2024 Consumption Outlook: More and More Need for “Cost Savings”

In 2023, a series of industry changes and new consumption phenomena all mean new changes in the consumer industry. So what will happen to the consumer industry in 2024? This article will provide you with some ideas. If you are interested, you can take a look.

2023 is a year of true "full opening", and there has been a fierce collision between changes in consumer demand and merchants' expectations.

Some hot tracks have torn off the fig leaf of conceptualization, and the top brands are no longer high and mighty. In order to reduce costs and increase efficiency, chain restaurant giants have chosen to try new businesses that they have never been involved in before. The competition in the new consumption track is becoming increasingly fierce, prompting various players to prepare for the final battle and continue to seize the sinking market.

As for consumers, after experiencing the backstab of "price assassins" and the awakening of consciousness from consumption upgrading to consumption stratification, people have become more rational, and their demand preferences have begun to shift towards cost-effectiveness and experience.

In fact, the series of industry changes and new consumption phenomena that have occurred in the past year are the result of the redirection of the entire consumer market. The industry trends reflected in them also hide the new logic of the comprehensive growth of the consumer industry in 2024.

1. Eat: Pre-prepared meals challenge traditional dining

Since the beginning of this year, although the voices of "boycotting pre-prepared meals" on social media have never diminished, it has not affected the rapid development of the pre-prepared meal industry in the slightest.

According to the "2023-2025 China Pre-prepared Food Industry Operation and Investment Decision Analysis Report" released by iMedia Research in July, the scale of China's pre-prepared food market will be 419.6 billion yuan in 2022, and is expected to reach 510 billion yuan in 2023, and is expected to rise to 1 trillion yuan in 2026. Under the "call" of the trillion-yuan market scale, the pre-prepared food market has become a visible new gold mine, both in terms of actual demand and product advantages.

The rapid rise of the pre-prepared food industry is largely due to the major challenges faced by the traditional catering industry in recent years. In the past three years, under the pressure of offline operations, leading catering chain brands such as Haidilao have closed stores one after another to curb their continued losses.

However, simply reducing the size of stores can only achieve the purpose of reducing operating costs. And although takeout can be used as an alternative, it can only receive a portion of the orders. Therefore, some companies with a complete supply chain began to think about developing pre-prepared food products, trying to solve the dilemma of offline physical catering business revenue obstruction through online retail operations. For example, Haidilao launched the "Let's Eat" series, and Xibei launched Jia Guolong Kung Fu cuisine.

Traditional catering companies' attempts to develop pre-prepared meals during this period can only be regarded as a helpless move. From a practical point of view, the pre-prepared meal business may not have brought much help to the leading catering giants in improving their revenue structure. One detail worth pondering is that Haidilao's financial report did not give much description of this business. And the relevant content circulated on the Internet only has the clue that "Haidilao's crayfish pre-prepared meals sold 10,000 boxes a day in the first week of listing."

In fact, if you recall a little, you will find that the hot sales of instant foods such as snail noodles and hot and sour noodles in the same period far overshadowed the popularity of pre-prepared meals. The real explosion of pre-prepared meals actually came with the gradual resumption of offline dining, when more and more traditional catering stores began to pay attention to and adopt them. It was also from this period that pre-prepared meals were regarded as the Pandora's box of traditional catering and became the target of public criticism.

Jingzhe Research Institute pointed out in the article "Who is hyping pre-prepared meals?" that according to the average salary standard of 6,000-8,000 yuan for chefs in first-tier cities such as Beijing and Shanghai, using pre-prepared meals to optimize the personnel structure of catering stores can significantly reduce labor costs. And after streamlining the on-site cooking process, the store's back kitchen area can also be reduced, thereby further compressing rental costs. So on the whole, pre-prepared meals are indeed a life-saving straw for the physical catering industry to overcome difficulties.

Based on the unique value of pre-prepared meals in terms of operating efficiency, it is a general trend for catering stores to adopt pre-prepared meals on a large scale. This is indeed the case. Data shows that the largest demand for pre-prepared meals in China comes from the catering industry, with more than 85% of pre-prepared meal products sold to the B -end. Compared with consumers' concerns about "eating food packages when dining in", the industry phenomenon of large-scale use of pre-prepared meal packages for takeout is a reality - according to Everbright Securities' estimates, the proportion of food packages used in takeout can reach 70%-80%.

It should be noted that according to the China Cuisine Association, pre-prepared meals can be divided into four categories: ready-to-eat pre-prepared meals represented by eight-treasure porridge and canned food; ready-to-heat pre-prepared meals represented by quick-frozen dumplings and self-heating hot pot; semi-finished ready-to-cook pre-prepared meals that need to be heated and cooked; and ready-to-prepare pre-prepared meals that do not require washing or cutting, and are often also called clean vegetables.

Among them, except for ready-to-cook pre-prepared meals, the other three types of pre-prepared meals have been completely popularized in daily life. The reason why consumers have prejudices against ready-to-cook pre-prepared meals is that offline restaurants not only provide customers with food, but also the dining experience is one of the contents of consumption. Eating a meal package in a restaurant and buying a meal package to heat up at home are obviously two different consumption scenarios.

Therefore, the real challenge for pre-prepared meals is not traditional catering, but how to break through negative product perceptions and give consumers the value expectations they deserve from price to experience.

There needs to be a "reconciliation" that satisfies both parties between catering businesses that seek to reduce costs and increase efficiency and consumers who consume rationally but also care more about experience.

2. Drink: Coffee chains compete with new tea drinks to compete for market presence

As an offline consumption format where user education has already matured, internal competition in the two major offline ready-to-drink tracks of new tea drinks and chain coffee brands has become increasingly fierce.

From the product innovation competition triggered by popular ingredients such as kumquat and raw coconut latte in previous years, to the price reduction war at the beginning of 2022, to the expansion competition around the sinking market throughout 2023, the offline ready-to-drink market has competed in almost all competitive dimensions.

But whether it is Heytea, Nayuki's Tea, Luckin Coffee or Kudi Coffee, the players in each segment looked at each other and found that everyone seemed to be taught by the same master and could not break the trick. So when they could not make a difference in product development, user operation and subsidy promotion, they could only choose to open up franchising, trying to use external forces and time advantages to accumulate food and troops as much as possible before the industry war. As a result, in 2023, horse racing and land grabbing became the common theme of chain coffee brands and new tea drinks.

As the first leading player to open up to franchising, Heytea won the race to expand its presence after announcing its opening to franchising at the end of 2022. Data shows that as of the middle of this year, six months after opening up to franchising, the number of Heytea stores surged from 800 to 2,000, of which more than 1,000 were franchise stores alone.

*Image source: Heytea official Weibo

Perhaps seeing that Heytea has achieved scale first through the franchise model, in July this year, Nayuki, as the "first stock of new tea drinks", belatedly announced that it would open up for franchising. According to the 2023 semi-annual report released by Nayuki, the number of its stores has reached nearly 1,200. According to the data from Zhaimen Canyan, as of December this year, Nayuki's total number of tea stores was 1,492, while Heytea's total number of stores reached 3,027, twice as many as Nayuki.

In the coffee chain market, the gap between Kudi and Luckin Coffee, which are from the same school, is also obvious. According to data released by Kudi Coffee on October 22, Kudi Coffee had 6,061 stores worldwide in its first year of operation, ranking fourth in the world. During the same period, Luckin Coffee announced that the number of stores reached more than 13,000, more than twice the number of Kudi Coffee stores, and Luckin Coffee announced plans to increase this scale to 15,000 by the end of 2023.

It is worth mentioning that the fierce competition among new brands has also prompted old brands to join the expansion war. On November 2, Starbucks released its latest financial report showing that as of the fourth quarter of 2023, the total number of Starbucks stores in China reached 6,806, a year-on-year increase of 13%. It is conceivable that with more and more chain coffee shops occupying city streets and even penetrating into county markets, the ready-to-drink track will inevitably experience a close fight.

However, before the competition for land grabbing reaches its final result, new tea drinks and coffee chains are also facing new challenges. One of the biggest problems is that the limited customer flow has been overly diluted under the extremely rapid expansion strategy. The long queues in front of the stores are gone, and the "seller's market" has become a "buyer's market." Therefore, in addition to competing for existing stores by location, brands are also faced with the problem of how to attract consumers' attention.

At present, we can see that brands such as Luckin Coffee and Kudi continue to provide price subsidies to maintain user repurchase, while new tea brands such as Heytea and Nayuki frequently use joint marketing methods to attract the attention of the audience with the help of well-known IPs. However, what also caused the industry to reflect is that new brands such as Bawang Chaji have quietly joined the battle at this time. Although their scale is not as large as other leading brands, judging from market feedback, the second echelon, which is temporarily behind in scale, is not without the opportunity to obtain a ticket to the decisive battle.

From this, we can also judge that in the future, while the new tea beverage and chain coffee brands will continue to attract users to repurchase through price wars, they will still need to constantly create a "sense of presence". On the one hand, they will consolidate the market advantages brought by the store scale, and on the other hand, they will resist the impact of new brands by strengthening user awareness and accumulating brand assets.

In 2024, the competition may no longer be about the product itself, but the war for hot products and subsidies will still be two important battlefields for coffee and new tea drinks.

3. Fun: "Exquisite picking" also needs to have a sense of experience

As the year when the tourism market has fully entered the recovery stage, the various industry phenomena that emerged in 2023 were unexpected by major tourist attraction operators and even local cultural and tourism bureaus.

In October last year, the Jingzhe Research Institute published an article titled "The Rise of Reverse Tourism, Are Niche Attractions Ready?" , revealing the industry trend that "young people are beginning to choose niche attractions and non-tourist cities as travel destinations." During holidays and even weekends, a group of young people working and living in big cities pack their backpacks and buy tickets to surrounding third- and fourth-tier cities. These unpopular cities may not be as famous as the Three Mountains and Five Peaks, but in the short two-day weekend, they are enough to allow people to experience a lifestyle they have never had before.

More importantly, in third- and fourth-tier cities, you can stay in a five-star hotel for only 300 yuan, and you can taste local food with local characteristics for 50 yuan per person. Tourists can not only satisfy the freshness brought by tourism in the atmosphere of the small city full of fireworks, but also relax their body and mind efficiently at a relatively low cost.

When public transportation was fully opened in early 2023, the concept of traveling to experience local life and a foreign lifestyle quickly spread. From Zibo, Shandong in the first half of the year to Wuhan, Jingdezhen, and Harbin in the second half of the year, college student special forces and young urban white-collar workers not only left the mark of "Internet celebrity cities" wherever they went, but also integrated the concept of fun that emphasizes experience into various consumption scenarios.

Therefore, when the long holidays come, some tourists from other places do not rush to the hotel after arriving at the airport or train station. Instead, they open the review software and recommendation platform on their mobile phones, and go directly to the food streets well-known to the locals, forming long queues in front of the down-to-earth Internet celebrity shops and old restaurants. After a hearty meal, they will start their journey of understanding this unfamiliar city with a free-spirited CityWalk or a free-spirited CityRide.

In short, when it comes to having fun, people no longer just pursue a check-in experience, but truly desire to feel the unique life atmosphere of the destination and find the essence of life in various down-to-earth scenarios.

Based on this simple and realistic attitude towards fun, an online video or a hot event may become an "invitation letter" to attract tourists from all over the country on the seeding platform. The "highlight" that is more direct than content seeding is offline performances such as concerts and music festivals.

The 2023 China "Performance + Tourism" Consumption Trend Report shows that concerts and music festivals are the two types of business with the largest number of audiences, of which concerts account for 59.6%. In this summer, the number of performances, box office revenue, and the number of audiences of tourism performances increased by 235.34%, 496.20%, and 717.85% respectively compared with the same period last year. According to ticket booking data from Tongcheng Travel Platform, the performances held by key scenic spots across the country during the peak summer season attracted a year-on-year increase of about 60%, which is significantly higher than the overall passenger flow of scenic spots across the country.

One example that cannot be ignored is that before and after the "TFBOYS Ten Years Concert" this summer, online bookings for local accommodation in Xi'an increased significantly compared to the same period last year. In particular, from August 6 to 7, when the concert was held, the total number of local travel orders increased by 738% year-on-year, with ticket revenue of 35.76 million yuan, directly bringing Xi'an 416 million yuan in tourism revenue.

*Image source: TFBOYS official Weibo

If this continues, the continued recovery of the offline performance industry in 2024 will also become a long-term catalyst for activating local consumption. For local businesses in the fields of accommodation, catering, etc., any city may usher in an explosion of passenger flow, which requires businesses to have a keen sense of the "check-in points" of Internet celebrities and be fully prepared to open up new battlefields.

Looking back at the changes in the fields of eating, drinking, and entertainment in 2023, it is not difficult to find that the entire consumer market is showing a trend of "going down". Consumers are becoming more down-to-earth, paying more attention to cost-effectiveness, and paying more attention to effects and efficiency, and the sinking market has become a new stage for the industry to seek new growth.

At the same time, even considering the general expectation of lower income, consumers in the process of consumption stratification still maintain their desire for novel experiences. "Save where you can, spend where you can, ride a bicycle to the bar" is not just a joke, but when faced with various consumption needs, people begin to plan their budgets in a targeted manner so as to get more consumption experiences on the basis of limited income.

Frankly speaking, consumer demand will never decrease, but the current market lacks products that can simultaneously meet user needs and wallet budgets. The new market environment also tests the ability of merchants and consumers to be thrifty.

Author: Bailu WeChat public account: Jingzhe Research Institute