A report drilling down into the generational divides of the China market reveal valuable opportunities for New Zealand exporters as the country emerges from its covid lockdown funk.
The BCG report Mind the Generation Gap, released through market insights company China Skinny, highlights the value of China’s aging demographic as middle-class affluence continues to grow.
In her foreword to the report, BCG MD Cinthia Chen, leader of the China consumer insight division, notes China’s domestic economy is showing initial signs of recovery as travel, consumption and finance demand lifts.
She says the growth of China’s middle class, even with a relatively steady or declining population, will be a steady consumption driver in lower-tier cities for several more years. From 2022 to 2030 China’s middle-class and affluent consumer (MAC) market is estimated to increase by about 80 million, claiming almost 40% of the population. Over 70% of the emerging MACs will live in cities that are third-tier and below.
Third-tier cities typically have populations of 150,000 to 3 million.
As consumers move from defining their wants as “we” to “me”, the report predicts trading up in quality will be a marked trend in coming years, something noted even during the recent tough economic times, with a greater willingness to pay for premium brands across multiple categories.
The food and beverage sector is predicted to enjoy the largest effects of trading up, with a net 26% gain in consumers seeking to trade up in their fresh and organic food choices over the coming 12 months. This is exceeded only by healthcare at a net 27%.
This holds upside for NZ food and beverage exporters.
A recent NZ Trade and Enterprise survey found Chinese consumers have the highest regard for NZ food and beverage products, with 80% of them regarding this country as a premium, high-quality food source.
This contrasts with United Kingdom consumers, of whom 45% regard NZ as such a source, while in the United States only 26% see NZ as a premium producer of food and beverages. Only a third of Japanese consumers perceive NZ as a premium source of food and beverages.
That awareness has also only just lifted after tipping down in the previous two years.
The BCG report narrows down on “Gen X and Y” and baby boomers as holding accumulated levels of wealth, while experiencing the strength of China’s most recent economic gains to the fullest effect.
Between them the groups also account for 80% of China’s population, and Gen X and Y are regarded as the “twin engines” of growth, despite the recent focus on the younger Gen Z market.
Sitting at the top of the career ladder, Gen X and Y have a strong willingness to consume and trade up for a higher quality of life. Typically, they spend 17-30% more to purchase premium offerings across all categories.
But as a sector, baby boomers also have a big influence on purchase patterns in coming years.
They are the fastest growing sector for social media use and at 16% they match Gen X, with many starting their own YouTube-type video followings.
Their interest in maintaining good health extends to a good knowledge and strong interest in nutritional products and dietary supplements and they are prepared to pay for them. Traditional Chinese medicine supplements are also important for 30% of them.
The report authors recommend marketers consider the Gen X, Y and boomer market more seriously than they have in the past.
“The overall demographic dividend may have disappeared, but a middle class of over 400 million constitutes is a powerful consumer base and the Chinese consumer market continues to possess tremendous resilience,” says Veronique Yang, MD for BCG in China.