· APAC,Food,Megacities,Strategy,Plant-based
Shanghai, China leading megacity for diamond food marketing
What a wild first half of 2020. We had meant to kick off our Aftertaste series early January and suddenly the world went sideways. Pandemics are scary things, that lead to even scarier geopolitical responses. Not wanting to get caught up in the flurry of mostly awkward we're here to help dear customer p.s not yet bankrupt business spamming that flew around a couple of months back, we've lurked patiently in the shadows until we couldn't wait any longer to share this oyster. 

We mean for Aftertaste to be a conversation series to share new generation food ideas, industry perspectives and strategic angles on where demand is heading and how this links back through the supply chain to producer and source. We want to provide more of a lens from the heart of the city or voice of the consumer whom we work hard to nourish. We hope Aftertaste encourages debate, discussion and collaboration. Feel free to respond with any areas you'd like to contribute towards or are interested in, and hopefully we can make sharing perspectives from Asia Pacific and Greater China a more regular gig.

Why Aftertaste now?

We're in a new epoch for food and investment-backed food/agri-tech industries. The interest in what we are eating, food as medicine, that food can be more sustainably and efficiently produced, that it can be personalised to our needs etc is exploding. Beyond Meat has made the future of food mainstream, and Danone is showing that corporate food players can responsibly move with the times (Fonterra and WH Group not so much, yet). We've been validating the need for more in-market APAC perspectives that help food industry stakeholders cut through the corporate, political or media spin and hear things straight. Protectionism is up, media models are whack, and many are fried on doom & gloom stories not knowing which opinion to trust. China is now well and truly on the global stage, and starting to flex a hardish power stance, whilst American hegemony with the West riding curtails is struggling with indulgent existentialism. Amongst all of this, food supply chains and resource-based views have become increasingly politicised.

Whilst it's easy to get stuck in political discourse talking countries and markets, we firmly believe there is so much more value in talking cities and consumer need. It forces clearer articulation of how best to get your food into the city, what promises you need to deliver on (safety, trust, provenance etc), have your brand understood against the competition, and ultimately purchased by people you want to feed. There's much more in common between Asian hubs like Seoul, Shanghai, Tokyo and Hong Kong (our coined diamond for brand building and influencers) in terms of food and consumer trends. Of course, every city is nuanced with local cultures, norms, trend cycles and neighbourhood vibes. Who is more stressed, who feels like they've less time, who feels healthy, who feels richer, who feels more guilty not looking after the in-laws - all conversations we want Aftertaste to dive into.

So Aftertaste builds on a key principle that we can do more to feed cities across Asia Pacific and Greater China more sustainably. If we can dodge the country generalisations, and give city-down insights on what's changing, then it becomes easier to distill strategies for execution, and try things quickly to see if they fit the opportunity. It also makes controlling the supply chains into cities a more focused priority, enabling source more ability to control, protect and promote nearer to consumer doorstep (instead of solely relying on Alibaba). Things always go wrong along the way and we think it's important to also discuss the failures. We're hoping we can frankly share more of what's working, and perhaps more importantly, what's not working or what's missing so we can arm you with a perspective or two to drop in the boardroom.

Consumer demand mapping from key Asian cities

Our Covid-19 take

Since Covid-19 was originally reported in Wuhan and spread globally, we've managed to bounce between New Zealand, HK, Mainland China and Panama (long story) timezones to deliver on strategic food projects. Some strategies have had to pivot, some delayed, although encouragingly for many reputable food companies there's sustained, if not increased, demand for quality, natural foods at fair pricing across APAC. Winners seem to be companies on the right side of disruption, already active in new retail channels and last mile delivery, and those who can shift volume into categories where consumers are trading down. The booming ready-to-eat meal category is a key example. Battlers seem to be those stuck in brick & mortar, or missing channel diversification e.g. limited outside of foodservice and hospitality. Commodity players are filling their boots exporting, which is counter productive to getting on with the value-add investment story but cash is understandably king for the foreseeable. China and ASEAN rebounds are encouraging to track, and anybody working in plant-based, fruit and produce, immunity-focused and primary export sectors with an extra tank of gas can afford to be bullish.

Now is a prime time to invest more and future-proof APAC strategies. Covid-19 ain't going anywhere quickly, 2021 and the socio economic impact of the recession will be painful for hundreds of millions, and protectionism and populism will continue. With travel limited there is required need to rely on local partners more - expect changing roles and power relationships across the value chain. It's important one has end-to-end supply chain visibility to city-level and gets as close to consumer doorstep as possible. APAC, and notably China, is still the main growth and demand engine for food, and it's only going to get more crowded with foreign brands pushed out of home chasing buyers. It might be easy to internally justify continuing a light-touch cross border strategy, but there's no stickiness and if there's no general trade model in place you miss diversification and losing control.

 

For most players across the board, we think doubling down on key cities with omni-channel coverage in China is a no brainer, given the growth and demand for products coming from New Zealand, Chile, Uruguay, Brazil etc. Consumers want to see line of sight to source and know that food has come from a Covid-19 free source (with as few a hands touching food during delivery). Governments now have some surplus tourism budgets to support this type of food origin marketing story. Countries like New Zealand and Taiwan have real plays here as long as they can keep Covid-19 down and out. We think Tokyo, Seoul, Taipei, Shenzhen, Shanghai, Los Angeles are interesting activation cities for the foreseeable, very much destination cities in the region for exceptional food experiences. Singapore and HK are still important incubators to try things out. There'll be some escalated plays for Malaysia, Indonesia, Thailand etc but expect margin erosion and we'd still focus on five cities in North East Asia any day over five cities in SEA for sustained margins.

More traditional Anglo markets like US and UK seem to be getting increasing attention from Kiwi and Aussie food exporters (imagine with a healthy dose of domestic government encouragement) and whilst Brexit is presenting some new arbitrage opportunities, we still don't see right to win opportunities for southern hemisphere players as there's significant local competition and subsidies to factor in. Niche plays (Fix & Fogg, Lewis Road Creamery etc) have a place, although we wouldn't be dropping North Asia any time soon to run around Texas trying to sell some imported whey powder. As a tangent, it has been interesting to watch the rise of plant-based alternatives challenge the need for legacy subsidies on traditional Ag industries. More to come on this in next couple of years we imagine.

new generation XYZ consumer, Wu Jingyang

Plant-based vs traditional animal-based plays

We've been working with a leading American plant-based player going through their APAC scale up. The technology, culture and buzz they've developed is encouraging, and they are serious about putting capital behind city-led activation. Previously we had heard from Starbucks how seriously they were taking sustainability and searching for scalable alternative proteins and liquids. Next minute, they've launched Beyond Meat in China, Impossible Foods in the US, and Oatly across China and the US. We've been asked by a number of larger traditional farming groups for our opinion on the plant-based trend and how it will impact farmers back in Australia, Argentina, New Zealand etc. We touched on this in an interview with Asia New Zealand Foundation and Fieldays Online if you've a spare 30 mins. Otherwise, here's some of our key perspectives:

  • Oatly, Beyond Meat, Impossible Foods etc are all proving plant-based and alternative proteins have gone mainstream. Smart MNCs have quickly followed. This isn't just a US-push trend, it is growing in Europe and now growing across Asian leading cities. Good Food Institute, Ellen Macarthur Foundation, EAT Forum are all leading global advocates in this movement. Still early days across many new categories e.g pet food, ready-to-eat meals and seafood alternatives.
  • Cell-based technology is developing at incredible pace but will still take some time to commercialise at scale - in our opinion minimum 6-8 years away. Loved the announcement of Higher Steaks' bacon and pork belly prototypes.
  • Any traditional Ag producer that doesn't have an alternative protein hedge, and is fighting in the commodity space targeting demand in the key regions mentioned above, should be worrying today for tomorrow. Time to sprint.
  • Traditional Ag producers need to focus on premium, differentiable stories quickly for their animal stories. Lewis Road Creamery, Spring Sheep both prime examples. Expect the premium segment to become increasingly crowded too, and if traditional producers aren't serious with investment behind brand and activation at city doorstep, don't bother. Interestingly, Uruguayans have pulled off a better grass-fed meat story than NZ in China in a short space of time - pricing helps. 
  • Countries like New Zealand and Australia are over-indexed today on animal protein exports. There is more of a burning (quite literally) platform to transition in Aus; whilst the laidback abundance philosophy in New Zealand isn't driving the same private sector-industry-government sector focus on plant-based. Outside of grass, what plant-based growing inputs can a country like NZ scale and have cost advantage in supply over? Canada, Australia, Argentina, US, Russia and China have solid comparative advantages in plant-based production - follow closely where the ABCD commodity players are investing. 
  • Collaboration and cross-over will be key in the emerging plant-based sector merging with bigger traditional ag partners - leading benchmarks for how to play in both include Danone, Kerry Ingredients, Givaudan, Cargill, DuPont and Nestle. 

This is an exciting and emerging industry with a lot of disruption and consolidation expected over next 2-5 years.

Please reach out if you'd like to chew on any of the ideas presented. Until next time!

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