Your roadmap to China’s Food and Beverage market

Part 2

Foreign enterprises in the Food and Beverage industry trying to

establish a presence in China may find the tax and customs

systems difficult to navigate. To avoid the complexity of the matter,

many companies start by shipping directly to end consumers,

which prevents much of the red tape associated with registering a company and brand in China.

Hiring the services of a firm specialized in cross-border shipping and custom clearance may help take your business to the next level. 

Entering the Chinese F&B market can be a risky move if it isn’t done right. Testing the waters through a few campaigns on a proprietary cross-border store can be a good start. Once customer demand can be validated through sales, you can move forward and take a more aggressive approach to investment and set up a legal structure such as a Limited Liability Company.

There are several laws and regulations on imports that vary depending on the type of food and may not be consistently applied and enforced by different ports, bureaus, and individual officers. Therefore, companies should consider additional time and money to resolve unexpected issues and work closely with reliable partners.

The following are some of the most common laws and regulations that firms should comply with:

  • The food safety law

  • The import and export commodity inspection law

  • The imported food importers and exporters filling regulations

  • The import and export animal and plant quarantine law

  • Health food certification

 

As China’s e-commerce market grows at a staggering rate, so does the need for stricter oversight and market regulation.

On January 1, 2019, China implemented a new e-commerce law that strengthens IP protections, reinforces consumer rights and regulates unfair competition in e-commerce retail.  The new polices also expand the qualified CBEC retail import system, adjust tax policies and enhance the CBEC import supervision system.

In China, food products can be labelled as “health food” if it applies to one of the following two categories:

Food with specific health functions: suitable for consumption by specific groups of people with the aim of regulating different human body functions. Function foods cannot be used for treating diseases, but they are considered beneficial to health in ways that go beyond a standard healthy diet.

Nutritional supplements: products that contain dietary ingredients used to supplement nutrients for the human body, but without providing energy or other active ingredients. Nutritional supplements are divided into single-ingredient and multi-ingredient, and include vitamins, minerals, herbs and sport supplements.

Implemented on July 1, 2016, the new Administrative Measure on Health Food Registration and Filing released by CFDA stipulates the registration and filing procedures and requirements for all health foods produced or marketed in China.

Manufacturers who plan to sell health foods in China must either have an office in China or appoint an authorized agent to obtain the certificate for them. If the product ingredients are not listed in the Catalogue of Health Food Ingredients, or if the product has been imported and does not contain vitamin or mineral supplements, then the registration procedure will require additional steps and scrutiny.

China is a completely different market than elsewhere in the world. If foreign brands can not find quality distributors then it gets difficult to gain return on investment.

Local Chinese distributors are selective and protective of their reputation. They will not choose a brand which has not created awareness on Chinese digital platforms and portrays a good e-reputation. Without such an existing presence is almost impossible to get noticed and get chosen by a distributor.

Distributors don’t help promote a product on their website, in fact if a brand is not doing well they will leave it and opt for a similar featured brand. Therefore, a digital marketing strategy is extremely important to survive the highly competitive market of China.

Chinese netizens follow social media platforms religiously. A big part of their spending on a product is dependent on reviews they read from other users. Chinese consumers do not trust in advertising of the products from the company itself.

It is critical for companies to have a solid social media presence to be successful in the Chinese digital ecosystem. Social media presence can backfire too, if not taken care of properly, therefore it is vital to partner with a reputable digital agency in China for guidance.

No matter how popular a brand is outside China, the Chinese audience only wants what is visible on Chinese digital platforms. In B2B lead generation, more trust and visibility is needed.

In China, consumers constantly look for new and trustworthy F&B brands, but first they need to be informed about the benefits of the product. Registering the intellectual property rights is a must, in order to protect the brand from counterfeit products.

Many brands fail to sell their products because of a lack of knowledge about Chinese culture. Therefore, it is extremely important to understand the local culture and conduct branding accordingly. A friendly message is not enough to attract Chinese consumers.

In the highly connected environment of China, customer engagement must be the top priority in the food industry. Chinese customers like online interactions and it can be achieved with the help of interactive apps and games.

Netizens seek personal experience in an app, that could be encouraged with one-to-one dialogue or contextual engagement. A successful mobile strategy should also draw actionable data in order to understand the customers’ perspective and intentions. 

Apart from mobile applications, customers can be engaged on social media, where they are extremely active, and responding to every post is considered an obligation. However, handling social media engagement in China is not easy. One negative comment can ruin a brand’s image, therefore companies should develop new models for effectively engaging individuals in a way that communicates brand identity, keeping customer preferences in mind.

Responses on social media must satisfy consumer concerns. Customer engagement on social media in China has the power to make or break a brand.

Influencers are another strong way of branding products in 2020. Retailers look for influencers that are relatable with their brand values. Customers already trust them and their recommendation. According to a report by PWC, 29% of Chinese consumers, as compared to 13% globally, use social media to see what brands or products KOLs and celebrities are endorsing. KOLs differ from eCommerce merchant in three ways, they interact with consumers, raise awareness and help build brands.

China has become one of the fastest growing lucrative markets in the world. Chinese consumers are opening to foreign brands even faster than expected, especially for food and beverages brands due to ‘safe food’ feature attached to it.

The online Chinese population has exceeded 731 million people, which is equal to the total population of Europe. Online shopping has become an important factor in China’s economy, contributing highly to annual GDP growth. The trend in digital shopping in various industries is growing rapidly and shows no signs of slowing down anytime soon.

eCommerce has enabled international retailers and brands to enter China more quickly and easily than before through online-only business models. Today, China is driven by mobile-consumer behavior, vibrant social commerce adoption, and a ubiquitous digital payments infrastructure.

Should you have questions about your road map to the Chinese food and beverage sector, complete the below inquiry form with your questions and comments. 

DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.

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