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Going Digital in China. What Is the Recipe for Success

A lot has been written about the rising Chinese middle classes putting greater emphasis on a balanced and healthy lifestyle. The result is clearly visible in the newly established organic supermarkets and restaurants all over Shanghai. A healthy meal is, however, only part of what Chinese customers are looking for, and an organic label might not be the single, decisive success factor for these ventures.

There is a history of scandals involving Chinese brands and a general mistrust of domestic production in the food and beverage industry. Trust is only slowly being regained, and supply chain transparency is what customers are increasingly seeking. This transparency should ideally be visible from farmer to consumer or, in other words, from the field where the crops are planted to the dining table.

Consider, for example, Hunter Gatherer, which positions itself as a seed-to-table ecosystem that serves and celebrates real food. Products sold at Hunter Gatherer outlets are sourced from their own local organic farms with the goal of building a more sustainable food system in Shanghai and beyond. These products can also be enjoyed directly in healthy lunch bowls at the food courts located in the center of Hunter Gatherer supermarkets.

While Hunter Gatherer seems somewhat conservative from a digital point of view, the Saucepan has added the e-commerce ingredient to organic with their simple, healthy meals. Initially planned as a restaurant only, the idea was abandoned as the Shanghai market turned out to be far more demanding than expected. But by embracing the emerging e-business hype, a new concept was quickly found. Saucepan began by delivering ingredients for quick and easy home cooking, but the approach did not work out as expected. The client base remained rather small and because hygienic delivery required too much packaging, customers were hesitant to make repeat orders. Based on this experience, the business was converted to a pre-cooked food delivery service and this time the concept seemed to work.

Since Shanghainese evenings are busy and agendas are packed, dedicating time to cooking is not an option for many.  One way to increase demand in such circumstances was to shift consumption from evenings to lunchtime, and this is the basis of what Saucepan does. The company currently serves ready-to-eat meals and salads, all made with fresh ingredients. Hot meals are delivered pre-chilled and can be heated in minutes. Elements that do not require cooking come in a separate container. The underlying concept is to target customers who care about what they eat and consumption of healthy food is booming in China. Since mid-2017, Saucepan has also been reaching out to Chinese customers, placing a strong emphasis on service as key differentiator in a city where client service still has a lot of catching up to do. Personalized service comes at a cost, however, and it is difficult to scale.

For online grocer Yimishiji, scalability seems more straightforward in comparison. This Shanghai-based start-up supports local producers of organically grown food. Yimishiji targets not only consumers with experience overseas who might be conscious of food safety and health issues but also families with young children who are concerned about the origin of their food. This is why the venture puts such an emphasis on product quality assurance. Prices are set against the benchmark of high-end grocery websites. The largest proportion of revenue is shared with the farmers to compensate for the risk of lower yields originating from organic production methods while the remaining revenue is retained to cover delivery losses. The luxury of having its own warehouse and logistics team to ensure delivery quality is only possible because of the company’s focus on the densely populated city of Shanghai.

Like Hunter Gatherer and Saucepan earlier, Yimishiji is also profiting from the healthy lifestyle boom. The readiness is there, and people are willing to spend more of their income on better and safer food. To build up consumer trust, Yimishiji focuses on transparency and sustainability. Each product is labelled with the grower’s name and the distance from downtown Shanghai to the farm is published to encourage consumers to visit the farms, meet the growers, and develop a personal rapport.

These three cases show how ingredients are added in varying quantities and combinations to create businesses which adopt their very own, unique signature model of operation. Next time you are in Shanghai, you might consider visiting one of the newly established organic food outlets for lunch. You will certainly find the next generation’s selection of ingredients ready to accommodate changing preferences and tastes in one of the world’s most fast-paced and demanding consumer markets. And what is more, a steady stream of innovative ingredients will soon be joining the list.