CityReads│Food, Digitalization and the Megacity

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Food, Digitalization and the Megacity

Prosperity, urbanization and digitization are indelibly changing Chinese food culture.

SPACE10 & YEAST, 2018. Food and the megacity: how urbanisation and technology are changing the way china eats

Source: https://space10.io/food-and-the-megacity/

Picture Source: https://medium.com/yeastlab/future-cities-of-food-a52cbd63689c

Happy Chinese New Year! Since eating with family is the most important thing to do in the Spring Festival, let's read a report about food and the megacity, pondering about how prosperity, digitalization and urbanization have changed how Chinese eat, when, where, and what Chinese eat.

This report is a collaboration between SPACE10 (a future-living lab in the heart of Copenhagen) and YEAST (a future-of-food laboratory based in Shanghai), identifying 12 of the most interesting food trends in Chinese megacities.

China's population is about 1.4 billion—20 percent of the planet's—yet it has just 7 percent of the world's arable land. Unsurprisingly, it is fast modernizing its domestic food industry and developing innovative technologies. It is also looking beyond its borders and buying more food from overseas. In 2013, China surpassed the US as the world's largest trading nation. And as the world's largest trading nation, the decisions China makes about feeding its people have ramifications that go beyond its borders. In 2016, China imported $19.6 billion worth of comestibles—up from $1.3 billion in 1999. Already home to seven of the world's 10 largest ports, China is further extending its trade routes with “One Belt, One Road”—a government-led strategy of investing in and developing roads and shipping lanes in Europe, Asia and Africa.

To understand the ramifications of how the world's second-largest economy manages to feed more than a billion people, consider the soybean. The humble legume is a key ingredient in several Chinese culinary staples—including soy sauce and tofu. It is also used to make soymeal, a protein-rich ingredient in animal feed—and, to cater for China's growing appetite for meat, imports of soybeans have soared. In fact, China now imports 60 percent of the soybeans traded worldwide. And there's the rub. Amid its trade war with Washington, China is boycotting soybeans from the US, its main supplier. It's a development that not only threatens the livelihood of American farmers but also fuels fears that China will run out of soybeans in 2019.

The most significant factors of the food trends is China's rapid urbanization. In the last 35 years, almost 500 million people have migrated from the countryside to urban areas, creating hundreds of new cities in the process which include some of the world's largest metropolises. Today, China has six megacities and 124 cities with a population of at least one million. Meanwhile, large-scale development plans are underway to create as many as 19 “megaregions”.

Another consequence of China's growing financial muscle is its rapid digitization. As its citizens get richer—by 2022, 75 percent of people in cities will be considered middle-class, earning an annual income of between $9,000 and $34,000—they are keenly adopting new technologies. For instance, the smartphone is now the dominant way that Chinese people get online. As of June 2018, 98.3 percent of the population accessed the internet through mobile technology, with only 34.5 percent accessing it through a laptop.

What's more, the near-universal adoption of smartphones in China has fueled the growth of mobile payment systems. In one recent survey, 40 percent of respondents said they carried less than 100 yuan ($14.50) on average, and 74 percent said they could comfortably survive on that sum of cash for at least a month. Moreover, China's widespread adoption of social networking, livestreaming and user-generated content has created the world's largest e-commerce market, which reached sales of a trillion dollars in 2017. Boosted by China's high urban population density, mobile technology has helped create opportunities for food-delivery companies, too. Today, China's food-delivery market is worth $33 billion dollars, almost double the size of the US market.

China's growing prosperity isn't just changing how its citizens eat, but what they're eating too. The emerging middle-class is increasingly enjoying a Western-style diet—including more meat. According to the UN's Food and Agriculture Organization, per capita meat consumption in China has grown by 130 percent since 1990. “Meat has gone from a rare treat to a regular staple for many Chinese people,” the Guardian reported two years ago. “In 1982, the average Chinese person ate just 13 kg of meat a year.” Today, the average Chinese person eats 63 kg of meat a year,  noting that the country's health ministry has recommended that people reduce their meat intake by 50 percent. Concerns are also growing that China's appetite for meat will undermine its efforts to combat climate change.

China is now the world's third-largest producer of beef, the second-biggest producer of poultry, and the world's leading producer of pork. In fact, in the last half-century, Chinese pork production has grown around 35-fold: from 1.5 million tonnes in 1961 to 54 million tonnes in 2014. Chinese citizens consume more than twice as much pork as the global average. Such has been the scale of China's demand for pork that it has even created a pork reserve to try to maintain and protect the price of pork by buying and selling in world markets. Its appetite for pork also saw it acquire the world's largest pork producer, a US company.

In short, three macroeconomic developments—increasing prosperity, increasing urbanization and increasing digitization—are indelibly changing Chinese food culture: how they eat, what they eat and where they eat will change forever.

1 Getting food deliveried is the new normal

Food-delivery workers have fast become a staple of daily life in China's cities.

Food delivery is arguably the most important food trend in China today. It's changing what people eat, as well as where and when they eat. It's changing the concept of the restaurant and where to locate them in cities. It's even changing the flow of people in China's cities.

According to a report by Meituan-Dianping, an online retailer (with about 310 million active users and 14.7 million daily transactions), $31.9 billion was spent on food delivery in China in 2017. The sector is dominated by two national competitors, Meituan and Ele.me, who together have 95 percent of the market (with the remainder made up by small, regional players). The explosion of food delivery in China is attributed in part to urbanization, including the density of the urban environment—which is seven times denser than in the US. It is also attributed to the role of digitization, with leading e-commerce companies plugging food-delivery services into their mature physical (e.g. delivery network) and digital (e.g. mobile payment) infrastructures.

Price is a critical factor, too. Food delivery in China is a competitive market, in which prices are low and demand is high. It's hard to beat convenience when the price is right. And while round-the-clock convenience has long been a feature of many cities, in China it means access not just to fast-food but to high-quality restaurant food, too—from weekday lunches to elaborate family-style Sichuan dinner spreads to food from bakeries, cafés and supermarkets.

2 The decline of street food

Office workers waiting for breakfast crepes, or jianbing, during rush hour. Small groups huddled on plastic stools, eating skewers of barbecued meat, or shaokao, late at night. These are the familiar sights of Chinese street-food culture—which has changed dramatically in recent years. Streets known for kerbside cuisine are succumbing to new zoning regulations, breakneck commercial development and increasingly restrictive food-safety measures.

This process of urban renewal is not uncommon in cities around the world. But it's the scale of rapid urbanization and the pace of change that makes it so interesting in China. Entire streets of businesses are shut overnight, with walls quickly erected to prevent them operating. And this is happening in cities all over China. In some cases, apartments are built to replace former cafés and restaurants, creating more space for residents. In others, the restaurant may carry on behind closed doors and windows, with authorities turning a blind eye—at least for a while.

Street food has long appealed to both the palate and the wallet of the city dweller, so it is unclear how street-food culture in China will survive or evolve in its fast-changing cities. Ael Thery, a food anthropologist who has studied Chinese street-food culture for years, says that “people go in the street not only for budget considerations, but also for the lack of spaces at home or work, and often for a way to escape the homogeneity of food habits and options.”

3 The rise of "Dark Kitchen" and delivery hubs

While some restaurants are being forced to shut down or move because of gentrification, others are setting up shop in what would traditionally have been considered undesirable locations. The reason? China's food-delivery boom.

Digital businesses are reshaping the role of the street and the retail environment, creating new typologies of restaurant and uses of public space. One of the impacts of so-called “dark kitchens”—essentially, restaurants that never take customers but rather produce food for delivery only—is that many streets in Chinese cities are evolving to become informal dispatch centers for food-delivery businesses.

Wander the back streets of Shanghai and you will find alleyways filled with tiny “restaurants” that don't have seats or diners. Instead, you will see clusters of orange, blue and yellow-uniformed employees waiting to collect a new delivery order. Inside the restaurants are boxes of plastic containers and single-use cutlery. There are no waiters, only staff receiving orders on phones and printing off receipts for dishes that must be delivered within 28 minutes.

The customers may never see or set foot inside these licensed restaurants. Features of traditional restaurants, such as service or ambience, are irrelevant. Instead, the key metrics are user reviews and ratings, promotions and discounts, and distance from the customer.

A study by Shanghai's Tongji University mapped the location of these delivery-focused restaurants and found that they tend to cluster three kilometers from the main commercial streets, filling the in-between spaces of the city, where rent is cheaper and they are closer to dense residential areas. “Streets that are commercially-challenged from the perspective of traditional retail business logic—high foot-traffic areas in close proximity to major public transit stations—actually can become successful as delivery hubs,” says Roy Lin.

The physical presence of digital businesses such as food delivery is changing the cityscape and the function of certain streets. While these “dark kitchens” appear to come and go quite frequently, the streets themselves remain resilient as de-facto food-delivery dispatch centres. Once home to shops, restaurants and local residents, many streets are now temporary physical spaces for the exchange of goods through a digital platform. The consequence is a lack of cultural diversity in the streets: instead of ethnic restaurants or grocery shops, many neighborhood streets in Chinese megacities are increasingly filled with delivery-oriented dark kitchens, coffee shops and grocery chains, creating a homogeneous look and experience.

4 Old-school Mom-and-Pop shops go digital

A subtle but critical change is taking place in the urban food space: the digital transformation of small, independent, family-run businesses (aka mom-and-pop shops). New real-estate projects such as shopping malls and office towers may dominate Main Street today, but mom-and-pop shops remain a steadfast presence on the side streets of China's cities, giving shoppers a quick and convenient way to purchase fresh produce and packaged food.

Moreover, thanks to internet tech giants in general—and competition in the e-commerce market in particular—these shops are thriving. Chinese tech rivals Alibaba and JD are recruiting these small businesses and providing them with software, supply-chain solutions and new monetization models. In return, the e-commerce giants get access to physical spaces, which they can add to their network of point-of-sale locations and food-delivery hubs.

At first glance, mom-and-pop shops all look the same on the surface. In fact, they're being stocked by centralized Alibaba or JD hubs in response to real-time fluctuations in demand, thus minimizing cost and waste. These shops may even be equipped with low-cost sensors to track foot traffic. And hyper-local data insights from the neighborhood can be used by the shop owner to curate a high-exposure snack shelf.

This “digitization-in-a-box” strategy is making small businesses “artificially intelligent” at a stroke, creating a potential platform for curated and personalised food retail environments, as well as a less wasteful stock and fulfillment process. For consumers, the gap between digital and physical shopping experiences is further collapsed.

5 Shopping malls as food-ddelivery centres

Shopping malls are prevalent across China. According to real-estate firm CBRE, some 4,600 malls exist today and China accounted for over half the world's malls built since 2015. The recent drive to clean up city streets has further cemented shopping malls as the main hub and attraction in terms of food experiences. And because of the rapid rise of food delivery—which effectively means that every restaurant in a mall is a food-delivery service—malls have unexpectedly become de-facto dispatch centers for food-delivery services.

However, other food retailers are also taking a delivery-oriented approach to business. Grocery startup Hema, which is part of Alibaba's group of companies, leverages its high-traffic locations to operate as both walk-in stores and delivery dispatch centers. Its many locations in central Shanghai, for example, give it the advantage of coverage and proximity to customers.

Luckin Coffee, the self-proclaimed main competitor to Starbucks in China, operates what appear to be walk-in stores, but are in reality dispatch centers for fulfilling online orders. If you physically visit one of their “stores”, you will be asked to order your coffee using their app.

The experience of these mixed retail/delivery spaces is impressive. Hema is at once an Amazon fulfillment center and a supermarket, and even operates several restaurants inside its stores. (Diners can select fresh fish from a tank and get it cooked to order at the food court.) These spaces are inhabited by real customers, who wander about tasting products that are algorithmically curated using Alibaba's local e-commerce data, and by digital customers, as embodied by delivery workers dashing around with smartphones to scan QR codes and filling shopping bags that are placed on an overhead conveyor belt, to be carried to fleets of scooters waiting just outside the mall. Inevitably, too, the stores are cashless.

6 The popularity of food and retail "experiences"

In Chinese cities today, consumers can enjoy a plethora of innovative and often experimental retail experiences. Shanghai is considered ground zero for the launch of experience-based stores by global brands. For example, Nike launched its first House of Innovation in Shanghai, not New York. The Chinese city was also chosen for the launch of Starbucks' second large experiential store, The Roastery, shortly after it opened the first in its hometown of Seattle.

Meanwhile, as China's megacities grow denser and living spaces get smaller, the desire to spend time in “third places” will likely grow. According to IKEA's 2018 Life at Home report, there has been a big increase in the number of people who say they feel more at home in places other than their residence. In fact, 35 percent of people feel more at home outside the home, and this figure has risen sharply in urban areas. Similarly, a report by Youthology, a Shanghai-based research company focused on Chinese youth culture, indicates that convenience stores like 7-Eleven and Family Mart provide an important “extra space” outside the home, and serve as “private spaces in the public to soothe empty stomachs and souls”.

7 The growth of automated food experiences

https://medium.com/yeastlab/future-cities-of-food-a52cbd63689c

In China the humanless retail experience is fast becoming an everyday reality—especially in the food space.

On the back of widespread use of mobile payments and growing government interest in investing in AI technologies, small and large tech companies alike have launched a plethora of variations on the humanless experience, mediated by robots, cameras and QR codes. Chinese companies are experimenting with everything from micro “box” shops selling packaged foods on college campuses to walk-in shops selling fresh produce in shopping malls. China is a fertile place for these types of shops due to its high smartphone penetration, ubiquitous mobile-payment services, high-population density and growing numbers of urban commuters who value convenience and efficiency.

8 Home cooking is the new special occasion

Convenient dining options abound in Chinese cities today are one of the many perks of the dense urbanization and plethora of digital services like food delivery. In fact, in 2017 the sum of money spent eating out in China exceeded Sweden's entire economic output that year.

However, because of all the convenient options the city offers, the option of cooking at home often seems to be the most impractical one. Yet eating isn't just a functional activity, but a social one, too. And the desire to gather at the table to unwind and socialize with friends hasn't wavered. What's changing is the act of cooking at home.

“Sharing a meal at home has become a sacred moment in our daily lives. The gathering and ritual of cooking becomes something worth celebrating, worth sharing,” says Pan Xiaoyue, the founder of a meal-kit startup that enables people to cook at home more. She believes “rituals are even more important when you're busy.” And the feedback she has got from customers is that new recipes and eye-catching plating suggestions are as important as convenience. In other words, the pleasure of cooking and hosting guests at home is the true motivator.

Moreover, the home-meal setting has transcended the intimacy of the family to become a place for entertaining friends and colleagues. “We originally positioned our products for everyday family meals, but soon realised that our users were buying our meal-kits to serve them during dinner parties and business dinners they hosted at home,” says Amy Tang, who left a career in the luxury-goods sector to start Jiaxi, a premium meal-kit startup. “A few years ago if you were a businessman and wanted to impress your clients, you'd invite them to a fancy restaurant, but now the new luxury is to host them in your home,” she adds.

On the other hand, the trend of cooking less at home means that people aren't buying as much kitchen equipment, which makes it harder to prepare more elaborate meals at home. Of course, in China there are apps for that, too. Take Hao Chushi, which allows you to hire a chef whenever you host a dinner party. Log on via WeChat or Alipay, select your location and view the profiles of chefs in the area. With just a few clicks you can choose a chef based on his or her portfolio, select the cuisine—Shanghainese, say, or Cantonese—and even ask the chef to buy ingredients and bring cooking utensils. Prices are relatively low, starting at 119 RMB, or about $17 dollars, for a three-person dinner (paid using your phone, of course).

9 The rise of influencer-driven apps and platforms 

In many countries, diners hoping to hear about a hot new restaurant might turn to established food critics writing reviews in newspapers and magazines. Others might rely on high-end authorities such as the Michelin Guide. Diners in China, however, have skipped traditional critics and judges and turned instead to online influencers and user-generated content.

Meituan-Dianping is one of China's leading food-related internet platforms. It's an app for discovering and rating food, but also a payment platform, a food-delivery platform and a network of influencers. Indeed, it's now common to see diners deciding what to eat by looking at their phone, not the menu, and scrolling through dish rankings and recommendations.

Kevin Gentle, a strategy director and expert in digital trends in China, says there are a few reasons why Chinese diners consume or share food-related content. “I would separate it into three categories: trendy food where food is part of a global zeitgeist with a focus on novelty, cultural food where food is part of the content universe of a certain sub-culture like sports or manga (such as fitness influencers who talk about food as part of a fitness lifestyle), and hobbyist food where people are actually interested in recipes and cooking techniques.”

China's most popular food apps demonstrate these variations. Xiachufang is a platform for browsing recipes and enrolling in digital cooking classes. Xiaohongshu is a “public notebook” app where people can follow the latest trendy foods enjoyed by celebrity influencers. And video platform Douyin is the best place to discover the latest eating trends and food crazes.

The role of influencers shouldn't be understated. On social channels they're an important way for people to discover new brands and products. Influencer-centric apps in China are packed with features to help people create, edit and share content. One of China's fastest-growing apps, with 150 million active users (as of June 2018), Douyin “treats its top influencers almost as its own employees [and] actively helps promote them by subsidizing their traffic.”

Still, in 2016, Michelin launched its first Chinese restaurant guide, listing recommended spots in Shanghai and publishing it in both English and Chinese. And 2018 saw Meituan-Dianping launch its own restaurant guide, the Black Pearl Guide. Yet what will become of these more traditional “authorities” in the influencer-driven world is very much an open question.

10 Online creativity and the rise of new food products 

In China today, social media isn't just about sharing content and influencers: it has also sparked food trends that have in turn materialised as new products. Video platform Douyin is at the heart of this craze: it allows ordinary people to create stunt-style videos using food, and in the process create campaigns for brands—sometimes intentionally, sometimes less so.

Predictably, perhaps, the platform has launched the careers of several celebrities. For example, Ms Yeah has won international media coverage for her cooking hacks involving homeware. In a sort of MacGyver-meets-Masterchef fashion, she shows viewers how to use an iron to cook beef, say, or how hot wires and drills can be used to grill fish. Ye Shi Xiao Ge is another internet sensation, who films himself cooking and eating in the wilderness. He has even released his own Douyin Beef Sauce, a nod to the platform that made him famous.

New flavor combinations and recipes emerge from this milieu, too. Entire channels on Douyin are dedicated to unexpected food combinations, like chocolate-fried rice or ice-cream noodles. These sensational ideas sometimes inspire brands to create new products. So viral was it that you can now order the “Douyin dish” and waiters will know what to bring you.

11 Livestreaming bridges the rural and the urban 

The lure of better opportunities and wages in cities has seen a mass migration from the Chinese countryside and rural populations plummet. As a result, the government is keen to promote and foster rural development in order to support China's rural economy and provide economic opportunities for those left behind.

The popularity of short-form videos and livestreaming apps in particular has exploded in the past three years. Livestreaming is now not just a medium for millennials living in cities, but also a new and direct channel for enabling commerce between rural and city dwellers.

Livestreaming is an excellent example of how technology can help maintain a way of life. Not only does it allow farmers in the countryside to engage directly with potential buyers in the city: it also increases transparency and trust in the food supply chain.

Alibaba and JD have both launched livestreaming facilities on their e-commerce platforms, allowing merchants to broadcast directly from their stores and work with influencers to help market their products. The food section of both platforms features farmers and individuals all across China showcasing a particular product or ingredient. Scrolling through the list you can follow bamboo farmers in the south, mushroom hunters in the mountains, and pig breeders in the country's heartland.

The distinction between e-commerce and entertainment is often blurry. Following the life of a rural pig farmer while you purchase some of his pork belly can be surreal. Often, too, you can chat directly with the farmer, take a tour of his chicken barn, or ask him to slice open some fruit to check its quality. You can even send him digital gifts, like flowers or heart emojis.

Alibaba's e-commerce platforms have in the last decade launched a series of initiatives to create opportunities for farmers and people in over 16,000 villages across China. Employing slogans such as “Through Taobao, you can escape bitter days. E-commerce runs toward the road of happiness”, these initiatives transform rural areas into digitally enabled commercial hubs, complete with local schools to teach basic knowledge and tools to sell products online, including via livestreaming. Moreover, there are now rural livestreaming professionals, hired by small and large food producers alike, to livestream from farms or production facilities and promote everything from honey to sausages.

12 Factories for scalable food production

Despite the growing appetite for meat, the Chinese diet remains heavily vegetable-based—prompting innovative ways to meet the increasing demand for greens.

Between 1961 and 2013, China's annual vegetable consumption quadrupled from 80 kg per capita to 348 kg. That's three times as many greens as Americans eat (114 kg in 2013). To meet the demand for all those veggies, food systems need to scale up, increase productivity, and overcome supply chain challenges posed by megacities.

Today, China largely consists of small parcel farms—90 percent of its farms are smaller than 2.5 acres. This is partly due to the country's geography and terrain. And smaller farms pose challenges in terms of their scalability and ability to adopt the kind of industrial technologies used in higher-yielding agricultural systems such as those in the US.

Major efforts are underway to consolidate land and create more scale and productivity efficiency. For example, CP Group China, a Thai-based multinational corporation, has developed models of sustainable and circular production systems, such as a semi-automated chicken farm outside Beijing: organic waste from its three million egg-laying chickens is used in its nearby fruit orchards.

China is also exploring alternative methods and technologies in food production. One example is plant factories (also known as indoor or vertical farms). Their controlled growing environments achieve stabler yields, allow for year-round growth, and require a lot less land and water. Then there's the potential advantage of being located in or near city centers, which reduces both the time and cost of transporting food, as well as associated carbon emissions.

As of 2017, China was home to more than 80 plant factories. Though it lags behind Japan—the global leader with more than 200—the Chinese market is expected to grow rapidly. In 2016, the world's largest plant factory, with production capacity equal to 300 farms, was built in Fujian province by Sanan Sino-Science, a Chinese indoor-agriculture tech company. Plenty, a vertical-farming startup whose investors include Amazon CEO Jeff Bezos and Japan's Softbank Corp, has also announced its intentions to enter the Chinese market.

Final thoughts

China is a country of intriguing contrasts. On the one hand, it has one of the world's oldest cuisines. On the other hand, it is keenly embracing trends and innovating its food culture. And, thanks to some of the world's fastest rates of urbanization, digitization and wealth creation, China is now a heady mix of past and future, formal and informal, tradition and innovation.

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