advertise with an influencer is a great option, but not cheap for example & you have to be sure you have the right partner for your brand. .
Challenges of China and Ice Cream
The Import Process
This is quite complex for China – you can find more detail in this post by the EU SME Centre. Ice cream falls under HS code 21.05, which is the easy part. You also need to take care of the following steps:
- Check that there is a signed protocol in place between your country and China for the import of dairy products, and that a health/sanitary certificate has already been agreed
- Both the manufacturer and the exporter have to be registered in the China authority’s database
- The products have to be labelled according to Chinese regulations
- Document everything needed for the export/import process
- Pass Chinese Customs inspection (it helps if you have an experienced importer) & then products will be added to the approved list for future shipments
Logistics & Distribution
As with any kind of frozen product maintaining the cold chain is a core challenge for working in the Chinese ice cream market. In fact, the only time I’ve had “food poisoning” on a business trip to Asia was after eating an ice cream at Jiuzhai airport back in 2010 (“you’ve got to try this one Kathryn, it’s the taste of my childhood”…hmmm).
Within higher tier cities there should be no issues (other than the cost of frozen logistics as everywhere) – online orders are delivered in styropore – but the deeper you extend your distribution into the regions, the more you need to keep an eye on things.
Despite the Challenges the Ice Cream Market in China is worth the effort
Almost a third of the ice cream consumed world wide is eaten in China. (even though pro capita consumption is 3 times lower than say Japan still). So the market has potential for growth as long as you can meet the Chinese need for an innovative experience.
Even though the competition is horrible (like almost all segments in China) and marketing is expensive, with the right strategy you can win in the long term.
If you feel that the import registration is too complicated or expensive for your operation right now, then it’s still worth considering how to market to Chinese tourists either in your home country or in those overseas markets where there are already a lot of post-pandemic tourists such as Thailand, Singapore or Indonesia. And of course, Hong Kong is still a great “shop window” for the mainland, even if it’s not a cheap option in any way.
As with any market, the key is to develop the “right” strategy to meet both your needs as a brand and those of the market. China is certainly a specialised market to enter, but it’s also a market that appreciates premium products and is prepared to pay for them so well worth analysing the opportunity.
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