China: Artisan ice cream is king but will COVID worries dampen sentiment?
According to data and analytics company GlobalData, the Chinese ice cream market is set to expand to CNY62.7bn (US$4.2bn) by 2026, registering a CAGR of 3.8% between 2021 and 2026.
But store and restaurant closures promoted by the surge of COVID-19 cases in the country could hamper on-the-go consumption this winter, the company’s consumer analyst Bobby Verghese predicts. “The omicron caseload resurged in late 2022 as authorities relaxed the stringent Zero-COVID policy amid the economic slowdown and rising public resentment. With consumers sheltering at home, on-premise and on-the-go consumption of ice cream will be hit. Moreover, the rising raw material costs due to the pandemic and the Russia–Ukraine conflict are escalating product prices."
In its market research, GlobalData revealed that Chinese consumers have been spending more on ice cream in recent years, with premium brands such as Yili and Cornetto gaining significant traction among millennial and Gen Z consumers. Value brands have also been on the menu. Meanwhile, new legislation introduced in the summer has meant that the authorities have been on the look-out for so-called ‘ice cream assassins’ – stores that are hiding prices or selling ice lollies for more than they are worth.
“Urban shoppers are already bemoaning the dearth of cheap traditional popsicles in retail stores,” said Verghese. “Also, authorities are cracking down on obscure local brands that sell costly ice cream without clearly indicating prices on packaging labels.”
The growing appeal of artisanal ice cream
According to GlobalData’s market research, China’s per capita expenditure (PCE) on ice cream increased from US$1.8 in 2016 to US$2.8 in 2021, surpassing the regional average of US$2.7. This is set to increase to US$3.4 by 2026, the company predicts.
Artisanal ice cream is set to be the fastest growing product segment within the category with a CAGR of 4.5% - followed by take-home and bulk ice cream. Shoppers are most often buying ice cream at convenience stores, which are the leading distribution channel for this category, followed by hypermarkets and supermarkets.
Verghese concluded: “Rising consumer purchasing power has catapulted China to one of the world’s top ice cream markets. Consumers are spoilt for choice with thousands of international and domestic brands fighting for shelf space. Innovation is rife, with consumers demanding natural and healthy formulations and novel flavors. By tapping events, such as the Single’s Day and 618 shopping festivals, and occasions such as the Qixi Festival and the Chinese New Year, leading brands have broken the perception of ice cream as a seasonal treat.”