According to a survey by the Chinese Academy of Preventive Medicine, Chinese health data is not optimistic: there are more than 100 million patients with hyperlipidemia, 270 million with high blood pressure, and 120 million with fatty liver disease. Those chronic diseases account for 86% of the mortality rate. The good news is that, according to a report released by CBN Data on young people's health consumption trends, more than 90% of the post-90s generation are already conscious of healthy living, and more than half of the post-90s generation have started to implement healthy lifestyle habits.
This round of XNode Innovation Insights will explore the latest health-food and product innovations in the Chinese market, and whether or not they truly contribute towards a healthier lifestyle?
01 | The “Golden Age” of Meal Replacements
According to Euromonitor International, the global meal replacement market reached US$66.16 billion in 2017, of which China accounted for US$8.58 billion. The Chinese meal replacement market is expected to reach US$18 billion in 2022.
Meal replacements are usually made up of ingredients like cereal, beans, and potatoes, and are intended as substitutes for solid food meals. They are usually high in fiber so as to provide low calories and satiety, and use “healthy ingredients and time-savings" as selling points. The rising health consciousness of Chinese young people is changing their pattern of consumption and gradually making meal replacements more and more popular.
Take WonderLab Milkshake as an example. The product is positioned as a "zero-fat milk shake" to attract customers. Utilizing innovative flavors and consistent packaging, WonderLab Milkshake was able to effectively establish its brand identity and capture market share. In addition, through high frequency targeted advertising on social media, WonderLab rapidly increased its brand exposure in a short period of time and caught the attention of a large number of consumers. This common marketing strategy has helped rapidly build up many brands.
Among the many meal replacement products on the market, Wonderlab Milkshake is not the only one getting lots of attention. Wangbaobao, a recently established Chinese cereal brand that sells cereal-based food products on Tmall, chose to work with a large number of KOLs to penetrate the product brand into its target consumer markets. However, with the advent of multiple forms of communication and media, especially the many apps available on mobile, audiences have become very fragmented, making digital marketing more difficult. As Wangbaobao founder, Jing Yao pointed out, "depending on KOLs from various fields to promote our products is a shortcut”. The future remains both an opportunity and a challenge for digital marketing.
Why would companies be willing to spend a lot of money on publicity? This goes back to the meal replacement product itself. The average grain-based meal replacement bars in the OEM costs only 2 RMB each, but through smart marketing and packaging, profits are able to increase tenfold. Meal replacement products are mainly focusing on young people in Tier-1 and Tier-2 cities. Relatively speaking, this group of consumers have good economic conditions and are not only satisfied with basic food and clothes, and are willing to "pay for the favorite". As long as it is in line with the tastes of young people, they are willing to pay an amount that far exceeds the value of the product itself. Whether it is because they genuinely believe that meal replacements contribute to living a healthier lifestyle, or through the act of buying meal replacements they can label themselves as "healthy-living", this invariably shapes the marketing strategy and demand for different health products. Meal replacement companies like WonderLab and Wangbaobao are capturing these needs and succeeding.
02 | Have you joined the sugar-free movement yet?
On May 13, 2016, the National Health and Family Planning Commission officially released the Dietary Guidelines for Chinese Residents (2016). It emphasized that everyone should control their intake of sugars: "not exceed 50g, preferably less than 25g".
In promoting a reduced sugar lifestyle, many food companies like beverage giant, Coca-Cola, have launched low-sugar products.
The natural sugar substitute used by Coca-Cola is stevioside, a 0-calorie sugar extracted from stevia that is 250-450 times sweeter than cane sugar. But, high concentrations of stevia have a strong off-flavored taste, so it must be produced using a fermentation-based method to mitigate its own bitterness. This raises the cost of production to 1.50 RMB (US$ 0.22) per unit of sweetness, which is more restrictive in its use compared to 1 RMB (US$ 0.15) per unit of sweetness for abasweet, and 0.60 RMB (US$ 0.09) for acesulfame. As a result, it wasn't until 2011 that the European Union approved stevioside for addition to food products.
Recently, another new low-sugar product worth mentioning is the Yuanqi Forest. With a "0 sugar, 0 fat, 0 calories" slogan, and featuring "sparkling water + sugar-free", Yuanqi Forest drinks use two sugar substitutes, erythritol and sucralose. Erythritol has a strong advantage as a sugar substitute, possessing only 60% of the sweetness of sucrose, but only 1/10 of the calories of sucrose, so it is a better quality product among the natural sugar substitutes on the market. Its biggest problem is the high cost of extraction, so artificial sugar substitute "sucralose" is added to enrich the sweet taste. However, these artificial sugar substitutes, including sucralose, are hundreds of times sweeter than sucrose and can hardly be absorbed by the human body. This metabolization difficulty has been one of the key factors leading the questioning of whether artificial sugar substitutes can cause health problems such as cancer, obesity, and diabetes.
The controversy on the health concerns of sugar substitutes have polarized experts. Some have pointed out that even though most epidemiological studies have linked sweeteners to obesity, correlation does not imply causation, as sweeteners are often not consumed alone, and are often eaten with other fattening foods. Therefore, it is still too arbitrary to definitely conclude that artificial sweeteners cause obesity.
03 | Warning for local gym: Internet Fitness is coming
The outbreak of the Covid-19 pandemic has sparked an explosion of new online fitness trends. Could this be the new normal for the future of the fitness industry? Let's dive into the latest online fitness trends through a case study of internet fitness startup, Mirror, which was recently acquired by Lululemon for a whopping US$500 million.
Founded in 2016, the New York-based internet fitness company’s titular flagship product is a smart, networked full-body mirror. In addition to the features of a regular dressing mirror, Mirror incorporates a fitness system that can keep track of users' body movements in order to customize personalized sessions. Secondly, the screen is made of LCD, so you can directly see the coach's live online sessions and adjust your movements in time to achieve an immersive atmosphere at home.
Smart fitness hardware like Mirror has gained huge traction in the U.S. market thanks to both the advantages of the online fitness model, as well as the growing fitness-conscious population and its high willingness to pay. However, this model may be too far ahead of its time for Chinese customers. After all, with a unit price in the tens of thousands of dollars and a monthly charged membership subscription fee, even if Mirror enters the Chinese market, it will be geared more towards high-end consumers. For the masses, it's entirely possible to buy a variety of inexpensive products locally to assemble a basic version of Mirror’s features. Aside from the in-person coaching experience and mutually supervised workout atmosphere of traditional gyms, which are hard to replace, internet fitness is disrupting the traditional fitness business model with free or very low cost online membership models and complete sports fitness layouts. In the near future, there will be more products like Mirror that use smart hardware as part of their core offering. The price of the hardware may be significantly lower or nearly free, and the merchants will then use the membership model to maintain long-term revenue, encouraging smart fitness devices to enter Chinese people's homes on a large scale.
04 | Sodexo: It’s all about what you eat
A good friend of XNode, Sodexo is one of the pioneers in driving healthy eating. The Sodexo Group is a multinational catering and tourism services company. With more than 40 years of experience, Sodexo Alliance has become one of the world's largest multinational companies in the field of food service and integrated logistics management, and is ranked among the world's top 500 companies. On October 19th,2018, Sodexo held its Open Innovation Day in Shanghai. It was the first time that Sodexo China showcased its accelerated projects with XNode. XNode helped Sodexo deep-dive into the startup community and re-position themselves as a startup-friendly brand; co-working with relevant startups, and generating momentum for internal change and intrapreneurship.
Sodexo has been able to successfully address both nutritional needs and environmental impact. In addition to placing great emphasis on providing fresh and healthy food, Sodexo also facilitates the customer's user experience through the use of digital technology by enabling customers to order via mobile phones, and offering contactless payment and home delivery services especially during the pandemic to ensure food safety and customer satisfaction.
XNode Innovation Insight
The pursuit of a healthier lifestyle is an eternal topic, and many industries are trying to capitalize on this trend and become leaders in their market segments. Both the newcomer in the beverage industry, Yuanqi Forest, and French food services giant, Sodexo, are constantly innovating in their approach to providing healthier products and services to consumers. In the face of increasingly discerning and health-conscious consumers, some of these innovations are “flash in the pan", and some are able to have a profound impact on the industry. Only by listening carefully to the needs of consumers and developing user-oriented innovations, can new ventures have long-term viability.
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