China Food for Thought 1#: April 11, 2024
Dao Foods views China as the world's most important protein and food market from both a climate impact and business opportunity perspective. Our new series China Food for Thought delves into the rapidly evolving alternative protein sector in China, and the broader market trends within the food industry. We selectively curate and share industry news from China with international audiences that may lack easy access to news and trends in China. Our goal is to provide readers with a ground-up view of valuable industry content from the Dao Foods perspective.
If you haven't subscribed to our newsletter yet, please click here:
1. Beyond Meat
Beyond Meat reported fourth-quarter 2023 revenues that topped analysts' estimates. Following the upbeat earnings report released on February 27th, shares of the company skyrocketed in after-hours trading, with an increase of over 70%, and at one point more than doubling in value.
The ripple effects were felt in China's burgeoning alternative protein sector the next day, where related stocks surged. Shuangta Food, Solbar Protein, Dongbao Bio-Tech, Sinoglory Health Food, and other key players hit trading ceilings, while companies such as Huabao Flavor and Sihuan Pharm capitalized on the trend with notable gains.
Among the beneficiaries was Shuangta Foods(a leading vermicelli producer), a pea protein supplier for Beyond Meat since 2020, which capitalized on the surge. The company has further bolstered its position by embarking on research and development in the plant-based protein sphere, signaling its strategic shift towards prioritizing the R&D, production, and sales of these products as a central business focus.
Similarly, Solbar Protein(a leading soy protein producer)’s textured vegetable protein line can be widely applied in the production of plant-based meat. With its textured vegetable protein lauded as a flagship product, Solbar stands as a pivotal supplier not only to Bunge Global (a global leader in agribusiness and food) but also to prestigious Chinese names like Shuanghui (the largest meat producer in China), Yanjin Shop (a top snack brand in China), and Sanquan Food (the first frozen food to go public in China).
Resource List:https://mp.weixin.qq.com/s/liV5a7MO2kkk4gaarup5BAhttps://m.thepaper.cn/kuaibao_detail.jsp?contid=6149195&from=kuaibaohttps://m.jiemian.com/article/9558544.htmlDao Foods Perspective:
The success of Beyond Meat abroad has impacted, and may continue to influence, stocks and companies in China. Despite the alternative protein market in China being in its nascent stages, significant industry players are closely watching these developments. Their goal is to strategically position themselves to capture the rising opportunities in this sector, both globally and domestically.
2. Songxianxian: Can condiments open the door for plant-based products in China?
Songxianxian, a trailblazer in China's condiment industry, is redefining flavor norms with its best-selling umami powder, an all-natural, 100% plant-based alternative to traditional MSG, chicken essence, and salt in Chinese cooking. This innovative approach has not only captured the market's attention but also established Songxianxian as a premium brand.
In 2023, Songxianxian's consumer base surged to over ten million, boasting a staggering 300% year-over-year sales growth. The brand dominated the sales charts in the chicken essence category on major platforms, such as Douyin (China's TikTok), Tmall, and JD.com, which are the top two online retailers in China. Remarkably, Songxianxian’s sales on Douyin alone hit 112.5 million yuan, frequently topping the monthly seasoning sales charts and consistently ranking in the top five.
Behind Songxianxian's meteoric rise are founders Zihan and Xiangyu, renowned plant-based influencers and proprietors of the plant-based product company, Qingxin Lake. Their entrepreneurial journey evolved from a humble street stall vending vegan burgers to launching Qingxin Lake in 2016 and subsequently birthing Songxianxian in 2020, focusing on matsutake-based seasonings. Within six months, the brand's signature umami powder flew off the shelves, with sales in the millions.
Resource List:https://mp.weixin.qq.com/s/M1m2tkMph3jFkXxGE6nDkADao Foods Perspective:
Given the early success of Songxianxian in mainstream non-vegan consumer markets, alternative protein and plant-based entrepreneurs might find it beneficial to observe their approach. They should consider whether any strategies or tactics could be applicable to their own ventures. For instance, could "side door" approaches like condiments be an effective way to introduce plant-based eating to mainstream consumers?
Keep an eye on Dao Foods as we are preparing to release an in-depth article about Songxianxian, where we will delve deeper into these dynamics.
3. Oatly
Oatly has launched its pistachio oat milk in China, innovatively enhancing the classic oat milk formula with pistachios to boost plant-based nutrition. This new offering contains approximately 4.2 grams of omega-3 unsaturated fatty acids per carton, delivering a rich and sweet flavor profile.
In early 2024, leading brands McDonald's, Costa, and Seesaw—a trendy specialty coffee chain—embraced the festive spirit by introducing limited-edition pistachio oat lattes. These offerings tap into the cultural affection for pistachios, known in China as the "happy nut" because of their smiling face-like appearance when the shell is cracked open. This symbolism captures the essence of joy and well-being, aligning perfectly with the celebratory period of the Chinese New Year, signifying happiness and new beginnings.
Resource List:https://mp.weixin.qq.com/s/rCaWzg660BnxT5Ee7zZsqghttps://mp.weixin.qq.com/s/0Fmo0olk90MX4FfCuEs9Cwhttps://mp.weixin.qq.com/s/EutXoQAMJ_Elg7Ek77-CEQ4. Nestlé
Recently, Nestlé officially announced the launch of its first developed red bean plant-based beverage.
According to the announcement, the new red bean light milk series comes in three flavors: Red Bean Milk Tea, Red Bean Jasmine Green Milk Tea, and Matcha Red Bean Latte. The new products use red beans as the main ingredient and, after steps like peeling, impurity removal, and grinding, each bottle is enhanced with over 5 grams of red bean protein powder. The new products are low in sugar and free from trans fats, containing polyphenols and dietary fiber.
The new products are now available at the Nestlé Tmall flagship store, with a size of 260ml per bottle and a reference price of 19.5 yuan for 3 bottles.
Resource List:https://mp.weixin.qq.com/s/912nmQSCF_SgcpyUFgXpgw5. KFC
On December 15, 2023, KFC inaugurated its Grand Canal restaurant at Wulinmen Wharf in Hangzhou, marking a significant milestone as the number of KFC outlets in China surpassed 10,000.
Amidst this expansion, the "Buddhist-style" trend gained traction among young Chinese, characterized by an "it is what it is" philosophy and an inclination towards healthy, plant-based eating. In response, KFC China introduced Grandpa's Carefree Tea, aligning with this trend by launching popular items like Sandalwood Rice Milk Tea and Lotus Rice Milk Tea. These Buddhist-style beverages quickly became a sensation, dominating the tea drink market and becoming the top-selling item in the stores with daily sales surpassing 1,000 cups.
Building on this momentum, in 2023, KFC expanded its innovative offerings with the Black Goji Berry Rice Milk Drink, catering to the health-conscious consumers across the nation. Moreover, embracing the popularity of rice milk, KFC ventured into coffee, launching a rice milk latte in collaboration with the Japanese anime "Spy X Family". These initiatives indicate KFC's strategic focus on enhancing and diversifying its rice milk-based beverage line, positioning it for continued growth in the coming year.
Resource List:https://mp.weixin.qq.com/s/9kXdxdtyckzdwEuPo5aEIwhttps://mp.weixin.qq.com/s/ZSUJn3Xak_RIIb8EGxZ_4Qohttps://mp.weixin.qq.com/s/nfTdQprrmg31LNm7l5Oy2QDao Foods Perspective:
Chinese consumers frequently consume a variety of plant-based milks. Dao Foods believes these beverages can effectively introduce plant-based products to the Chinese market, resulting in faster market penetration and increased capital efficiency. Dao Foods' portfolio includes companies like Plant Now, True Plants, and Wow Kids. These companies specialize in plant-based milk, highlighting Dao Foods' dedication to the plant-based sector.
6. Angel Yeast: Yeast protein
Angel Yeast, renowned as Asia's largest and the world's second-largest yeast producer, has been at the forefront of developing national and industry standards within China's yeast sector. The company espouses the virtues of microbial protein, particularly yeast protein, citing its high efficiency, sustainability, health benefits, and low environmental impact.
Presently, Angel Yeast is advancing its commitment to this vision by planning and constructing a yeast protein production line in Yichang,Hubei province. With anticipated completion next year, this facility is expected to produce over 10,000 tons annually.
Yeast protein boasts a composition rich in nutrition, with over 80% protein content and a remarkable 96% utilization rate. It also comprises all eight essential amino acids necessary for the human body. Capitalizing on this nutritional powerhouse, Angel Yeast plans to expand its product portfolio to include items like yeast protein energy bars and plant-based meats derived from yeast protein.
Last year marked a milestone for Angel Yeast as their independently developed yeast protein was officially recognized in the National Health Commission's catalogue of new food materials.
Resource List:https://mp.weixin.qq.com/s/fhgUZk0UMB2GGiYUuao8EQhttps://www.foodtalks.cn/news/321897. Hiroad Food Technology opens new factory with new plant-based cream production line
Hiroad stands out as a leading supplier of bakery ingredients, particularly cream, and has the distinction of being the first cream producer to be publicly listed in China.
On March 1st, Hiroad inaugurated a new factory in Foshan, Guangdong province. This facility spans 16,532.13 square meters, representing an investment exceeding 100 million yuan. It is equipped with two plant-based cream production lines capable of yielding 60,000 tons annually.
In its pursuit of innovation, Hiroad is set to broaden its product range by introducing light cream and plant-based protein beverages, building upon its existing line of plant-based cream products. The company is dedicated to fostering growth through its Future Food Science and Innovation Center, which will spearhead research and development initiatives.
Resource List:https://mp.weixin.qq.com/s/VGAAQ0L-5mZBootlkalj_Qhttps://mp.weixin.qq.com/s/IOj1bPFIH_BrsslpaHF38wDao Foods Perspective:
As the demand for alternative proteins escalates, an increasing number of leading food companies are channeling investments into this sector. This surge in interest underscores a significant shift in the food industry towards products that are not only health-conscious but also environmentally sustainable.
8. JUZTLABT: Food as medicine
The innovative wellness brand JUZTLAB has successfully secured tens of millions of yuan in its angel investment round. Despite a cooling investment climate in the consumer market over the past two years, with a notable decline in consumer industry investments and financings in 2023, JUZTLAB has emerged as a standout.
Rooted in the principle of "food as medicine," JUZTLAB was founded in late 2021 by alumni of Cornell University. The brand, in partnership with the Tea Research Institute of Zhejiang University and Zhejiang Chinese Medical University, is dedicated to reviving traditional Chinese remedies through modern innovation.
Its flagship product, JUZT Drink, a hangover-relief candy formulated with Chinese arrowroot, embodies the brand's commitment to blending tradition with science. Referenced in "Shennong's Materia Medica," Chinese arrowroot boasts a wealth of flavonoid compounds known for their potent detoxifying and antioxidant properties, facilitating liver function in alcohol metabolism and easing post-consumption discomfort.
Resource List:https://mp.weixin.qq.com/s/uMirX031b_XjdfIlHlNP7gDao Foods Perspective:Dao Foods acknowledges the potential of the 'food as medicine' market within this emerging sector. This vision is mirrored by our portfolio company ShiShen, which also promotes the integration of nutrition and healing.
9. Cilantro New Products
"Love It or Hate It: The Great Cilantro Debate" consistently ignites lively discussions across the Chinese internet, solidifying its status as a perennially trending topic. Innovative cilantro products continue to emerge, with three new offerings recently becoming hot topics online.
Baixiang Cilantro Instant Noodles:
Baixiang, a top CPG company specializing in noodles, released cilantro instant noodles that sold out on their Douyin launch day in December 2023. The launch event captured public attention, drawing over 8.62 million viewers to the brand's official Douyin livestream and generating an impressive 47,000 live chat messages. With the brand's broadcasting account gaining over 200,000 new followers, Baixiang's total GMV soared to 28 million, quadrupling its previous sales figures and dominating Douyin's rankings across several categories.
Huiyuan 100% Cilantro Juice:
Huiyuan Juice, a leading name in the beverage industry, introduced its 100% Cilantro Juice, available in 125ml bottles. Marketed for its versatility, it can be enjoyed as a beverage, dressing, sauce, and much more. Huiyuan has also collaborated with Baixiang, marketing their products as the "cilantro couple".
Pizza Hut: Cilantro Pizza
On February 19th, Pizza Hut China launched "Cilantro and Beef Pizza" and "Cilantro and Lemon Soda" in select cities, marking its second foray into cilantro-centric menu items. Following the success of its Spicy Cilantro Pizza in October 2023, these new offerings, part of a city-limited, quantity-limited strategy, showcase the chain's innovative approach to leveraging the herb's divisive yet popular profile.
Resource List:https://mp.weixin.qq.com/s/YA33oYoSvINFtXG3MXH72Ahttps://mp.weixin.qq.com/s/7UYmV0Lw6-RI4CNGJtv2yghttps://mp.weixin.qq.com/s/aaqw_iisQkHvHSSbUYiFWwDao Foods Perspective:
In the rapidly changing food and beverage sector in China, brands quickly adapt to online trends. They use livestreaming to engage directly with consumers. This real-time interaction helps them promptly adjust their marketing strategies and products.
10. Holiland
On February 20th, the 30-year-old bakery brand Holiland introduced its new subsidiary, Holiland Pet, which specializes in pet birthday cakes, officially starting sales at its Tmall store with nationwide delivery.
The cakes, featuring flavors favored by pets, include a fresh blend of meats such as beef, duck, chicken, and others, covered in a "fondant" crafted from cheese, tailored to suit pets' palates and digestive needs. The ingredients are high-quality raw materials, traceable from the factory to the farm, and free from added preservatives.
In 2023, China's pet market expanded to nearly 250 billion yuan, demonstrating a compound annual growth rate of 13.1% over the past five years. Under the leadership of second-generation owner Luo Cheng, who has amassed 3 million followers on Douyin, Holiland has initiated 33 collaborative ventures over seven years. These collaborations, ranging from Coca-Cola and Oreo to Pantone, Wallpaper Magazine, and IPs like Harry Potter and Rick and Morty, have helped Holiland engage with the younger demographic.
According to the "Post-Pandemic Development Change Insights of the Baking Industry from the 2023 Meituan (Chinese Yelp) On-Site Restaurant Category Report," out of the top 100 bakeries on Meituan in 2019, 39 had shut down by 2023, and 32 had downsized. Furthermore, in 2023, prominent international bakery brands such as Lady M, Lenôtre, and LeTAO closed all their stores in China. In contrast, Holiland's flagship store on Tmall generated impressive sales of 349 million yuan from October 2021 to September 2022, with volumes reaching 5.6871 million items.
Resource List:https://mp.weixin.qq.com/s/9GfiRvNV0OSiGyJhMtxXRQhttps://mp.weixin.qq.com/s/Puwn94nizQ1eUIqoRqTKsAhttps://mp.weixin.qq.com/s/retPKCXsTHHf8P5yLAqZLwhttps://mp.weixin.qq.com/s/vyodRkQRvwNl4zomF0sY5ghttps://mp.weixin.qq.com/s/rHd7ZELES3pqgh5V38JD8QDao Foods Perspective:
Despite the challenges in the bakery industry post-pandemic, Holiland has thrived. The CEO's emergence as a Douyin influencer has increased the brand's visibility. By actively collaborating with other brands and entering the growing pet market in China, Holiland's innovative marketing strategies stand out, meriting close attention.
