Which is hotter – duck neck or chips? Ask China’s millennials

Duck neck maker Zhou Hei Ya last year sold nearly 2.5 billion yuan in duck necks and duck parts, turning a traditional dish into a trendy bite-snack for young Chinese consumers

PUBLISHED : Monday, 08 May, 2017, 7:52pm
UPDATED : Monday, 08 May, 2017, 10:44pm

Spicy duck neck is hot – it is the trending snack among China’s millennials.

Once a traditional dish from central Wuhan city, its rise to national popularity status on a par with potato chips and chocolates can be credited to Zhou Hei Ya (周黑鴨)and a shrewd marketing plan built on understanding the psychographics and social media.

Across WeChat, Weibo and online marketplaces Taobao and Meituan, consumers have posted numerous threads of their purchases and experiences with the brand and the snacks. The duck neck producer’s WeChat account offers discounts and promotions to consumers who sign up as members.

Hao Lixiao, chief executive officer of Zhou Hei Ya International Holdings, said gauging the millennials’ likes and their spending habits was crucial to help the snack go viral. The company mainly targets the 18–35 year old age group, which they found were willing to pay for entertainment and self-expression.

The Hong Kong-listed and Wuhan-based casual braised food producer and retailer, is known for its deep reddish-brown, spicy and numbing braised duck neck, but also specialises in other duck parts.

“The success is not all about taste,” he said in an interview with the South China Morning Post.“What we’re selling is a distinguished experience.”

Consumers agree. “I like its multi-layered taste which is not simply spicy, but a little bit sweet,” said Cici Chen, a 26-year-old Wuhan local. “And Zhou Hei Ya’s stores, packages look fancy, not like some others, which are very shabby. ”

In some of Zhou Hei Ya’s brick and mortar shops, you can even try the latest VR games.

“We bring out the feeling of entertainment by eating Zhou Hei Ya,” Hao said, pointing to the efforts invested in the packaging which is becoming lighter in weight and more stylish.

What we’re selling is a distinguished experience
Hao Lixiao

The most popular product is a fixed-weighted matt transparent box with a bright yellow cover featuring a cartoon image of a cute little girl.

The box has adopted a technique, namely MAP, or Modified Atmosphere Packaging, to keep food fresh. Zhou Hei Ya was the first among Chinese braised food producers to launch fixed-weighted packages for MAP products in 2016, after several years of testing market interests.

“We have noticed that many girls have psychological barriers to eating duck necks out of plastic bags as it looks a bit unsightly. So we’ve upgraded the packages, making it colourful and animated so that even when they are put on your work desk, they don’t look cheap,” Hao said. MAP-packed products now account for almost 90 per cent of the company’s sales revenue.

He said that the company has also scaled up production of individually packed vacuum packages which is easy to carry around and can be stored at room temperature. The idea is to provide tired office workers with a refreshing jolt when they are working long hours.

Hao believes that a wider range of products would raise the food giant’s competitiveness. As such, the company is constantly considering new products and how to innovate further so as to meet young people’s yearning for new things.

The drive to stay ahead seemed to have borne fruits, as the company saw its net profit rise 30 per cent to 715.6 million yuan (US$103.65 million) last year, following a 34 per cent increase in 2015. Total revenue rose 15.8 per cent to 2.81 billion yuan.

Zhou Hei Ya’s duck food is the best seller in Chinese online marketplace Tmall. It sold an average 70,000 gift packs which contain duck neck, duck shoulder and duck wings in a month, according to Tmall data.

In addition to classic duck parts – duck neck, duck tongue and duck feet – it has launched a seafood and a vegetable series. For instance, the company has added spicy crayfish – a popular night-time snack in many Chinese cities, to its portfolio.

The 41-year-old Hao was made CEO in March after founder and chairman Zhou Fuyu stepped down from the position. Hao was a salesman at Wuhan’s shopping centre, before he joined Zhou Hei Ya 10 years ago.

The change in leadership is a sign of it moving away from a family business to one that is structured and run by professional managers. Priority will go to understanding customers’ needs over expansion, Hao said.

China’s casual food industry is growing rapidly against the increase in personal income and the e-commerce boom, Hao said.

ASKCI Consulting expected the retail market size of casual snacks to reach 91 billion yuan by 2017 and close to 130 billion yuan by 2020.

Morgan Stanley analysts said in a report last December that Zhou Hei Ya’s brand recognition is strong, comparable to brands like Starbucks, Haagen-Dazs or Costa Coffee in some major tier-one cities.

Investors seem to agree with Zhou Hei Ya’s potential growth story. Its shares have rallied 40 per cent since it debuted in Hong Kong in November, 2016.

Braised duck chain Zhou Hei Ya gets off to a flying start on Hong Kong shares debut

Founded in 2002, Zhou Hei Ya has grown to become China’s second largest casual braised food company by revenue and retail store network, tailing behind Hunan-based Juewei Duck Necks.

It is planning to open between 180 and 220 new stores annually, bringing the total to more than 1,000 stores by the end of this year. As of the end of 2016, it operates a total of 778 offline stores, compared to 641 in 2015, with average spending per purchase reaching 59.24 yuan, rising 5 per cent from the previous year.

This year, Hao said the new store openings would be focused on China’s northern and eastern areas, especially in cities with a high proportion of young people. In the longer term, they are also looking to bring their food products to Hong Kong and foreign markets.

“And I hope one day we can bring Chinese braised food, which has a long history, to the overseas market, and I would be very proud of that,” Hao added.