China Consumer

Fighting the flab

An introduction to the brands driving China’s ‘meal replacement’ vogue

Wonderlab w

Better than chicken and rice? WonderLab’s meals in a bottle

To impart the impression that leafy greens packed in cute, see-through bottles could keep consumers in shape, a Chinese food start-up called Sweetie Salad hired a hundred bare-chested Greek-looking foreigners in 2017.

Sporting Spartan warrior costumes (think of the movie 300), the phalanx paraded through Beijing’s Sanlitun district, showing off their six-packs and biceps.

However, police then stepped in to stop the publicity stunt and some of the ‘Spartans’ were arrested. Sweetie Salad got tremendous publicity but its food turned out to be a fad and the company closed in 2019.

But the shutting down of Sweetie Salad does not make the case that the Chinese aren’t interested in developing healthy eating habits.

Quite the contrary: demand for more wholesome food has been growing from Chinese consumers, fuelled by changes in urban lifestyle and a new generation of shoppers more interested in health and their body image.

Eschewing nosh-ups, they go for refreshments that are nutritious, high-fibre and low-calorie. Best of all, the new products save them from the chores of cooking.

A case in point would be the ready-to-drink milkshake called Dikakong or Smart Calories, which was launched by snack giant Pepsi last June (see WiC501). Each bottle is said to be able to keep dieters full for up to four hours, despite an energy load capped at 200 calories. Protein bars, instant porridges and soups-to-go are other popular options.

According to data from leading e-commerce platform Tmall, sales of these items, better known as ‘meal replacements’, nearly quadrupled on the year in 2020, with average spend in the category crossing Rmb3,000 per person.

By 2022, the market could reach Rmb120 billion ($18.6 billion) in revenues, forecasts market research firm Euromonitor.

The maturing of China’s snacking culture, which implies a wider acceptance of processed, ready-to-eat nibbles, has provided a strong foundation for meal replacements to flourish as substitutes (see WiC485). Many of the newer food items are seen as snacks that have been fortified with nutrients and re-engineered to strip out much of the less desirable contents.

“We are surrounded by junk food – which is high in sugar, oil and salt – as well as additives, preservatives, artificial colours and flavourings. These substances give you excessive energy and yet fail to nourish you,” Zhang Guangming, a former nutritionist to China’s Olympic athletes, told 36Kr, a local news source. In his new more entrepreneurial career Zhang has launched a collection of protein bars under the brand ffit8. “My goal is to educate the public on consuming quality food, meaning good protein, low sugar, and good fat,” he added

Just over 700 new ‘meal replacement’ brands came to market last year alone, taking the total to more than 3,500. One of the better-known players is WonderLab, a two year-old label backed by IDG Capital, Cathay Capital and Tiantu Capital (see WiC446). It had sold more than 30 million bottles of its protein powder blend by the end of December. Tagged as “your bodyshape manager,” WonderLab shakes are described as nutritious, combining the protein of a cup of milk, a 100-gram steak and 30 chunks of spinach. Providing 25 grams of protein, the drink is designed to keep hunger at bay for up to five hours (longer than a bowl of rice and a piece of chicken breast can manage, the company claims).

The drink contains 500 fewer calories than a typical beef burger, WonderLab adds, meaning that its consumers can avoid the 7km of jogging or 60-minute skip needed to burn off the extra fat.

A differentiator between WonderLab and other milkshakes that make similar claims is the range of flavours on offer, such as Earl Grey milk tea, hazelnut chocolate, genmaicha tea and walnut-sesame. Some of its shakes add ingredients like collagen and cranberry extracts, claiming beauty benefits. WonderLab shakes were the bestseller among female dieters in China over the last two years.

Reporting more than a million health-conscious customers, the Shenzhen-based firm is well positioned to tap another lucrative market: health supplements. Its recent new offerings include probiotics, fibre supplements and vitamin tablets.

But it is Wangbaobao, a Beijing-based oatmeal brand, that is ahead of the chasing pack when it comes to fundraising. While many of its peers have not got beyond series A investment, Wangbaobao closed its series C financing in December, raising hundreds of millions of yuan from a consortium including MatrixPartners and Hillhouse Capital.

Over the past two years Wangbaobao has emerged as the top-seller in the cereal category during the country’s various online shopping festivals (surpassing Quaker Oats and Kellogg’s in popularity). Offline, it took just seven months to scale up its points of sales to 10,000, building out a sales network that accounted for 40% of its revenues as of the end of last year, according to Lieyunwang, a tech news source.

What helps Wangbaobao stand out is its marketing of the healthier method it says it uses to process its oats (low-temperature baking), as well as the innovative flavour profiles of many of its products (for example, peach oolong or the more savoury, pork floss with corn).

Producers of more expensive meal replacement products are also trying to improve on the profit margins made by more traditional (and less healthy) snack products. But because the meal replacement brands also outsource much of their food’s manufacturing, they face the same issues as the snack firms: limited bargaining power when it comes to their costs; dilemmas over quality control; plus the problem of differentiating the taste of their product vis-a-vis similar, rival offerings.

Another implication is that the meal replacement market – like that for snacks – will remain a competitive one, which explains why some investors have felt the need to hedge their positions by betting on multiple players across the segment.

Last year alone there were 19 deals that saw over 40 investors chasing 13 emerging meal replacement providers from China, according to TideSight, a zimeiti (and that figure doesn’t include similar transactions struck by traditional food giants such as Want Want, Master Kong and Nestlé – see WiC522 – which all want a slice of the budding market too.)

Of course, there is always the chance that investment in the meal replacement market starts to overheat, hurting the participants. Future demand for the product isn’t guaranteed either. According to a survey by DoctorDingXiang, a healthcare news platform, only 7% of consumers who had tried meal replacements for a month decided to stick to their dietary regime, while 52% of respondents indicated that it wasn’t a product that they would persist with over the longer term.

That said, there’s a lot of potential dieters in a 1.4 billion population. These can fill the void when existing consumers give up on the weight-loss habit…

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