Though older Chinese wives still prefer to shop the neighborhood street markets for fresh food, the fast pace of urban life has made young professionals and singles with little time or skill to cook for themselves to opt for frozen food.
In major cities such as Beijing, Shanghai and Shenzhen, supermarkets with well-stocked frozen food departments are becoming permanent fixtures, with freezer cases full of attractively designed packs featuring everything from dumplings, rice balls and spring rolls to prepared poultry and vegetables.
Among all frozen foods, the largest sector is ready-meals, which mainly consist of traditional foods such as dumplings, which account for 60 percent of the market as a whole.
Li Qian, a bank clerk at Agricultural Bank of China, Guangzhou branch, told the Global Times, “I often go back home at around 9 pm on work days, and I either eat at a restaurant or buy fast frozen food like dumplings, since it doesn’t take much time.”
Li’s case is typical in urban China.
Increasingly more people, especially urban residents, purchase frozen foods for the convenience, freshness and neatness. The frozen food industry has grown at an average rate of 20 percent annually since the early 2000s.
Meng Suhe, secretary-general from Chinese Institute of Food Science and Technology (CIFST), told the Global Times that, the number of registered frozen food companies in China is over 2,500, and most are run by families or individuals. The frozen food companies had a total sales volume of 1.99 million tons last year.
According to a research from Global Business Insights, a UK-based market research consultant firm, China’s frozen food market was valued as 100 billion yuan ($14.6 billion) at the end of 2008.
The research predicted that the total frozen food market will grow by over 30 percent in constant value over the next five years, to reach over 130 billion yuan ($19 billion).
Hot competition
As the industry has grown, so has the competition. Three companies, Sanquan Food Co Ltd, Zhengzhou Synear Food Co Ltd, and Longfong Food Co Ltd, dominate half of the market.
Among the three, 25 percent of which belongs to Sanquan, according to the latest research report from the Changjiang Securities released on August 5.
“Chinese top frozen food companies experienced a big price war in 2003, now they are heading for an even tougher war to establish their superiority,” Shao Wenzhong, an analyst from Changjiang Securities, told the Global Times.
“Compared with Western countries, there are less varieties of frozen food in China, which results in less focus on specific brands by customers,” Shao explained.
“In 2008 when Beijing was hosting the Olympic Games, Synear and Sanquan both launched their new brand based around the Games. One was named Bawang (The Overlord) and the other was named Zhuangyuan (The Very Best).”
“However, responses showed that most customers didn’t notice the differences between the two. Some of them even claimed they both were from one company,” Shao said.
“Therefore, if a company wants to attract more customers, it should make itself stand out from the others,” he noted.
Wan Chai Ferry, a well-known frozen food brand from United States-based food giant General Mills, is one good example for setting up a brand. The brand is popular in South China, especially in Guangdong and Hong Kong.
Though the brand only occupies 10 percent of the frozen food market, the gross profit rate of the company reached over 40 percent, 3 percent higher than the number of Sanquan.
“Wan Chai Ferry grades itself a high-end market position due to its niche where the income of customers is generally higher. The average price for the brand is around 35 yuan ($5) per kilogram, 20 percent higher than average,” Shao said,“Wan Chai Ferry customers have a lot of brand loyalty and less sensitive to price fluctuations.”
But he added that its lack of variety, like the larger companies, would be future stumbling block.
Building bigger
Two major players have also been expanding their production facilities during the last two years. Sanquan, for example, invested 250 million yuan ($36.5 million) at the end of 2007 on three factories in Zhengzhou, Henan Province, Chengdu, Sichuan Province and Taicang, Jiangsu Province. By doing so it enlarged its production capacity from 99,000 tons in 2007 to 117,600 tons in 2008, and plans another 220,000 tons increase in 2010.
Synear also took an aggressive step. It plans to enlarge its production capacity from 360,000 tons to 500,000 tons at its old production base in Zhengzhou, by 80,000 tons in Chengdu, by 120,000 tons in Huzhou, Zhejiang Province and by 100,000 tons in Guangzhou, totaling 800,000 tons in the next three to five years.
Shao said China’s frozen food industry will not thaw anytime soon. “The history of the frozen food industry in the Western countries shows there will often be a strong rebound after a financial crisis. This is because spending on frozen foods is linked to the economy. And now the economy in China is getting better, the frozen food industry is riding the wave as well.”