Quick – which do you think is doing better in the market? Plant-based meat or non-alcoholic beer? It may not be the one you read about more often these days...

In recent times, companies like Beyond Meat have brought plant-based meat substitutes into the public eye considerably.

However, when examining some facts and figures about meat and meat substitutes, an OECD (data.oecd.org) study shows a volume of 323 million metric tons of consumption in 2020 for all types of meat, while meat substitutes of all types accounted for 470 million kilograms in 2020 – converted to metric tons that’s only 470,000 tons. That’s a share of 0.145% – absolutely miniscule.

By contrast, non-alcoholic beer seems to be doing much better. While there isn’t a single global volume share number available as easily, total global revenue is estimated at 25 billion USD out of a total beer market of 528 billion USD – a share of 4.7%. That’s pretty significant and shows that non-alcoholic beer has made a niche for itself that somehow, plant-based meat has not.

So, based on the numbers, non-alcoholic beer is doing about 30 times better than meat-substitutes – plant-based meat being only a small part of that latter category.

The question becomes, why is it this way? And the answer, as always, lies in what consumers really want and whether or not brands are able to truly satisfy those wants.

While there doesn’t seem to be one comprehensive survey asking the same questions, surveys about why consumers choose non-alcoholic beers show a few key reasons popping up consistently. Across South-East Asian countries, reasons around “cutting down alcohol consumption” or “cutting down calories from drinking” are big reasons – suggesting that people who regularly consume alcohol choose non-alcoholic beer to control their intake. Reasons cited in European countries are similar, though usually expressed as wanting to avoid the side-effects of drinking too much alcohol (hangovers, mostly). Consistently across markets, non-alcoholic beers rate as refreshing, good-tasting, satisfying, and often even healthier than traditional soft drinks.

Surveys around why people consume plant-based meat cite two key reasons consistently – a perception that meat-substitutes / plant or soya based meat is healthier, and a perception that it is better for the planet. A US survey shows a per capita consumption of 0.3 kg of meat-substitutes a year, out of a total per capita meat consumption in excess of 98 kg. That’s a share of less than 0.03% – which suggests that even the people who cite these reasons for eating meat-substitutes aren’t eating a lot of it. Also, comparisons of the nutritional value of several different brands of plant-based burgers show that they often fail the two fundamental premises on which consumers choose them – being healthier than meat and tasting similar to meat.

Perhaps the core problem is that meat-substitutes don’t really have a clear target segment. Non-alcoholic beers aim at people who normally drink beer, but for a variety of reasons don’t want to do so. Which leaves plenty of room for something that tastes and feels like a beer but isn’t alcoholic.

Last of all, while a lot of non-alcoholic beers taste like the real thing and cost a lot less, the better tasting meat-substitutes are usually much more expensive than the real thing.

Interestingly, China is the largest market in the world for meat-substitutes, at USD 2.24 billion in 2022 (estimated) out of an estimated global total of around USD 7 billion. Also, while per capita consumption of meat-substitutes is low at 0.1 kg, it is a larger percentage of the per capita meat consumption of around 40kg, which is a signal for potential growth as meat consumption in the market grows.

All of which would seem to point to China being a better place to focus on meat-substitutes than most other markets, but doesn’t take away the challenge of segmenting consumers based on their needs and picking a segment that you can actually win in.

For deeper data and insights on how you might go about doing this in China, get in touch with us at enquiries@searchlightchina.com

We’re now on day 36 of lockdowns in Shanghai (longer in Pudong) and it’s been very educational watching what consumers do, what they buy, which businesses manage to create opportunities for themselves and so on. Here are some key lessons we learned.

1. The importance of diversified supply chain

Shanghai is, after all, just one city. Even if it represents 25 or 50% of your business, there is still a market in other cities for most businesses that they can continue to service, possibly try to grow to compensate for the loss of revenue in Shanghai.

There are many companies who are unable to to do this for one simple reason – all their supply chain is in Shanghai and it’s been locked down with everything else.

While they’re trying hard to find alternative sources, it’s obviously very difficult to accomplish at short notice and while working from home.

2.The importance of diversified markets

By the same token, businesses that weren’t completely dependent on Shanghai have managed to keep their revenue chugging along – even if it’s not as healthy as before. This assumes, of course, that they weren’t entirely dependent on Shanghai for supply. Of course, Shanghai is a big market and there will be a revenue hit for a couple of months but that is less damaging than if it was your only market, which is the case for a lot of the smaller retail businesses that haven’t yet looked beyond one city.

3. Voluntary group-buys, a new (old) channel for brands to reach consumers directly:

As a preface to this point, bear in mind that big-city dwellers in China are used to a level of delivery convenience unparalleled elsewhere in the world. It was feasible to order a single drink (bubble-tea and such) because delivery costs were so low and it was possible for a delivery courier to show up right at your doorstep.

Obviously during lockdowns, couriers aren’t allowed beyond the main gate of a compound, most restaurants are closed anyway, most couriers are in the lockdown as well and no volunteer in a compound is going to appreciate making deliveries of small individual items – so that entire ecosystem crashed completely.

However, what took over very swiftly is various forms of group buys orchestrated via informal groups on WeChat (mostly). Residents of a building or compound coming together to meet a minimum order requirement for all kinds of things – from essentials like vegetables and dry goods to coffee, indulgences like KFC, Shake Shack and wine. After the initial few weeks of short supply, almost everything is now available through these channels and companies that have found ways to quickly build delivery capability and social media groups of their consumers have rescued at least some revenue through these means.

What’s particularly interesting about this new development is the brand-new, direct channel to groups of consumers who have self-selected themselves as being interested in a brand or category. Premium coffee drinkers ordering Nespresso pods, for example – under normal circumstances it would have been really difficult for a brand to find them – during the lockdown it’s become really easy because people are voluntarily registering to set up group buying, finding participants, collecting the money and placing the orders. Why should this stop when the lockdown ends? It’s a golden opportunity for brands to bypass normal distribution channels and sell directly to these consumers.

Incidentally, purchases during the lockdown weren’t just food / consumables / classic FMCG. Two appliances that have done really well (anecdotally, we don’t yet have hard data for this) are refrigerators – especially the smaller ones used as extra cold storage – and air-fryers. Given the number of people who would normally never cook for themselves who are now forced to do so, there are probably other kitchen appliances as well that have had some new opportunities come up during lockdown. Of course, if they weren’t adequately stocked in Shanghai before the lockdown started, that opportunity has passed them by.

Of course, lockdowns are (hopefully) not frequent, recurring events – for the most part it makes sense for businesses to optimize for business as usual, but these circumstances at least raise the question of having a plan B in place. Also, problems or crises often bring opportunities of their own, some of which can become long-term and very valuable for businesses that think differently and move quickly.

If your business in China is facing challenges that you’d like help to navigate, reach out to us at enquiries@searchlightchina.com

As Shanghai enters the 12th day of what was originally billed as a 4 day lockdown, the impact on businesses is very visible. We have clients who are affected and looking at their struggles and financial reforecasts for the year gives us a sense of the pain that many industries will face in China this year.

Nowhere is this more marked than retail and hospitality – businesses that depend entirely on people being able to move about freely. For this piece, we’ll focus on the hospitality business, the impact of the latest round of lockdown in Shanghai and some thoughts on what to do going forward.

We went back and looked at some statistics from 2020 when the pandemic first hit and there was a round of closures / voluntary quarantine and so forth. Bear in mind that then, it was countrywide measures whereas now we’re looking at far stricter measures but only for key cities and affected areas.

What stood out was a sharp drop in room occupancy (71.4% in Beijing and 63.9% in Shanghai) that led to corresponding drops in REVPAR (75% and 69% respectively). Revenue for all star hotels in China in 2020 dropped from 671 billion RMB in 2019 to 461 billion, the first time since 2014 that the industry shrank. Back in 2020, 73% of all hotels in China closed for an average of 27 days during January / February 2020 – which was the peak CNY travel season.

All of which goes to show that lockdowns in 2022 will have similar, deep, painful impact on the hotel industry – even if it’s not nationwide this time around. Since 2020, domestic travel within China has slowed and international travel to China has slowed even more, with only citizens and work / residence visa holders allowed back, so the industry still hasn’t recovered from the blows of 2 years ago.

One interesting dynamic that came up as China worked out a quarantine policy around April 2020 was the creation of the “quarantine hotel” business model. Hotels from almost every star category feature in the list of approved quarantine hotels where incoming travelers have to stay for 14 days, paying for their own rooms and meals. By and large, room rates are similar to normal rates, meals are fairly basic and not provided by the hotel kitchen, and there is no housekeeping for the duration of your stay – so it seems like a good way for a hotel to keep revenue going during this time. On the downside, however, there are some very tangible cost issues around putting in more manpower to ensure contactless delivery of meals, disinfection, keeping track of each patient’s quarantine history and so forth. Staff are also reluctant to work in a quarantine hotel since there is some additional risk of being infected. Most important is the risk that being branded a “quarantine” hotel may adversely affect the brand in years to come, with people reluctant to visit it just after these measures end.

What can you do if you’re running a hotel and need to find ways to survive the next 12-24 months as China continues to pursue strict lockdowns and other restrictions to achieve zero-COVID? Clearly, travel is a fickle source of income since you could open up this week and be shut down again next month. How can you drive revenue up and costs down without diluting or losing your brand for the long term?

There is no one-size-fits-all type of answer here but the core of it lies in redefining a local market that you can serve which is not dependent on travel, is available in any time but a total lockdown of the city and is either light on resources or delivers consistent long-term revenue. Depending on your hotel positioning, location and the typical consumer profiles you serve there are a few different ways to approach this which we can help you think about.

At Searchlight, we work with domain-experts in various fields as and when needed. We have access to experts from the hospitality industry who work with us to help clients address their short-term business pressures without losing sight of their long-term brand health. Get in touch at enquiries@searchlightchina.com to find out more.

As we look back on the client projects we worked on through 2021, one thing that stands out as a common theme across many of them is that the client already had more than enough data or research or information of various sorts to make good strategic decisions. Yet, somehow, they were usually in one of two modes – either looking for even more data and research to justify decisions or making decisions without considering any of the information they already had at hand.

In this post I’ll try and lay out why this happens and how to avoid it (apart from the obvious solution of hiring us to solve the problem, of course!)

First, some quick examples from the clients we worked on:

1. An online subscription platform where everyone in marketing was obsessed with growing the user base until we figured out that their main issue was the hemorrhaging of heavy users every year
2. A retail client with almost 30 people in the marketing department, an annual research budget well in excess of 2 million RMB and tons of research that hadn’t got a clear brand architecture in place and did every campaign starting from first principles instead of building on what they knew
3. A retail F&B chain intent on building more outlets instead of first understanding how to make their existing outlets profitable by getting more of their members to visit more often

There were others, of course, but I was taught long ago that 3 bullet points is all you need so I’ll stop there.

Why does this happen? To my mind, there are three fundamental reasons – sometimes driven by diametrically opposite dynamics that work in organizations at different stages of development.

1. Lack of understanding of what a differentiated strategy should look like

Many clients we meet don’t really understand the power of a clear strategy. They think doing what their competitors do, slightly cheaper, faster or better, will do the trick. They’re endlessly tactical in approach, always rushing to produce one more “seasonal” or “topical” campaign rather than setting up a clear long-term strategy built around a clear brand architecture

2. Disconnect between the data and the decision-makers

This happens usually because the person who has access to the data doesn’t have to make decisions and the person who’s making decisions doesn’t have access to the data.

I’ve seen it happen in a large organization where the research director thought her job was to manage the research budget and timelines for delivering the research projects marketing commissioned. She never thought about things in the context of what decisions needed to be made, what sorts of information were required, what already existed and therefore what minimum additional information needed to be generated. The head of marketing, on the other hand, never thought in that way either, so the briefs to the research team were not based in information requirements for strategic decision-making.

I’ve also seen this happen in startups where the CEO doesn’t understand marketing / consumer data, someone else is managing the consumer / transaction data but doesn’t use it to create reports or headlines for the CEO to act on.

Both of those situations lead to lack of a clear research / information management framework and break the link between strategic decision-making and the data that should guide it.

3. Lack of ownership of an overall business outcome

This is slightly linked to the previous point but a bit different, tending to happen more in larger teams where a silo mentality creeps in. The core problem is that people think they’re responsible only for one specific thing rather than understanding their role in driving an overall business outcome.

For one client, the head of marketing kept telling the entire marketing team that their job was driving traffic to the store – what happened after they got there was not their problem. They didn’t spend enough time thinking about what consumers did in the store, what they did after they bought the product and experienced it, how they then talked about it to other consumers – all essential parts of the purchase-decision-making chain and therefore of marketing strategy. Brand managers thought their role was to get briefs out the door on time so the agency could come back with campaigns – not collate everything the organization knew about the business to identify what they really needed to do to drive it forward.

At another, each “brand manager” focused on their role of driving either annual subscriptions or one-off orders without understanding that often the same consumer was behind both kinds of transactions and that there was considerable overlap between what they were all trying to do. The “consumer service hotline” people thought their job was offering compensation for damaged product rather than understanding how disappointed the consumer was and finding ways to address that disappointment with the brand. Small wonder that the brand lost large proportions of its heavy users when their subscriptions ended.

How do you avoid these situations?

Well, for starters, it’s really important to understand how information / data / research feed a good, differentiated business and marketing strategy, and what that strategy should look like. This means, right at the start and perhaps every 2-3 years, doing a thorough business and marketing review, ensuring there is a well thought-out strategy in place based on consumer, market and business knowledge.

Then, it’s important to preserve the link between information and decision-makers so that there is constant input into the ongoing progress of the business against that strategy. This means a proper MIS system so that on a regular basis, key business information is reviewed by the people who make decisions from it. A marketing head who does not know revenue and brand health data or a CEO who doesn’t know last week’s numbers can’t make good decisions about the business.

Last, it’s important that everyone in the organization sees their role in driving the holistic goal that defines success for the business. When people define their role very narrowly they are likely to miss the wood for the trees.

You’ll notice that my headline had the word “insight” in it and I’ve very cleverly avoided getting into it later on. I’m not going to get into it now either, except to say insights are what you build strategic choices on. Sometimes that means taking a leap from the data you have, sometimes it means unearthing data that other people don’t have – either way it gives you an “aha” moment on a way to build your business that isn’t entirely obvious until you see it.

At Searchlight we work with our clients to help them make better decisions about business and marketing strategy. A big part of this is creating better processes and decision-making frameworks that align different internal specialists and all internal and external information around a clear organizational objective and strategy. Reach out to us at enquiries@searchlightchina.com for more.