China’s middle class invites Danish food companies over for dinner
China’s mass grocery retail is booming and the turnover of both Chinese and foreign supermarket chains are growing. The middle class’ new consumption patterns and increasing income has been a catalyst for growth and creates new export opportunities for Danish food companies
Today, China’s growing middle class is experiencing a strong growth in purchasing power and constitutes a very attractive segment of consumers for both foreign and domestic supermarket chains. The competition among supermarkets in China is fierce, but foreign chains like TESCO, Wal-Mart, Carrefour and the Metro Group all perceive China as a key market with great opportunities for growth in the coming years.
Opportunities for Danish companies
The strong growth in China’s mass grocery retail sector also opens for opportunities for Danish food companies. The country’s distribution structure has been developed and is now far more efficient than earlier. This is a development that along with the growing purchasing power among Chinese consumers, is contributing to the boom in China’s mass grocery retail sector.
Foreign quality is preferred
Foreign food products enjoy high prestige in China, and as a result of the growing purchasing power of the middle class, an increasing part of the population is now able to buy up-market products. The Chinese consumers put increasingly high focus on quality and food safety, a trend that gives Danish food companies a competitive advantage over the cheaper products from Chinese food companies
An increasing number of supermarkets
China’s mass grocery retail has experienced a boom in growth and the number of supermarkets and other food stores doubled between the years of 2002 and 2008. It is especially foreign companies like Carrefour and Wal-Mart that have had great success with attracting consumers to their hypermarkets. In 2008, the average annual turnover of China’s 915 hypermarkets reached almost 12 million US dollars. The total turnover of the entire sector reached about 265 billion US dollars in 2008; an increase of nearly 80% compared with the year of 2002.
A majority of Chinese supermarkets
Chinese supermarkets however still dominate the market. Even though Carrefour, TESCO and Wal-Mart have experienced much success, their stores only constitute a small part of the entire market. For example owns Chinese Lianhua Supermarket Holdings approximately 3800 stores in all of China and the Shanghai Bailian Group owns around 6500 supermarkets. Nevertheless, the foreign supermarket giants are getting a stronger foothold in the market through mergers and acquisitions with Chinese chains. Thus acquired Wal-Mart the Chinese convenience store chain Trust-Mart already back in 2006 and thereby doubled the American giant’s network in China.
