Consumers in China continue to show a strong appetite for snacks, with global and domestic brands expanding their footprint and innovating to meet evolving needs.

Global food and beverage giant PepsiCo Inc has gained market share in the country's savory snack segment over the past year, highlighting sustained consumer demand for indulgent snacking, according to its 2024 financial results.

The company reported a 14 percent increase in operating profit for Asia Pacific, Australia, New Zealand and China in 2024, reinforcing its confidence in long-term international growth.

PepsiCo continues to ramp up its investment in China.

Last year, it broke ground on its first food production base in the northwest, a $1.3 billion facility in Shaanxi province. In September, the company launched a food production base in Shandong province, featuring automated potato chip production lines with an annual capacity of 25,000 metric tons.

This January, PepsiCo entered into a partnership with Jiangsu Rilong Food Co to invest in a new factory focused on developing its oat brand Quaker in the Chinese cereal nutrition market.

Major Chinese snack brands are responding to market demand with expansion and production upgrades.

Qiaqia Food, a snack producer in Anhui province, launched its 11th plant in Baotou, Inner Mongolia autonomous region, in November, boosting capacity to 39,000 tons of sunflower seeds and 6,000 tons of nuts annually. The facility is expected to serve northern provinces, ensuring supply chain efficiency ahead of the festival shopping season.

The snack company reported 4.76 billion yuan ($651.5 million) in revenue for the first three quarters of 2024, up 6.24 percent year-on-year, with a net profit increase of 23.79 percent to 626 million yuan.

Meanwhile, Yanjin Shop, a snack maker based in Jiangxi province, was ramping up production for the Spring Festival peak sales season. The company recorded 3.86 billion yuan in revenue for the first three quarters of 2024, a 28.5 percent increase, with net profit up 24.5 percent to 490 million yuan. Its third-quarter revenue alone rose 26.2 percent year-over-year to 1.4 billion yuan.

The broader snack market in China is also seeing shifts in consumer behavior.

According to Mintel Group, a research institute, retail sales of nut and seed snacks grew 3.5 percent in 2023 to 140.6 billion yuan and are projected to reach 180.4 billion yuan by 2028, with a compound annual growth rate of 5.1 percent.

However, the potato chip segment slowed, growing 3.2 percent in 2023 to 28.9 billion yuan and is forecast to grow to 36.7 billion yuan by 2028, or a CAGR of 4.9 percent.

"Health concerns are reshaping the category, with brands needing to focus on innovation in nutrition to sustain growth," said Pepper Peng, senior analyst, China Insights at Mintel.

New product trends suggest rising consumer interest in functional snacks.

Mintel data showed that over the past three years, the fastest-growing claims (information claimed by the producer) in nut snacks include added ingredients, convenience, and naturalness. Antioxidant claims surged, while small, portable packaging saw a 337.2 percent growth rate.

In crisped and puffed snacks, alternative ingredients such as sweet potatoes, taro and lotus root have gained traction, with their use rising over 200 percent.

Functional claims have been the fastest-growing category in crisped snacks, up 414.9 percent from 2021 to 2023, signaling a shift toward health-oriented snacking.

Despite the strong growth, the industry faces challenges as consumers become more health-conscious. "Regulatory trends pushing for reduced salt, sugar and oil content are prompting brands to reformulate products and develop healthier alternatives," said Peng.

The competitive landscape will likely favor companies that improve craft and ingredients, while also leveraging local flavors and innovative formats to lift health benefits of their products, she added.