The relatively affluent Shanghainese live in low-cost, subsidized housing, are subject to China¡¯s one-child policy and have a purchasing power parity annual income of US$10,000-$40,000. If China¡¯s economic miracle continues for another decade, the growing middle class of China¡¯s coastal urban provinces, including Shanghai, could reach 500 million persons by the year 2005.

China is also experiencing the "Little Emperor" phenomenon in which one child receives the exclusive care of two working parents, along with two sets of grandparents. These children spend, on average, more than $1 every week on snack foods.

Overall the Shanghainese spend 9 percent of their total grocery bill on snacks. In supermarkets, snack food spending increases considerably as most meats, vegetables and fruits are still purchased in traditional outdoor markets called "wet" markets.

Snacks Traditional in Chinese Cuisine

Traditional Chinese snack foods were originally classified as either "wine accompaniments" or "food accompaniments" and included fried beans, nuts and tofu.

As China¡¯s premier international city until 1949, Shanghai residents were exposed early to Western foods through trade and a large local expatriate population. After the re-opening of Chinese markets in the late 1970s, many new Western snacks began to trickle in to Shanghai.

Snack foods are available at virtually all Shanghai retail outlets. The large variety available includes dried fruits and nuts, cookies and crackers, chips and puffs, chocolate and candies, chewing gum and jellies and, in the summertime, a rainbow of Popsicle and ice-cream flavors.

Eastern, Western Choices Share Market

The Chinese normally adhere to strict mealtimes, rarely skipping a meal. Snack foods are usually eaten on a whim or to satisfy an impulse, not to quench basic hunger.

Snack foods can be classified as either Eastern or Western. Eastern selections include dried and preserved fruits, seeds and nuts, dried meats, dried cuttlefish and shrimp. These foods are sold mainly by loose weight, but packaged sales are increasing.

Western-style snacks include chocolates, potato chips, crackers, cookies, popcorn, hard candy and ice cream. Japanese additions include prawn crackers and rice puffs.

Popular brands include Hershey¡¯s Kisses, Pringles potato chips, Keebler crackers, Wrigley¡¯s Doublemint gum, Britain¡¯s Cadbury, France¡¯s Prince and Japan¡¯s Oishi.

Western snacks are most often purchased for impulse eating, where emphasis is placed on flavor over nutrition. Eastern snacks are often eaten at social occasions, such as Chinese tea.

Salty, Sweet, or Frozen?

Salty products, often targeted to adults, encompass both Eastern and Western snack categories. Salty snacks include chips, crackers, dried fish products, seeds and nuts.

Sweet snacks are usually targeted toward the children¡¯s market. The Chinese palate generally prefers less sweet desserts, but continued exposure to Western-style snacks is expected to increase the demand for sweeter items.

While salty foods sell better in colder months, frozen snack consumption peaks during the summer months. Popular frozen snacks include Walls, San Marlo and Mountain Cream brands.

Walls was the first company to loan freezers to small shops so that the retailers could sell their ice cream products. Unfortunately, the retailers also used the freezers to sell other items.

Store Size Dictates Distribution Mode

The optimal distribution mode for snack foods usually depends on the size of the retail store that will be selling the products. Larger stores, such as supermarkets and state-run stores, tend to be their own distributors; smaller stores depend on other distributors.

Supermarkets and Mega Marts. Shanghai has more than 700 supermarkets. These stores devote a large amount of space to snack foods, which are their highest profit items.

Established chains such as Japan¡¯s Yaohan, Shanghai¡¯s Hualian and Lianhua and Hong Kong¡¯s Park N¡¯ Shop are opening large networks of stores in Shanghai. These stores provide U.S. snack food manufacturers with reliable and established distribution channels.

In these stores, consumers select products off the shelf. Frozen ice cream products are usually sold in individual portions, as they are eaten immediately. Larger sizes have recently been introduced, with moderate success.