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Trust in TradeVerifiable Trust:A foundational digital layer underpinning the physical,financial,and information supply chainMarch 2023In this report1.Executive summary 22.The Trusted Technology Environments(TTE)working group 52.1.Members of the working group 53.Introduction 64.Layers of trust in trade 84.1.Trust in the legal layer 84.2.Trust in the governance layer 84.3.Trust in technology 85.Identity,authentication,authorisation 106.The trade ecosystem 116.1.Stakeholders in trade 116.2.Trade assets 117.Trade digitisation vs.trade digitalisation 147.1.Trade digitisation 147.2.Trade digitalisation 148.An example use case of transitive(verifiable)trust in trade digitalisation 178.1.Introduction 178.2.Example documentation flow 198.2.1.Commercial Invoice 198.2.2.eB/L 218.3.Trade systems relying on transitive verifiable trust 228.4.Table of interactions:instruments,subjects,systems 249.Privacy engineering and data sovereignty 259.1.What is data sovereignty 259.2.Data sovereignty example in the trade context 259.3.Verifiable trust as a facilitator for data sovereignty 2510.Retention of trust information over time 2611.PKI(Public Key Infrastructure)2711.1.Centralised vs.decentralised PKIs 2711.2.Asymmetric vs.symmetric cryptography 2711.3.Trust across trust domain boundaries 2811.4.Trust imposed transaction cost in trade 2811.5.Transitive trust 2811.6.Centralised vs.decentralised PKIs 29Trust in Trade111.7.Similarities of digital certificates and verifiable credentials 3011.8.Differences 3012.Zero Trust Architecture 3212.1.Directory service federation spaghetti 3212.2.Security threats 3212.3.Zero trust 3213.Standards 3413.1.Technical standards 3413.1.1.X.509 certificate 3413.1.2.DID 3513.1.3.Verifiable credentials 3613.1.4.ACDC 3713.1.5.CESR 3813.2.Combining ACDC and CESR 4013.3.Identity relevant standards in trade 4013.3.1.The Legal Entity Identifier(LEI)4013.3.2.Verifiable Legal Entity Identifier(vLEI)4013.3.3.Role Credential 4013.3.4.Global Location Number(GLN GS1)4113.3.5.Global Trade Item Number(GTIN GS1)4113.3.6.Data Universal Numbering System(DUNS D&B)4113.3.7.Decentralised Identifier(DID)4113.4.Standards Inflation 4114.References 4215.Appendices 4315.1.Appendix 1-Definitions 4315.2.Appendix 2-Identity terms 4515.3.Appendix 3-An example for an X.509 certificate 46Trust in Trade2Digital trade,or the application of digital technologies to trade and supply chain processes,is an opportunity to drive efficiency,speed,and resilience for companies,industries and countries that rely on trade for growth.The pace of technological advancement,and the falling cost of computing power and storage,now make the benefits of digitally-enabled trade accessible to more parties than ever before.However progress towards digital trade is slow-less than 5%of merchandise trade is digitalised by most estimates-with SMEs and the emerging markets relatively slower to adapt.Barriers to digital trade include the lack of an enabling policy environment,the proliferation of multiple digital trade practices and standards,as well as a lack of capacity and culture of data sharing.The ICC Digital Standards Initiative(DSI)was established to address these barriers.Specifically this report is the outcome of the DSIs Industry Advisory Boards Trusted Technology Environment(TTE)working group,which was established in Spring 2022,to provide a perspective on how to create and maintain a technology environment that would facilitate trade digitalisation at scale.A particular focus was placed on issues of authentication,verification and security,with the caveat that the group would remain neutral with regard to the choice of technology and vendor/platform,and be inclusive of organisations regardless of their level of technological maturity.In essence,transforming analogue supply chain and trade processes represented by key trade documents by the use of automated data transfer and sharing,the verification,authentication and protection of such data becomes paramount.Thus as DSI proposes alignment of digital standards for key trade documents(viz.the key trade documents and data environment working group),this report proposes to start the conversation about technology principles for the global digital trade ecosystem.Trade transactions involve sometimes dozens of participants and roles along international supply chains.These parties undertake many interactions which frequently are documented in separate and security-encapsulated systems,resulting in digital islands,which often do not align to available data standards.Data transition between these islands is mostly provided by using paper documentation or electronic paper substitutes.This makes end-to-end digitalising of all interactions between the participants in the execution of a trade transaction particularly challenging.It is aggravated by the often high number of parties involved in data exchange along trade processes.Often,parties may invest in trade digitisation which retains conventional business processes but facilitated by electronic means.The goal of trade digitalisation is to reduce the friction or duplication of the information flow of data along the supply chain,by automating the data path in a secure way that crosses boundaries between entities and jurisdictions.Often called a digital twin,the data path in an international supply chain forms its own data-supply chain that modulates or facilitates the associated physical and financial supply chain.From a Executive summary1Trust in Trade3secure data transmission perspective,the important data supply chain boundaries are those that define trust-domains.Information(data)that can cross trust-domain boundaries without losing its trustworthiness provides what we call transitive trust.Low friction transitive trust could be a primary enabler for automating secure international data supply chains and hence all supply chains that are reliant on information(data)as a facilitator.To further the degree of automation,visibility,and manageability,among many other goals,business process chains should become interwoven between the systems of trading parties and their service providers.Breakpoints in the form of paper or paper-substitute interfaces should be replaced by interfaces conveying data,preferably in real-time.However,this also requires replacing conventional trust mechanisms,like ink-signed paper.In other words,digitising supply chains by using electronic signing of paper substitutes(i.e.PDF)with a semi-digital equivalent(i.e.DocuSign or Adobe Sign)will produce efficiency gains or labor saving,but not the gains in terms of trust,traceability or anti-fraud.In short,every digital interaction in an international trade transaction should become verifiable,non-repudiable,retro-traceable,accountable and auditable for any required retention period.Trust,in its traded semantic,should be established through verifiability.The overall conception should be developed around the“never trust,always verify”mantra,embodied by the counterintuitively labelled“Zero Trust Architecture”movement,which is rapidly growing within the cybersecurity industry.A new,verifiable digital layer beneath the information supply chain,which itself underpins the physical and financial supply chains,is required:the“trust supply chain”.All interactions between two subjects of any country and a subject and an object(such as goods or containers)being part of a digital fabric would be supported by this trust layer,which would be abstracted and independent from any layer above.A trade asset created in system A and routed through system B and C,must be verifiable in system D to be reliably attributable to its original creator in system A.A trust supply chain providing such“transitive trust”is a prerequisite for digitalising-as opposed to simply digitising-supply chains and will provide means for weaving trusted end-to-end supply chain processes across organisational boundaries.Strong cryptography deployed in Public Key Infrastructures(PKI)is instrumental to achieving this goal.Zero Trust Architecture,an architecture proposal/paradigm for building organisations future IT landscapes,will help lay further foundations,but also requires verifiable trust to provide for stringent and repetitive authentication and authorisation.Only the use of cryptographically produced verifiability will ensure that the multitude of parties in trade will be protected in a legally authoritative fashion along a chain of services.An indispensable part of Zero Trust Architecture and the practice of cryptographically produced verifiability is the use of digital identity to secure,sign and authenticate data sets that document any transaction along the supply chain even as multiple borders are crossed.Basically,if parties rely on exchanged datasets in lieu of PDF and physical documents,these need to be signed and authenticated by the relevant parties,which can be achieved securely using digital ID.Trust in Trade4Use of digital ID will also address the interoperability of authentication and authorisation as a key building block for the digital trade ecosystem.Digital identities will gradually replace conventional means of“signing off”on agreements and facts,which are exchanged in trade.The Zero Trust Architecture1 paradigm will change application landscapes widely over the coming decade.Network perimeters like firewalls are already losing their relevance to protect ringfenced resources,as the trend to cloudification moves enterprise resources into serviced data centres.Roaming resources,as“rolling stock”equipped with internet of things(IoT)devices,further blur the lines between internal and external networked resources,as“rolling stock”can be delivery trucks where the smartwatch of a driver becomes an instrument to sign off on a Delivery Note,or a ship moored in a port communicating with the ports infrastructure regarding its cargo.Consequently,identity and access management functions in organisations will have to re-center their activity from role-based access to application functionality to resource-centric access admission in a more dynamic style.Cloud computing is already asking for this and supply chains partners which adapt earlier will position themselves for advantage in the future.The foregoing principles the application of Zero Trust Architecture to enable cryptographically produced verifiability and the use of digital identity will enable data sharing that is key to efficiency,traceability and accuracy along the supply chain.However there is one caveat.Interoperability between systems and software instances is critical to avoid investments in trade digitalisation turning into sunk investments in digital silos or islands.Interoperability is to be achieved by standardisation conducted on multiple layers,whereby standardisation efforts usually overarch single layers.It starts on the technical infrastructure layer,continues on the data layer,to reach up to the service layer and further up to the legal layer.Digital identity for instance requires standardisation on all these layers to become fully interoperable.Suffice to say that interoperability of data and alignment of parties data infrastructure and practices to established standards for data sharing along the supply chain will allow digital trade to become the de facto practice at scale.The present concerns of data security,particularly related to data flow across borders,can all be addressed by aligning to the technology principles established herein,namely the use or application of:Zero Trust Architecture,backed by cryptographically produced verifiability Digital ID for all parties transacting Interoperabilty for all data,implying alignment with global standards where they exist The TTE working group has prepared this paper to build on the knowledge and work of others in the field,in order to contribute to the task of digitalising global trade in a secure,trusted manner taking advantage of the technologies available today.It goes without saying that as technologies advance,the technology principles proposed and described herein may evolve and improve our understanding of verifiable trust in the emerging digital fabric of international trade.We invite feedback and contributions which might advance our collective thinking on how the concepts enshrined herein can enable trade digitalisation in the interests of efficiency,inclusion and sustainability worldwide.1 https:/ in Trade5The Trusted Technology Environments(TTE)working group2The TTE is composed of the working group Co-chairs Stephan Wolf and Richard Morton and the industry experts nominated by the ICC DSI members and the WG Chairs.The group consists of trade and standards experts from different fields and organisations who jointly contributed the recommendation paper for wider industry audience supporting the digitalisation of trade,including all parties in the supply chains and promoting existing and suitable standards and technical solutions supporting paperless trade.The purpose of the TTE working group is to support the development and implementation of high-quality and informed recommendations for the International Chamber of Commerce(ICC)Industry Advisory Board(IAB)in line with the objectives of the Digital Standards Initiative(DSI)which this paper provides.Usman AliyuDangote Nico DeCauwerPort of AntwerpIvano DisantoInsiel S.p.AEmmanuellue GanneWTOStephan GraberFIATASudha GuptaBHPGerard van der HoeveniSHARE FoundationHans Huberid4.trade GmbHAmar JanduBHPAaron KaneSWIFTDavid LeungBIS Innovation HubDerrick LoiAnt GroupHannah NguyenICC Digital Standards InitiativeBenedicte NolensBIS Innovation HubChris ONeilBHPPhillipe RichaudFinastraYefei SongAnt GroupLouise Taylor DigbySWIFTMichael VrontamitisFinastraLucy WongBIS Innovation Hub Stephan WolfGLEIF2.1.Members of the working groupTrust in Trade6Introduction3In international trade,many participants interact along a network of supply chains.Physical movements of goods are superimposed by the flow of financial resources.Both flows-the physical and the financial supply chain-are underpinned by many interwoven information flows-the information supply chain.Almost all events in the information supply chain are subject to legal considerations,which vary in the perspectives that the individual participants assume.In the end,all actors in trade want to prove they have fulfilled their respective duties.In the pursuit of de-risking their activities,they all desire certainty on questions like:“Will I be paid?”“Are certified properties(like lead free circuitry)indeed facts or fake?”“Has my consignment been delivered in good shape?”“Does my labelling for hazardous goods meet the requirements in both Japan and Germany?”“Will my cargo be released in time?”“Can I perform my duties to supply required information at acceptable efforts?”Be it certifying a goods origin as an input for customs clearance(Certificate of Origin),the fact of a consignment having been loaded on a ship as the point of risk passing(incoterm event),a case-by-case information of a buyers credit status(Letter of Credit),information accompanying a transport of chemicals(Security Data Sheet),or a certification of the electronic circuits in a mobile phone being soldered lead-free(RoHS compliance certification),all legally meaningful information conveyed along the information supply chain must be relied upon as all this information can potentially become subject to later reference,scrutiny,and also litigation.With the ever-increasing number of trade relations and rising quantities of goods traded,conventional means of information exchange on signed paper will lead to ever-growing efforts on rendering desired trust levels.Next to the rising quantities stands the need for an enhanced information density in supply chains,to improve steerability or fulfil intensified traceability assertions in pursuing ESG goals.In an increasingly denser woven digital fabric of applications and networks,reliance on trust mechanisms provided by proprietary applications and protected networks appears too complicated and laborious to look through,and almost impossible to reliably register in a structured fashion for later reference,when using conventional,often paper-based means of administration.The practice of imitating paper by digitising trade,which means retaining conventional processes,enhanced by sped-up dispatching of information in PDFs or spreadsheet files,neither yield the desired effects of acceleration and effort reduction,nor can it be considered secure or deliver processes of sufficient quality or in real-time fashion.Trust in Trade7Digitalising trade must encompass holistic removal of process breakpoints in the form of paper or paper substitutes,like PDF,XLS,or XLS“printed”into PDF.Wet-ink signatures on paper further impede this case,and neither will electronic signatures placed on paper substitutes get us anywhere closer to end-to-end verifiable connectivity.Bridging application islands through Application Programming Interface(API)-based connectivity is a means to that end.The interactions performed between API-connected applications require authentication(“Who am I?”)and authorisation(“Am I entitled to do this?”)on-the-fly.With this,applications can verify the authenticity of presented information on the transaction layer,and its origin and data access permissions.A new verifiable trust layer,underpinning the existing information supply chain,is needed.This is the trust supply chain.Fig.1:Supply chain layers,subjects and objects(examples)Supply chainsSellerService ProvidersBuyerPhysicalFinancialInformationTrustIoTDevicesTrucksContainersPalletsRacksPaymentsRiskMitigationsInsuranceSuretyFinanceDocumentationDataTechStandardsAPIsNetworksIdentifiersCredentialsCertificatesTrustChainsCryptographyExchanging goods&servicesExchanging financial resourcesExchanging informationAscertaining interactional trustTrust in Trade8Trade is a risky business.Dispatching merchandise around the world exposes enterprises to all sorts of risks.Not only can outstanding payments become uncollectible,theft or arbitrary seizure of goods is also a constant threat.Fraud protection becomes imperative for reliable business transactions.The Merriam-Webster dictionary defines trust as“assured reliance on the character,ability,strength,or truth of someone or something.”Trust provides confidence in someone or something.There are three layers of trust building upon each other to make trade less risky for all participants,or allow smaller contributors to partake:4.1.Trust in the legal layerThe sovereign of a jurisdiction can define trustworthiness by law.Examples are the legal truth about an individual or firm(birth certificate,business registration).Also important is the principle of legal certainty.It is at the heart of private law.Legal certainty is based on the requirement of clarity,stability,predictability and guarantee of legal norms as well as the specific legal obligations and entitlements linked to them.It is part of the elementary basis of a constitutional social order.The legal systems underpinning trade are therefore a constant area to be further harmonised.Examples are rules and regulations around customs clearance or fixing incomplete,ambiguous and often hard to execute rules on data protection and digital signing.4.2.Trust in the governance layerGovernance is the process of interactions through the laws,norms,power,or language of an organised society over a social system(family,tribe,formal or informal organisation,a territory or across territories).It is done by the government of a state,by a market,or by a network.In lay terms,it could be described as the political processes that exist in and between formal institutions.A variety of entities(known generically as governing bodies)can govern.The most formal is a government,a body whose sole responsibility and authority is to make binding decisions in a given geopolitical system(such as a state)by establishing laws.Other types of governing include an organisation(such as a corporation recognised as a legal entity by a government),a socio-political group(chiefdom,tribe,gang,family,religious denomination,etc.),or another,informal group of people.In business and outsourcing relationships,governance frameworks are built into relational contracts that foster long-term collaboration and innovation.Governance is often a matter for private actors to agree on standards.Examples are joint ventures or member organisations.4.3.Trust in technologyOn top of legislation and governance,the technology offered to enable digitally rendered interactions needs to provide sufficiently reliable trust levels using cryptographic(mathematical)verifiability.Information security refers to the processes and tools designed and deployed to protect sensitive business information from modification,disruption,destruction,and inspection.In InfoSec,trusted authorities or user trust are being generated using cryptography.For centralised systems,security is typically based on the authenticated identity of external parties(e.g.,sign-in with Google,Apple,etc.).Rigid authentication mechanisms,such as public Layers of trust in trade4Trust in Trade92 W3C:World Wide Web Consortium,an international community that develops open standards to ensure the long-term growth of the Web3 ToIP:Trust over IP,a confluence of multiple efforts in the digital identity,verifiable credential,blockchain technology,and secure communications spaces to converge and create an interoperable architecture for decentralised digital trust4 IETF:Internet Engineering Task Force,producing high quality,relevant technical documents that influence the way people design,use,and manage the Internet.5 ISO:International Standards Organization,an independent,non-governmental international organisation with a membership of 167 national standards bodies.ISO/IEC JTC 1,entitled Information technology,is a joint technical committee of the International Organization for Standardization and the International Electrotechnical Commission.Its purpose is to develop,maintain and promote standards in the fields of information and communications technology.6 ITU:The International Telecommunication Union(ITU)is the United Nations specialised agency for information and communication technologies ICT.key infrastructures(PKIs)have allowed this model to be extended to distributed systems within closely collaborating domains or within a single administrative domain.During recent years,the leading innovations in computer science have focused less on centralised systems and more on distributed computing.This evolution has several implications for security models,policies and mechanisms needed to protect users information and resources in an increasingly interconnected computing infrastructure.The need for verifiable trust doesnt stop at borders.There is no global legislature and no global government.Usually this is solved by bilateral treaties,e.g.,trade agreements between countries or mutually granting of access to networks by private firms.But the need for an enormous variety of bilateral or multilateral agreements prevents the global trading community from efficiently administering trade.Paperless trade could become just as convoluted with disparate laws,governance structures,standards,etc.as we see in global supply chain today.Technical standards on verifiable trust can help to prevent this.Standards are worked on at the W3C2,ToIP3,IETF4,ISO/EIC5,ITU6,among others.This paper will exemplify what role verifiable trust plays in digitalising international trade and will allow for business processes to be interwoven between the participants in trade in a trustable manner.This opens leeway for traditional processes to change and for new products and services to be invented.Trust in Trade10A digital identity is information used by computer systems to represent an external agent a person,organisation,application,or device.Digital identities allow access to services provided with computers to be automated and make it possible for computers to mediate relationships.Authentication is the act of proving an assertion,such as the identity of the user of a computer system.In contrast with identification-the act of indicating a person or things identity-authentication is the process of verifying that identity.It might involve validating personal identity documents,verifying the authenticity of a website with a digital certificate,determining the origin of a document by verifying the latter appropriately,or ensuring that a product or document is not counterfeit.Authorisation is the function of specifying access privileges to resources,which is related to general information security and computer security,and to access control in particular.More formally,to authorise is to define an access policy.For example,human resources staff are normally authorised to access employee records and this policy is often formalised as access control rules in a computer system.During operation,the system uses the access control rules to decide whether access requests from(authenticated)consumers shall be granted or rejected.Resources include individual files or an items data,computer programs,computer devices and functionality provided by computer applications,like an electronic Bill of Lading(eB/L)as a service.5Identity,authentication,authorisationTrust in Trade11The Trade Ecosystem66.1.Stakeholders in tradeA trade transaction is usually conducted between a seller and a buyer.The two parties,however,make use of many service providers,without whom a trade transaction cannot be executed.Service providers comprise Logistic service providers undertake transport and storage of merchandise,but also offer services like labelling and packing of goods to name just two.Financial service providers help with payments,mitigate payment risks and help bridging liquidity by financing transactions.Insurance companies offer protection against damage,loss,and theft.Inspection agents help to fulfil the numerous rules and regulations imposed on traders.Customs authorities impose tariffs on imports and exert limits on export of certain goods.IT service providers conceive,build,and to an ever-greater extent also operate applications and application landscapes that allow for information flows required in conducting trade.Business associations like IPCSA,ICC,Chambers of Commerce and consortia like DCSA,IDSA help to convene the parties in trade to mutually shape the future landscape of trade.Finally,policy makers and legislators in the national legislations and supranational organisations create rules,directives and shape statutory conditions.All these parties need and want legal certainty and therefore rely on trust technology to maintain digital interactions.In ever more digitalised environments,cryptography-based verifiable trust becomes a key factor.In our use case example below the stakeholders are exemplified as listed and described below:SellerBatavia B.V,Amsterdam,Netherlands wholesaler of wine and more delicious produce.Trades globally on selected B2B networks.BuyerCentreShop Ltd.,Singapore runs a chain of supermarkets in Singapore and Malaysia offering high quality grocery products and more.Sources globally via B2B networks.Seller bankGIN Bank,Amsterdam,Netherlands advising on and confirming the Letter of Credit(L/C)for the seller.Maintaining a correspondent banking relationship with SDB Bank and offers Letter of Credits on L/C Quick.Buyer bankSDB Bank,Singapore issuing a Letter of Credit as a payment risk mitigation on behalf of the buyer and for the seller in correspondence with the seller bank and offers Letter of Credits on L/C Quick.Logistics service provider and shipping co.MarineLog,Hamburg,Germany procuring transport on SeaTrans and elsewhere and issuing Bills of Ladings(BL).Trust in Trade12 Transport insurerMarineCover,San Francisco,USA,issuing Transport Insurance Certificates for sea transports,including pre-and post-carriage on TranSafeNet.Chamber of CommerceRotterdam Chamber of Commerce,Rotterdam,Netherlands.Issuing Certificates of Origin on the ICC-Origin network to be used in customs clearance processes to obtain preferential origin and to be presented in the L/C process.Sea port operatorJurong Port Ltd.,Singapore operating the port facilities in Singapores main seaport.6.2.Trade AssetsBill of Lading 1.Contract of carriage,2.Receipt for shipped goods,3.Document of title.A Bill of Lading(BL)is a contract of carriage between the carrier and consignee for ocean or overland imports and exports.The Bill of Lading contains the terms and conditions of transportation.It provides evidence that the carrier has agreed to transport the freight to its destination as per the agreement between the seller and buyer.At the point of origin,a Bill of Lading confirms that the seller has transferred the freight to the carrier in good condition.The carrier confirms receipt of the goods on board their cargo vessel in optimum condition as per contractual terms.The Bill of Lading acts as a title to the goods.Whoever is receiving the goods must show the bill to secure the release of the freight from the carrier.Access to the contents can only be gained by producing the Bill of Lading.The Bill of Lading must often be submitted when making an insurance claim.A Bill of Lading is key to the Letter of Credit process.Certificate of Origin A Certificate of Origin(CoO)is usually submitted to customs authorities in the importing country to prove the products eligibility for entry.It is also used to establish whether the goods are eligible for preferential treatment under the terms of any trade agreement existing between the countries of origin and import.Information on the certificate will determine the level of duty applicable to the goods and can,if a trade ban or sanctions are in place,determine whether goods can be legally imported.CoOs are particularly useful for customs teams in nations that:Restrict imports from certain countries Limit the quantity of goods that can be imported Give preference to products manufactured in certain territoriesCommercial Invoice The Commercial Invoice is a key document in trade which often contains a vast amount if information also found on other trade documents.It enumerates the funds owed from a trade transaction,lists up the goods delivered and contains details about the sender and recipient of a consignment.It supports taxation processes,is used to determine customs duties owed,is being financed against and needs to be presented in a Letter of Credit transaction.Customs Declaration Form Specifies the quality and quantity of merchandise to be imported following a goods classification scheme.Many countries nowadays offer and demand electronic means for customs declarations.Packing List Who is sending the package,the destination of the cargo,which and how many items the package contains.A packing list is compiled by whoever is responsible for packing the goods-usually the seller,exporter,or freight forwarder.It is essential for both ocean and air shipments.The document includes details about the Trust in Trade13nature,weight,and dimensions of the goods in the consignment.It also carries information about how the goods were packed,and notes any marks or numbers present on the exterior of the box,crate,or other container used to protect the goods during transit.The details on the form will be used by freight forwarders,customs officials,and others involved in the supply chain.Customs teams at ports of origin and arrival will refer to a packing list when checking that the product and packaging comply with local rules and regulations.The document helps customs officials at the destination port calculate import duties or taxes payable and determine whether reduced tariffs or preferential treatment should be applied to a consignment.A packing list also provides a source of vital information required to complete a Bill of Lading.Purchase Order-A commercial document and first official offer issued by a buyer to a seller,indicating types,quantities,and agreed prices for products or services.It is used to control the purchasing of products and services from external suppliers.Purchase orders can be an essential part of enterprise resource planning system orders.The issue of a purchase order does not itself form a contract.If no prior contract exists,then it is the acceptance of the order by the seller that forms a contract between the buyer and seller.Trade Contract Legally binding agreement to deliver specified merchandise or service in return for a payment.Warehouse Receipt negotiable instrument securitizing proprietorship of merchandise stored in a warehouse or storage pile.Receipt of having taken over the merchandise for storage.Transport Insurance Certificate Negotiable instrument certifying the right to draw insurance coverage for merchandise in transit.Coverage can be transferred to the buyer during risk passing in CIF or CIP7 deals.7 Incoterms which include an obligation to procure for transport insurance.CIF:Cost,Insurance,Freight(to named destination);CIP:Carriage and Insurance Paid To(named destination)Trust in Trade14Trade digitisation vs.trade digitalisation7Like in many other industries the application landscapes established in the past 30 years have been built mainly to fulfil specified functions in organisations and companies.Although the advent of the internet and its precursor,the telecommunication infrastructure,brought about enormous connectivity capabilities.Applications have been deployed in organisations fulfilling similar functions,but these applications very often still constitute digital islands.Interconnectivity to up-and downstream applications along the business processes across organisations was rarely a development goal,or if so,many hindrances prevented good results.The lack of common data format standards and algorithmised standard business processes,the lack of legal recognition of electronic records,tardiness in adopting real time system architectures(i.e.replacing end of day processing by straight through processing),the absence of powerful database architectures being able to concurrently process and provide data from within one single instance,and the shortage of a common trust layer employing transitive verifiable trust have prevented functional process interconnectivity between organisations and have resulted in tenacious survival of legacy processes.The reverse conclusion is perfectly valid in this case:there was never an incentive to make structural changes to legacy processes,even if identified as outdated.In a networked economy without a working trust layer,inventing and selling products based on business processes that are overarching organisations boundaries is hard,or a nonstarter.Especially the lack of transitive trust provisions during data exchange posed a seemingly unsurmountable barrier.This conserves breakpoints in cross-company process flows,which have long been and are still being bridged by exchanging paper documentation.7.1.Trade digitisationThe rise of the internet brought about progress on the“connectivity layer”,which was used to speed-up conveyance of information by replacing wet ink signed paper and fax with electronically signed(or unsigned)PDFs dispatched via email or file-transfer-APIs.However,the process breakpoints continue to exist.Progress on the“logic layer”was not achieved in large scales.Traditional process flows have hardly been changed,but only accelerated.A PDF based“digital”documentation may be digitally signed,but it remains hard to determine who produced the data items contained in it.The PDF may even contain structured data,but its authenticity ends at the“container level”.The single data items cannot be traced back to their originators,so the“palette or crate level”remains unauthentic.This is trade digitisation.Trade digitisation leaves the biggest portion of the digital dividends untapped by ignoring most of digitalisations change potential.7.2.Trade digitalisationTo fully digitalise trade,paper substitutes need to be replaced by structured data,which can be conveyed via APIs,directly processed,and consumed in real-time Trust in Trade15by downstream applications,which can directly acknowledge receipt and return process feedback on the fly,again via APIs.A fully digitalised structured trade data conveyance and processing system,we call a data supply chain.This data supply chain may be stand-alone for digital goods or may be used to facilitate an associated physical goods supply chain.Data being conveyed between applications using APIs will need to retain its attributability to its source,no matter how often it has been forwarded and what further processing the data has been made subject to.However,data in the form of JSON or XML files cannot be practically signed using electronic signature products like DocuSign or Adobe Sign,let alone with ink.For short we describe the secure attributability of data to its source along a data supply chain including any transformations of that data,its provenance.Analogously to how the authenticity of a classic work of art is provenanced via the establishment of an unbroken chain-of-custody back to its origin,the authenticity of data may be provenanced via an equivalent chain of cryptographically verifiable commitments back to its source(s).To exemplify this:a trade receivable,i.e.an invoice,having been issued in the Enterprise Resource Planning(ERP)system of a vendor in Germany,will need to be attributable to this vendor in the ERP system of a buyer in Singapore to which it has been conveyed for further processing.The invoice also needs to continue to be attributable to its original issuer,in the likely case it has been routed via a B2B system prior to being conveyed to the buyers ERP system.Data items in that invoice having been provided by an upstream provider,i.e.,a manufacturer of a pre-product,need to remain attributable to this supplier.Verify Back to OriginSeller ERPPASFineWineB2BB2B networkERP systemERP systemRecloaB2B NetworkTransferTransferBuyer ERPINVOICE ORIGINALINVOICE DATA COPYINVOICE DATA COPYSELLERBUYERB2B OPERATORVerifyFig.2:Verifiability across networksTrust in Trade16The same maintenance of attributability applies to all further process ramifications the invoice may end up in,i.e.into a supply chain finance network providing receivables discounting.To conclude,authentication and authorisation,and certification requiring the former two,needs to sink down on data level,rather than remain on the level of the individual networks,being the source of the information.Certificates may help to authenticate and authorise sessions but making certificates work on dataset level or even on subsets of datasets seems close to impossible.This is trade digitalisation.Another,less data provenance-,but more process-oriented part of trade digitalisation would be to look at how a transitive verifiable trust layer would allow for re-architecting of information transmission processes in trade.Do we really need to convey an invoice between systems as indicated above?Or could the invoice just remain in the ERP system which it originates in,accessible and verifiable for subjects(people)or objects(peoples computer systems)having a stake?If the identity of the subject or object accessing the invoice can reliably be proven at the time of access,authentication and authorisation follow up and if legitimate access could be granted.Verify Back to OriginSeller ERPPASFineWineB2BXC4.TradeB2B networkERP systemERP systemRecloaB2B NetworkTransfer dataTransfer dataBuyer ERPSELLERBUYERB2B OPERATORINVOICE ORIGINALDATA SPACESYSTEM/SYSTEM CLASSVerifyXYZVerifyFig.3:Verifiability on a data spaceTrust in Trade178.1.IntroductionOn 21st October 2028 the container ship“Digital Age”embarks on a journey from the port of Rotterdam in the Netherlands to Jurong port in Singapore.On board it carries 16,384 containers stacked with machinery,chemicals,pharmaceuticals,batteries,wine,and many other produces.All containers on board are equipped with IoT devices fulfilling several different functions.All IoT sensors form a mesh network and communicate among each other and in real-time with the ships IT infrastructure.The ship itself is in constant exchange with either satellite constellations in the sky,communicates with mobile phone networks when close to coast lines or connects to port infrastructures.It will cross the Suez Channel and is scheduled to arrive in Singapore on 06th November 2028.The respective ports digital infrastructures will query all containers onboard via the ships infrastructure for information upon arrival and send updates.A closer look at an FTL8 consignment aboard the ship Digital Age reveals:Case:Cool WineContainer 2048,a 40 foot reefer,contains 22,176 bottles of French red wine on 22 palettes,each holding 84 crates of 12 bottles.The wine is delivered from Batavia B.V.,a Dutch exporter of European wine.In transit the containers inner temperature may never exceed 18 degrees celsius and the buyer,CentreShop Ltd,a food retailer,demands a tight temperature recording regime to safeguard the quality of the wine.Any temperature excess event will trigger an insurance claim.Furthermore,every delay in delivery shall result in a penalty of 5,000 USD per day.The consignment has a trade value of 254 TUSD and a retail value of 685 TUSD or 938 TSGDThe wine is being traded on FineWineB2B,a wholesale B2B network convening sellers and buyers of large quantities of wine from all over the world.Batavia B.V.has asked CentreShop Ltd.to have its bank SBD Bank to issue a Letter of Credit as a payment risk mitigation.SBD Bank issues the Letter of Credit and determines trade documentation to be presented as specified below:Trade documentation and documentation flow relying on verifiable trust in future Trade Contract the contract underpinning the trade,closed on the B2B network FineWineB2B Purchase Order the order placed by CentreShop Ltd.following the trade contract Commercial Invoice issued by Batavia B.V.An example use case of transitive(verifiable)trust in trade digitalisation88 FTL(Full truck load).A consignment that occupies an entire freight container,as opposed to LTL(less than a truck load),where several consignments are grouped in a container.Trust in Trade18 Certificate of Origin-issued by Rotterdam Chamber of Commerce on behalf of Batavia B.V.by using the Chambers instance on ICC-Origin Packing list produced by Batavia B.V.s ERP System PAS using product data therein and the purchase order placed by CentreShop Ltd.on FineWineB2B Import Customs Declaration-produced by CentreShop Ltd.s ERP System Raceloa according to templates and data sourced from Singapores instance on GlobalClear Bill of Lading issued by the logistic service provider MarineLog on the network SeaTrans to the order of Batavia B.V.Certificate of Transport Insurance issued by the Marine Insurer SeaCover on the insurance network TranSafeNet on behalf of the applicant Batavia B.V.Logistics DomainDocument Flow:Cool WineMarine insuranceTranSafeNetInspections&CertificationsMARINE COVERPort SystemGlobally transport networkSea TransCargo ReleaseLEGAL ENTITYSEA PORT CONetwork of custom authorities globallyElectronic certificationof originGlobalClearICC OriginSGP CUSTOMSLOCAL CHAMBERS OF COMMERCECustoms DomainTrade DomainFinancial DomainERP systemPASSELLERB2B networkFineWineB2BB2B OPERATORERP systemRecloaBUYERSupply chain financeTrade DiscountTRADE RISK INVESTORSRisk mitigation a serviceL/C QuickBUYER SELLER BANKSXC4.tradePurchase OrderImport Customs DeclarationCertification of OriginTransport Insurance CertificateBill of LadingInvoiceTrade Contract.Trust in Trade19All documentations are digitally signed by their respective issuers and acknowledged by their respective applicants or beneficiaries by digital signature.All documentation is being put onto XC4.trade,a data space for trusted trade documentation exchange.A documentations digital signature on XC4.trade allows for unambiguous attribution to its issuer and current controller at any time.The controller is the current holder of the electronic record being the documentation.There is only one controller of a trade documentation at any given time to satisfy the exclusive control and singularity requirements proposed by the ML-ETR9 that the respective national legislations are asked to derive from it.A full history of all digitally signed changes made is being kept and placed into the metadata layer of the documentation,so that any downstream system consuming and processing the trade documentation knows who has contributed which data objects in each documentation provided,and who at any time is the exclusive controller of the instrument,and who has signed it for which purpose and at which process step.The metadata could also entail information on purpose and function within the respective stake holding organisation.Each instruments content will only be modifiable through the identity layer controlling access to the instrument,its content,and its metadata.To avoid any discrepancy between trade documentation with the L/C requirements,SBD Bank may offer a documentation a largely automated pre-check service on the condition of fully electronic and digitalised presentation on the Financial Network“L/C Quick”.L/C Quick supports this service.SDB Bank further asks for the Bill of Lading and transport insurance to be put to their order by Batavia B.V.for the time of the transport.SDB bank herewith assumes exclusive control over the Bill of Lading.Batavias bank,GIN,will confirm the L/C based on the electronic presentation.L/C-Quick offers extensive matching capabilities for documentation presented in an L/C transaction.A feature,which is facilitated by its trusted position in the network,following its reputation to fully respect data sovereignty assertions imposed by the trading parties.This in turn means,that not every party has full visibility into the entire set of documentation,but only to the extent required to provide the respective service.Extended visibility may be granted against subordination to data sovereignty assertions and may be at a price.Any temperature excess above 18 C will be reported by the containers IoT device as a condition violation into the metadata of the Transport Insurance Certificate.The IoT device will sign this event report using its digital identity.Hence,the condition violation event report will be verifiable and authentic.It will always be attributable to the IoT device from container 2048.8.2.Example documentation flow8.2.1.Commercial InvoiceThe seller issues a Commercial Invoice in his ERP system for the wine to be dispatched and digitally signs it.The invoice is being stored on the trade data space XC4.trade and referenced in FinWineB2B.The buyer is being notified and digitally signs the invoice in FineWineB2B to acknowledge the invoice.FineWineB2B updates the invoice on XC4.trade.The buyer presents the invoice on L/C Quick as requested in the Letter of Credit by amending the L/C Quick transaction with a reference to the invoice on XC4.trade.The buyer bank is being notified and signs the invoice on L/C-Quick as subject to risk mitigation.An investor in trade risk on the network TradeDiscount,which offers refinancing of trade receivables for the 9 ML-ETR:Model Law on Electronic Transferable Records,a recommendation by UNCITRAL on national statutory implementation of Electronic Transferable Records in the interest of harmonising trade legislation pertaining to digital trade internationally.1A1B2A2B3Trust in Trade20customers of seller bank,checks for the veracity of the CoolWine invoice and positively verifies the digital signature of the seller and the acknowledgement of the buyer.The investor also takes note of the subject to risk mitigation-flag.She finances the invoice for its remaining days outstanding and signs it as financed.On behalf of the importer the Singapore customs authorities can access the invoice from within their GlobalClear instance to support determination of import duties.Singapore customs will read all required data for customs clearance from the invoice and other documentation already provided on XC4.trade.Singapore customs will also see,who is importing and what.A Transport Insurance Certificate is being issued based on the data of the Commercial Invoice.In a fully digitalised trade environment architecture copies of the invoice need not be produced.Instead,there could be only one version,which is accessible and fully verifiable for anyone having a stake and being able to prove it.This primary version may be placed on a data space,but it could as well remain in the system of origination,as long as the invoice(or any other instrument)remains accessible,and its authenticity remains verifiable.Still(subset)copies of the dataset can be drawn to update downstream systems in the respective parties domains,serving any supposable purpose.These copies,however,will be marked as such,while the original,the primary version,must always be recognisable as being the primary.Logistics DomainDocument Flow:InvoiceMarine insuranceTranSafeNetTICInspections&CertificationsMARINE COVERPort SystemGlobally transport networkSea TransCargo ReleaseLEGAL ENTITYSEA PORT CONetwork of custom authorities globallyElectronic certificationof originGlobalClearICC OriginSGP CUSTOMSLOCAL CHAMBERS OF COMMERCECustoms DomainTrade DomainFinancial DomainERP systemPASSELLERB2B networkFineWineB2BB2B OPERATORERP systemRecloaBUYERSupply chain financeTrade DiscountTRADE RISK INVESTORSRisk mitigation a serviceL/C QuickBUYER SELLER BANKSInvoiceXC4.trade1A52A2B341B45Trust in Trade21Trust Flow:InvoicePAS ERPSELLERFineWineB2BB2B OPERATORL/C QuickRISK MITIGATIONTrade DiscountSUPPLY CHAIN FINANCERecloa ERPBUYERInvoiceSeller signedInvoiceSeller signed as issuedBuyer signed acknowledgedB2B signed as handled by FineWineB2BInvoiceSeller signed as issuedBuyer signed acknowledgedB2B signed as handled by FineWineB2BRisk Mitigated on L/C QuickInvoiceSeller signed as issuedBuyer signed acknowledgedB2B signed as handled by FineWineB2BRisk Mitigated on L/C QuickFinancedInvoiceSeller signed as issuedBuyer signed as acknowledgedVerify8.2.2.eB/La.MarineLog takes over the transport of CoolWine and issues a SeaTrans e/BL to the order of the seller on XC4.trade(Issuance and Control Transfer).MarineLog digitally signs the eB/L,the seller acknowledges receipt by digitally countersigning the eB/L.b.The sellers ERP system automatically uploads a reference to the eB/L onto FineWineB2Bc.MarineLog notifies SeaPort Co.in Singapore via the network SeaTrans of the consignment.The seller presents the eB/L on L/C-Quick on behalf of the buyer to the buyer bank and digitally signs this action.The seller also puts the eB/L to the order of the bank(Control Transfer),as requested in the Letter of Credit.The buyer is being notified by FineWineB2B and acknowledges all that by digitally countersigning each act.SeaPort Co.s CargoRelease system notifiesa.the buyer,b.the seller,and c.the buyer bank via XC4.trade of the merchandise having arrived and being ready for release.The eB/L has in the meanwhile been continuously updated on XC4.trade with the process IDs of the transactions of the systems the eB/L has been made instrumental in.The digital signatures provided also serve as means of authorisation to effect this.The buyer bank,who is the current controller of the eB/L,puts the eB/L to the order of the buyer and digitally signs this act.The buyer is again notified and digitally signs this act as acknowledged.1234Trust in Trade22The buyer bank debits the account of the buyer and credits the sellers account with seller bank.The buyer,who now controls the eB/L presents it to SeaPort Cos CargoRelease system at the seaport and receives the merchandise.The eB/L assumes the status spent and is being archived for future reference according to retention periods specified by its stakeholders.Logistics DomainDocument Flow:eB/LPort SystemCargo ReleaseInspections&CertificationsSEA PORT COMarine insuranceGlobally transport networkSea TransTranSafeNetMARINE LOG COMARINE COVER CONetwork of custom authorities globallyElectronic certificationof originGlobalClearICC OriginSGP CUSTOMSLOCAL CHAMBERS OF COMMERCECustoms DomainTrade DomainFinancial DomainERP systemPASSELLERB2B networkFineWineB2BB2B OPERATORERP systemRecloaBUYERSupply chain financeTrade DiscountTRADE RISK INVESTORSRisk mitigation a serviceL/C QuickBUYER SELLER BANKSBill of LadingXC4.trade1A1C1B3C23A3B48.3.Trade systems relying on transitive verifiable trustAll systems and interconnection scenarios below are fictitious.Some may already have representations in todays world,some are in the process of being built,some are a vision of what would be beneficial to have to fully digitalise trade.PAS ERP the sellers enterprise resource planning system.Commercial invoices originate here,next to other trade instruments.Recloa ERP the buyers enterprise resource planning system.Purchase orders originate here,next to other trade instruments.FineWineB2B a B2B Network and marketplace for wine.FineWineB2B offers product catalogues maintained by sellers,enriched with all downstream required product information.It also features a trade contract editor and consults on using favorable incoterms.FineWineB2B assists with customs declarations by interconnecting with GlobalClear and is a selling point for digital Certificates of Origin of ICC-Origin.L/C QUICK a decentralised system to orchestrate Letter of Credit interactions between seller,seller bank,buyer,and buyer bank on a distributed ledger.5Trust in Trade23It is interconnected to XC4.trade and accepts references to trade documentation stored and governed in there.TranSafeNet a decentralised marketplace for sea transport insurance.It stores Transport Insurance Certificates on XC4.trade on behalf of its customers.The Transport Insurance Certificate can be transferred alongside an eB/L at the time of risk passing on XC4.trade.TransSafeNet allows for integration with IoT devices on board of containers.SeaTrans a logistic service provider network offering pre-carriage,sea transport and post carriage services of goods around the globe.SeaTrans also offers issuance of electronic Bills of Ladings and has them governed on XC4.trade,which accesses and executes the eB/L process libraries of SeaTrans eB/L.ICC-Origin a future decentralised system of ICC WBO allowing local Chambers of Commerce to issue globally verifiable electronic Certificates of Origin to support preferential custom clearance.ICC Origin sells on B2B systems like FineWineB2B.GlobalClear a global custom clearance network operated by participating national custom authorities on mutuality.FineWineB2B sources its HS-code product classifications from GlobalClear.FinTrade a cloud-based trade finance front and back-office as a service system for banks.FinTrade seamlessly integrates services of L/C-Quick,and XC4.trade,among others.FinTrade connects into the back-offices of banks.CargoAccept part of a system suite covering the processes in seaports for accepting containers for carriage on sea vessels.It integrates with stowage planning systems of sea vessel operators and port systems.CargoRelease part of a system suite covering the processes in seaports for releasing containers to their consignees against presentation of a Bill of Lading.XC4.trade a trade data space that accepts authenticated trade documentation and allows for traceable transfer of control of Electronic Transferable Records.XC4.trade solves the singularity requirement,which asserts that there can at any time only be one primary version of a trade documentation,while all copies are to be considered secondary.XC4.trade also solves the exclusivity of control requirement,which asserts that there can only be one controller of a trade documentation at any given time.Control Transfers between two parties can be performed on the identity layer of the trust supply chain.Further,XC4.trade allows weaving process interactions between different Electronic Transferable Records,e.g.a Bill of Lading and a Promissory Note,or a Delivery Note and a Warehouse Receipt.XC4.trade can also group documents for presentations to a Letter of Credit orchestrated in L/C-Quick.Or interact with CargoRelease to reclaim a container in its port of destination.XC4.trade wraps trade instruments in a data container,which are controlled by fully decentralised digital identities.It interconnects the information supply chain with the trust supply chain.Trust in Trade248.4.Table of Interactions:Instruments,subjects,systemsDocumentationOriginators(Subject)Source SystemDestination SystemsReceivers(Subject)Trade Contract Batavia B.V.CentreShop Ltd.FineWineB2BL/C Quick SBD Bank GIN BankPurchase OrderCentreShop Ltd.Recloa ERP FFineWineB2B PAS ERP L/C Quick FinTrade Batavia B.V.SBD Bank GIN BankCommercial InvoiceBatavia B.V.PAS ERP FineWineB2B Recloa ERP L/C Quick FinTrade CentreShop Ltd.SBD Bank GIN BankPacking ListBatavia B.V.PAS ERP FineWineB2B Recloa ERP L/C Quick FinTrade CentreShop Ltd.SBD Bank GIN BankCertificate of OriginRotterdam Chamber of Commerce ICC-Origin FineWineB2B PAS ERP L/C Quick Recloa ERP GlobalClear Singapore Customs SBD Bank GIN BankImport Customs DeclarationCentreShop Ltd.Recloa ERPGlobalClear(SGP Instance)Singapore Customs SBD Bank GIN BankBill of LadingMarineLog S.E.SeaTrans PAS ERP L/C Quick Batavia B.V.CentreShop Ltd.SBD Bank GIN BankCertificate of Transport InsuranceMarineCover S.E.TranSafeNet PAS ERP Recloa ERP L/C Quick Batavia B.V.CentreShop Ltd.SBD Bank GIN BankTrust in Trade25Privacy engineering and data sovereignty99.1.What is data sovereigntyData is said to be the new oil.In digitalised business processes it is being exchanged and made available to others to an ever-greater extent.Divesting structured data makes it easy for the receiver to use data as intended,but also in other ways.To maintain control over data yielded,technical limitations of the usage of data to certain,pre-defined and agreed upon processes is required.In future dataspaces a lot of data will be accumulated.The often-stressed term“full transparency”,however,is not always a desired property of an exchange environment.Parties making data available are often eager to protect an array of interests and desire to draw back data which has been shared as a requirement for a service provision.Secondary uses of data,of which there can be many,shall often be prevented.9.2.Data sovereignty example in the trade contextConsider SBD bank issuing a series of L/Cs for CentreShop Ltd.,being presented with a series of trade documentation in digital form.CentreShop Pte Ltd.may not want this documentation to be made subject to data mining,to hide trade secrets from service providers or competitors.CentreShop Pte Ltd.may fear that identity tagged data could put service providers like banks in a position to apply discriminating pricing schemes against it and wants to rule this out.Since SBD bank may have to respect retention periods for transaction documentation,deleting presented documentation after transaction closure may not an option.But how else would the bank exclude CentreShops import information from their prescriptive analytics processes?Identity data attached to business data may help SBD bank to reliably exclude customer data from certain processes,while concurrently making the same data subject to other,indispensable processing.This way identity information may become a facilitator for data sovereignty.9.3.Verifiable trust as a facilitator for data sovereigntyCentreShop has signed the invoice and other documentation which was presented in the L/C process.CentreShop may have added a“do not analyse”tag to the documentation.The bank may have added their own“do not analyse”tag during their processing and after reading CentreShops tag.This was only made possible on the fly by CentreShop having digitally signed the invoice before it was presented,and the bank has been able to evaluate this information automatically.Both digitally signing the invoice as well as adding tags for downstream processing would happen on the meta layer.The core data of the invoice remains unchanged.Trust in Trade26Retention of trust information over time10Legally and regulatory relevant information is frequently subject to retention periods.Business data needs to be archived and may not be deleted for periods of time determined by the law or regulations and depending on the subject matter background.Trust services facilitating authentic data exchange can help alleviating this and simplify meeting the multitude of requirements.Verifiability and attributability to originators on data level helps to flag data as being subject to retention and also to not being the latter any longer and therefore be released for deletion.Trust in Trade27With the arrival of cryptographic algorithms for the creating of private/public key pairs it became possible to create standards around these algorithms.One standard deals with digital certificates.The International Telecommunication Union(ITU)standardised digital certificates in their X.509 standard in the 1980ies.It took some time before rule books and governance models arrived,resulting in Public Key Infrastructures(PKI)and the establishment of certificate authorities(CA).CAs are responsible for the issuance and revocation of digital certificates.PKI is a technology for authenticating users and devices in the digital world.In its centralised form one or more trusted parties,certificate authorities,digitally sign documents certifying that a particular cryptographic key belongs to a particular user or device.The key can then be used as an identity for the user in digital networks.Its decentralised form,Decentralised Public Key Infrastructure(DKPI)does not require a certificate authority,the certificate is replaced by a Decentralised Identifier(DID)or an Autonomic Identifier(AID)which are self-certifying and self-sovereign and contain the public key.Upon request,the owner of the DID can prove its control over the DID/AID using the private key.Users and devices holding keys are called entities.In general,anything can be associated with a key that it can use as its identity.Besides a user or device,it could be a program,process,manufacturer,component,or something else.The purpose of a PKI is to securely associate a key with an entity.An entity in trade can be either a subject,having rights and obligations,hence a natural person employed by a legal entity or the legal entity itself,in the form of a trading party or a service provider.Attributable to these subjects are objects,like trucks,containers,pallets,IoT sensors,computing resources or data.11.1.Centralised vs.decentralised PKIsPKI as we know it today is largely centralised.The advantages of decentralised over centralised PKI in global trade are explained here.11.2.Asymmetric vs.symmetric cryptographyThe core technology underlying PKI is called asymmetric cryptography.Its asymmetric with respect to cryptographic keys.Unlike symmetric cryptography,whose operations use a single shared secret key,asymmetric cryptography uses a pair of keys,which are mathematically entangled.One key in the pair is the private key and the other key is the public key,forming a public-private key pair.The main advantage of asymmetric cryptography is that only the public key is shared,while the private key is never and must never be shared.This enables security without having to trust in some other entity.One of the important operations enabled by asymmetric cryptography is a non-repudiable digital signature.Non-repudiable digital signatures enable more secure attribution of data to its source.With an asymmetric digital signature,the signature is created by the unshared private key.The signature may be verified by anyone who has the shared public key.An attacker cannot forge a signature without the private key.This means a signer cannot repudiate a signature made with their private key.This means that any verifier can verify without having to trust the signer and the signer can prove it signed without having to trust the verifier.A symmetric key signing operation,on the other hand,is repudiable because the signing key must be shared with whomever needs to verify the signature.Thus,the signer can repudiate any signature because any verifier is enabled to be a forger.Symmetric cryptography is only secure PKI(Public Key Infrastructure)11Trust in Trade28amongst a set of mutually trusting parties and only to the degree that those parties act in a mutually trustworthy manner.11.3.Trust across trust domain boundariesA related key insight underlying security is about trust and who must be trusted.A trust domain can be loosely defined as the set of trusted infrastructure that is shared by every organisation that operates within that domain.The hard problem is enabling trust to cross trust domain boundaries.Symmetric cryptographic operations are only secure within the same trust domain.In contrast,asymmetric cryptographic operations have the potential to be secure across trust domain boundaries.This points to the crux of why one should care about decentralised PKI versus centralised PKI.Centralised PKI largely defeats the main potential advantage of asymmetric cryptographic,that is,its ability to allow trust to cross trust-domain boundaries.In the limit the best infrastructure is Zero Trust Infrastructure.Zero trust is short for:never trust,always verify.What it really means is that any operation or communication from a given source must be verifiable by the end user.This is called end-verifiability.This means that as information crosses from the source entity to another to yet another to eventually the end user,the path taken doesnt matter.The middle does not need to be trusted because the end can verify the information back to the source.11.4.Trust imposed transaction cost in tradeIn the context of international trade,trust domain boundaries are strong boundaries.These boundaries impose high degrees of friction and hence cost.These costs may be more formally classified as transaction costs.Transactions costs may be divided into three categories,that are:triangulation,transfer,and trust.Triangulation costs include finding,filtering,and matching of the parties,products,and services associated with a transaction.Transfer costs include transportation,fulfilment,and payment of exchange of goods and services associated with the transaction.Trust costs include identification,authentication,authorisation,and reputation of the parties to the transaction as well as ascertaining the risks associated with the parties fulfilling their obligations under the transaction.It is the latter,trust transaction costs,that PKI impacts.In a strong sense,lowering trust transaction costs enables transactions that would not have been possible or economical otherwise.For example,a Bill of Lading on paper cannot be processed in two locations concurrently.A digitised Bill of Lading(i.e.on PDF)may be swiftly conveyed but cannot seamlessly be included into a ramified process thread.A digitalised eB/L,maybe offered on a blockchain based system,can be called and manipulated from anywhere in immutable fashion,but all stakeholders around it would be required to make use of the same trust provider.Unless the trust provision is transitive between the large variety of systems to be found among the seemingly infinite permutations of systems having to interoperate.This has been addressed as open interoperability problem.11.5.Transitive trustClearly enabling trust to cross trust domain boundaries is essential to reducing trust transaction costs in the arena of international trade.This is called transitive trust.Indeed,in the limit Zero Trust Infrastructure could approach the lowest possible trust transaction costs.So how does a more decentralised PKI better provide transitive trust compared to a more centralised PKI?The vital function of a PKI is to bind controllers,identifiers,and key pairs.A controller is a person that controls an identifier with a(public,private)key pair.If any of the bindings are weak then the infrastructure is subject to attack.The infrastructure is therefore weak.Trust in Trade2911.6.Centralised vs.decentralised PKIIn a centralised PKI,the bindings between identity and a subject or object are asserted by some trusted entities like DNS/CA registrars and certificate authorities,or a given shared ledger.The trusted entity controls the shared infrastructure supporting those bindings that everyone must trust.This makes it difficult for the trust in one trust domain to securely cross over to another trust-domain.However,exactly this is a requirement in supply chains,where a multitude of actors are interacting and will in future have to interlink their business processes across domain boundaries.This is the interoperability assertion.In a decentralised PKI the bindings are based on verifiable cryptographic operations.This makes the bindings strong.Because all operations are verifiable,they require no trust into any given,centralised trust provider and therefore that verifiability is transitive across trust domains.The most important operation is determining the state of the controlling keys for a given identifier.The difficulty for decentralised PKI is ensuring that all operations are duplicity evident.This means that duplicity by a given party to a transaction is detectable by the other party or parties to that transaction.Ensuring duplicity evident operation in a totally decentralised way may be accomplished by splitting the infrastructure into two parts.These are the promulgation infrastructure and the confirmation infrastructure.What is being promulgated is the key state which underlies the bindings between the controller,identifier,and key pair.What is being confirmed is that there is no evidence of duplicity or irreconcilable duplicity in that promulgated key state.Each controller controls its own promulgation infrastructure;each verifier controls its own confirmation infrastructure.This split enables what is called shared data without shared control over the infrastructure.There is no shared control over the infrastructure.What is shared,however,is the key state.This is the shared data.The key state is provable using a verifiable data structure.All that needs to be agreed upon is the protocol for sharing the key state as verifiable data structure and not who controls shared infrastructure.Shared control over the PKI is what makes it centralised to some extent and makes transitive trust difficult.Clearly,in an international setting,shared control may be extremely problematic.By splitting the infrastructure into two parts,shared control is no longer needed.Each controller controls its own key state promulgation infrastructure,and each verifier controls its own key state confirmation infrastructure.This makes the system totally decentralisable.This split fosters competitive differentiation and innovation which drives lower cost-for-performance and in turn lowers trust transaction costs.In a decentralised PKI there are two classes of identifiers.The first class consists of self-certifying identifiers.These are cryptonymous(crypto-pseudonymous)identifiers that are cryptographically derived from key pairs.There is no practical limit to the number of cryptonymous identifiers and only the holder of the private keys can prove control over such an identifier.These form a cryptographic end-verifiable root-of-trust to the bindings between the controller,identifier,and key pairs.The second class consists of human meaningful identifiers.Because human meaningful identifiers are scarce,they require some entity to issue them.This is inherently centralising to that entity.However,if the infrastructure that supports them is otherwise decentralised,their trust may securely cross trust domain boundaries,i.e is transitive.Global Legal Entity Identifier Foundation(GLEIF)s Legal Entity Identifier(LEI)is already accepted as a cross-jurisdictional human-meaningful identifier.The Verifiable Legal Entity Identifier(vLEI)is a credential based on decentralised PKI that enables cryptographic verification of the association between an LEI and the controllers of an AID(cryptonym).Thus,a vLEI imbues a LEI with cryptographic verifiability of the bindings between controller,identifier,and key pairs in a cross-trust-domain friendly way.The protocol to exchange and verify public keys as well as their status as issued or revoked is called Key Event Receipt Infrastructure(KERI).KERI allows for bridging trust domains,e.g.across multiple blockchain applications or APIs,by anchoring any credential on the target system.The infrastructure for this network-of-networks is called Witness Network.Trust in Trade3011.7.Similarities of digital certificates and verifiable credentialsBoth digital certificates and verifiable credentials use crypto-algorithms for binding the content to a pair of keys,the private and public keys created by a PKI.In both cases the content is verifiable which means it is tied to the holder and it cannot be changed without compromising the hash code.The latter means that there is certainty about the data contained has not been modified or tampered with.This is called authenticity of the data,in this case the identity information.The crypto-algorithms are foundational.In general,all different types of crypto-algorithms and key lengths(important for protection against hacking the keys)can be used in digital certificates and verifiable credentials.Additional standards are in place to define them in a specific context.The underlying software is usually open source and can be used equally for digital certificates and verifiable credentials.Both come with templates describing the content of the digital representation:The x.509 standard defines a skeleton of attributes to be used.Contents of certificates can be enhanced by additional attributes based on additional standards.Good examples are electronic Identification,Authentication and Trust Services(eIDAS)compliant certificates in the European Union.There,the content template is defined by a corresponding European Telecommunications Standards Institute(ETSI)standard.It is important to recognise that both sender and receiver of digital certificates must agree on the standards and protocols.This leads in many cases to different types of certificates used only in a certain context.Verifiable credentials also contain content linked to the key pair.The standards,e.g.,VC 1.0 by W3C,ACDC 1.0 by Trust over IP foundation(now a draft specification at the Internet Engineering Task Force(IETF)and market standards such as AnonCreds on Hyperledger,allow the definition of templates.In principle,the templates for digital identity could be similar.To use an analogy,digital certificates as well as verifiable credentials are in fact containers for data,sealed with the private key of the holder.11.8.DifferencesDigital certificates are used mainly for identity information.Typical examples are transport layer security(TLS)certificates on the internet,or qualified seals in eIDAS.They are usually used for encryption and authentication when accessing a resource,e.g,.web service,or for digital signing,e.g.,machine-readable contracts,invoices,reports etc.Certificate issuance is the domain of certificates authorities(CA)and trust service providers(TSP).The underlying PKI is centralised PKI.To obtain a certificate for a certain use case,it must be applied for with a CA.The certificate itself contains the content as well as the trust chain of the CA.Chain of trust means the hierarchy of issuers.So,if the certificate coming from a TSP in Europe,it contains the trust chain of the certificate of the holder,linked to the certificate of the issuer,which is linked to the root certificate,e.g.,of a European jurisdiction.Certificates have a fixed time to live.Encoded within the certificate is the date from which on the certificate is invalid and cannot longer be used.This can create an issue with the integrity and accuracy of the contained information compared to the real world.For instance,a name could change but the holder may continue to use certificate which carries the old value until they become invalid.In some use cases,the validity is restricted to very few minutes,in others up to a year or longer.To overcome this referential integrity issue between certificates and the real world,certificates can be revoked at any time.The certificate is added to a central revocation list with all revoked certificates of a certain trust domain.Downstream applications can access the revocation list to prove the validity.This results in the need for having multiple certificates for multiple domains,and over time multiple certificates for the same underlying identity.And all certificates have a different cryptographic identifier which makes it impossible to have a complete trace Trust in Trade31for all certificates issued for the same entity or person.To solve these problems requires rigorous rules and infrastructure which must be controlled for compliance.In the end,verification of all aspects is complex,and delegated to applications and infrastructures which makes it more error prone and costly than it should be.Verifiable credentials are more flexible.For easier read,the differences between the various types of credentials will not be discussed here.Basically,any ecosystem could define templates for credentials as described in a governance framework.In case of the vLEI the content is restricted to very basic information such as the LEI and/or the role of the holder.All other information can be provided outside as the embedded LEI points to the most up to date information on identity of an organisation.Data privacy constraints can be managed outside the credential.Verifiable credentials are decentralised by nature.Both the issuance and the use can be distributed among autonomous systems or nodes in a network,aka the internet.A required standard is the protocol between all nodes and across trust domains.In case of the vLEI this protocol is KERI,also a draft IETF standard.Verifiable credentials can but do not need to have an expiration date.In case of the LEI we see a life-long unambiguous identifier that will never change or get re-used.The digital twin vLEI should be valid as long as the LEI is issued and renewed.However,this requires the possibility of real-time revocation.In the event of newer information,e.g.,if the company ceases trading and the LEI is retired,the information about the revocation must be available to downstream applications immediately.Furthermore,each derived credential is rendered invalid as well.If a company cease to exist,all credentials for all employees,customers,members etc.will become invalid at once.This is guaranteed by the KERI protocol.Each request for verification includes the check for revocation.It should be noted that the verification happens against distributed nodes.The credentials contain information regarding the path for verification.A central blockchain or ledger is not needed.Trust in Trade32Organisations have for long operated applications they require to perform business functions-application landscapes within their own networks,often called intranet.This was,and to an extent still is,being done in dedicated company owned data centres or private clouds.The networks are typically enclosed by software instances controlling access to applications on certain ports,the so-called firewalls,and helped by role-based access limitations.Several lines of defence were defined to protect the network and keep attackers out of private networks and data centres.12.1.Directory service federation spaghettiEmployees are usually being given access to a set of applications in an organisation.Theyre being assigned dedicated roles to perform certain functions while using their subset of applications.The roles are being assigned by the organisations identity access management team for all the organisations personnel.A person in a bank working on Letter of Credit has access to a trade finance back-office system and a variety of other applications required.This mode of operation has long worked rather poorly than ideal,but another mode of operation just didnt exist,though there was often the need to allow for access for external people to interact with internal applications.A trade example would be for a banks employee working on a Letter of Credit to access a Bill of Lading that has been stored in a logistics service provider network.How could this access be granted?Attempts to federate directory services,providing foreign identity information,have mostly failed over the exponential permutation growth in the number of services to be interconnected.And there will be ever more interconnection requirements.Whats more,the accelerating trend to cloudification has gradually perforated the security perimeters of organisations,following the need to connect and integrate more and more internally and externally operated applications with those of external service providers.12.2.Security threatsThere is another downside to the traded model of operating“private central identity”.An organisations internal network security parameters resemble a castles wall.From outside no access is possible,but once an attacker has surmounted the perimeter,there is often little limits to further“lateral movement”.This type of criminal activity is on a raise globally with devastating effects for affected organisations.Often access to a network is attained by phishing attacks.An attacker gains access in a staggered approach,tempting an internal user to click on a link or open a forged file attached to a mail,eventually gaining knowledge of the users credentials and then continues to move laterally alongside the attacked users authorisation spectrum.In many cases,internal users who either lack skills or can socially be tricked into conducive behaviour are the target for attacks regardless how careful the security perimeter has been designed.12.3.Zero TrustAn environment built following Zero Trust Architecture principles does not pose vulnerability of that kind.Access privileges are not centred around users,but always around the resources that are being used.A resource can be anything.A data object like a file,an IoT device or just the data it makes Zero Trust Architecture12Trust in Trade33available,calculation power rendered by either a server cluster or an edge instance like small computing unit in a car or a container.Let us assume the resource in consideration is an electronic Bill of Lading,which represents a consignment.Let us further assume that access to this eB/L,or a subset of its information shall be granted to a port authority,but only at the time the container is in the port.An IoT device in the container would connect to the port authoritys network and be asked for authentication.The reference to retrieve the eB/L from a data space would only be sent by the IoT device once a two-way authentication and authorisation process has successfully completed and the port authority has proven their access right.As soon as the container is released and left the port,no further access to the eB/L is possible,since the reference to the eB/L is a single-use token.The single-use token could also be limited to a certain process or purpose.Or only allow for certain required sections of the eB/L to be revealed,while others remain hidden.This way Zero Trust Architectures and transitive trust support the right to use certain data for a certain process at a certain time,but not for anything else or at a later point in time.This is data sovereignty.Zero Trust Architectures are based on verifiable credentials and address this and a multitude of other issues.The methods for resolution between foreign networks are always build-in.Trust in Trade34Standards1313.1.Technical Standards13.1.1.X.509 CertificateAn X.509 Certificate,often just called certificate,is a digitally signed file binding an identity to a public key.The identity can represent a hostname(a specified computer),an organisation(i.e.a company participating in a trade)or a human being(a natural person).The certificate is usually issued and signed by a commonly known,reputable,and trusted certification authority,i.e.Lets Encrypt(not for profit)or IdenTrust(commercial).A digital certificate certifies the ownership of a public key by the named subject of the certificate.This allows others(relying parties)to rely upon signatures or on assertions made about the private key that corresponds to the certified public key.In other words:a trade documentation that has been signed with the private key of a x.509 certificate and thus can be verified by its recipient to having been issued by the subject specified in the certificate.The X.509 standard has been set by the International Telecommunication Union in 1988.Since a X.509 certificate relies on the trust put into the certificate authority the PKI it supports has a centralised component.Certificates come with an expiry date,after which they must be re-issued.A trust chain can be formed from an end-entity certificate via one or more intermediate certificates through to a root certificate,typically held by the certificate authority.Trust ChainEnd-entity CertificateIntermediate CertificateReferenceReferenceSignSignSelf-signRoot CertificateOWNERS NAMEOWNERS PUBLIC KEYISSUERS(CAS)NAMEISSUERS SIGNATUREOWNERS(CAS)NAMEOWNERS PUBLIC KEYISSUERS(ROOT CAS)NAMEISSUERS SIGNATUREROOT CAS NAMEROOT CAS PUBLIC KEYROOT CAS SIGNATURETrust in Trade35In case a certificate is discovered to have been improperly issued,or if a private key is thought to have been compromised,certificates can be irreversibly revoked by the CA by adding it to a certificate revocation list,which are usually updated on a daily basis.Software relying on certificates thus need to check against revocation lists every time trust in a certificate is being asserted.X.509 certificates are used in many internet protocols,including TLS/SSL,forming the basis for HTTPS,the secure protocol for browsing the World Wide Web.They are also used for electronic signatures.13.1.2.Decentralised Identifiers(DID)10 Decentralised Identifiers are based on the model that the controller of an identity keeps a private key which is used for authentication,assertions and other use cases.All DIDs resolve to a DID document,which includes the corresponding public key.This way,anyone can verify that an entity claiming to control a given identifier holds its private key.This removes the need to map between multiple identity provider representations;the DID is essentially its own identity provider.11DIDs are currently mostly used in blockchain/DLT solutions,but do not rely on DLT.Decentralised Identifiers12 enables verifiable,decentralised digital identity.A DID refers to any subject(e.g.,a person,organisation,thing,data model,abstract entity,etc.)as determined by the controller of the DID.In contrast to typical,federated identifiers,DIDs have been designed so that they may be decoupled from centralised registries,identity providers,and certificate authorities.Specifically,while other parties might be used to help enable the discovery of information related to a DID,the design enables the controller of a DID to prove control over it without requiring permission from any other party.DIDs are Uniform Resource Identifier(URI),a unique resource identifier,that associate a DID subject with a DID document allowing trustable interactions associated with that subject.Each DID document,being a set of data describing the DID subject,can express cryptographic material,verification methods,or services,which provide a set of mechanisms enabling a DID controller to prove control of the DID.Services enable trusted interactions associated with the DID subject via service endpoints.A DID might provide the means to return the DID subject itself,if the DID subject is an information resource such as a data model.This document specifies the DID syntax,a common data model,core properties,serialised representations,DID operations,and an explanation of the process of resolving DIDs to the resources that they represent.A DID uniquely identifies any subject,like a trading party,be it an organisation or a natural person,or an object,which can be data,a machine,a software process,or a trade documentation in the form of transferable record.There is no need for a central trusted authority to issue a DID.The DID subject is the entity identified by a DID and described in a DID document.Anything can be a DID subject:A person employed by a bank,a seller Co.operating on FineWineB2B,a physical thing like an IoT device,a digital thing like an electronic Bill of Lading,a logical thing like a process library running on XC4.trade to govern allowed operations on the eB/L stored,or a trade itself,represented by its trade contract entered into on FineWineB2B.The DID subject is usually,but not necessarily the DID controller,who can make changes to the DID document.In case the DID identifies an object,as a trade documentation,its controller may be another object,a software process,whose DID is then controlled by a DID subject being a natural person,and therefore legally a subject.10 Source:W3C-https:/www.w3.org/TR/did-core/11 Source:Nis Jespersen,28th plenary Meeting UN/CEFACT.https:/unece.org/sites/default/files/2022-10/Nis Jespersen - Solving International Trade ChallengeswithEmerging Web Technologies.pdf12 https:/www.w3.org/TR/did-core/#dfn-decentralized-identifiersTrust in Trade36DID-ArtefactsRegisters&authenticatesVerifiesattributesStoredIssuesAssociatedDIGITAL IDREGISTRYDIGITAL IDDOCUMENTDIGITAL IDIDENTIFIERCREDENTIALPROVIDERENTITY TO BE IDENTIFIEDCONSUMER OFID INFORMATIONRefers toUsersAuthorise use ofVerify Back to OriginIssuerHolderVerifierVERIFIABLE CREDENTIALMetadataClaimsProofMetadataRedacted claimsProofVERIFIABLE PRESENTATION13.1.3.Verifiable CredentialsThe Verifiable Credential(VC)standard of the World-Wide-Web Consortium(W3C)explains13:Credentials are a part of our daily lives;drivers licenses are used to assert that we learned how to operate a motor vehicle,university degrees can be used to assert our level of education,and government-issued passports enable us to travel between countries.This specification provides a mechanism to express these sorts of credentials on the Web in a way that is cryptographically secure,privacy respecting,and machine verifiableA credential is a set of one or more claims made by an issuer.A VC is a tamper-evident credential whose authorship can be cryptographically verified.VC can be used to build verifiable presentations,which can also be cryptographically verified.Authorship of data can hence be trusted.Example:A VC issued for a bottle of wine by a winemaker and specifying a certain quality of wine can be verified to having been issued by this winemaker.It doesnt guarantee that the wine meets the quality features that have been claimed.Someone else,a wine inspector of good reputation could issue another VC,which would be provably issued by her.13 https:/www.w3.org/TR/vc-data-model/Trust in Trade37IssuerIssuerVerifierWINE MAKERRETAIL CUSTOMERVerifierBatavia B.V.CenterShopVERIFIABLE CREDENTIALMetadataClaims:BordeauxFrenchChateauProofClaims:FrenchProofVERIFIABLE CREDENTIALMetadataVerify Back to Origin/Target13.1.4.Authentic Chained Data Container(ACDC)An authentic chained data container is an IETF14 internet draft focused specification being incubated at the Trust over IP foundation.An ACDC is a variant of the W3C VC specification.One primary purpose of the ACDC protocol is to provide granular provenanced proof-of-authorship(authenticity)of their contained data via a tree or chain of linked ACDCs(technically a directed acyclic graph or directed acyclic graphs(DAG).Like the concept of a chain-of-custody,ACDCs provide a verifiable chain of proof-of-authorship of the contained data.Chains of ACDCs that merely provide proof-of-authorship(authenticity)of data may be appended to chains of ACDCs that provide proof-of-authority(delegation)to enable verifiable delegated authorised authorship of data.This is a vital facility for authentic data supply chains.Furthermore,any physical supply chain may be measured,monitored,regulated,audited,and/or archived by a data supply chain acting as a digital twin.Hereby ACDCs provide the critical enabling facility for an authentic data economy and by association an authentic real(twinned)economy.An ACDC is a data container that provides a verifiable proof of origin linked to an identifier.This origination identifier is called the Issuer.It identifies the entity that the ACDC is issued by.Optionally an ACDC can also be linked to another identifier called the Issuee that it is issued to.It then identifies the entity the ACDC issued to.The Issuee can provide a verifiable proof of its identity at the time of presentation.Each ACDC can also be chained to other ACDCs.Interdependencies between several ACDCs,like different trade instruments wrapped in ACDCs and contracts relating them can this way be woven.This combination of features enable a set of ACDCs to provide a verifiable chain of provenance of the contained data and optionally a verifiable chain of authority from Issuer to Issuee to Issuer and so forth.Thus an ACDC can convey both verifiably authoritative data and authorised entitlements.14 IETF Internet Engineering Task Force,https:/www.ietf.orgTrust in Trade38Trade DocumentationCreate any number ofThey can be the issuer or subject inEntitiesACDCDEVICESORGANISATIONSCERT OF ORIGININVOICEBILL OF EXCHANGEEXPORTPERMITPURCHASEORDERBILL OFLANDINGAPPSDecentralised IdentifiersDID:KERI:123456DID:KERI:ABCDEFDID:KERI:XZ65BFPEOPLE13.1.5.Composable Event Streaming Representation(CESR)Composable Event Streaming Representation(CESR)is a protocol allowing to sign subsections of a documentation.More than one person(or software process)can sign the same or different sections of a documentation provided.The CESR specification and proof format were developed within a ToIP working group and currently are drafts of the Internet Engineering Task Force(IETF)15.Content in sections of a report or a documentation,can be signed by one or more officers and employees/managers of an organisation using their Official Organisation Roles(OOR)and Engagement Context Role(ECR)vLEIs.The entire content of the same report,for example,also can be signed in its entirety by one or more officers and employees/managers of organisations using their company issued credentials.A Bill of Exchange(BoE)is frequently multi-signed on different sections.The drawer(debtor)signs the BoE,as well as the drawee(creditor)and every consequential endorser of the instrument signs a separate section.Similar procedures apply to Bills of Lading,Warehouse Receipts,and other negotiable instruments.In case standardised credentials for company roles were to be used in trade on a global level to multi-sign trade documentation,ACDC and CESR could provide means to dramatically simplify exchange of documentations,which i.e.,securitise property or represent documentation required for a trade related process,i.e.,hazardous goods information.GLEIFs vLEI offers such a standard.The CESR protocol allows for swift transport of data containers between different systems while preserving the unique features of the data containers and supporting human readable and machine-readable data representations concurrently,while preserving the identity context of the information provided.In more plain words:CESR allows retaining of who has provided what information regardless of how many times the information was conveyed to a downstream system.Further CESR enables signing of entire data containers or subsections of its content.It even allows multi-signing of sections and subsections.As an example,a Promissory Note is being signed by its issuer and can in a downstream process become endorsed by multiple endorsees on its endorsement section.15 https:/weboftrust.github.io/ietf-cesr/draft-ssmith-cesr.htmlTrust in Trade39Example for human-readable and machine-readable data representation combined on a wine labelNested information containerisation and representationINSTRUMENT eB/LINSTRUMENT PROCESSIDACDCINSTRUMENT eB/LINSTRUMENT PROCESSIDACDCINSTRUMENT eP/NINSTRUMENT PROCESSIDACDCDVP CONTRACTRELATED IDs OF ACDCsIDACDCACDCHuman readable text formatMachine readable binary formatIDPROCESSINSTRUMENT0I00I00I0I0I0III0II000I00II0CESRACDCIDPROCESSINSTRUMENTI0I0I0I0I00II000II0II0I00II0CESRHuman-readabledata representationMachine-readabledata representationSection signsMultisigningACDCIDCONTRACTPROSECONTRACTCODE0II00I0I0I0I0I0II00II0III00I0II00I0CESRInterrelated ACDCs,CESR serialisedNested information containerisation and representationINSTRUMENT eB/LINSTRUMENT PROCESSIDACDCINSTRUMENT eB/LINSTRUMENT PROCESSIDACDCINSTRUMENT eP/NINSTRUMENT PROCESSIDACDCDVP CONTRACTRELATED IDs OF ACDCsIDACDCACDCHuman readable text formatMachine readable binary formatIDPROCESSINSTRUMENT0I00I00I0I0I0III0II000I00II0CESRACDCIDPROCESSINSTRUMENTI0I0I0I0I00II000II0II0I00II0CESRHuman-readabledata representationMachine-readabledata representationSection signsMultisigningACDCIDCONTRACTPROSECONTRACTCODE0II00I0I0I0I0I0II00II0III00I0II00I0CESRTrust in Trade40As another example a Bill of Lading is being signed in full by the carrier and countersigned in full by the shipper and consequently put to the order of a succeeding proprietor of a traded commodity by signing it again.13.2.Combining ACDC and CESRThe combination of ACDC as an instrument bearing credential and CESR as a conveyance facilitator may be a powerful solution to alleviate the interoperability challenge of digital trade documentation while at the same time introducing a cryptographically strong bond between the information supply chain and the trust supply chain.ACDC and CESR can be used in blockchain,cloud or any other technical application.13.3.Identity relevant standards in trade13.3.1.Legal Entity Identifier(LEI)The LEI is a 20-character,alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization(ISO).It connects to key reference information that enables clear and unique identification of legal entities participating in financial transactions.Each LEI contains information about an entitys ownership structure and thus answers the questions of who is who and who owns whom.Simply put,the publicly available LEI data pool can be regarded as a global directory or business register,which greatly enhances transparency in the global marketplace.Data about a LEI holder can be obtained free of charge from https:/search.gleif.org/#/search/13.3.2.Verifiable Legal Entity Identifier(vLEI)The vLEI is the secure digital counterpart of a conventional LEI.It is a digitally trustworthy version of the 20-digit LEI code which can be automatically verified,without the need for human intervention.The vLEI is a digitised LEI service,utilising digitally verifiable credentials containing the verified organisation identity to provide automated identity verification between counterparties.The vLEI provides a cryptographically secure chain of trust that can replace manual processes needed to access and confirm an entitys identity across industries.vLEI is delivered in an agnostic method able to support self-sovereign identity(SSI)platforms.This ensures the identity holder has control of his/her personal data over how,when,and to whom that data is revealed.13.3.3.Role Credential A verifiable credential certifying the official role of
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11SUMMER/FALL 2023JINGDAILY.COMREPORTCONSUMER INSIGHTS AND MARKET ANALYSISDECODING CHINAS DIVERSIFYING BEAUTY MARKET:Prepared exclusively for Transaction:0146847274Follow Uson WeChatSUMMER/FALL 20231 2023 Jing Intelligence.All rights reserved.This is a public report only for the use of the individual who downloaded it and should not be copied or distributed without permission.REPORTAbout Jing DailyLaunched in 2009,Jing Daily is the leading digital publication on luxury consumer trends in China.It is our mission to understand the forces shaping the future of the luxury industry by bringing our readers the latest news,analysis,features,and reports exploring developments in that landscape.We seek to understand how the definition of luxury,and by turn its consumption,is changing,how the digital landscape in China is developing,and how brands are adapting and taking advantage of those changes.Our readers are industry leaders seeking to understand Chinas complex and rapidly evolving luxury industry.The Jing Group The Jing Group,which includes Jing Daily,China Film Insider,MOVE THE MIND,Jing Travel,Jing Meta,Jing Collabs&Drops and Jing Culture&Crypto,is one of the most trusted English-language sources of news and information about global trends in culture,technology,and the business of luxury and fashion,including Chinese culture and commerce,for institutions,companies and professionals worldwide.The Jing Group also encompasses Jing Intelligence,which brings together the expertise of a team with decades of experience in the China luxury,culture,technology,branded content,and travel industries.Report CreditsAuthors:Ivy YangEditor:Steve PriceDesigner:Cho Ser JenqCover Photo:Memo Paris Flagship Store in ShanghaiFor editorial inquiries:For partnership opportunities:Charlie Gu,JINGDAILY.COMPrepared exclusively for Transaction:01468472742Chinese Beauty Industry OverviewChinese Beauty Consumers and Emerging Consumption Trends Explained Gen Z:The New VIP Chinese Consumer GroupUnlocking Success Through Diverse Marketing Strategies in ChinaThe Impact of Chinas Policies and Development on the Beauty Industry0313242936Chapter 1Chapter 2Chapter 3Chapter 4Chapter 5TABLE OF CONTENTSPrepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 3CHINESE BEAUTY INDUSTRY OVERVIEW 3CHAPTER 1Prepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 4As China navigates the post-Covid-19 landscape,pent-up demand from the past three years is poised to unleash its full potential.As per the data for March 2023 disclosed by the National Bureau of Statistics of China,total retail sales soared to 3.8 trillion RMB($530 billion),up a significant 10.6%year on year.This level of expansion is expected to continue,driven by increasing demand for premium products and Chinas expanding Gen Z demographic.E-commerce platforms such as Alibabas Tmall,JD,Douyin,and WeChat mini program storefronts are the main channels brands use to reach customers.These digital platforms allow personal care and cosmetics brands to accurately target consumer groups based on age,geography,preferences,and other characteristics.They offer time-honored brands and new brands alike effective and cost-efficient marketing solutions to reach Chinese consumers.Domestic Chinese brands have invested heavily in online channels,allocating resources to brand building through e-commerce channels to drive sales.Data shows that the proportion of e-commerce channel sales in China surged from 23.5%in 2017 to 38.6%in 2021 and is expected to reach 47.9%this year.Source:Forecast of Sales Proportion of E-commerce Channels in Chinas Beauty and Personal Care Industry from 2017 to 2023201720182019202020212022202323.526.831.037.638.643.847.90102030405060Prepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 5Finding the Right Partner in Chinas Post-Covid-19 Digital Economy While the digitalization of Chinas economy had been world-leading in many respects,the Covid-19 pandemic further accelerated the development of online shopping habits.Therefore,the penetration rate of beauty and personal care products in Chinas online marketplaces is expected to deepen further as the digital retail market grows.The rise of social media,the growing influence of beauty KOLs,and the rise of live-streaming and short videos provide new opportunities for new brands.But this vast opportunity set also presents new challenges.If a brand wants to successfully launch in China,it must find the right partner to navigate those country-specific requirements,execute growth strategies,and protect its brand equity.For the past 17 years,SYoung International has provided solutions for brands looking to enter China.SYoung has introduced niche and premium beauty brands to Chinese consumers and helped brands formulate and execute their China market strategies.Roundtable discussion at SYoung Exclusive Cosmetics Forum/Image:SYoung InternationalPrepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 6Exploring Diversity:The Beauty Market The skincare,fragrances,personal care,and cosmetics markets are part of the broader beauty industry,and the emergence of Chinas middle class has been pivotal in propelling industry growth.As disposable income increases,consumers move toward higher-quality,premium beauty products.Research shows that beauty products have become a crucial part of Chinese consumers daily routines,particularly among millennial and Gen Z consumers.These groups value self-care and physical appearance maintenance more than their parents did two decades ago,resulting in a significant shift in consumer behavior.The beauty and personal care(PBC)industry has grown steadily in recent years,even in the face of the pandemics impact.Cosmetics retail sales in China reached 402.6 billion RMB($5.6 billion)in 2021,up 14%YoY.The skincare segment has emerged as the most prominent and fastest-growing segment of Chinas beauty and personal care industry,growing at double-digit annual rates.As such,domestic and foreign beauty brands can capture market share by catering to Chinese consumers evolving preferences,particularly the younger demographics.One of the primary factors driving market Memo Paris flagship store in Shanghai/Image:Memo Paris Prepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 7expansion is consumers rising consciousness of their appearance.On a global scale,the industry is highly competitive,with numerous established and emerging brands vying for market share across multiple product categories.In China,the contest for mindshare is even more intense.Chinese consumers extensively research social media channels,compare prices across e-commerce platforms,and consider peer reviews.The beauty and skincare market are driven mostly by Chinas savvy urbanized population and its growing beauty consciousness.China is a large and fragmented market;brands must be everywhere all at once to reach their target audience.To successfully navigate the Chinese market,trusted local partners are a crucial part of the equation.Generally,brands expanding into China make use of two types of partnership:Single Channel Partnership and the China Partner Model.The former involves investing resources in one channel and solely managing branding and sales through that channel,which can result in swift,favorable outcomes.However,a brand that adopts this approach risks putting all its eggs in one basket.Also,a single channel strategy is insufficient to fully support long-term brand development and market penetration in the greater China region.The Single Channel Partnership model is usually appropriate for well-established,traditional brands with pre-existing management and marketing in China.The internal and local teams can handle brand building,marketing,channels,and consumer education.Image:Charles Deluvio on UnsplashPrepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 8Skincare Among the various segments of Chinas BPC market,skincare stands out as one of the fastest-growing categories.Skincare is defined by a wide range of beauty regimen and products that aim to help users maintain healthy skin and solve dermatological concerns,such as products that target acne,skin cleansing,deep-hydration,anti-aging,exfoliation,and sun protection.The market has surged in recent years,driven by rising consumer awareness of the importance of skincare and increasing demand for natural and organic products.The clean beauty trend is gradually gaining popularity in China.According to a report by the Tmall Innovation Center X Kantar,Chinese consumers are particularly drawn to the safety aspect of natural and organic ingredients,and they are willing to pay a premium for it.Interestingly,Chinese and Western consumers express a similar perception of what constitutes clean beauty.In the US and Europe,clean beauty brands prioritize sustainable materials,eco-friendly packaging,safe and effective formulations,and ethical and social practices,such as fair trade.Similarly,in China,clean beauty also entails using fewer fragrances,colors,and preservatives and instead using hypoallergenic ingredients.However,while the US has enacted regulations on packaging materials,ingredients,and animal testing,Chinas emerging domestic clean beauty standards mainly focus on the percentage of natural ingredients used in products and formulations.Image:Lumene Prepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 9FragrancesFor decades,Chinas fragrance market has been dominated by top-selling global names,such as Chanel N5 and Dior JAdore.And while international luxury groups still account for the lions share of fragrance sales in China,the evolution of consumer tastes in recent years includes a greater willingness to experiment with lesser-known brands from both overseas and Asia.As a result,demand for niche and independent fragrance brands in China has recently surged.Between 2017 and 2019,Chinas personal care market boomed,and fragrance was one of its fastest-growing categories,according to consumer research firm Kantar Worldpanel.An online survey by Chinese market research firm iResearch found fragrance ranked as a top category in fashion and beauty(excluding cosmetics and skincare)among female Gen Z consumers,ahead of clothing and accessories.According to Mintel,large beauty groups and luxury conglomerates such as Coty,LOral,Este Lauder,and LVMH still account for around 60 percent of the global fragrance market.Yet,they face challenges in China as early adopters tastes evolve and gravitate towards scents that more accurately reflect their identities,daily moods,and outfit styles.Image:Jo By Jo Loves Prepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 10To penetrate the Chinese market,brands today generally adopt a strategy that seamlessly integrates online and offline channels,otherwise known as the O2O approach.Because of the fragrance categorys experiential aspect,offline channels are vital to building brand affinity and educating customers.Finding a local partner that has a strong network of offline department store relationships is imperative to effectively engaging the target consumer base.Last year,SYoung International,Chinas premier partner for international beauty brands entering the Chinese market,launched Shuiyangtang,an interactive retail space that includes a Formulation Lab and Perfume Gallery.This fragrance emporium features niche perfume brands and,through interactive installations,introduces consumers to the brand story and product details.As the number of fragrance consumers grows,awareness of brands beyond the top sellers will expand to encompass niche labels.A corresponding increase in usage will occur as more consumers shift from using fragrance infrequently to adopting the practice as part of their grooming routine.Strong consumer interest in fragrance-adjacent goods,such as scented candles and shower gels,will further fuel demand for fragrance products.Shuiyangtang and theonline-to-offline strategyShuiyangtangs Formulation Lab/Image:ShuiyangtangPrepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 11Cosmetics Two cosmetics trends are gaining momentum in China:the Y2K trend and skincare makeup trend.Y2K,which stands for year 2 kilo,refers to the widespread fear of computer-induced apocalypse in the year 2000.Y2K has since resurfaced and gained popularity among Gen Z consumers,thanks in part to TikTok and the hit US TV series Euphoria.The trend is making ripples in both the fashion and makeup worlds,with metallic and shimmer shades,blue eyeshadow,glossy lips,matte skin,highlighted cheeks,messy and smoked-out eyeliner,and skinny brows being some of the signature looks.Retro clothing styles,including butterfly hairclips,are also part of the Y2K trend.Celebrities such as Bella Hadid and Dua Lipa have also been seen rocking the Y2K style,and the trend has gained popularity among the younger generations.In China,Gen Z content creators are recreating signature Y2K looks on social media,such as Xiaohongshu,and cosmetics brands are taking notice and leveraging this trend.Skincare makeup is also becoming mainstream and popular in China.Skincare makeup refers to cosmetics that enhance beauty and nourish and protect the skin.Chinese consumers look for cosmetics products that are both functional and can help improve skin texture.Skincare-based makeup products include foundation products,eye makeup,and powder products.Chinese consumers,especially those who are Gen Z,make purchasing decisions based on the following three skincare makeup qualities:1.Nourishment and protection:moisturizing and antioxidant ingredients that counteract damage from environmental pollutants.2.Lightweight and easy to apply:skincare makeup is typically lightweight and easy to apply without burdening or stressing the skin,resulting in even coverage of blemishes for a natural-looking finish.3.Promotes radiant skin:skincare makeup helps promote radiant skin with ingredients that provide hydration,reduce inflammation,and brighten the complexion.Image:Kiko Milano Prepared exclusively for Transaction:0146847274CHAPTER 1CHINESE BEAUTY INDUSTRY OVERVIEW 12Personal CareChinas personal care industry boasts tremendous growth potential,fueled by a large and growing consumer market composed of individuals with rising disposable incomes and expanding demand for high-quality personal care products.The industrys potential is particularly evident in the hair,body,and oral care categories,where consumers are seeking innovative and effective products to improve their grooming routines.The high-end body care segment is a beneficiary of these developments.In May last year,JD Internationals imported personal care category saw year-on-year growth of over 100%,with scalp-balancing and nourishing products accounting for more than 70%of the new additions.Among the imported personal care products,the transaction volume for body oil products grew over 300%YoY.The skinfication of hair is another trend gaining popularity in Chinas personal care category.According to InStyle,ingredients commonly found in skincare products,such as hyaluronic acid,niacinamide,hydroxy acid,and salicylic acid,are also effective in hair care products,and chemists have embraced this knowledge when formulating hair care products.Chinas oral care market has shifted from focusing on cosmetic benefits to more holistic approaches that prioritize functionality,efficacy,and sustainability.According to CBN Data X Tmall,Chinese consumers,especially those from the Gen Z demographic,care about product packaging aesthetics,celebrity endorsement,and brand IP collaborations.Oral care brands,which historically have relied on retailers,are also expanding beyond offline retail channels to use e-commerce and social media to reach target consumers.Additionally,the trend that embraces natural and organic products is also growing in popularity in China,providing opportunities for brands that prioritize sustainability and eco-friendliness.As the industry continues to expand and mature,companies that can successfully navigate the complex regulatory environment,effectively market their products,and deliver high-quality formulations that meet consumer needs are likely to thrive in Chinas dynamic personal care market.Image:NeutrogenaPrepared exclusively for Transaction:014684727413CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED 13CHAPTER 2Prepared exclusively for Transaction:014684727414CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED Trends and BehaviorsChinese consumers are increasingly discerning and sophisticated in their decision-making,prioritizing high-quality and authentic products and experiences that reflect their values and aspirations.To effectively engage with Chinas changing consumer needs,brands must adopt a nuanced approach built on a deeper understanding of customer behaviors and desires.Ingredient enthusiasts,consumers who scrutinize product details and seek out safe,effective,healthy,and natural ingredients,especially in the beauty and personal care industry,have emerged as a force.They increasingly prioritize health and safety in their purchasing decisions,and consequently,products that meet these criteria have been favored.Other key trends in China include sun protection,anti-hair loss,anti-aging,and acne-related products.Chinas consumer market is a tapestry of complexity and uniqueness,shaped by geographical regions,cultural norms,and varied lifestyles,all culminating in a wide spectrum of consumer preferences and behaviors.This diverse and dynamic market is further energized by swift technological advancements,varying income levels,and evolving social trends,all of which are significantly revolutionizing interactions between Chinese consumers and brands,as well as shopping habits across digital and physical platforms.Image:Qiu Yan on UnsplashPrepared exclusively for Transaction:014684727415CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED Customer Segmentation:The Six Customer ProfilesConsumers of Functional RemediesCreating customer segments based on broad characteristics and preferences may not accurately capture individual customers nuanced needs and behavior patterns.But to better understand the opportunities available in Chinas beauty market,the report analyzes and categorizes Chinese BPC consumers into six groups that reflect the markets diversity.This consumer segment often experiences work-related stress,environmental pollution,and eczema,which all negatively impact the skin.They prioritize gentle products free of harsh ingredients,such as fragrances and certain preservatives,which can irritate sensitive skin.Brands cater to this group by offering targeted solutions for sensitive skin.How Pier Aug Effectively Reaches Chinese Consumers The Pier Aug(PA)brand was created in 1961 in Monaco by pharmacist Pierre-Jules Aug.Its signature scientific research and development approach,dubbed the Dergyl method,is based on two of the brands key fundamentals:respect for the skins physiological function,and the precise selection of active ingredients.The brands message of restoring the skins balance resonates with consumers of functional remedies looking for noninvasive skincare products made with natural ingredients.This unique and niche brand DNA helped it grow its market share in China.Many Chinese consumers learn about PA through its hero product,the Douce Aura Resourcing Treatment-Mask,from 1Image:Pier AugPrepared exclusively for Transaction:014684727416CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED various rankings on e-commerce platforms such as Tmall and JD.These rankings are read by skincare aficionados and consumers who seek a source of affirmation to make purchasing decisions.The mask product,which was listed on Tmall and JDs mask bestseller lists multiple times,put Pier Aug in the top 20 brands in the category.PAs Brand Positioning PAs target customer demographic is selective and discerning customers who also opt for quick fixes to skincare issues.The brand positioning of specialization in sensitive skin repair yielded positive results in China.The brand has achieved significant growth in China over the past year,with sales up 259%YoY.PA has become one of the top-selling imported masks on Tmall Global.Social Media Channels of ChoicePier Aug adopted a combination KOC KOL strategy.Key Opinion Customers,or KOC,are an essential cohort of trendsetters on Chinas social media channels.They are individuals who have a following on Xiaohongshu and other channels and can influence consumers purchasing decisions.Consumers often trust the opinions and recommendations of KOCs more than traditional marketing messages.These KOCs have built a reputation for being knowledgeable and trustworthy,and their followers value their opinions.The Douce Aura Resourcing Treatment-Mask achieved impressive success in 2022,posting remarkable 536%YoY sales growth,the result of the brands strategic use of influential celebrities,KOLs,and KOCs on social media.Additionally,the brand has launched in two of Chinas most iconic luxury department stores,Beijing SKP and Chengdu SKP,which are popular retail destinations among the Gen Z population.Furthermore,the brand has been invited to be one of the first featured brands at Shuiyangtang,an immersive high-end shopping destination in Changsha city that opened in October last year.Prepared exclusively for Transaction:014684727417CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED Niche Beauty TrendsettersThis group comprises affluent consumers who prioritize high-end beauty products and services.They seek exclusive and personalized experiences that cater to their discerning tastes and are willing to pay a premium for products that align with their values and lifestyles.Trendsetters:This group comprises younger,fashion-forward consumers who prioritize innovative,cutting-edge products that reflect the latest trends.They value novelty,exclusivity,and popularity on social media.Niche fragrance brand Memo Paris is popular among young consumers and is known for its fragrances that evoke unforgettable memories relating to the idea of journeys.Its best-selling fragrance,Inl,was listed as among The Most Popular Niche Fragrances for Generation Z on Tmall Global and ranked top in the imported fragrance category in the pre-sales list.The brands success can be attributed to the Niche Chic trend that Gen Zers have come to love.Memo Paris-Taking Niche Fashion Center Stage After entering China,Memo Paris quickly established itself in a market dominated by international luxury groups.It rose in popularity and became a Chinese consumer cult favorite.Memos China Partner helps the brand build awareness among consumers through the curation of brand events and generating positive coverage and creating buzz,such as via the Perfume Column in Vogue China and Memo X Purple Scent offline perfume exhibition.Consumers value offline trials when they experience fragrances.In January this year,Memo Paris opened its first offline flagship store in Shanghais IFC Mall,its official debut in China.To link with Chinese consumers more deeply,the brand has launched a series of tailored offline VIP activities.Since 2021,Memo Paris has cooperated with high-end fragrance boutiques,SKP luxury department stores,and exclusive beauty concept stores like Little B to host fragrance sharing sessions,which invite industry experts and KOLs to attend,taking French elegance and the modern style of fragrances to the center stage.2Memo Pariss flagship store in Shanghai/Image:Memo ParisPrepared exclusively for Transaction:014684727418CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED Seekers of Natural and Effective Beauty ProductsThis group prioritizes natural,organic,and environmentally friendly beauty and personal care products that align with their health and wellness goals.They are interested in products offering practical benefits and improving their overall well-being.Consumers looking for natural,effective beauty and skincare products often prefer formulations free from harmful chemicals and synthetic ingredients.They are drawn to elements such as plant extracts,essential oils,and natural antioxidants that provide a range of benefits to the skin,including hydration,brightening,and anti-aging effects.Lumene,based in Kauklahti,Finland,prides itself on developing and producing most of its products locally.The companys primary markets are Finland,Scandinavia,the UK,and China.The brand is a pioneer in circular beauty and aims to be carbon-neutral by 2025.Between 2007 and 2019,Lumene reduced its product production water usage by 40 percent.Its brand positioning focuses on its social responsibilities and commitment to supporting womens issues and breaking down stereotypes.How does Lumene Reach Chinese Consumers?Lumene wanted to continue its brand thesis of naturality meets mindfulness and tackle skincare issues with a balanced approach and natural ingredients in China.3The First SYoung Global Brand Festival/Image:SYoung InternationalPrepared exclusively for Transaction:014684727419CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED Its China partner localized the brands visual elements,including its logo,color palette,fonts,and marketing materials for the countrys e-commerce platforms.By standardizing the brands visual elements in China,Lumene deepened its raised awareness of its history as a clean beauty brand in its marketing communications to Chinese audiences.Lumenes hero products include the Intense Hydration 24H Moisturizer,and its main brand positioning centers on concepts of natural,clean,and effective products.By showcasing the powerful effects of natural ingredients,Lumene has attracted a loyal following of consumers in China who value purity and naturalness,resulting in repeat purchases.Social Media Channels of ChoiceThrough working with two major China marketing KOLs on a live-streaming campaign,Lumene was able to reach more than 13 million potential customers via Douyin,and 65,000 units of products were sold.The brands social media strategy is extensive:more than 1,200 KOL/KOC partnerships throughout the year consistently built brand awareness through word-of-mouth recommendations and product endorsements across major mainstream promotional platforms in China.To deepen consumers understanding of the brands philosophy,Lumene,together with its China partner,created brand promotion campaigns that established communication channels with Chinese consumers.For example,Lumene invited three KOLs whose tone and audience demographics align with the brands Nordic theme to visit the brands production site and create content on how the brands products protect Nordic consumers skin from frigid weather conditions.Prepared exclusively for Transaction:014684727420CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED Anti-aging and Wellness EnthusiastsSocially Responsible ShoppersThis consumer group started researching and buying anti-aging products at a young age to combat early signs of aging.The focus is on internal nourishment through taking health-related supplements and applying anti-aging external skincare.Brands like Neutrogena have succeeded in the Chinese market by offering innovative products focusing on the Vitamin C in the morning,retinol at night idea.This trend involves using vitamin C and retinol,two powerhouse ingredients that address multiple skin concerns.Vitamin C protects the skin from environmental damage and brightens the complexion,while retinol increases collagen production and improves skin texture and firmness.Using vitamin C in the morning and retinol at night allows consumers to reap the benefits of both ingredients without overwhelming their skin.These consumers care about animal welfare issues and seek out brands that do not test on animals or use animal-derived ingredients.A segment of this group is also emissions-conscious and concerned about the impact of their purchases on the environment.It seeks out brands that prioritize sustainable manufacturing and transportation practices.Brands like Comfort Zone are Certified B corporations,which are committed to attaining various social and environmental metrics.The brand is loved by consumers for offering vegetarian,cruelty-free,and sustainable products that help the skins ecosystem achieve the optimal balance.Ninety percent of Chinese consumers say purchasing healthy or eco-friendly products was essential to them,putting the mainland ahead of other significant markets in terms of demand for this type of product,according to AlixPartners.Meanwhile,a report by McKinsey shows that 80 percent of shoppers in China are willing to pay for sustainable packaging compared with 68 percent of Americans.45Prepared exclusively for Transaction:014684727421CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED Makeup Color Paletting Makeup Color Paletting is a unique beauty trend in China.It reflects the needs of young consumers seeking to express individuality and creativity.The Makeup Color Paletting trend covers a wide variety of color choices,textures and brightness levels,and related makeup products that consumers can mix and match according to their liking.The rise of this trend in China is closely related to the popularity of the sharing mag makeup tutorials on Chinese social media,including Xiaohongshu,where KOCs and KOLs share their makeup looks and inspire the continuation of trends such as color paletting.Consumers pursuit of the makeup color paletting trend is evident in their willingness to try various new colors and combinations,and more brands are jumping on this bandwagon.As consumers become more knowledgeable about beauty products,their demand for product quality and creativity is continuously increasing.Therefore,color cosmetics makeup brands should continuously innovate and follow trends to meet market and consumer demands in China.Investigating Kiko Milanos Success in the ChinaKiko Milano,an Italian makeup brand from Milan,has achieved significant growth and success in the Chinese market.Its success 6Image:Kiko MilanoPrepared exclusively for Transaction:014684727422CHAPTER 2CHINESE BEAUTY CONSUMERS AND EMERGING CONSUMPTION TRENDS EXPLAINED stems from its adept navigation of the Chinese markets trends and its use of emerging marketing channels to create standout products.Notably,Kiko used live-stream e-commerce and short-video channels,resulting in the successful launch of best-sellers like its Weightless Perfection Wet And Dry Powder Foundation,Unlimited Double Touch liquid lipstick,and more.By adopting precise marketing strategies and collaborating with well-known KOLs,Kiko has expanded its influence and connected with Chinese consumers.Additionally,the brand has stayed up-to-date with trends by launching unique limited-edition and popular new products specifically for the Chinese market.Understanding Chinese ConsumersA significant factor in Kikos success is its deep understanding of Chinese consumer preferences.The brand has a designated research and development team focused on China and learning about the changing needs of the countrys younger generations.The business has developed products tailored for Chinese skin tones,lip colors,and beauty preferences.Focus on Emerging Consumer GroupsKiko has recognized the potential of Gen Z and Gen Alpha consumers,global digital natives who are eager to express themselves through their consumption choices.It successfully targeted this younger demographic by offering high-quality products at affordable prices.The brand encourages its consumers to share their makeup creations on social media,further strengthening the brand-consumer relationship.Moving ForwardKikos achievements in China include partnerships and showcases at major events,such as Milan Fashion Week.It plans to continue developing products tailored to Chinese consumers,strengthen KOL collaboration,expand its offline store network,implement localized marketing activities,and focus on emerging consumer groups.By maintaining its core concept of playing with makeup Prepared exclusively for Transaction:014684727423CHAPTER 3GEN Z:THE NEW VIP CHINESE CONSUMER GROUPcolors and adapting to Chinas market norms,Kiko is well-positioned to consolidate its leading position in the country.The wide-ranging nature of Chinese consumers beauty and cosmetics needs is increasingly clear.This diversity is largely fueled by Chinas vast population and its uniquely differentiated urban landscape.With more than 1.4 billion residents,Chinas market is as dynamic as it is fascinating.Traditional tier-one cities like Beijing and Shanghai are key consumer markets,but they only represent a tiny fraction 5%to be exact of the countrys entire population.Although their influence in defining global trends and attracting international brands is undeniable,they are but a slice of the vast opportunities China presents.The rising consumption power stars are the new tier one and tier two cities,such as Changsha,Chengdu,Chongqing,and Wuhan.SYoung City,located in Changsha,is harnessing this growth.With nearly 500 million urban residents living in these cities,they provide a direct link to most of Chinas urban population and its diverse beauty market needs.Gen Z,an influential segment in these cities,is reshaping consumption trends.This digital-native,socially conscious generation values authenticity and social impact,prompting brands like SYoung to adopt a multifaceted approach.The rise of these cities signals the increasing complexity of Chinas consumer base,prompting brands to evolve in versatile ways.Prepared exclusively for Transaction:014684727424CHAPTER 3GEN Z:THE NEW VIP CHINESE CONSUMER GROUPGEN Z:THE NEW VIP CHINESE CONSUMER GROUP24CHAPTER 3Prepared exclusively for Transaction:014684727425CHAPTER 3GEN Z:THE NEW VIP CHINESE CONSUMER GROUPImage:Daniel Rigdon on UnsplashThe generation born between 1997 and 2012,commonly known as Generation Z(Gen Z),has emerged as a significant consumer group,contributing a remarkable 40%to consumption in China.But with an estimated population size of 264 million,Gen Z represents less than 20%of Chinas total population.However,this cohort is forecast to comprise 73%of new entrants to the workforce in the next decade.As a result,this cohorts level of consumption is anticipated to quadruple by 2035,reaching a staggering 16 trillion RMB($2.2 trillion USD).In light of this,its reasonable to assert that Gen Z will become a critical driver of consumption growth in China.Gen Z is already influencing culture and creating a new consumer relationship between brands and shoppers.According to CNBC,by 2031,Gen Zs income will surpass millennials,reaching a staggering$33 trillion and becoming the most disruptive to economies,markets and social systems.As they continue to progress and earn higher incomes and hence generate more purchasing power,Gen Z consumers are expected to usher in a long-lasting transformation of trends and attitudes.Prepared exclusively for Transaction:014684727426CHAPTER 3GEN Z:THE NEW VIP CHINESE CONSUMER GROUPWhat are Chinese Gen Z ConsumersConsumption Preferences and Patterns?Share of the Worlds PopulationAged 15 Years and Older by GenerationChinese Gen Z consumers,like their Western counterparts,comprise the first generation of true digital natives who have never known a world without the internet or ubiquitous smartphones.They have grown up with the app economy,4G/5G technology,and an always connected mindset,collectively shaping their consumption patterns.By 2026,as Gen Z fully matures,almost 60%of the global adult population will be born in a world where the internet is an essential,omnipresent part of everyday life.For overseas brands wishing to sell Chinas Gen Z,establishing a strong connection with consumers through the internet and e-commerce channels is essential.Chinas Gen Z is highly connected and community oriented.It sees digital channels as creative platforms to express individuality,connect with like-minded peers,and form strong bonds with friends,brands,and opinion leaders.Its members are highly perceptive and can quickly identify inauthentic marketing pitches.Therefore,brands must adopt a co-creator perspective and prioritize the concept of a shared goal rather than pushing their brand philosophy and products.Although this marketing approach may take longer to develop initially,it can build a deeper and more lasting brand affinity that will be invaluable in long-term brand-building.Source:U.S.Census19952005201520250 0P%MILLENNIALSGEN ZPrepared exclusively for Transaction:014684727427CHAPTER 3GEN Z:THE NEW VIP CHINESE CONSUMER GROUPHow to Win OverThe Most Unique and Stylish Consumer Group in China:Gen Z?Foreign brands carry less mystique for Gen Z than they do for the baby boomer generation.Therefore,foreign brands need to think outside of their existing marketing framework and make a concerted effort to find creative ways to stand out.Launching in China with clearly articulated product and brand benefits and speaking to the target audience in a way that resonates with their preferences is vital for brands to take advantage of the market opportunities available in the country.Even niche brands can grasp enormous opportunities in China with this segment of consumers,who are willing to try and experiment with new brands.One key caveat is that global brands must balance their brand positioning to cater to trends in China and globally to ensure cohesiveness.Gen Z will not view a brand as superior because its foreign.Partnering with a local partner that fully understands the nuances of brand communications on the ground is vital to ensuring a successful launch and sustainable brand-building in China.Brands that fail to invest in Chinas Gen Z are missing out on a key consumer group and the opportunity to build brand connections with it.A China partner that can adequately advise and direct resources to begin building relationships with Gen Z shoppers should be part of every brands China strategy.Image:LumenePrepared exclusively for Transaction:014684727428CHAPTER 3GEN Z:THE NEW VIP CHINESE CONSUMER GROUPHow to Tap Chinas Gen Z Consumers?Despite this consumer segments potential,Gen Z is also tough to define and full of contradictions.Gen Z consumers take pride in their individualism and self-expression.They are ambitious,have strong self-esteem,and are eager to pursue and try new experiences.Simultaneously,its also the group thats ushering in a new paradigm of lying flat,referring to a movement of young people in China who reject the never-ending grind of the 9-9-6 work culture and choose an alternative lifestyle characterized by a rejection of materialism as a form of rebellion.Mainstream Gen Z culture and language reflect this groups collective experiences and values,as diverse as they might be.Mastering the metaphorical and literal language that Gen Z speaks is essential for interacting with this increasingly important consumer segment.Gen Z is fluent in digital communication and social media platforms and deploys a communication style that includes emojis,memes,and Chinese slang.As Gen Z enters society and the workplace(older Gen Zers born around 1997 are already of working age,and the post-2000 generation will soon enter the workplace),its income and consumption will further increase,leading to the gradual rise of a new consumer base in China.Gen Z is also embracing new mediums that companies should pay attention to.The podcast is an emerging media format that Gen Z engages with.Some beauty brands are taking notice and launching campaigns via the medium in new and creative ways.At the end of 2022,Lancme and Small Cosmo FM(小宇宙播客)invited seven podcasters to share their stories of staying up at night.These story-based mini campaigns covering the night of the World Cup,Mid-Autumn Festival reunions,long heart-to-hearts with parents,or late nights binge-watching TV dramas proved highly relatable to young peoples daily lives.Through the campaign,Lancme communicated brand authenticity to reframe its Gnifique Eye Cream product.Drawing on Gen Zs love of podcasts,the personalities behind the shows,and the timeless delight and nostalgia of staying up past bedtime,the collaboration generated an emotional connection that resonated with the target Gen Z audience.The success of this campaign also highlights the importance of brands utilizing precise marketing methods to reach their target audience.Given Chinas vast and diverse consumer base,understanding various social media platforms and accurately matching products to consumers through targeted advertising has become a crucial step for brands to achieve success in the Chinese market.Image:Qiu Yan on UnsplashPrepared exclusively for Transaction:014684727429CHAPTER 4UNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINAUNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINA29CHAPTER 4Prepared exclusively for Transaction:014684727430CHAPTER 4UNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINAThe China Social Media Play:Complex and DynamicFor marketers seeking to target Chinese consumers,understanding the most effective social media platforms to target beauty brands is crucial.According to third-party data,beauty brands allocate most of their social media marketing budget to Douyin and Xiaohongshu,with the former receiving the largest share at 44 percent and the latter close behind at nearly 30 percent.A distinctively Chinese brand strategy thats worked well for many Western brands entering China is the Hero Product Strategy.Focusing a marketing strategy around one hero product can pay off handsomely for Western brands testing the waters in China.By dedicating concentrated efforts and investment into promoting a single product,theres a bigger chance of capturing potential customers attention and increasing brand awareness.This concentrated effort can also act as a gateway to introducing customers to other products within a brands portfolio,further driving sales.Ultimately,a well-planned marketing strategy around a hero product can help companies increase sales,improve brand recognition,and strengthen their long-term position in the marketplace.Image:Jan Bller on UnsplashPrepared exclusively for Transaction:014684727431CHAPTER 4UNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINAXiaohongshu Chinas social media landscape is as diverse as it is fragmented,but Xiaohongshu is,without a doubt,one of the most important social platforms to reach Chinese Gen Z consumers.It covers a wide range of age groups,with young users aged 18-30 being the main demographic,accounting for 69%of total users.Xiaohongshu users are mainly concentrated in high-tier cities,with 90%of users located in first-and second-tier cities.The platform has grown in popularity,especially among female consumers,due to its authentic and reliable user-generated content,which provides a trustworthy source of information and recommendations for consumers.Additionally,Xiaohongshus algorithm utilizes machine learning and data analysis to create personalized content and shopping experiences for each user.Proportion of marketing budget of beauty brands on different social media platforms in 2021Source:43.53).41%DOUYINXIAOHONGSHUOTHERSWECHAT ARTICLEWEIBOKWAIBILIBILIWECHAT CHANNEL9.79%9.02%3.14%5.11%Douyin and Kuaishou(Kwai)Douyin and Kuaishou(Kwai)are both short-video live-streaming platforms.The content on these platforms is mostly entertainment and live-streaming-focused;however,in recent years,their commercial value for brands has become increasingly apparent.Douyins audience is predominantly female,with over 50%of it falling between the ages of 18 and 35,particularly those born in the 1980s and 1990s.Moreover,Douyin has a large Gen Z user base,with 75%of users aged under 25.As Prepared exclusively for Transaction:014684727432CHAPTER 4UNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINABilibili,Weibo,and WeChat Aside from Douyin and Kuaishou,Bilibili and Weibo are also essential marketing and advertising channels in China.As a platform for PUGC(professional user-generated content),Bilibili disseminates higher-quality content and primarily attracts Gen Z users,with around 82%of its users forming part of this age group.Most Bilibili users are high school,or university students located in first-and second-tier cities.Unlike Douyin and Kuaishou,Bilibili is more suitable for customer education and content dissemination before converting potential customers through multiple channels.Weibo,a more established social media platform akin to Twitter,is another critical channel that marketers shouldnt overlook.Weibos open social networking and celebrity endorsements can quickly spread brand information and reach a large audience.Compared with Bilibili and Douyin,Weibos user base is relatively older,with 60%of users aged between 23 and 30.WeChat is an all-in-one app that combines messaging,social networking,e-commerce,and mobile payments.Companies can leverage WeChat to engage with consumers through official accounts,which allows them to share content,promote products,and offer customer services.WeChats mini program also allows brands to create storefronts and has e-commerce functions.Beauty market trends,consumer demographics,demand,and the influence of social media,show that Chinas beauty market is a diverse and dynamic playing field.With the global consumption landscape shifting dramatically,China now stands as a powerhouse consumer market,presenting golden growth opportunities for international beauty brands.For a brand to seize success in this market,it must fully understand Chinas complex beauty landscape,pinpoint Chinese consumers unique needs,and execute a comprehensive,omnichannel brand management strategy.creators on Douyin produce content that resonates with their viewers,they establish credibility and rapport,resulting in a more favorable perception of promotional content and product placements.On the other hand,while Kuaishous overall average daily active users are lower than Douyins,the platform has a faster-growing male user base,and 24%of users are under 23.Kuaishous content is more oriented toward everyday life,using the short-video format to create a community-oriented platform atmosphere.As a result,Kuaishou boasts high user stickiness.Its also an effective channel for brands to reach lower-tier markets in China due to the demographics of its user base.Prepared exclusively for Transaction:014684727433CHAPTER 4UNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINAEviDenS de Beauts Journey:Navigating Chinas Diverse to Achieve SuccessEviDenS de Beaut is a brand that prides itself on its combination of Japanese beauty technology and French elegance.The brand offers an anti-aging skincare range specially created for sensitive skin.Its formulas combine the effects of Eau de la Foux Spring Water and Triple Collagen for complete results regenerating,moisturizing,anti-aging on all skins,even the most sensitive ones.The China Context Despite the pandemics impact over the past three years,the high-end consumer market in China continues to grow strongly.Approximately 36%of Chinese women suffer from sensitive skin,and the sensitive skin market is valued at over 8 billion RMB($1.1 billion),and the segments market share continues to grow.Meanwhile,anti-aging products have become more and more prevalent.Despite the aging population,the anti-aging consumer base in China is becoming younger and younger.Recognizing the vast potential of the sensitive anti-aging skincare industry,EviDenS de Beauts China partner helped the brand position itself as an anti-aging skincare expert that offers products designed for sensitive skin and leveraged its market localization expertise to reach younger consumer groups in China.This strategic move paved the way for the brands growth,establishing it as a prominent player in China and securing it considerable market share in a short span of time.The First SYoung Global Brand Festival/Image:SYoung InternationalPrepared exclusively for Transaction:014684727434CHAPTER 4UNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINAExpand Market Reach and Craft Precise Brand Imagery and ContentEviDenS de Beaut primarily targets urban,sophisticated consumers.Through market research,its marketing team learned about its target consumers unique aesthetic preferences,and that the best way to reach them was through a combination of online and offline strategies.EviDenS de Beauts target consumer base relies on social media recommendations and high-end offline department stores to learn about brands.EviDenS de Beaut cultivates a brand identity that emphasizes exclusivity and luxury to effectively reach these consumers.By collaborating with celebrities,high-profile KOLs and KOCs,and rolling out tailored membership outreach efforts and targeted product launches,EviDenS de Beaut accumulated positive word-of-mouth and exposure in China.EviDenS de Beauts emphasis on user-generated content and cultivating a community of high-status users paid off.Over the past four years,the brand has collaborated with more than 3,000 brand ambassadors,including socialites,executives,and KOLs,achieving acclaim and prestige.Its flagship products,such as The Special Mask and The Moisturizing Lotion,have garnered praise and led to healthy sales growth.Offline Promotion and Brand-building EffortsEviDenS de Beaut complements a strong online brand presence by establishing strong partnerships with high-end brick-and-mortar channels,including Sephora,Joyce Beauty,SKP Select,Shuiyangtang and the Wangfujing Mall in Beijing.One China-specific strategy is the brands tailored high-end membership outreach,which has attracted over one million members,and strong customer engagement that resulted in repeat purchase rates as high as 37%.EviDenS de Beaut also created a solid partnership with Rosewood Hotels and Resorts to expand the brand experience to spas.This collaboration is expanding to China with dedicated spa rooms in Beijing and Sanya.EviDenS de Beaut provides customized services to its members through a meticulous online and offline membership outreach strategy via one-on-one beauty consultations.Members can also enjoy exclusive privileges,such as access to private salons,customized afternoon tea gatherings,VIP dinners,and spa treatments at high-end spas in Shanghai,Sanya,and Beijing.The brand has enhanced its user loyalty and engagement by conducting a series of offline and online activities.With the assistance of its China partner,SYoung International,EviDenS de Beaut has utilized precise market analysis and strategies to reach its target consumers,which enabled the brand to thrive in Chinas diverse beauty market.Prepared exclusively for Transaction:014684727435CHAPTER 4UNLOCKING SUCCESS THROUGH DIVERSE MARKETING STRATEGIES IN CHINAKey Takeaways and the Case for the China Partner Model The China Partner Model is a comprehensive framework that enables brands to thrive in Chinas business landscape,securing more business opportunities and establishing a solid foundation for ongoing growth.Serving brands across the entire lifecycle of their China entry,it empowers businesses with extensive omnichannel capabilities and overall brand development.Under this model,marketing channels are matched with brand positioning to create the most impact.It further ensures the implementation of consistent pricing strategies across all online and offline platforms,maintaining brand credibility and consumer trust.By encouraging resource diversification,it minimizes risk and promotes resilience in the face of Chinas ever-evolving market dynamics.Through a partnership with a China partner,brands can guarantee a seamless brand experience across all consumer touchpoints,strengthening brand loyalty and setting the stage for long-term success in this complex and dynamic market.Image:SYoung InternationalPrepared exclusively for Transaction:0146847274THE IMPACT OF CHINAS POLICIES AND DEVELOPMENT ON THE BEAUTY INDUSTRY36CHAPTER 5THE IMPACT OF CHINAS POLICIES AND DEVELOPMENT ON THE BEAUTY INDUSTRY36CHAPTER 5Prepared exclusively for Transaction:0146847274THE IMPACT OF CHINAS POLICIES AND DEVELOPMENT ON THE BEAUTY INDUSTRY37CHAPTER 5Image:KOBU Agency on UnsplashChinas cross-border e-commerce industry has grown rapidly in recent years,with imports and exports reaching 1.92 trillion yuan($268.6 billion)in 2021,for year-on-year growth of 18.6 percent and accounting for 4.9 percent of Chinas total foreign trade,according to official government data.The Chinese government has implemented policies and initiatives to facilitate this growth with the aim of creating a more welcoming environment for foreign businesses.In 2018,China introduced a comprehensive regulatory system for cross-border e-commerce retail imports.This policy established a list of products that could be imported through cross-border e-commerce,as well as related tax rates and transaction limits.The government has also established cross-border e-commerce pilot zones,which offer simplified customs procedures and lower tax rates for cross-border e-commerce transactions.In 2022,pilot zones for cross-border e-commerce were set up in 33 cities and regions to promote the industrys growth.China has also simplified and updated the NMPA registration requirements.In 2021,Chinas National Medical Products Administration(NMPA)officially released the new regulations on cosmetics registration,which were implemented on May 1,2021.Except for cosmetics claiming special efficacy,general cosmetics products are exempt from animal testing.The Case for China:Cross-border E-commerce and Related Policies Prepared exclusively for Transaction:0146847274THE IMPACT OF CHINAS POLICIES AND DEVELOPMENT ON THE BEAUTY INDUSTRY38CHAPTER 5In addition to favorable policies,China has established several free trade zones,such as the Shanghai Free Trade Zone,which offer a range of benefits for foreign companies,including reduced customs duties and simplified import and export procedures.Chinas efforts to promote economic growth and cooperation with countries around the world have also resulted in more opportunities for Western brands,particularly in the beauty and personal care categories.By reducing barriers to entry and offering incentives for investment and trade,China is working to foster mutually beneficial relationships with foreign businesses.The country has taken significant steps to protect intellectual property in recent years,including strengthening its IP protection laws and enforcement,introducing a new law on the protection of trade secrets,and establishing specialized intellectual property courts to handle disputes.Its also worked on streamlining the import process,simplifying import documentation,and reducing the time it takes for products to clear customs.For example,companies can declare their goods online and submit customs declarations in advance,speeding up the clearance process.Chinas cross-border payment solutions,such as Alipay and WeChat Pay,are widely used,and accepted.Foreign payment providers can now apply for licenses to offer payment services in China,opening up new opportunities for foreign businesses to serve Chinese consumers.With government support and a growing market,Chinas cross-border e-commerce industry is poised for continued growth and offers new opportunities for foreign businesses.Free Trade and Intellectual Property Protection Image:Zhou Xian on UnsplashPrepared exclusively for Transaction:0146847274For partnership or advertising inquiries in C
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Technology Trends That Will Shape the Global Fashion Industry in 2023 Copyright|CONTENT0305071013151618IntroductionTime For Shake UpPhase 1 Design Phase 2 ManufacturingPhase 3 Inventory&DistributionPart 4 Marketing&Retail Future of ClothingSummary Generative AI becomes co-designer3D prototyping for quicker samplingFit-Tech for better sizing solutionsNew-age smart fabrics Digital factories get smarter Sourcing marketplaces Using blockchain to improve traceabilityOn-demand 3D printed productsAdvancements in soft robotics Real-time factory management with ERP NFTs to combat counterfeit issues Move towards D2C model Advancements in warehouse automation AR/VR for virtual shopping Live video commerce AI-based digital stylists Rental/Resale/Repair models gain groundWearables Digital-only fashion Circular fashion Copyright|03INTRODUCTIONThe fashion industry is one of the most exciting and dynamic industries in the world.It has grown exponentially in recent years,but its not without its challenges.In this white paper,well explore how technology is shaping the future of fashion,what the biggest threats and opportunities are for players in the industry,and what you can do today to prepare yourself for success tomorrow.We will cover various aspects such as how e-commerce is changing traditional retail models;how consumers are becoming more selective about what they buy and where they buy it from;and how new innovations such as blockchain are forwarding the future of modern supply chains across industries.Well also discuss some of the most exciting trends that are shaping the future of fashion at largefrom 3D printing and custom manufacturing to augmented reality technologies like blockchain-based smart contracts or clothing that can track your heart rate and more.A look at the current state of the global fashion industry and all its key playersDespite new waves of COVID-19 and subsequent lockdowns that resulted in other restrictions on global markets,global sales of apparel and footwear grew by 12%y-o-y in constant terms in 2021,with an estimated$2.5 trillion in sales expected by 2026.This growth comes as no 1surprise when you consider how much we spend on clothingeven when compared to other categories like cars or electronics!The average American spends over$1,800 on clothes each year 2.While that number may seem high,it doesnt even scratch the surface of the global fashion industrywhich has an estimated value of somewhere between$1.5 to 1.7 trillion.One of 3the largest sources of global revenue,the fashion industrys value is larger than the economies of all but a handful of countries.It is also one of the most labor-intensive industries,with an estimated Size of global apparelindustry by 2026People employed bythe fashion industryLVMHs marketvalue in 2022$2.5Trillion60Million$367BillionNikes market valuein 2021$84Billion Copyright|0460 million people employed in clothing and footwear manufacturing alone.4The industry is also home to some of the world biggest and most popular brands.For instance,Nike valued at$84 billion had the biggest brand value of any apparel brand in 2021.On the luxury end,Louis Vuitton-parent LVMH had a market capitalization of 367 billion dollars in 2022.5However,the fashion industry is also one the largest contributors of pollution and waste.The production of fashion goods accounts for about 10%of the worlds greenhouse gas emissions.The apparel industry 6uses more than 93 billion cubic meters of water per year,which is four percent of all freshwater extraction globally.The fashion industry has 7been facing criticism for its environmental impact in recent years.There are many reasons for this,including the growing demand for fast fashion,which creates a need for greater production capacity and speed at every step of the supply chain.Consumers are now more aware than ever of how their choices impact the environment and human rights.The negative impacts of fast fashion are well documented and the industry has been criticized for its failure to respond to this criticism with any meaningful action,apart from producing more sustainable marketing campaigns.As a result of this pressure,the industry has been forced to change.Companies like Patagonia,Stella McCartney and more have led by example by creating products that are sustainable from beginning to end,including materials sourcing and supply chain transparency.Copyright|05TIME FOR A SHAKE UP The global fashion industry is experiencing a time of great change.While the sector has historically been slow to adopt new technologies,recent technological developments have caused the industry to shift its thinking.With fashion being a part of every aspect of our lives,modern technologies will inevitably shape the way we think about,create,and consume fashion.In fact,technology is already changing how the fashion industry operates.It is presenting new opportunities for brands and retailers to offer consumers a more personalized experience.But those are not all our worries,there are also some fantastic opportunities for companies who can find ways to leverage modern technologies and make the most of new innovations.This whitepaper will help you understand how innovation will change this industry in the near future,what challenges are being overcome,and where your business can take advantage of these changes in 2023.Fashion is one of the most resource-intensive industries on earth,with significant impacts on the environment through resource extraction,production and transportation.The industry is also highly fragmented and complex,with an estimated 200,000 brands operating in more than 100 countries selling thousands of different types of products.These factors have led many experts to predict that technology will play an increasingly important role in shaping the future of fashion.The fashion industry is a large and complex system.It is important to understand its structure and how the various parts interact with each other.This white paper is structured to follow the four key phases of a products lifecycle and will give you an idea of how technology is disrupting each stage of the fashion production cycle.Well take a look at how consumers will interact with retailers,how brands will communicate with consumers,and even how they will source their products.The fashion sectors growth rate is impressive,but there are still several glaring challenges in this industry:Rising costs associated with production Lack of transparency between brands and customers Increasing competition from new entrants into the market Rising expectations around the quality and price of products Blurring lines between online and offline experiences Consumer expectations for customized and personalized experiences and more!Copyright|06THE FUTURE OF FASHIONThe future of the fashion industry will be a combination of technology,data and design.The industry is moving towards more personalized experiences for both the consumer and brand.Brands will continue to rely on technology to help them create better products faster,while consumers will use their devices to shop in new ways!Copyright|07TREND#1 Generative AI becomes your co-designer AI-generated designs will be a hot topic for 2023.The technology is still in its early stages,but its already being used by some brands to create new products.AI is used to generate ideas based on existing trends and consumer preferences,then designers tweak those suggestions before putting them into production.This is a big shift from how brands create products today.In the past,designers would come up with ideas and then present them to consumers for feedback.With generative AI,that process has been flipped on its head,the technology generates ideas first,then humans can work on perfecting them.PHASE 1-DESIGNAI-generated design will become an important tool in the fashion designers arsenal.Designers will use AI to generate ideas based on existing/upcoming trends and consumer preferences and then tweak them in their own style before production.Copyright|08Some examples of generative AI include Amazon Lab 126s GAN tool,which uses machine learning to create fashion designs based on customer data and trends.CALA,that reimagines DALL-E as a clothing designer,allows designers to sketch,prototype,and produce new products.Most recently,Antwerp-based fashion designer Flora Miranda used AI,data and generative design to turn peoples Facebook history into personalized garments.TREND#2 3D Prototyping to speed up samplingThe use of 3D design and printing technology has exploded in recent years,and many companies are now using it as a prototyping tool.Its much faster than traditional methods like hand sketching and stitching muslin pieces which can take weeks to produce just one sample.In the past,fashion brands had to wait for samples from manufacturers or factories before production could begin.But with 3D printing,designers can create prototypes in hoursand sometimes even minuteswhich means they can iterate more quickly and efficiently.The benefit of this technology is that designers can create a unique,custom fit for their customers.This can be especially useful for brands who want to offer plus-size clothing or those working with extremely specific body types.3D prototyping is already being used by most big fashion businesses and the technology is only going to become better and more widely used in the coming years.TREND#3 Using Fit-Tech solutions for smarter sizingFitting technology is another emerging field that promises to help brands offer more custom-fitted clothing.When coupled with 3D printing,Fit-Tech allows designers to create garments that are more comfortable and flattering for their customers.Fit-Tech encompasses a range of different technologies,including artificial intelligence(AI),machine learning(ML)and computer vision algorithms.These tools allow brands to measure the body dimensions of their customers and use this information to produce better fitting clothes.Some important startups in this space include True Fit(an AI-based fitting solutions provider for fashion retailers),3DLOOK(an AI and cloud-based 3D body scanning app for fashion),Obsess(AR/VR-based fashion shopping solutions provider),and (SaaS-based AI-enabled Bold Metricsvirtual trial fitting solution)among many,many others.Copyright|09TREND#4 New generation of smart and sustainable fabricsWe are entering an age of smarter and more sustainable fabrics,with innovations that improve performance while reducing resource use.Advanced technologies such as nanotechnology and AI are being used to create fabrics that are both environmentally friendly and highly functional.The future of fashion is here!For example,Sensoria is a wearable technology company that uses sensors to track body movements and provide real-time feedback.The company has developed athletic apparel that tracks heart rate,breathing patterns,muscles tension and movement during exercise.It also offers a line of smart socks that measure gait analysis to help people improve their running form.There are many other players in the textile innovation space.is a Nanotexcompany that uses nanotechnology to create fabrics that are stain resistant,self-cleaning and antibacterial.The companys products have been featured in the London Fashion Week and it has received funding from big names like Richard Branson.Another company that made waves in the luxury fashion world with its Hermes collaboration is MycoWorks who specializes in making leather from mushrooms.Copyright|10Solutions such as WFX Smart Factory allow companies to monitor their operations in real-time through visual dashboards that can viewed on TV screens,laptops,tablets and smartphones.WFX Smart Factory automates the collection,processing,and analysis of data through RFID tags and sensors for the entire supply chain.Phase 2-MANUFACTURING TREND#5 The digital factory is becoming smarter than ever The concept of the smart factory has been around for years,but its implementation is only just now starting to become reality.The idea of a smart factory is to automate as much of the manufacturing process as possible,while also using information technology to improve visibility and make all aspects of production more efficient.This will allow manufacturers to produce high-quality goods faster and cheaper than ever before.With the rise of nearshoring,manufacturers are beginning to realize that they need to take advantage of new technologies to manage their decentralized operations more effectively.This is especially true for those who have moved or expanded their manufacturing facilities outside their home countries and need to react quickly to changes in demand.WFX Smart Factory can help not only with meeting customer demand,but also with reducing waste and increasing efficiency throughout the supply chain.This means that businesses can power up their production floor and produce more high-quality products.They can reduce errors and shorten their time-to-market.Copyright|11In addition,smart factories allow companies to improve the working conditions for their employees.For instance,they can use data to understand where bottlenecks are occurring in production and then redesign those processes so that they run more smoothly.This will reduce errors which can lead to better quality products being produced by the factories.TREND#6 Sourcing marketplaces for suppliers and factoriesOne of the biggest challenges for companies that want to work with factories is finding suppliers and manufacturers that can meet their needs.While many companies have international suppliers or partner,they may not be able to produce products quickly enough or make changes on demand.Nearshoring is big trend for 2023 which means we will need advanced sourcing marketplaces to minimize this problem by allowing businesses to find the right supplier for the job in real-time.These marketplaces will help companies reduce risk in their sourcing operations by opening up newer geographies and opportunities.They will also make collaboration easier for companies who want to work with factories in other countries,since they can communicate with their suppliers via the platform.This will help companies find suppliers that can meet their needs and allow them to easily scale production whenever they want.The advanced sourcing marketplaces of the future will also help companies implement and support better sustainability practices in their supply chains.By using AI and machine learning,these platforms will be able to monitor the efficiency and effectiveness of each suppliers operations as well as identify any problems.TREND#7 Improving supply chain visibility with blockchain A blockchain is a technology that records data in a way that makes it exceedingly difficult to tamper with.By recording all information about the entire supply chain on a blockchain,businesses can ensure that they know where their products are being made and by whom.This includes information about where materials are sourced from and shipped to,as well as which parties are involved in each step of the process.This can help businesses ensure that their suppliers are meeting quality standards throughout the production process and provide customers with more information about what goes into their products.This can also help them avoid buying counterfeit goods or supporting unethical labor practices,something that many brands have struggled with in recent years.Copyright|12In addition,blockchain technology can help businesses track the movement of their products throughout the supply chain.This can be helpful in cases where there are issues with quality control or when a product has been recalled.It also makes it easier for companies to monitor how their suppliers are handling products after they have been shipped out.TREND#8 On-demand 3D printed productsOne of the most exciting trends in 3D printing is the ability to produce customized products on demand.This has been made possible by 3D scanning and printing,which allows companies to collect data about yourbody or an object and then use that information to create a product just for you.This can be useful for everything from clothing retailers that want to offer their customers a custom fit,to medical providers who need equipment made specific for their patients.Companies like Nike and Adidas are already using 3D printing to make shoes for their customers,while companies like Carbon&Stratasys have developed machines that can print an entire shoe in a single run.This trend is also being used for the creation of unique jewelry,art pieces and even furniture.The ability to create customized products on demand will continue to grow in the coming years as 3D printing technology becomes more accessible and affordable for both businesses and consumers.TREND#9 Advancements in soft robotics The use of soft robotics is becoming more popular among manufacturers and researchers as they look for ways to improve the design and functionality of their products.Soft robotics will help manufacturers and warehousing companies overcome some of the limitations that traditional robots have,when it comes to performing tasks like grasping,sensing and mobility in environments that are too dangerous or delicate for humans.Soft robotics are also a way to address the shortage of skilled labor in the garment manufacturing industry.Soft robots are seen to automate tasks that were previously done by hand,such as sewing and stitching garments together.They can be used for tasks like cutting fabric or packing boxes with garments without damaging them or needing any human intervention.Copyright|13TREND#10 Real-time factory management with centralized ERPMany companies are still using on-premise legacy systems to manage their factories.These systems are often disconnected from each other and dont have the ability to communicate in real-time.They also require manual data entry,instead of connecting directly with IoT devices on the factory floor and often lead to more errors and redundancy.The next big shift in garment manufacturing is real-time production management and data-driven decision making.Every successful company will invest in a centralized cloud-based ERP system such as WFX Apparel ERP that can connect machines,robots and people in real time to track production status,quality control,inventory management and more.This will enable companies to act on data as its generated through smart visual dashboards,instead of having to wait for reports at the end of the week.Real-time management is becoming more important because manufacturers are faced with mounting pressure from customers and shareholders to improve efficiency.Theres also an increasing demand for transparency in the supply chain.Customers want to know where their products come from,how theyre made and what impact that has on the environment.Whats more,many manufacturers either have opened or are opening factories outside of their origin countries to support the demand for nearshoring.This makes the job of a central cloud ERP all the more important.Having a real-time system that connects all different aspects of the business will help manufacturers meet the rising demands for transparency and traceability.The use of a cloud-based ERP solution allows companies to easily integrate data from multiple applications into one place,making it easier for employees at all levels in the organization to have access to real-time information about their work as well as sharing data with other departments.Phase 3-Inventory&Distribution Copyright|14TREND#11 Non-fungible tokens to help combat counterfeit issuesThe use of non-fungible tokens in the apparel industry is becoming increasingly popular,as they can help to combat the growing problem of counterfeit goods.This technology provides a way for brands and manufacturers to ensure that their products are authentic by using a blockchain or other distributed ledger system.Non-fungible tokens can be used on their own or in conjunction with other technologies such as RFID tracking tags and QR codes that provide added security features on top of traditional barcodes.The apparel industry is no stranger to counterfeiting,which can cause problems for both consumers&brands.The use of non-fungible tokens(NFTs)can help brands prevent counterfeit goods from entering their supply chains by creating a unique digital fingerprint that identifies each product.NFTs are also useful in providing consumers with additional information about a product before they purchase it or return an item that doesnt meet their needs.TREND#12 Brands moving towards a Direct-to-Consumer modelWith consumers becoming more comfortable with shopping online&the rise of social media influencing their purchasing decisions,brands are shifting to a Direct-to-Consumer(DTC)model.This allows them to have more control over their inventory,pricing&customer service while also increasing brand recognition.Brands can offer personalized experiences in which they collect data on customers preferences and provide relevant offers based on that information.They can also use this information to create targeted ads and even products for specific audiences.This model helps brands keep up with the demands of customers,who are using social media to voice their opinions and share their experiences.The DTC model also allows brands to be more transparent about their products&services,which can help them build trust in a competitive marketplace.TREND#13 The next league of automated warehousesAutomated warehouses are an emerging trend in the logistics space.These facilities use robots and other technology to automate much of the process of moving goods from point A to point B,thereby reducing labor costs and enabling companies to offer same-day or next-day delivery.Automated warehouses are more cost-efficient than their human counterparts and can process more orders at once.They use sensors and computer vision software to track inventory and order products from suppliers automatically.Automated warehouses are already being used by several companies,including Amazon&Walmart.They are especially useful for retailers that need to process massive amounts of orders in a short period of time,for example,during the holiday shopping season.Copyright|15Phase 4 Marketing&Retail TREND#14 Using AR/VR for virtual shoppingVirtual reality(VR)and augmented reality(AR)have been used primarily in gaming and entertainment,but now they are also starting to be used by fashion brands and retailers.VR allows users to experience a 360-degree view of products,while AR overlays digital images on top of the real world.Retailers can use this technology to allow customers to try on clothing or view furniture in their homes before they buy it.Theyre also starting to integrate AR/VR into their stores and websites through mobile apps that let customers see what specific items look like on them before purchase.These technologies will allow retailers to create more immersive shopping experiences that keep customers coming back for more.AR/VR is also being used to help retailers with their marketing efforts.An example of this could be a brand using these technologies to create more engaging ads that let customers interact with the brand in new ways.This could be through AR ad integrations for a movie coming out this summer where people are allowed to try on costumes from the film.Copyright|While these technologies are still being worked upon and developed further,we are going to see many implementations in real world scenarios in 2023.For example,B2B digital showroom solutions such as WFX Virtual Showroom turned out to be a big boon for manufacturers,brands and buyers for conducting virtual showroom appointments during the pandemic.WFX Virtual Showroom allows companies to create an easy to use,customizable and scalable digital showroom.It can be used as a standalone solution or integrated with existing systems like PLM or ERP.With the increasing adoption of smart devices and mobile apps,we are going to see more use cases for augmented reality and virtual reality.These technologies have already started making their way into businesses in many different ways such as showing 360-degree views of products on ecommerce websites or providing customers with walkthroughs of new homes they are looking to buy off the plans.16TREND#18 WearablesThe future of fashion is wearable technology,and this will change our relationship with clothing forever.The rise of wearable tech in recent years has been driven by the popularity of fitness trackers,but in 2023 we will see more user-friendly smart garments enter the market as brands like Apple and Google continue to innovate.The first generation of wearable technology was focused on fitness,but we can expect to see the focus shift towards features such as connectivity and personalization.This will allow brands to create garments that are more than just clothes;theyll become extensions of our personalities and lifestyles.Its not just clothes that are becoming smarter;we can expect to see a rise in the number of brands offering connected accessories such as shoes and bags.Consumers will have the ability to track their fitness data,order products on the go and share their travel experiences with friends via social media.As wearables continue to evolve,so too will our relationship with themin fact,we will even come to regard them as essential parts of our lives!The future of wearable fashion is bright,but there are also plenty of challenges that we will need to address in 2023.The rise of wearable technology will also raise concerns over privacy and security as brands begin to incorporate biometrics into their products.If a brand can collect data on how and where you wear their clothing,they can use this information to target consumers with personalized marketing messages,which some consumers may find invasive.In addition,this technology will also be a boon for criminals who are looking to steal their identity or personal data.We could see an increase in cybercrime as wearable devices become more popularand companies will need to take steps to protect their customers from these threats.TREND#19 Digital-only fashionAs more brands begin to produce clothing that can be worn in both the real and virtual worlds,it will become increasingly difficult to distinguish the two.This trend will encourage designers to create garments that are specifically designed with digital functionality in mindclothes that can be worn anywhere!While this is certainly exciting,it also raises questions around how brands will go about designing these products.Will they collaborate with existing virtual fashion brands or create their own?If so,how will this affect the way we shop online?THE FUTURE OF CLOTHING Copyright|17Were sure to see more designers jumping on the bandwagon and it wont be long before we see a new wave of fashion brands focusing specifically on digital wearables.We can only imagine what that will look like,but one thing is certain:It will require a different approach from traditional fashion brands.While we wait to see how the fashion industry will adapt,there are a few things we can learn from brands that have already launched virtual wearables.First,theyve shown that its possible to create an entirely new type of product categoryone that doesnt exist in the physical world.Second,theyve demonstrated how important it is to create a brand experience around this new type of product and how essential it is to iterate quickly on design and functionality.Finally,theyve shown that creating a virtual wearable is more than just launching an app or website.Its about creating a new type of brand experience that goes beyond traditional fashion retail and pushes the boundaries of what it means to be human in the digital age.TREND#20 Circular FashionThe fashion industry is one of the most wasteful industries in the world.Its estimated that a staggering 70%of clothing ends up in landfills after its first use,which is an incredible waste considering how many people around the globe are without basic necessities like clean water,food and shelter.This is why circular fashion has emerged as a new trend 8across all categoriesone thats focused on designing clothes with recycling/reusability/disposal in mind.To achieve circularity,fashion brands will need better systems to keep track of the entire lifecycle of their products from inception to disposal.This is where the role of robust,end-to-end integrated,modern,cloud-based Product Lifecycle Management solutions such as will become WFX Fashion PLMincreasingly important.Copyright|18Circular fashion isnt just about recycling and reusing materials,its also about designing products in a way that minimizes waste and maximizes durability.As a result,the fashion industry is finally starting to take responsibility for its impact on the environment.Designers are now making it easier for consumers to donate their old products or donate them directly to those who need them most(think TOMS Shoes).In addition to recycling programs,many brands have implemented zero-waste initiatives as well.These companies are committed to using only renewable energy,water and materials in their manufacturing processeswhich means theyre not just reducing their carbon footprint but also ensuring that resources are used responsibly.The circular economy is a growing movement thats having a major impact on the fashion industry.Companies like Patagonia,Eileen Fisher and H&M have all adopted circular business models that encourage sustainability and recycling and are seeing some impressive results as a result.Copyright|18SUMMARYThe global fashion industry is experiencing rapid change,and technology will be driving this change further in 2023.It is and will continue to revolutionize every function of the industry,from design and supply chain management to e-commerce and customer service.This rapid change has led to increased adoption of new production practices,faster innovation cycles,and more efficient operations.The past decade has seen an explosion of innovative tech products that have created entirely new markets or disrupted traditional business models.The rise of augmented reality(AR)and virtual reality(VR),for example,has changed how consumers shop for clothing and footwear.Virtual fitting rooms are enabling shoppers to try on clothes before buying them,leading to more sales for e-commerce retailers like Amazon Fashion.And AR technology is helping brands communicate with consumers more effectively through virtual dressing room mirrors that let customers view themselves wearing the newest styles from their favorite designers before committing to purchase anything at all.As we move into 2023,digitalization no longer remains an option,but a necessity.Fashion is a constantly evolving industry and one that will continue to be affected by technology.Todays consumers are digital natives who want to shop for clothing in the same way that they enjoy music and video and that means an end to the traditional approach to shopping.Innovators are using technology to create experiences that help customers make better informed decisions.Any company that wants to compete in todays market must understand what these changes mean for them and how they can best respond.The fashion industry has been one of the slowest to adopt technology,but that trend seems to be changing.The technology-driven changes in the fashion industry are helping companies to become more efficient and profitable.This white paper is designed to give you an overview of how technology has changed the fashion industry and where it is headed in 2023.If you have any questions after reading this,feel free to reach out!Copyright| 91 98997 61926 91 124 491 World Fashion ExchangeWorld leader indigitally transformingthe Fashion Industry
2023-12-22
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AI inE-Commerce FashionMaximizing Profitability Through InnovationLooking for the hottest marketing trends in e-commerce fashion?Look no further.Bloomreach personalizes the e-commerce experience.Its data engine unifies real-time customer and product data so businesses understand what customers really want.By connecting that understanding to every channel,the e-commerce experience becomes limitless reflecting a changing customer as they shop.Amplified by the speed and scale of Loomi,Bloomreachs AI for e-commerce,this creates endless new paths to purchase,greater profitability,and fast business growth.The company has multiple AI patents and serves 850 global brands including:Albertsons,Bosch,Puma,and Marks&Spencer.About BloomreachAI in E-Commerce FashionMaximizing Profitability Through Innovation 2023ContentsE-Commerce Fashion Profitability CAC vs.CPA:How to Lower Customer Acquisition Costs CLV Calculator How to Lessen the Impact of E-Commerce ReturnsArtificial Intelligence Artificial Intelligence in Online Fashion Retail Put Your Customer Data to Work With Our Use Case Library River Island Creates Differentiated Experiences With Bloomreach boohooMAN Sees Up to 25x ROI With BloomreachGet Started With Profitability and AI Today1.a.a.b.b.c.c.d.2.3.E-Commerce Fashion ProfitabilityC HA PTER 1Why Does Customer Acquisition Cost Matter?If you run an e-commerce business,your customer acqui-sition cost is a crucial statistic.Calculating,understanding,and optimizing your CAC should be a top priority.Calculating your CAC is similar to checking the pulse of your business.Measuring how much your business is spending to acquire customers can determine the vital next steps for your company,whether that means optimizing your customer lifetime value(LTV)or completely reassess-ing the cost/profit ratio of your business as a whole.This is especially true in relation to your LTV,a measure of a customers monetary value to a company over a period of time.The balance between your CAC and LTV is one of the most important relationships a business needs to keep un-der control its no exaggeration that this relationship will tell you whether or not your business can succeed.Luckily,this correlation between CAC and LTV is easy to comprehend.Simply put,if you want to know if your e-com-merce business is in good shape,your customer acquisition cost needs to be lower than your customer lifetime value.Customer acquisition cost(CAC)is one of those metrics that every marketer knows is an essential statistic,but not everyone fully understands.CAC vs.CPA:How to Lower Customer Acquisition CostsThis ratio lets you know how much your business can spend to acquire enough customers without spending more than the value those customers will bring to your company.How To Improve Customer Acquisition CostIf youre looking to lower your CAC,it can be hard to know where to start.Is the cost of your marketing a problem?Are you paying too much to bring a visitor to your site?Or is the issue that you just arent converting enough of them?Customer acquisition cost is a metric that deals with the full scope of your business,so drilling down on a few key areas and addressing these kinds of questions is the best way to make a big impact.Here are a few key ideas to considerHow To Lower Your Marketing CostsIf converting customers isnt an issue for your business,but its costing too much to bring them to your site,here are a few ideas to bring your costs down:Identify Your Best Acquisition ChannelsZeroing in on your best-performing channels and optimiz-ing them for acquisitions can go a long way towards driving down your customer acquisition cost.Heres a simple pro-cess to determine which channels are worth focusing on:Track the number of visi-tors coming in from each channel.You need to know how many customers are coming from each market-ing channel to fully under-stand your efforts.Divide the marketing spend for each channel by the number of visitors gained.Using this equation,you can determine which channel brings you the cheapest traffic and which is the most expensive.Focus your energy and budget on what works.With a ranking of your most costly and most af-fordable channels,you can start optimizing them and getting the most out of your spending.1.2.3.Identify Your Best CampaignsJust like your channels,you can pinpoint your most lucra-tive campaigns and use them as blueprints for a more opti-mized campaign strategy.Identify Your Target AudienceTruly knowing your customers is the best way to improve your targeting techniques.Understanding and connecting their behaviors,wants,and segments can both grow and streamline your efforts.Divide the cost of each campaign by the number of visitors gained.This will tell you your best acquisition campaigns.Which campaigns are the most cost effective?Once you identify the best performers,you can replicate them for the best results.1.Divide the cost of each campaign by the number of customers retained.This will tell you your best retention campaigns.Focus your time and budget on the ones that are most cost effective.2.A/Lean into lookalike audiences.Use the purchase predictions of your current users to create a Facebook or Google audience for a remarketing campaign.B/Segment your customers by their customer lifetime value.For your retention campaigns,make sure that targeted efforts for high-value customers have the most budget behind them,and that you arent spending too much to retain low-value segments.Optimize Your Ad SpendingIts important to make sure your ad spending is always aimed at customer acquisition.Here are a few key steps you can take:Improving Your Conversion CostsWhat if youre getting a good amount of traffic,but none of it is converting once you get your target audience on site?Here are a few ideas to help you lower your conversion costs:Optimize Your Customer JourneyMake sure your spending isnt going towards the wrong audience.Use negative audience segmentation to ensure no ads are wasted on an audience unlikely to convert.Dont waste your spending with repeated efforts.Use ad frequency capping to limit the number of times a visitor will be shown an ad.Support your ads with e-commerce best practices.Attract organic traffic through SEO,unique product descriptions,and other e-commerce optimization strategies to reduce dependence on paid traffic.1.Analyze your traffic and campaigns to see where youre losing customers.Which stages or steps in the buying process see the most drop off?1.2.A/B test different variations of your cus-tomer experience based on your analysis.Once you know where you are leaking customers,you can orchestrate your ideal customer journey.2.Cater to Returning VisitorsPersonalize your site to include recommended content.In-spire users revisiting your site with recommendations based around previous browsing history.Deploy banners to returning visitors.Make your recommended products front and center in their site experience.Display banners to returning visitors who have an abandoned cart.Remind them of the items in their cart and entice them to complete their purchase.Send personalized email offers based on their browsing history.A personalized email marketing strategy can bring customers back onsite and inspire a purchase.1.2.3.CAC/CLV Calculator Calculate nowTake our self-assessment and calculate your CAC to LTV ratioHow Your Marketing Team Can Lessen the Impact of E-Commerce ReturnsAs the popularity of online shopping grows,so too does the frequency with which customers are returning the products theyve purchased online.This has led to an e-commerce returns issue thats leaving companies of all sizes and verticals trying to stop the bleed-ing on their bottom line.Online retailers understand the critical role that customer satisfaction plays in driving repeat business and maintain-ing long-term customer relationships.While returns are an inherent part of the e-commerce ecosystem,excessive re-turn rates can significantly impact profit margins and hinder customer lifetime value.One of the key factors contributing to high return rates is the gap between the online and brick-and-mortar store experiences.Customers who shop online often face chal-lenges such as inaccurate product descriptions,sizing dis-crepancies,or color variations,leading to dissatisfaction upon receiving their purchases.Consequently,they initiate the return process,creating logistical complexities for the e-commerce store.Average AnnualCustomer ProfitAverage Durationof Customer RetentionTo address this issue,forward-thinking online retailers have implemented strategies like free return shipping and store credit to encourage customers to shop online with confi-dence.By offering free return shipping,e-commerce busi-nesses alleviate the financial burden on customers when returning products that didnt meet their expectations.Moreover,providing store credit instead of refunds em-powers customers to make alternative purchases,allowing brands to retain their business and improve overall custom-er satisfaction.In addition to these customer-centric approaches,e-com-merce stores are investing in advanced technologies and robust reverse logistics systems.These systems stream-line the return process,making it more efficient for custom-ers and reducing the chances of return fraud.By efficiently managing returns,online retailers can better control their in-ventory,mitigate losses,and allocate resources effectively.But while all of the above information is important for con-text,what will really help you impact your bottom line is finding the right solution whats the best way to not only manage your e-commerce returns,but also reduce the fi-nancial stress theyre causing your company?Managing e-commerce returns effectively is crucial for maintaining customer satisfaction and loyalty in the online retail industry.It involves streamlining the return process,en-suring timely refunds or replacements,and continuously im-proving customer service to address any issues that may arise during returns.But thats just the tip of the iceberg with e-commerce re-turns.If your company has marketing technology that can help pinpoint the consistent source of your product return problem,you can adjust your marketing strategies accord-ingly to mitigate loss.And that could go a long way towards solving your e-com-merce returns problem and maximizing your compa-nys profit.E-Commerce Returns Impact Customer LoyaltyE-commerce returns can have a significant impact on cus-tomer loyalty and customer lifetime value.How returns are handled and the overall experience cus-tomers have during the return process can greatly influence their perception of a retailer and their willingness to contin-ue shopping with them.A positive return experience enhances customer satis-faction,builds trust and confidence,encourages repeat purchases,generates positive word-of-mouth,showcas-es customer-centricity,and differentiates a retailer from its competitors.By prioritizing customer satisfaction and con-tinuously improving the returns process,retailers can fos-ter customer loyalty,strengthen their brand,and drive long-term success in the e-commerce space.The Wall Street Journal reported that a small number of customers tend to account for a large number of a retail-ers returns.In specific regard to one online retailer that Bloomreach works with,Bloomreachs Brian Walker told WSJ that 8%of shoppers made 70%of the retailers returns.Being able to effectively identify the other 92%of shoppers who arent returning products often and effectively process the few returns they do have is essential for getting that large percentage of customers to build brand loyalty.Mean-while,segmenting out the 8%of heavy returners and limit-ing the marketing communications they receive would help limit the return rate.E-Commerce Return StatisticsThe current state of e-commerce returns and e-commerce return rates is not a super positive one for online retailers.E-commerce return rates are typically significantly high-er than brick-and-mortar stores.In a study by Shippo(and compiled by Richpanel),the data shows that the average e-commerce return rate sits somewhere between 20-30%.That same study also shows the average return rates by vertical.With apparel slightly over 10%and jewelry and electronics approaching 10%,its easy to see why so many online retailers are frustrated by returns.Aggregated Return RatesBrick&MortarE-commerce ReturnsHoliday E-commerce“Expensive“productsSource:Forrester and reported by the WSJ500 %8-10tegory Return RatesApparelBeautyElectronicsHealth&WelnessJewelrySports&OutdoorsReturn Rate(%)With apparel slightly over 10%and jewelry and electronics approaching 10%,its easy to see why so many online retailers are frustrated by returns.That same study also shows the average return rates by vertical10.01%4.20%4.99%8.31%8.28%6.10%Returns can be costly for retailers due to factors such as shipping expenses,restocking fees,and potential loss in value for returned items.Studies suggest that the cost of processing a return can range from 20%to 65%of the items original value.According to the Wall Street Journal,return rates were 14%higher in 2022 compared to 2019,and on average,the cost to process$100 worth of returned merchandise is about$26.50.The WSJ estimated that if a retailer cut returns in half,it would result in 25%increased profit.These statistics highlight the significance of managing re-turns effectively and provide insights into the impact of re-turns on retailers and customer behavior.Consider also that returns can have an impact on the envi-ronment and your companys sustainable commerce efforts.Strategies for Lowering Your Return RateFortunately,there are ways to avoid becoming just another company getting crushed by returns.Lowering your return rate requires a proactive approach to address the underly-ing factors that contribute to returns.By implementing these strategies via your content man-agement system,you can proactively address common causes of returns and minimize the overall return rate for your business.Remember,an informed and satisfied cus-tomer is less likely to return a product,so prioritize transpar-ency,accurate information,and exceptional customer ser-vice throughout the customer journey.1.Write Accurate Product Descriptions2.Share Product Videos3.Provide Size and Fit Guidance4.Add Enhanced Product Images e.g.high-res,multi angles5.Use Quality Control Methods to minimize shipment of faulty products Using Artificial Intelligence To Improve Your E-Commerce Return RateIn todays competitive marketplace,artificial intelligence(AI)has had a massive impact on e-commerce in general,but hasnt been utilized much in returns specifically.Many companies have not yet begun to specifically lever-age AI to directly reduce returns.They are instead using AI to better understand their customers and treat the custom-ers with high return rates differently than others who make fewer returns.What AI can really do for e-commerce companies is en-hance the customer experience through richer and more personalized content being delivered to end customers.This helps the customer better understand what theyre pur-chasing,which can impact returns by reducing the sizing,fit,fabric,or feel issues that often lead to product returns.Doing this helps limit the strain on reverse logistics.In-creased e-commerce personalization efforts are being im-plemented by businesses all over the world to ensure that customers are buying the right product or accomplishing what they are trying to achieve with a brand.All of this directly contributes to lowering return rates.Identifying“Heavy Returners”One of the most important things that artificial intelligence can do for your business is to help you identify who your“heavy returners”are and where specifically they are hiding in your customer base.Heavy returners in e-commerce are customers who fre-quently return items they have purchased online.Typical-ly,these customers have a higher-than-average return rate and may return items for a variety of reasons,such as wrong size,color,or fit,dissatisfaction with product quality,or simply changing their mind about the purchase.Heavy returners can be a significant challenge for e-commerce re-tailers as they can impact profitability,customer satisfaction,and operational efficiency.Identifying heavy returners is important for e-commerce re-tailers as it can help them develop targeted strategies to reduce returns and prevent loss of revenue.Some ways to identify heavy returners include tracking customer order history,analyzing return data,and using software that can identify patterns in customer behavior.Once identified,e-commerce retailers can take steps to ad-dress the root causes of returns for heavy returners,such as improving product descriptions,offering alternative op-tions,providing better sizing information,and enhancing customer service.By addressing the needs and concerns of heavy returners,e-commerce retailers can reduce their re-turn rates and improve customer satisfaction,resulting in in-creased sales and profits.Segmenting customers by their return rate can ensure that your online store achieves profitable and sustainable growth.And if it becomes necessary,e-commerce retail-ers can also opt to take a more aggressive approach with heavy returners.Once you have segmented your heavy returners,you have the option to refrain from showing them discounts for prod-ucts(as they are apt to return them)and products with a low margin.Or consider only showing them payment methods that are better for your companys bottom line,even if they may be less convenient for them.While you certainly dont want to take that approach with all segments of your customer base,those strategies will help you mitigate the losses your business suffers from your heavy returner segment of customers.Mitigating Returns The aforementioned use case and these four additional ones specifically designed to lower your e-commerce re-turn rate are a great place to start.Weblayers To Prevent Purchase of the Same Item in Different SizesWeblayers are personalized banners that are shown to cus-tomers on specific pages of your website.Theyre a great way to drive engagement and conversions,and are execut-ed via HTML,CSS,and JavaScript.If a customer has the exact same item in their online shop-ping cart multiple times in different sizes,deploy a weblayer that links to a sizing guide or customer service representa-tive.These two options would help the customer find their true size for the item in their cart.For your business,using this tactic will help reduce the num-ber of returns of duplicate items bought in different sizes.Very few shoppers are setting up their carts with the intent of keeping both of these differently sized items.This weblay-er would help you reduce costs and improve profit margins.Experiments To Prevent Purchase of the Same Item in Different SizesSimilar to the use case above,you can use experiments to trigger an alert to customers that have the exact same item in multiple different sizes in their cart prior to them making the purchase.Experiments are a web optimization and web personal-ization tool that allow you to make any changes to your website using a simple visual editor without needing to deploy code.Once again,your messaging could point cus-tomers to a sizing chart or customer representative to help determine which size would be best,potentially leading to cost savings for your company by mitigating a future prod-uct return.Daily Exclusion of Low-Profit Customers From RetargetingIts simple to use Bloomreach Engagement to find low-and negative-profit customers via our single customer view and our advanced customer segmentation.Take that one step further to lower your return rate by re-moving these customers from your Facebook and Google retargeting audiences.This will save you ad budget by not targeting customers who arent profitable for your business,and can lead to lowering your return rate as well.Boosting High-Profit Products in Product Recommendation ModelsUsing personalized product recommendations to help cus-tomers find what they want with your brand is a great strat-egy for driving revenue and fostering happy customers.While theres certainly a chance that these product rec-ommendations could recommend products that custom-ers ultimately return,you can help mitigate that cost by op-timizing your product recommendations for higher-profit products.This builds in potential return costs so your com-pany isnt negatively impacted if customers do indeed de-cide to return.ArtificialIntelligenceC HA PTER 2Artificial Intelligence in Online Fashion RetailMost retail businesses see artificial intelligence as a tool of the future.But in reality,AI is essential for addressing retails challenges in the here and now.Heres an overview of the current role of AI in the online fashion industry,and what we can expect from the ground-breaking technology in the future.The State of Artificial Intelligence(AI)For modern businesses trying to navigate the retail land-scape,AI is imperative for success.Artificial intelligence has a wider influence on contemporary business than most companies realize.Without the aid of AI,businesses can miss sales opportunities and lose efficiency within their teams.Its an integral part of any strategy,not just e-com-merce or digital efforts.The Rapid Rise of Generative AIMost people recognize AI by the popular prompt-and-response tools that have made recent headlines,like ChatGPT.This type of conversational AI technology has tak-en the world by storm,with early adopters praising the sig-nificant impact these AI tools will have on all aspects of modern life from the art world and education to retail and conversational commerce.But much of the buzz around generative AI comes from how foreign the technology seems at first glance.Most people view AI as a black box you feed it data and you get great results,fast.And while this is true in some retail AI use cases,it doesnt paint a clear picture of what AI is or does.How Does Generative AI Work?Its easier to understand AIs use and application by viewing it as a tool for making predictions and projections,and do-ing so much faster than humans are capable of.Most current AI algorithms make predictions and choices like humans would:they learn from historical data.Rath-er than being told specifically what to do every step of the way,generative AI is designed to create and innovate on its own,with minimal human intervention.The algorithms used in generative AI are trained on massive datasets and can create new,unique outputs based on the information that theyve been fed.And as we begin providing AI with higher quality data,its precision will dramatically improve.Why AI in Fashion Is So ImportantThis pursuit of precision and speed is why artificial intelli-gence is such an exciting new tool.As data gathering and processing evolves and becomes more refined,artificial in-telligence continues to play a bigger role for online busi-nesses and retail stores.And more and more industry experts are predicting that no area of life or business will be insulated from AI,especially the fashion industry.Valuable customer data,product data,and predictive analytics can be integrated and optimized like never before.Today these technologies are disrupting every retail indus-try,not just fashion retail.Artificial intelligence no longer re-quires a high level of technical know-how to apply.Its be-coming more accessible with user-friendly platforms and straightforward use cases,making it an appealing and practical tool for retail businesses to adopt.Here are a few ways that AI is actively changing the retail landscape.Many Companies Are Incorporating AIAccording to a recent study by IMRG&Hive,three-quarters of fashion retailers will invest in AI over the next 24 months.And this trend shows no sign of slowing down.From big-box stores to direct-to-consumer brands,the AI-based online fashion store is becoming the go-to model for modern businesses.And its easy to see the benefits of this movement towards AI.As modern businesses feel pressure to increase efficien-cy and output to meet customer needs and reach high-er sales targets,the appeal of intelligent machine learning looks less like a perk and more like a necessity.The Impact of AI on Online Retail BusinessThe ever-increasing scale and granularity of personalization in online fashion retail is impossible to manage without the assistance of AI and related automated processes.The growing number of companies adopting these new technologies is raising the bar for service and personaliza-tion,which customers have learned to expect.In recent years,dozens of well-known fashion retailers have faced the threat of bankruptcy,and most of the struggling companies shared a common trait:Failing to adapt to the modern need to create personalized,one-to-one experi-ences.Todays customer allows businesses to collect and use their personal data,and they expect an elevated customer expe-rience in exchange.Lightning-fast service,relevant market-ing,and personalization at every stage is the new norm.They demand a customer journey that caters to their spe-cific customer preferences,from recommendations and search results to landing pages and email campaigns.AI technology offers the scale and speed to make that hap-pen.While investment may seem like a big step to take at first,AI in fashion is becoming absolutely necessary.And the gap between the businesses that adopt artificial intelligence and those that do not is only getting wider.144%The McKinsey Global Fashion Index recently found that the top 20%of fashion businesses generated 144%of the industrys profits.Thats why implementing AI is now crucial.It helps compa-nies streamline their costs and provide the kind of experi-ence that shoppers expect,allowing companies that utilize AI effectively to compete with the major players.Share of the profit made by more than 500 fashion companiesTop 20!-80%Bottom 20%-34%68%How Do Customers Interact With Artificial Intelligence?Knowing how your target audience prefers to engage with AI can help you determine how you incorporate artificial in-telligence and automation into your customer journey.To-days modern shoppers have a baseline of expectations,but different generations will embrace different levels of machine learning applications.Gen Z is already highly accepting of AI,especially personal-ization.But older generations still tend to be wary of AIs im-pact on their lives.This distrust is largely due to misconceptions about AI as a concept,and focusing on the goal of artificial intelligence can go a long way in calming a shoppers unease.At the end of the day,its all about orchestrating a more en-joyable and seamless journey for customers their satis-faction is the whole reason that AI is used in the retail envi-ronment.Again,your customers hold their shopping experiences to a high standard.No matter the generation,shoppers expect a lot from an online shopping experience:That it wont waste their timeThat they will find products they want in their sizeThat the product they want will be in stock,with a large variety to choose fromThat the experience will be personalized for themThis is exactly what AI can achieve.And thats why it is quickly transforming the way customers shop for fashion products online.How Can AI Be Used for Online Fashion Retail?As weve already explained,AI in fashion goes way be-yond ChatGPT although the prompt-and-answer tool is a game-changer that fashion brands shouldnt ignore.Whether its a big,sweeping change to your supply chain management or a pivot in your customer loyalty strategy with automated customer service software,AI can be used to optimize every corner of your business.There really is no limit to how impactful AI technologies can be for retail com-panies.Here are a few ways you can incorporate AI into your busi-ness.Using AI for Customer SegmentationSegmenting your customers into similar,targeted groups is an essential step of any marketing strategy.Using AI and machine learning models can help you identify your ideal audience and keep your customer segments as up to date as possible,ensuring your efforts are always relevant.Take My Jewellerys style profile test,for instance.This cloth-ing and jewelry retailer based in the Netherlands gamified its data collection using a decision tree-based machine learning model,offering customers a series of choices to re-fine their personalized retail experience.My Jewellerys items are shown sequentially in the style profile test,prompting the customer to make a decision on each item presented.Customers simply click either the heart or the X to choose whether or not the item being shown is appealing to them or not.After a decision on each product shown is made,My Jew-ellery is able to offer customers a personalized style pro-file filled with items that each individual customer will like based on their communicated style preferences.AI takes all the decisions they made,creates customer profiles,and connects them with the perfect items instantaneously.Its a simple concept that completely changes the retail ex-perience for its shoppers and allows My Jewellery to con-stantly continue learning about its customers changing wants and needs.Using AI To Predict Customer PurchasesThe ability to anticipate a customers willingness to pur-chase is a huge advantage for retail businesses.AI can help you identify that customer behavior with predictive analyt-ics and create actionable insights to use in your strategy.Leveraging aggregated data from all your customers,AI can be used to predict whether certain customers are showing signs of making a purchase soon.By analyzing their engagement with your brand such as the num-ber of visits to product pages,the frequency of newsletter opens,etc.artificial intelligence can learn which shoppers are likely ready to convert so you can adjust your marketing efforts accordingly.Using AI ChatbotsAI chatbots,or smart assistants,are another way that artifi-cial intelligence is used in fashion e-commerce.These chat-bots can mimic customer service agents,helping custom-ers find what they are looking for.With the ability to instantly respond to a customer query,chatbots provide an elevated level of customer service for shoppers.And when it is powered by AI,a chatbot can offer customers the same level of personalized service that an in-store employee would,recommending similar products to what they are searching for,complimentary items that theyve purchased in the past,and so on.Its a valuable and scalable method of customer service that can go a long way in building a relationship with your shoppers.What Is the Future of AI in Retail?AI will undoubtedly grow in complexity,speed,and preci-sion.It is destined to become embedded in our daily lives,creating an ever-increasing divide between businesses that utilize AI and those that dont.Especially AI in fashion,which is an industry that exists on the cutting edge.The key concept to remember is that artificial intelligence and algorithms exist to make your business strategy better.The role of AI in fashion is to save you time,deepen your un-derstanding of your industry,and improve your bottom line.And even as the applications of AI in the fashion indus-try expand,the effectiveness of your efforts always comes back to your data.With the right data,you can harness AI to achieve the level of contextual personalization that every modern business strives for reaching the right customer,in the right place,at the right time.Learn morePut Your Customer Data to Work With Our Use Case LibraryLooking to put your customer data into action with tailored use cases that drive revenue?Check out our use case library and learn how to use AI to retain your customers at a higher rate.River Island Creates Differentiated Experiences With Bloomreach Engagement25 ROIboohooMAN Sees Up to 25X ROI From CDP-Powered SMS Campaigns With BloomreachReady to Get Started?Request DemoAre you ready to take your e-commerce profitability to the next level thanks to the power of AI?Request a demo today to learn how Bloomreach Engagement can help your company foster brand loyalty and drive revenue like never before.
2023-12-22
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IntroductionAbout Luxe.COAbout Luxury Brands in China Power RankingTop 20 in China Power Ranking 2023Top 20 Brands Overall ScoreCategory Distribution of Top 10 Brands ActivitiesTop 20 New Entrants(2023 vs.2022)Brands with the Most Significant Rise(2023 vs.2022)Parent Companies of Top 20 BrandsThe Cities that Launched the Most Luxury Brand First Stores in 2023Distribution of Luxury Brand First Stores in 2023Top 11 Cities with the Most First Stores Opened in 2023Number and Distribution of New Store Openings in ChinaTop Brand Cases in Chinas Luxury MarketPrevious Power Rankings OverviewAbout Tong.Luxe.COLuxe.CO Intelligences Reports on the Luxury Goods Industry and BrandsAll Luxe.CO Intelligence research reports are currently only accessible to Luxe.CO premium members.For registered members,please scan the QR code to download the Luxe.CO app or log in to the Luxe.COwebsite at https:/luxe.co/For inquiries about custom projects and collaboration discussions,please contact:Wang Qiong|Project DIrectorLuxe.CO IntelligenceWeChat：elisatina929(Please include noteIntelligence Collaborationalong withyour name and company)Email：lciluxe.coReport Author：You JiaLayout Design：Tang QiCompletion Date：January 20241Luxe.CO Intelligence WeChatLuxe.CO APP0203050709101213141516172025575859As Luxe.CO celebrates its tenth anniversary,the“Luxury Brands in China PowerRanking”has come to the third year.Backed by our proprietary industry database and proven research capabilities,thisunique“Power Ranking produced by Luxe.CO provides a comprehensive overviewof the latest development of almost ALL major luxury brands in China market overthe past year.Based on the continuous tracking and collection of data and cases,this unique reportoffers an objective and systematic summary and analysis of the various activitiescarried out by the luxury brands;while the ranking,calculated by taking intoconsideration both the intensity and the importance of the activities,outlines a vividpicture of these brands in terms of strategic focus and level of investments in Chinaluxury market.The trends and best practices revealed in this report are not only crucial for luxurybrands but also hold significant reference value for the broader fashion value chain,including commercial real estate,high-end retailers,public relations and advertisingcompanies,as well as other Chinese and overseas brand companies.People tend to forget that China is still a young market,said the global CEO ofa luxury brand during conversation with Luxe.CO.We resonate with this sentiment:On the one hand,the youthfulness of the China market signifies vibrancy,dynamism,opportunities,and possibilities.The rapid growth of the luxury goodsindustry in China in recent years has fully validated this.On the other hand,the“youthfulness”of the China market also implies more“uncertainty.”Brand building is still in its early stages,market penetration is relativelyshallow,and the“brandpower”is yet to be firmly established.The targetdemographics are always evolving.The mindset and behavior patterns of localconsumers,especially the young ones,are constantly shifting the center ofattention,means and routes of consumption and communication IntroductionTo keep up with this“young”and“uncertain”market of such a magnitude,luxury brandscan not merely hold on to the status quo but constantly renew their efforts on differentaspects as retail expansion/upgrading,content development,communication andcustomer relations.Executives at the headquarter of luxury brands should always keep China at the top oftheir agenda,and proactively adjust their strategy and tactics in line with the ever-evolving landscape.Through continuous learning and innovation,they must work closelywith the local team to maintain and enhance the brands visibility,vitality,andrelevance in the China market.The effectiveness of these investments should not only be evaluated and judged basedon short-term sales data but also on the impacts on the“awareness,”“reputation”and“desirability”of the brands among Chinese consumers over a much longer period oftime which are critical in acquiring genuine pricing power and ensuringsustainable growth for the brand.With this latest version of the Luxury Brands in China Power Ranking 2023,you willgain a clear understanding of which luxury brands have increased investments in Chinain the challenging year of 2023 and find out where they specifically directed their efforts.Also,you will know which cities opened the most new luxury brand stores,and what bestbrand practices are worth referencing and learning from.As seen from the many CEO interviews on Luxe.CO,almost all major global luxurybrands have expressed their confidence in the future of China luxury market.Even asthe global luxury market expects a rather“mild”year of 2024,the China market will mostlikely remain busy and bustling.If you wish to explore more data,information,and research reports about the luxurygoods industry and specific brands,please visit the Luxe.CO website or app.2About Luxe.COFounded in 2013 and honed over a decade,Luxe.CO has become an iconic IP across the world of fashion and finance.It serves as theultimate destination for discerning readers seeking comprehensive business and financial information on luxury,fashion and lifestyle sectors.It is also the preferred platform for fashion and luxury business leaders to make their voices heard in China.By consistently delivering a spectrum of high-quality fashion business and financial contents over the past decade,Luxe.CO has attracted Chinas most valuable users characterized by high income,high spending,high education,and high sensibility.Over the past decade,we have diligently documented all major investments and M&A deals in the domestic and international fashion industry,offering professional interpretations and in-depth analyses by our in-house analysts.Weve engaged in conversations with a large number of global fashion and luxury executives,founders,and family heirs,capturing their valuable views and opinions.Weve been building the worlds most extensive brand database with over 5,000 brands included so far.The nearly 30,000 high-quality articles on Luxe.CO cover luxury,fashion,beauty,sports,outdoor,home,travel,and wellness sectors,with almost all major business and financial events recorded.We have the largest collection of financial reports on domestic and international fashion and luxury companies(listed and private),along with a vast array of industry research reports,including original reports produced by”LuxeCO Intelligence and carefully selected third-party reports.34About Luxury Brands in China Power RankingLuxury brands and the luxury industry have been the main focus of research and media coverage for Luxe.CO since its inception in 2013.In May 2020,we issued the first“Luxury Brand Bi-weekly Reports”；one and half year later,we produced the first Luxury Brands in China Power Ranking”for the year of 2021.The Luxury Brands in China Power Ranking report is the industrys first comprehensive and systematic summary and analysis on the activities carried out by major luxury brands in the China market regarding channel expansion and brand marketing.This report covers brand activities in ten main categories,including visual communication,brand spokespersons/ambassadors,brand collaborations,creative partnerships,cross-industry activities,retail stores and pop-up events,fashion shows in China,digital marketing and e-commerce,brand exhibitions,and others.There are a number of subtypes under each main category.For each subtype,a weighting factor is assigned to reflect its relative importance and magnitude.The power ranking for each brand is generated based on the number and type of activities carried out by the brand in the China market.Luxury Brands in China Power Ranking 2023 covers the period from January 1st to December 31st,2023,with 953 activities from 104 luxury brands recorded.(Please note:This report does not include brand activities related to beauty,skincare,and fragrance.)5The Luxury Brand China Power Rankings”encompass activities in ten main categories,with various subtypes under each category:1.Store Expansion:Global flagship store openings,nationwide flagship store openings,city flagship store openings,other new store openings,significant store renovations.2.Brand Exhibitions:Large-scale brand exhibitions,regular brand exhibitions,brand city tours.3.Fashion Shows:Offline fashion shows held in China.4.Collaborations:Collaborations with Chinese business brands,collaborations with celebrities/KOLs/top artists,collaborations with Chinese independent designers,collaborations with international IPs,collaborations with local IPs.5.Sponsorship:Sponsorships for public welfare,cross-industry sports,cross-industry music,sponsorship of cultural and artistic events.6.Creative Partnerships:Collaborations with local artists/creative individuals.7.Brand Spokespersons/Ambassadors/Friends:Appointments of Chinese brand spokespersons,appointments of Chinese brand ambassadors,appointments of brand friends.8.Visual Communication:Publication of books/films.9.Digital Marketing and E-commerce:Online stores,interactive experiences,podcasts.10.Other Brand Activities:Customization,art installations,pop-up shops,experiential spaces.The scoring for the Power Ranking is calculated based on data collected by Luxe.CO on the marketing activities and channel expansion efforts of major luxury brands in the China market in 2023.Different weighting factors are assigned to different subtypes of brand activities based on their importance and magnitude.For example,the weight for a grand exhibition is higher than a regular exhibition,and the weight for a nationwide first store opening is higher than that of a citys first store opening,with first stores in first-tier cities carrying higher weight than those in second-tier cities,and so on.(*Please note:This report does not include brand activities related to beauty,skincare,and fragrance.)6789Top 20 Brands Overall ScoreRankBrandScore1Louis Vuitton1822Dior1103Gucci974Versace715Prada676Celine657Valentino647Herms 648Max Mara619Cartier609Maison Margiela6010Burberry5810Breitling5810Marni5811Tiffany&Co.55RankBrandScore12Qeelin5413BVLGARI5113Loewe5114Fendi4715Chopard4616Vacheron Constantin4517De Beers Jewellers4417Van Cleef&Arpels4418Blancpain4318Bottega Veneta4318Chlo4318CHAUMET4318Chanel4319Jil Sander4020Longines37Category Distribution of Top 10 Brands ActivitiesTOP 1TOP 4TOP 2TOP 3TOP 5TOP 610No.of Activities:63No.of Activities:24No.of Activities:31No.of Activities:19No.of Activities:34No.of Activities:25Brand ambassadorCollaborationOther ActivitiesSponsorshipStoreFashion showDigitalizationExhibitionBrand ambassadorOther ActivitiesSponsorshipStoreFashion showExhibitionBrand ambassadorOther ActivitiesStoreDigitalizationExhibitionBrand ambassadorStore,20Digitalization,2Brand ambassadorOther ActivitiesSponsorshipStoreDigitalizationExhibitionStoreCategory Distribution of Top 10 Brands ActivitiesTOP 7（Tied for 7th）TOP 7TOP 8（Tied for 9th）TOP 9（Tied for 9th）TOP 9（Tied for 10th）TOP 10（Tied for 10th）TOP 10（Tied for 10th）TOP 1011No.of Activities:21No.of Activities:17No.of Activities:19No.of Activities:15No.of Activities:22No.of Activities:15No.of Activities:13No.of Activities:18（Tied for 7th）Brand ambassadorCollaborationOther ActivitiesSponsorshipStoreDigitalizationCollaborationsOther ActivitiesStoreExhibitionOther ActivitiesStoreExhibitionBrand ambassadorOther ActivitiesStoreDigitalizationOther ActivitiesCollaborationStoreBrand ambassadorCollaborationStoreOther ActivitiesCollaborationStoreSponsorshipStoreExhibitionTop 20 New Entrants（2023 vs 2022）TOP 4TOP 10TOP 15TOP 18TOP 18TOP 18TOP 18TOP 19TOP 201236342222191817161415Brands with the Most Significant Rise(2023 vs.2022)NO.4NO.10NO.25NO.20NO.25NO.30NO.24NO.15NO.32NO.2713Parent Companies of Top 20 BrandsRanked by the number of brands from each group and sorted alphabetically within each group.14In 2023,a total of 277 new stores were opened,with 62 luxury brandslaunching112of these as their first stores or first stores in specific cities.This indicates a prevailing trend among luxury brands to expand into non-first-tier cities.The top 11 cities with the highest number of luxury brand first stores opened in 2023 are:The Cities that Launched the Most Luxury Brand First Stores in 202315CityNo.of Stores OpenedLanzhou13Shenzhen12Zhengzhou11Hefei7Sanya6Jinan6Fuzhou5Nanchang5Qingdao5Changsha5Nanjing5CityNo.of Stores OpenedHangzhou4Dalian4Kunming3China3Ningbo3Chengdu2Shijiazhuang2Macau11Haikou1CityNo.of Stores OpenedBeijing1Guangzhou1World1Chongqing1Shenyang1Nanning1Suzhou1Taiyuan1Changzhou1Distribution of Luxury Brand First Stores in 202316Shenzhen12Blancpain-first directly managed storeCanada GooseGraffShenzhen Bay MixcCanaliDamianiGucci watch&jewelleryLa Perla MulberryPomellatoRen CaovillaRalph Lauren-The World of Ralph LaurenShenzhen MixcMarni Marni Market Shenzhen Mixc WorldLanzhou13BlancpainBreitlingCartierErmenegildo ZegnaGlashtte Original IWCOmegaPaneraiQeelinRolexTAG HeuerTodsVersace Lanzhou MixcTop 11 Cities with the Most First Stores Opened(2023)Zhengzhou11BlancpainBreitlingBreguetCHAUMETChanelDiorFredGlashtte Original LongchampUlysse NardinVan Cleef&Arpels Zhengzhou DennisDavid CityHefei7BalmainBottega VenetaCurielCHAUMETChristian LouboutinEtroLoeweHefei Yintai Centre17Sanya6BuccellatiCeline DiorFredLouis Vuitton Loro PianaSanya Haitang Bay cdfMall IIFuzhou5Bottega VenetaBVLGARICartierCelineVan Cleef&ArpelsFuzhou MixcNanchang5BalmainBurberryChloEtroJimmy ChooWuchang WushangMallQingdao5CelineDiorFendiRalph LaurenVan Cleef&ArpelsQingdao HinsensePalazaChangsha5ChloChristian LouboutinDunhillHublotMaison MargielaChangsha IFSJinan6BalenciagaBreitlingChopardLongchampTAG HeuerThom BrowneJinan MixcNanjing5BalmainBreguetChloHarry WinstonJil SanderNanjing Deji PalazaTop 11 Cities with the Most First Stores Opened in 202318Luxury Brands in China Opened 4 First Stores,in China and Globally in 2023Dior has opened its first China caf,CAF DIOR,in Taikoo Li,Shanghais Xintiandi district.Canali has opened the worlds first Caff CANALI in Beijings Financial Street Shopping Center.FENDI has opened its third global and first Chinese flagship FENDI Casa home store at 1788 Plaza on Nanjing West Road in Shanghai.H.Moser&Cie.has opened its first mainland China boutique on Nanjing West Road in Shanghai.19Number and Distribution of New Store Openings in ChinaCompared to 2022,the number of physical stores opened by luxury brands in China has increased by 45%year-on-year.Looking at the distribution of new store openings across cities,luxury brands are continuing their expansions into lower-tier cities.Its worth noting that over the past three years,the number of new luxury brand stores in non-first-tier cities has been increasing year by year.In 2023,74%of store locations were in non-first-tier cities,and the number of stores increased by 68%compared to 2022.New Store Openings by Luxury BrandsNew Store Openings inFirst-Tier CitiesNew Store Openings inNote:First-tier cities refer to Beijing,Shanghai,Guangzhou,Shenzhen,Hong Kong,Taibei,and Macau.202131912772021年2022年2023年9469722021年2022年2023年1191222052021年2022年2023年Which Luxury Brands Opened More Stores in 2023?BrandNo.of Stores OpenedMaison Margiela 9Chlo 9Qeelin 8Marni 8Breitling 7Chopard 6Jil Sander 6Longines 6TAG Heuer 6Celine 6Balmain 5BrandNo.of Stores OpenedCartier 5Christian Louboutin 5Ermenegildo Zegna5Glashtte Original 5Gucci 5Louis Vuitton 5Max Mara 5Omega5Rolex 5Versace 5Blancpain4Bottega Veneta 4BrandNo.of Stores OpenedBoucheron 4Burberry 4Canada Goose 4CHAUMET 4Etro 4Fendi 4Dior 4Loro Piana4Additionally,10 brands opened 3 new stores.27 brands opened 2 new stores.27 brands opened 1 new store.Detailed information is not provided in this table.21Cities With the Most New Store Openings in 202322City Ranking Changes in the Number of New Store Openings(2023 vs.2022)RankCityNo.of Stores OpenedCity Rankings Changes1Chengdu43Increased 12Shenzhen23Increased 13Beijing18Increased 24Lanzhou16Newly Ranked4Shanghai16Decreased 35Hangzhou14Increased 46Zhengzhou13Increased 27Fuzhou11Newly Ranked7Jinan11Newly Ranked7Nanjing11Decreased 28Changsha9Newly Ranked8Sanya9Decreased 49Dalian8Newly Ranked9Haikou8Decreased 310Hefei7Newly Ranked23Overview of the Number of New Store Openings and Their Distribution in Cities in 2023CityNo.of Stores OpenedChengdu43Shenzhen23Beijing18Lanzhou16Shanghai16Hangzhou14Zhengzhou13Fuzhou11Jinan11Nanjing11Changsha9Sanya9CityNo.of Stores OpenedHaikou8Dalian8Hefei7Hongkong6Guangzhou 6Nanchang5Qingdao5Wuhan5Chongqing5Ningbo4Suzhou4Kunming3CityNo.of Stores OpenedMacau2Changzhou2Nanning2Shenyang2Shijiazhuang2Tianjin2Xiamen1Taipei1Taiyuan1Xian1Changchun12425While compiling the annual Power Ranking,Luxe.CO Intelligence hand-picked 15 top cases from the 953 luxury brand activities in 2023.These cases represent the best practices of luxury brands marketing efforts in China over the past year.For each case,we have highlighted the most important learning points and key trends reflected.These cases are significant marks left by luxury brands as they deepen their presence in the China market，which are expected to have lasting effects on connecting with local consumers and enhancing brand power.Through the many interesting details,we could see the level of marketing investment of the brands in China and the capability of the brands team in terms of planning,execution,and innovation.We hope the following top cases will provide new clues,inspirations and stimulations to our readers in their own effort to build and upgrade their brands in luxury and many other different sectors.*Note:The top cases are listed in alphabetical order of the brands English names.26Case OverviewThe 6th Blancpain-Imaginist Literary Prize ceremonywas held in Beijing.This award was jointly initiated bythe Swiss luxury watch brand Blancpain and theChinese publishing brand Imaginist in 2018.It aims todiscover and encourage outstanding young writersunder the age of 45 in the field of Chinese-languageliterature.The theme of this literature award was Stand up forComplexity,withmorethanseventyworksincontention.After a rigorous selection process,youngwriter Yang Zhihan won the top award of this literatureaward with his work A Solid Block of Ice.27Luxe.CO InsightsOver the course of six years,Swiss luxury watchmaker Blancpain has built a literary award from scratch in China,investing time and resources to develop it into a new and independent intellectual property.Liao Xinjia,Vice President of Blancpain China,introduced the award at the ceremony.We are the only award that targets young authors under 45 and accepts various novel genres.We often see luxury brands choosing to build their image through means such as storytelling in movies,event sponsorship,and support for the arts.However,when a brand ventures into image building beyond its home market,especially when it involves a project distinct from its daily marketing efforts that requires a significant budget and effort,it becomes a rigorous test for the brand.The brands initial motivation is crucial when deciding what to do and how to do it.Moreover,it is even more challenging to stay committed to the initial intention and continue to invest in it once the decision is made.Liao Xinjia explained the initial intention of the Blancpain-Imaginist Literary Prize:First,we want to create a fresh,clean,and innovative award that conveys a sense of fairness,authority,and professionalism.Second,we want to shine a spotlight on talented young authors.We hope this literary award can last for 5 years,10 years,20 years.Although the award has faced challenges in recent years,Blancpain has connected watchmaking and literature through time,and has deeply engaged with the younger generation and consumers who appreciate the humanities.This has allowed Blancpain to achieve a more comprehensive brand communication approach.28Case OverviewCanada Gooses flagship store in Sanlitun Taikoo Li,Beijing,has reopened with a fresh new look.This storemarks the brands first entry into the mainland Chinamarket and has now expanded to become CanadaGooses largest global flagship store.Thenewflagshipstoreislocatedinatwo-storystandalone building and showcases a wide range ofseasonal apparel,classic heritage products,and a richcollection of designer collaborations.The highlight of thestoreistheexperientialaspect,featuringalow-temperaturechamberthatsimulatesicyandsnowyconditions,allowing consumers to firsthand experiencethe superior performance of the products.29In 2023,Canada Goose marked its fifth year in the Chinese market by opening new stores in cities such as Chongqing,Hangzhou,and Shenzhen.This expansion also marked its entry into the South China region with a new store in Shenzhen.With nearly 30 stores in China,the brand now boasts the largest directly operated store network globally.As the brand ventures into broader markets,a crucial consideration is how to maintain its unique identity while being embraced by a diverse range of communities.This is a key factor in breaking through performance ceilings for the brand.The brands journey in the Chinese market began with its first store in Sanlitun Taikoo Li,Beijing,which has now expanded into the worlds largest flagship store.The new flagship store is located in a two-story standalone building inspired by the scenic landscapes of Canadas northern wilderness.Inside,it showcases a rich array of seasonal apparel,from lightweight down jackets,rainwear,and clothing to a footwear collection.Moreover,the store features art installations and includes a low-temperature chamber that simulates icy and snowy environments.This immersive experience covers multiple dimensions,including visuals,sound,and temperature,providing consumers with a firsthand experience of Canada Gooses outdoor heritage,product performance,and lifestyle.Through these stores,consumers can deeply connect with Canada Gooses brand identity and the evolving aspects of the brand,serving as a bridge for communication with Chinese consumers.30Luxe.CO InsightsCase OverviewCartierheldaleopard-themedexhibitionattheGuangzhouPostalMuseum.Thisthemedexhibitionfeatured various spaces,including the Panthere Salon,Time Corridor,Jeanne Toussaint Studio,Tunnel Roomand Style Space,Master Workshop,Perfume SensorySpace,Panthere Fashion Hall,Panthere VocabularyIndex,Library,and Tea Room.These spaces showcasedthe origins and evolution of the leopard style over morethan a century,guiding visitors to explore the enduringlegend of style through multisensory interactions,multipleperspectives,andimmersiveexperienceswhileexperiencing a modern interpretation of the leopard spirit.31In the Guangzhou Postal Museum,a century-old historic building by the Pearl River in Guangzhou,Cartier showcased the origins and evolution of the leopard style over more than a century.Through multisensory interactions,multiple perspectives,and immersive experiences,the brand embedded the iconic image of the leopard,representing the brand and its founder,in the minds of visitors.As Chinese consumers become more familiar with luxury brand names and logos,brands are exploring ways to further refine and visualize their brand identity.While some brands emphasize and magnify certain classic/new product lines,patterns,or geometric symbols,Cartier chose to amplify the iconic IP animal image that best represents the brand and differentiates it from other brandsthe leopard.This choice serves as an effective medium for the brand to continue deepening its presence in the Chinese market,solidifying consumer awareness,and fostering meaningful communication and dialogue.32Luxe.CO InsightsCase OverviewFollowing the release of the 2023/24 early spring resortcollection fashion show in Los Angeles in May 2023,Chanel brought the runway to the Shenzhen Bay SportsCenter to present the early spring resort show once again.French visual artist Andr created the invitation and visualart posters for the event,inspired by the streets ofShenzhen.Duringtheevent,Chanelengagedtheaudiencethroughvariousthemedforumsandfilmscreenings,providing an immersive experience of thebrands core values.33The 2023/2024 early spring resort collection fashion show held in Shenzhen was avibrant celebration lasting for three days.It featured a variety of activities such aslectures,film screenings,night markets,and music performances.Throughoutthese events,one could observe the integration of local culture in various details,reflecting the brands strong desire to connect with its target audience.This seriesof event arrangements likely solidified the desire of Chanels high-end clientele forthe brand.In fact,since May 2022,Chanel revealed plans to open more independentboutique stores(Salons Privs)catering exclusively to top-tier clients.Thisinitiative began in early 2023,with Asia being one of the first pilot regions.InOctober 2023,Chanel opened an exclusive salon store in Shenzhens MixC Mall.In the global luxury market,Chanels ability to control pricing is significant,andone of the key factors behind this is the balance in the brands relationship with itscustomers and the long-term maintenance of emotional connections.TheShenzhen fashion show,in terms of its scale,duration,guest list,on-siteatmosphere,and event details,provides valuable insights and serves as areference for the industry.34Luxe.CO InsightsCase OverviewDiors newly renovated flagship store at Shanghais Plaza66hasopeneditsdoors.Thebrand-newexterior,designed by Kengo Kuma and Associates,features apleated design reminiscent of high-end tailored gowns,paying homage to the craftsmanship.The interior spacespans four floors and includes ready-to-wear fashion,accessories,jewellery,watches,and fine art pieces for aluxurious shopping experience.35In the past,top luxury brands,including Dior,were pioneers in expanding their presence in the Chinese market.Today,the question all luxury brands face is the level of commitment and pace at which they should invest in the Chinese market.In China,Dior continues to expand into lower-tier cities while deepening its presence in super cities like Shanghai.The recent reopening of the flagship store in Shanghais Plaza 66 is a prime example of this commitment.The revamped store,in terms of size,design details,and product categories,bears resemblance to Diors flagship on 30 Montaigne Avenue.In the Chinese market,enhancing the loyalty and brand affinity of local VIP customers(VIC)has become one of the most critical tasks for luxury brands.In this four-story,1,700-square-meter flagship store,there are multiple VIP lounges.Such VIP spaces are a significant consideration in the ongoing upgrades of luxury brand stores.They aim to maintain the loyalty of VIC customers through more private,dedicated spaces and one-on-one services.36Luxe.CO InsightsCase OverviewHerms hosted a petit h exhibition at its Beijing GuomaoShopping Mall flagship store,showcasing creative workscrafted by the Petit h Creative Workshop.Petit h CreativeDirector,Godefroy de Virieu,also graced the event inperson.TheexhibitionspacewascreatedbytheChinesearchitecture firm CATS,using reeds and clay to constructa poetic environment.The products on display included agiantpandalandscapetrinketbox,dragon-shapedbookshelves,bear-shaped shelves and benches,bentoboxes,and more.37Luxury brands often use high-quality materials from top suppliers worldwide,but inevitably,there is waste in the form of scraps and leftovers during the production process.In 2010,Herms established the Petit H Concept Lab to develop and create new clothing,accessories,and more using leftover materials or scraps from other Herms departments.Currently,Petit H meets consumers through limited-time exhibitions held globally,selecting only two cities per year.These exhibitions feature unconventional store spaces and offer the exhibited items for sale.During the Beijing exhibition,Creative Director Godefroy de Virieu visited the China World Mall flagship store and introduced the creative philosophy behind Petit H and the stories behind the various creative products.Unlike the traditional product design process from themes to design boards,Petit H employs a reverse creative approach.Starting from the leftover materials,designers imagine what they could become and create products accordingly.Thus,at this Petit H exhibition,you could see unique and one-of-a-kind creative works such as a guitar made from saddle leather,a hammock made from scarves,a diamond-shaped scarf made from ties,a coffee table made from plate shards,as well as items like band-aids,bookends,music boxes,and jewelry,all of which were quickly snapped up by eager buyers.By using creative design to embody sustainability,Herms redefines luxury,allowing more consumers to encounter,understand,and be willing to pay for sustainable products.38Luxe.CO InsightsCase OverviewAs the 2023 Valentines Day approaches,Louis Vuittonhas launched a new feature in its brand mini-programcalled the Art of Gifting Guide in anticipation of theromantic occasion.Tailored to meet various gifting needs and different giftingscenarios,itincludescategoriessuchasElegantlyPlayful,Heartfelt Accessories,Fragrant Innovations,Housewarming Joy,Travel Inspirations,and JoyfulCollaborations.For instance,the Housewarming Joycategory is specifically designed for gift-giving duringhousewarmingoccasionsandcoversproductslikecarpets,storageboxes,tableware,vases,cocktailshakers,and more.The Joyful Collaborations sectionfeatures items such as golf bags,headphones,notebooks,makingitparticularlysuitableforcorporategifting.Meanwhile,Elegantly Playful and Travel Inspirationsare targeted towards individuals who have a passion forsportsandtravellifestyles,respectively.HeartfeltAccessoriesandFragrantInnovationsaremoresuitable for female gift-giving or self-indulgence.39Although the local digital infrastructure and e-commerce platforms in the market have matured significantly,it is believed that for the majority of consumers,purchasing luxury goods in offline stores remains the mainstream choice.Online luxury shopping is still a relatively new and somewhat hesitant experience for most.However,on social media platforms,we have noticed an increasing number of people voluntarily sharing their buying experiences on the Louis Vuitton mini-program.These shared experiences are overwhelmingly positive and often come with a sense of pleasant surprise.When giving gifts,people always have expectations,and such purchase/unboxing experiences are more likely to encourage users to share them on social media.In the brands official WeChat mini-program,you can see that features related to gift-giving are prominently placed.For example,on the mini-programs home page,the Art of Gifting section is given a prime spot in the bottom navigation bar.In the left-side drop-down menu for sorting categories,Gift Selection takes the top position,followed by New Collections,Handbags,and other product categories.Louis Vuitton leverages the needs of the gift-giving audience and the development of the WeChat mini-program to effectively promote lifestyle and fashion accessory products.They also provide complementary gift services,iconic gift boxes,as well as text and voice gift cards,enhancing the overall user experience.40Luxe.CO InsightsCase OverviewLouis Vuitton has opened a flagship store in SanyaInternational Duty-Free City Phase II,located on YunjieIsland in Haitang Bay.The store spans two floors andoffers a comprehensive range of the brands products,including womens and mens clothing,leather goods,travel items,accessories,footwear,watches,high-endjewelry,fragrances,and lifestyle art collections.41Among Louis Vuittons store locations in the Chinese market,this boutique in Sanya holds a unique position.It not only marks Louis Vuittons first boutique in Hainan but also signifies a significant milestone in the brands presence in the Chinese tourism retail industry.For a long time,top-tier luxury brands have been cautious about the duty-free channel,but they have not ignored the potential of the Hainan market.Louis Vuittons entry into Hainan in a taxable format makes it a pioneer among top luxury brands opening stores in Hainan.The establishment of this boutique also represents a major breakthrough in the Hainan luxury goods market.Historically,Hainans high-end retail market has primarily focused on categories such as high-end cosmetics,jewellry,and watches,with only a few luxury brands presenting their stores in a full product range boutique format.Jean-Jacques Guiony,the Chief Financial Officer of Louis Vuittons parent company LVMH Group,stated in October last year,Hainan is an important market to consider.He also revealed that all brands within the group are contemplating opening stores in Hainan in specific ways.Following Louis Vuitton,brands under the LVMH Group such as Dior and Celine have also opened boutique stores in Sanya.42Luxe.CO InsightsCase OverviewTo celebrate the 10th anniversary of the Teddy Bearcoat,Max Mara has opened a creative plush-themedhome space called the MaxMara Fluffy Residence atthe IFS Guji Plaza in Chengdu,China.This marks thefirst stop in the global tour of this space,which featuresthe brands iconic camel-colored decor and every itemwithin the space is wrapped in Teddy bear fabric.43Pop-up stores have indeed become a conventional way for luxury brands to shape their brand image and continuously generate freshness.However,brands need to constantly refresh their pop-up experiments to leave a deeper impression on consumers.Max Maras Fluffy Residence global tour exhibition shares many similarities with pop-up stores in form and provides a new approach for luxury brand pop-upexperiences.Built around the iconic brand image of the Teddy bear,this space created by Max Mara can be seen as both an urban womans retreat and an immersive themed playground.The brand establishes a deep emotional connection with consumers through sensory experiences such as visuals.Furthermore,the choice of Chengdu as the first stop for the global tour exhibition indicates Max Maras desire to reach a broader target audience by radiating from this southwestern metropolis.This aligns with the current trend where many luxury brands,while deepening their presence in tier-one cities,gradually expand into the wider Chinese market.They achieve this through channel expansion and a more diverse range of offline activities,fostering deeper engagement with local young consumers.44Luxe.CO InsightsCase OverviewMulberry has held the British Craftsmanship,SalutingSustainabilitytouringlimited-timeexhibitioninShenzhen,Beijing,Shanghai,and Nanjing.This alsomarks the official launch of The Mulberry Exchangecustomization project in China,allowing consumers topersonalize their bags with their preferred colors andletters.Additionally,craftsmenfromthebrandsSomersetfactory were present at the limited-time exhibition toshowcase the bag-making process and personalizeBayswater handbags for consumers,creating a uniqueand engaging experience for customers.45With the increasing focus on sustainable lifestyles,more and more young consumers are becoming open to and enthusiastic about trading in second-hand products.In 2020,Mulberry initiated an innovative product recycling program called the Mulberry Exchange service and introduced it to China in 2023.Through The Mulberry Exchange,consumers can resell the brands handbags.They simply need to use their smartphones to tap the NFC label on the bag,which directly takes them to a product information page,providing details on product certification,maintenance,resale,and more.Mulberry plans to implement digital ID management for all its products by 2025.Compared to buying new products,extending the lifespan of products can significantly reduce carbon footprints and waste issues.Luxury brands often use the highest quality materials,which retain excellent performance and quality even at the end of a products life.By introducing the Mulberry Exchange service in China,the brand not only establishes direct and ongoing connections with Chinese consumers but also integrates its sustainable philosophy into the daily lives of Chinese consumers.This also provides more opportunities to avoid product waste and extend product lifespans.46Luxe.CO InsightsCase OverviewPrada is hosting the Pradasphere II exhibition at theShanghai Star Art Museum.This Shanghai stop marksthe global premiere of the exhibition,curated personallyby Miuccia Prada and co-creative director Raf Simons.The exhibition showcases nearly 200 fashion ensembles,some of which are being publicly displayed for the firsttime in 30 years.In total,it features over 400 exhibits,encompassing Pradas collaborations in art,architecture,culture,sports,and more.It provides Chinese audienceswith a comprehensive glimpse into the brands richhistory spanning 110 years.47In the Q2 2023 earnings conference call held in July,Prada Group CEO Andrea Guerrastated,If we talk about another opportunity for Prada,it is definitely in Asia,especiallyChina.Prada Brand CEO Gianfranco DAttis also mentioned that they visit Chinaapproximately every two months.The Pradasphere II exhibition,which brings togetheralmost all the key figures of this luxury brand,is a testament to their focus on China.The exhibition is hosted at the Shanghai Star Art Museum,which was formerly the RihuiPort Goods Warehouse,Chinas first intermodal rail-sea transshipment platform.It hadserved as both a freight and passenger train station.Even after its transformation into an artmuseum,the exhibition space is designed based on the prototype of the warehouse,resembling an industrial warehouse and a train station platform.It preserves a section ofrailway tracks,a Longmen crane along the river,a locomotive,and several green passengercars.This design reflects Pradas deep connection to Chinese local culture in the curationprocess.The exhibition covers Pradas collaborations in various fields,including art,architecture,culture,sports,and more,showcasing the brands most significant works and collectionsfrom its 110-year history to Chinese audiences.In this exhibition,Prada has collaboratedextensively with Weibo,integrating users visual and cultural experiences online.They havealso actively partnered with fashion-related IPs on Weibo and influencers in various fields tocreate distinctive content suitable for online dissemination.Within a week of the exhibition opening,Weibo hashtags#prada上海大展#and#prada仓库故事#accumulated over 1.16 billion reads and more than 2.25 million discussions.OnDouyin(TikTok),#PradasphereII had 16.25 million views,and on Xiaohongshu(Little RedBook),#Prada 仓库故事 had 930,000 views.48Luxe.CO InsightsCase OverviewPrada Group,in collaboration with the Intergovernmental Oceanographic Commission of UNESCO(IOC/UNESCO),has launched its educational project SEA BEYOND along with the touring exhibition Ocean&Climate Village in China,commencing with an exhibition in Qingdao.The exhibition is situated on the 81st and 82nd floors of the Qingdao Haitian Centre Complex and encompasses five key thematic areas:The ocean planet,A changing climate,Focus:China case study,Marine biodiversity and eco-systems,and Solutions for the ocean we want.49Pradas Ocean&Climate Village touring exhibition,as its first stop in China,chose thecoastal city of Qingdao rather than a major metropolitan city like Beijing or Shanghai.The decision to host the exhibition in Qingdao offers a unique perspective,as it allowsvisitors on the 81st and 82nd floors of the Haitian Center Complex to overlook thebreathtaking beauty of the Fushan Bay area.This location naturally creates anenvironmentally themed exhibition space that blends seamlessly with the coastalenvironment.While the industrys primary focus often revolves around cultivating environmentalawareness among consumers,Prada Group has shifted its focus towards the more long-term goal of educating the next generation.This exhibition is specially designed for the younger generation,particularly primary andsecondary school students,vividly illustrating how the ocean impacts climate,nature,and the environment.It sheds light on the challenges the ocean is currently facing andanswers the question of why we should care about and protect the ocean.In addition to the exhibition itself,Prada Group has incorporated interactive workshopsfor children as part of the event.Although the exhibitions initial intent was to target children and teenagers,in reality,itattracted a significant number of local residents in Qingdao,with over 5,000 attendees injust two days.Thanks to centuries of nourishment from the ocean,Qingdao has developed a uniquemaritime city culture.The people living in this region have formed a distinctive human-land relationship with the sea.When the exhibition landed in Qingdao,it resonatedwidely with the local audience,creating a strong connection with the unique maritimeculture of the city.50Luxe.CO InsightsCase OverviewQeelinishostingtheQeelinMiracleGardeninShanghai,showcasing a collection of jewelry piecesinspired by their iconic Wulu series,including Wulu Fairy,Wulu Garden,and WuluWulu.This event marks thebrands first major event held in China in recent years,with the presence of Qeelins global CEO,creativedirectorDennisChan,theheadquartersteam,andseveral brand VIPs in attendance.51Among the many international luxury jewelry brands,Qeelin stands out as aunique presence with a distinct blend of Chinese heritage and a fusion of Easternand Western concepts.In recent years,the brand has experienced rapid growthand remarkable achievements in the Chinese market.Qeelins visibility in the Chinese market has significantly increased over the pastfew years.The Qeelin Miracle Garden is one of the brands larger-scale eventsin recent years.Not only did the event witness the presence of the brands globalCEO and creative director,Dennis Chan,along with the headquarters team,but italso attracted several celebrities and brand ambassadors.Through this exhibitionthat blends Eastern symbolism and modern sensibilities,Qeelin provided VIPcustomers with an intimate and immersive experience,conveying the brandsunique positioning.VIC(Very Important Customer)clients are willing to pay for exceptional service,and the brands story and history hold a strong appeal for them.A carefullyplanned offline event by a luxury brand is a significant opportunity to expressbrand culture.It plays a crucial role in enhancing brand image and maintainingrelationships with VIC customers.52Luxe.CO InsightsCase OverviewIn 2023,Vacheron Constantin held the LessEntialnational tour exhibitions in various locations,includingDavid Plaza in Zhengzhou,the China Jinmao Tower inShanghai,WuxisCenter66,BeijingWFCentral,Hangzhou MixC,and Wuhans Heartland 66.Through fourmainexhibitionareas,namely,InspiringElegance,Timeless Corridor,Simplicity in Craftsmanship,andMasters Workshop,the brand showcased a variety ofexquisite wristwatch masterpieces.53How to convey the brands historical heritage to a broader audience of Chinese consumers is a question that every luxury brand contemplates,especially an important topic that wristwatch brands should think about and put into practice.As Chinese consumers show increasing interest in wristwatches and jewellry,its crucial for brands to influence the consumers mindset beyond just the investment and hedging value of their products.Vacheron Constantin has expanded its offline communication with consumers through a wider range of cities and more extensive touring exhibitions.Through each wristwatch,consumers see not only a timepiece but also a more complete and vivid interpretation of the brands nearly 270 years of historical culture and craftsmanship.Compared to the brands permanent exhibitions in first-tier cities,VacheronConstantin has taken this touring exhibition to cities such as Zhengzhou,Wuxi,Hangzhou,and Wuhan,deepening brand awareness among a broader range of Chinese consumers.Furthermore,Vacheron Constantin has introduced WeChat Mini Programs and Little Red Book Mini Programs for this touring exhibition,aiming to guide users through virtual panoramic tours,gamified interactions,and store reservation services.This approach encourages user engagement and secondary sharing,ultimately driving traffic to the offline events.54Luxe.CO InsightsCase OverviewIn 2023,Van Cleef&Arpels unveiled its limited-timeexperiencespace,PoetryofTime,attheBeijingNational Stadium(Secondary Venue).Cantered aroundits watch collections,it engaged in a poetic dialogue withthe Chinese audience.This marked the second stop forthis watch experience space in China,following its debutin Shanghai.Furthermore,Van Cleef&Arpels conducted its inaugurallive broadcast on Tmalls official flagship store,allowingconsumers to experience the Poetry of Time limited-timeexperience space through the live stream and appreciateseveral of the brands watch masterpieces online.55In the highly competitive wristwatch market where homogeneity is prevalent,how brands craft narratives that resonate with consumers and convey meaningful value is a critical challenge.Traditionally,time on wristwatches may be represented by complex movements and three hands on the dial.However,in Van Cleef&Arpels miniature dials,time becomes lovers embracing kisses,the swaying of a ballet dancers skirt.This unique horological philosophy is what makes Van Cleef&Arpels watch narratives particularly touching to the brands female customers.To address this,the brand chose to present its watch exhibition in the form of an immersive experience space,a poetic narrative approach not commonly seen among traditional watch brands.Moreover,this exhibition was open to the public,and the offline space served as an important way for Van Cleef&Arpels to connect with the younger generation,even if they are not yet brand customers.Its worth noting that Van Cleef&Arpels conducted its global-first live broadcast on Tmalls official flagship store,lasting approximately 80 minutes.During this broadcast,the brands Asia-Pacific President and China Region Managing Director personally narrated the brands philosophy and led online viewers through the entire limited-time experience space.This broadcast focused solely on storytelling without direct sales,and it garnered 57,000 likes,demonstrating the success of this unique approach.56Luxe.CO InsightsPrevious Power Rankings Overview57China Luxury Brands Power Ranking2022China Luxury Brands Power Ranking2021China Luxury Brands Power Ranking 2023 H1Launched on Luxe.CO website and app in early summer 2022,Tong.Luxe.CO is an innovative digital service that tracks daily activities of fashion brands with all-encompassing coverage for China market and selective coverage for overseas market.The activities covered include product launch,store opening,marketing events,as well as personnel change,financial reporting and other major corporate initiatives.Through Tong.Luxe.CO,you could find over 2000 entries on average each month about more than 1000 brands in luxury,fashion,beauty,sports and outdoor,all tagged carefully to facilitate multi-dimensional analysis for further research.About Tong.Luxe.CO5859Luxe.CO Intelligences Reports on the Luxury Goods Industry and BrandsLuxe.CO Intelligences Reports on the Luxury Goods Industry and Brands60All Luxe.CO Intelligence research reports are currently only accessible to Luxe.CO premium members.For registered members,please scan the QR code to download the Luxe.CO app or log in to the Luxe.COwebsite at https:/luxe.co/Luxe.CO Intelligence has been deeply involved in the fields of fashionand luxury for an extended period.Utilizing our continuously developedindustry networks,data intelligence,and knowledge systems,we arecommitted to providing professional,innovative,and forward-lookingconsulting services to brands and enterprises in China and abroad.The areas we cover include brand revitalization and upgrade strategies,brandcontentandcommunicationstrategies,nicheindustrypositioning and opportunity analysis,as well as entry strategies intothe Chinese market.WeregularlyreleaseseveraloriginalresearchreportsthroughLuxe.CO Intelligence each month and periodically host industrylectures and forums.If you have any collaboration inquiries related tothese domains,please do not hesitate to get in touch with us.About Luxe.CO IntelligenceDisclaimerThe information in this report is considered reliable,but the companymakesnocommitmentsregardingitsaccuracy,reliability,orcompleteness.The data,opinions,and speculations in this reportreflect judgments at the time of its initial publication and may besubject to adjustments without prior notice.The report aims to beindependent,objective,and impartial,and its conclusions are notinfluenced or commissioned by any third party.This report is provided solely as general information and is intended forreference purposes only.It does not constitute any final investment,legal,accounting,or tax advice,nor does it constitute an offer orpromotional material for any securities or financial products.The textual copyright of this report belongs to the company,and allimage copyrights belong to the respective brands.Without prior writtenauthorization from the company,no one may publish or reproduce thisreport in any form.If quoted or published,it must be attributed toLuxe.CO Intelligence,and the report may not be edited or modified ina manner that contradicts its original intent.Scan the QR code to download the Luxe.CO app Connecting global fashion innovation Empowering growth of Chinese brands
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www.smartproteinproject.euThis project has received funding from the European Unions Horizon 2020 research and innovation programme under grant agreement No 862957.Evolving appetites:an in-depth look at European attitudes towards plant-based eatingNovember 2023A follow-up to the 2021 survey report What Consumers WantExecutive summary 3Introduction 5Survey methodology 6Looking back at the 2021 results 7Chapter I:Exploring meat reduction and its motivations 8Chapter II:Exploring the transition towards a plant-based lifestyle 19Chapter III:Understanding consumption behaviours:Plant-based food perspectives 24Chapter IV:Market opportunities for plant-based alternatives 32Chapter V:Social medias influence on European attitudes and purchase behavioursr 48Chapter VI:European opinion on food policy actions 51Chapter VII:Conclusions and final recommendations 53Key recommendations for the future 56Imprint 59Content1 Definitionusedinsurvey:meat(e.g.beef,pork,chicken).2 Definitionusedinsurvey:Isometimeseatmeat,butIamtryingtoreducemymeatconsumptionandoftenchoose plant-basedfoodsinstead.3 Definitionusedinsurvey:Legumesaresourcesofplant-basedprotein,andincludelentils,beans,soya,and chickpeas(dried,canned,frozen).4 Definitionusedinsurvey:Plant-basedfoodalternativesareproductsmadesolelyfromplant-basedingredientsand aredevelopedtoresembleconventionalanimal-basedfoodssuchasmeatordairy.(Examplesincludesoyaburgers andsoyamilk).This latest Smart Protein consumer researchsheds light on an ongoing shift in European eatinghabits.Notably,51%of European meat consumers report reducing their annual meat intake,up from 46%in 2021.Health emergesasthemostinfluentialfactor(citedby47%of respondents)driving this change.Thelargest reductions in meat consumption are seeninItaly,Germany,andFrance,wheremorethan 58%of consumers report having reduced theirmeatconsumption.However,ourfindingsalsohighlightasignificantgapbetweeninten-tion and action and suggest that respondents donothaveanaccurateideaoftheirownlevelsof meat consumption.Intermsofdietarylifestyles,27%ofEuropeansidentify as flexitarians,1 that is 3%less flexi-tarians than in 2021.Germany takes the lead in 2023,with 40%of individuals identifying as flexitarian.Whenlookingatwhichplant-basedfoodsarebeing embraced by European consumers,thedata suggests that legumes are the most pop-ular option.57%of respondents incorporate legumes2 into their diets at least once a week,while 28%regularly eat plant-based alternatives3 and 17%regularly eat legume-based alternatives.4 Furthermore,43%ofrespondents plan to increase their consump-tion and purchase of any of these products.But,its important that they are tasty(53%),healthy(46%),andaffordable(45%).Looking at perceptions around trust,46%of Europeans said that they trust plant-based alternatives more than they did three years ago.This is mostly because they are consideredsafetoconsume,accuratelylabelled,andreliable.Whencomparedtoothersourcesofprotein,plant-basedproteinisperceivedasthemosttrustworthycoreingredientforplant-basedalternatives,followedbycultivatedprotein(e.g.cultivatedmeat,cultivateddairy,etc.)andfungi(e.g.mushroom,mycelium,yeast).Regardingtheinfluenceofdigitalmediaoncon-sumerperceptions,45%of social-media users trust online sources such as search engines and health and nutrition-society websites the most when looking for accurate infor-mationaboutplant-basedfood.Executive Summary51%of European meat consumers report reducing their annual meat intake,up from 46%in 2021.Followingonfromthewidelycited2021SmartProteinreportWhat Consumers Want,thissecondroundofresearchfoundpromising changes in European consumer preferences and behavioursoverthelasttwoyears.Thenewreportprovidesadeeper understanding of the long-term potential of the plant-basedsectorandofferspracticalrecommendationssothatfurthergrowthcanbesustained.JASMIJN DE BOO CEO of ProVeg InternationalThestudyalsoreflectsanurgentneedforpolicyaction in Europes food sector.A substantial 63%of European consumers would like to see more transparency in product certification,while 62%support tax-free food productsalignedwithenvironmentalandhealthvalues.Italy,Spain,andtheUKstandoutwithstrongsupport for policy measures aimed at shiftingthepopulationtowardsmoreplant-basedeating.In summary,the data suggests a broad and ongoing shift across Europe towards more plant-based eating.However,Europeaneatinghabitsonthewholeremainunsustainableanda multifaceted strategy is needed to further accelerate this shift.This strategy shouldincludeemphasisingthelong-termhealthbene-fits of plant-based diets,tailoring messaging for diverse generations and regions,imple-mentingtransparentandtrustworthylabelling schemes,and,most crucially,ensuring thatplant-based products are easily accessible.Its also important to responsibly leveragethe influence of social media in guiding con-sumerpurchasedecisions.Finally,thecurrentmomentum of cultivated foods in Europe pre-sentsanopportunitytocapitaliseonconsum-ersdemandforhealthierandmoresustainable foods.Bycombiningtheseapproaches,theshiftto plant-based eating can be further accele-rated,contributing to a healthier and more sustainablefuture.Overthepastfewyears,therehasbeenaremarkablesurgeinthepopularityofplant-basedfoodproductsin Europe mostly driven by consumers embracing sustainable,ethical,and health-conscious dietarychoices.5Europesplant-basedfoodsectorhasgrownsignificantlyinrecentyears,withbothtotalsalesvalueandunitsalesspikingby21tween2020and2022,withthesectorcurrentlyvaluedat5.8billion.6 The futurelooksevenmorepromising,withapredictedannualgrowthrateofnearly9%overthenextfiveyears.7 Moreover,by2035,oneineverytenservingsofmeat,eggs,dairy,andseafoodworldwideisexpectedtobeintheformofalternativeprotein.8Giventheescalatingdemandforplant-basedfoodsinEurope,theneedforinnovativeandappealingplant-based food choices is self-evident.Building on theresearchconductedtwoyearsago,What Consumers Want,theprimaryobjectiveofthisfollow-upstudyistotrackandanalysewhetherthetrendsthatwe identified in 2021 have persisted,intensified,plateaued,or fallen.By looking at changes in con-sumerpreferencesandbehavioursoverthelasttwoyears,this report aims to gain a deeper under-standingofthelong-termpotentialoftheplant-basedsectorandtheextenttowhichfurthergrowthcanbesustained.IntroductionThe results of this follow-up study provide usefulinsightsintoEuropesconstantlyevolvingplant-basedfood sector.It is encouraging to observe that the positivetrajectoryoftheacceptanceofplant-basedfoods has continued,with interesting shifts takingplace across various demographics and regions.As wemoveforwardtowardsamoresustainablefuture,stayingcarefullyattunedtoconsumerpreferences and market dynamics will be crucial in order toharnessthefullpotentialoftheplant-basedfood sector and its benefits for the environment andhuman health.5 Alcorta,A.,Porta,A.,Trrega,A.,Alvarez,M.D.,&Vaquero,M.P.(2021).Foodsforplant-baseddiets:Challengesand innovations.Foods,10(2),293.6 GFI(2022):MarketinsightsonEuropeanplant-basedsales2020-2022 https:/gfieurope.org/market-insights-on-european-plant-based-sales-2020-2022/7 ResearchandMarkets(2023):EuropePlant-BasedFoodandBeverageMarket-Growth,TrendsandForecasts(2023-2028)https:/ BCG,BlueHorizonCorporation(2023):Alternative-ProteinMarkettoReachatLeast$290Billionby2035 https:/ appetites:an in-depth look at European attitudes towards plant-based eatingIntroductionTheresultsofthisreportarebasedonatwenty-minute online survey of 7,500 participants(witharound 750 respondents per country,and allrespondentsovertheageof18).ThesurveywasconductedinJune2023,andisafollow-uptoaprevioussurveyconductedinJune2021,theresultsofwhichareusedinthisreportinordertocomparechangesinbehavioursandattitudesoverthelasttwoyears.Inbothsurveys,thecountriesincludedwereAustria,Denmark,France,Germany,Italy,theNetherlands,Poland,Romania,Spain,andtheUK.Thesurveywascompletedbyrespondentsrecruited by Innova Market Insights.Innovas ConsumerInsightshasastrictdataqualityandmanagementprotocol in place.Their panel partners are ISO20252andISO26362certifiedandupholdstrictqualitychecksontheirrespondentdatabases.Wecollecteddataonseveraldemographics,inclu-dingage,gender,andeducationalbackground,andsetquotasforageandgenderforalltencountriesinordertoensurethatthesamplewasrepresent-ative of the European population as a whole intermsofthesetwovariables.Becausemanyofthesurveyquestionsrelatetopurchasingdecisions,weaskedpeopletofilloutthequestionnaireonlyiftheywerefullyorpartlyresponsibleforthehouseholds groceryshopping.Survey methodologyFollowingtheresearchmethodologydeployedin2021,the 2023 sample consisted predominantlyofpeopleonamixeddietbutalsoincludedflexi-tarians,pescatarians,vegetarians,andvegans.Itsimportant to note that we provided clear defini-tions for each dietary lifestyle,and respondentswere asked to choose the one that best alignedwith their preferences.Our analysis is based onrespondents self-identification with each dietarylifestyle,whichmaynotalwaysperfectlymatchtheofficial definitions for each category.As a result,weadviseapproachingtheinterpretationoftheseresultswithcaution.The countries included were Austria,Denmark,France,Germany,Italy,the Netherlands,Poland,Romania,Spain,and the UK.6Evolving appetites:an in-depth look at European attitudes towards plant-based eatingSurvey methodologyThe first iteration of the survey suggested thatnearly half of European consumers had reducedtheir meat consumption during the previous 12 months,andthree-quartersofthemidentifiedasflexitarian.Dutch,Romanian,andGermanconsum-ersemergedasthebiggestreducers.When looking at consumer acceptance of plant-based products,primary barriers to widespreadadoption included limited availability of diverseplant-basedfoodoptions,concernsaboutafforda-bility,a lack of accessible information,and the influence of social interactions.Nevertheless,a significant portion of European consumersexpressed a strong trust in plant-based foodproducts,particularlythosefeaturingfamiliarpro-teinssuchasplant-basedoptionsandalternativessourced from fungi or algae.Respondents also trusted products containing ingredients such as potatoesandrice,lentils,almonds,andchickpeas.Looking back at the 2021 resultsIn terms of therole that digital mediaplayedatthetime,searchenginesandreputablehealthandnutrition-societywebsitesemergedastheprimaryplatformsusedbyconsumerstogatherinformationonplant-basedfoods,andwerewidelyregardedashighlycrediblesourcesofinformation.These findings not only highlighted the immense potential for plant-based foods in Europe but also served as a compelling call to action for all those involved in the industry.Thecontinuously rising consumer demand for alternative proteins isastrongindicatorofaflourishingmarketwithampleroomforexpansion.These findings not only highlighted the immense potential for plant-based foods in Europe but also served as a compelling call to action for all those involved in the industry.7Evolving appetites:an in-depth look at European attitudes towards plant-based eatingLooking back at the 2021 resultsCurrent market outlook on European meat consumption Recent data on European meat consumption shows a declining trend.9Itisestimatedthatbetween2021and2023,porkandbeefconsumptiondecreasedbyabout2.8%and0.8%,respectively.In2023,theaverageEuropeanisprojectedtoconsumeapproximately40kgannuallywhenbothporkandbeefaretakenintoaccount,whichtranslatestoabout770gperweek.However,this current level of meat consumption in Europe still significantly exceeds the recommendations provided by various national dietary guidelines,10whichtypicallyadviseaweeklymaximumintakeofredmeatbetween300and500gramsorconsumptionuptothreetimesperweek.Exploring meat reduction andits motivationsChapter I9 OECD/FAO(2023):OECD-FAOAgriculturalOutlook2023-2032.OECDPublishing.Paris.https:/doi.org/10.1787/08801ab7-en.AndOECD.stat(2023):OECD-FAOAgriculturalOutlook2023-2032.Availableat:https:/stats.oecd.org/26.10.2023 10 Europeancommission(August2023):Food-BasedDietaryGuidelinesinEurope https:/knowledge4policy.ec.europa.eu/health-promotion-knowledge-gateway/topic/food-based-dietary-guidelines-europe_en 11 Meatconsumption:Whicharethecurrentglobalrisks?Areviewofrecent(20102020)evidence.https:/www.ncbi.nlm.nih.gov/pmc/articles/PMC7256495/Basedonthesefindingsalone,itisconceivablethatif European countries were to strictly adhere to their current national dietary guidelines,there is reason to be slightly more optimistic that the detrimental impact on individual health and the environment could have been minimised to some extent.Extensivescientificresearchhashighlighted the detrimental impact of high meat consumptiononbothindividualhealthandtheenvironment.Livestockproductionisamajorcon-tributortototalgreenhousegasemissionsandutilises a disproportionate share of the Earths limited resources.Notably,in 2015,the Inter-nationalAgencyforResearchonCancerclassifiedredmeatasaprobablecarcinogenforhumans,whileprocessedmeatwasclassifiedascarcino-genic to humans.118Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsFREQUENCY OF CONSUMPTION OF ANIMAL PRODUCTS(TOTAL SAMPLE,SELF-REPORT,PERCENTAGES)Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Total:n=7500Accordingtorespondentsself-reportedconsumptionlevels,dairy products and eggs are both daily and weekly staples,with more than 70%of European respondents including them in their meals at least once a week.Milkisconsumedatleast4timesperweekby54%ofrespondents,followedbycheese(49%),yoghurt(46%),andeggs(37%).Poultryisthemostcommonlyconsumedanimalmeat,with60%ofEuropeanconsumersincludingitintheirmealsatleastonceaweek,whileabout40%ofEuropeanssaythattheyconsumefish,beef,orporkatleastonceaweek.Many Europeans may underestimate their actual meat consumption.Itsinterestingtonotethatonlyaround14%ofEuropeanssaythattheyeatporkorbeefmorethanthreetimesaweek,giventhatcurrentmarketdatashowsthattheaverageEuropeanconsumesaround700gramsperweek.Thissuggeststhatmany Europeans may underestimate their actual meat consumption or eat particularly large portions when they do so.Regardless,there is an urgent need to educate consumers about the impact of meat production and consumption.Such edu-cationiscrucial,giventhedetrimentaleffectsofexcessivemeatconsumptiononbothhealthandtheenvironmentandwillhelpindividualstomakemoreinformedchoicesabouttheirfoodchoices.Whenconsumersgainaclearerunderstandingofhowoftentheyconsumemeat,theycanbecomenotonlymoremotivatedtoreducetheirmeatintakebutalsobetterequippedforeffectivechange,ultimatelyleadingtotheadoptionofhealthierlifestyles.9Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsFREQUENCY OF CONSUMPTION OF ANIMAL PRODUCTS(BY COUNTRY,SELF-REPORT PERCENTAGES,MORE THAN 3 TIMES PER WEEK,BEEF,PORK,POULTRY,FISH)Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?( 3timesperweek)|Singlechoice|Total:n=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750Overall,alargernumberofconsumersinFrance,theNetherlands,Denmark,andPolandexhibitaware-ness of their high levels of animal-based product consumption(more than 3 times per week)comparedtoconsumersinothercountries.Conversely,fewerconsumersintheUK,Austria,Italy,Spain,and Germany acknowledge their high levels of consumption in comparison to the average European country.This highlights regionalvariations in the extent to which consumers underestimate their animal-basedconsumption.However,regardless of the region,there is a need for educational campaigns about the frequency and impact of excessive meat consumption,as the ideal scenario,according to the European Commission,would be for allEuropeanstoconsumeredmeatslikebeefandporklessthan3timesperweek.Withestablishedguidelines,institutions have a crucial role to play in leading by example through their procurement practices.Government offices,schools,hospitals,and even workplaces can prioritise plant-based meals.This will not onlypromote healthier dietary choices but will alsocontribute to normalising meals with reducedmeat content.10Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsSELF-REPORTED MEAT CONSUMPTION,COMPARED TO A YEAR AGO(TOTAL MEAT EATERS,2023 AND 2021,PERCENTAGES)20232021A lot less1514Slightly less3632No change3948Slightly more75A lot more21Q8:Comparedtoayearago,howmuchmeat(e.g.beef,pork,chicken)areyoueatingatthemoment?|Singlechoice|Slightlyless/more:less/morethan50%involume,Alotless/more:more/lessthan50%involume|Total2023n=6679|Total2021n=6882|Highlightedingreen:significantlyhigherata95%confidenceintervalDespite high levels of red meat consumption in Europe as demonstrated above,in 2023,51%of European consumers reported having reduced their meat consumption(e.g.,beef,pork,chicken)compared to the previous year.Amongthem,36%madeslightreductions(lessthan50%),and15%madesubstantialreductions(morethan50%).However,still9%ofpeoplereportedanincreaseintheirannual meat consumption overall.Compared to the 2021 research data,the share of individuals reducing their yearly meat intake(a lot less and slightly less)has increased from 46%to 51%,while the percentage ofpeoplewhostatenochangeinmeatconsumptionhasdecreasedfrom48%to39%.Still,thenumberofpeoplewhoareeatingslightlymoremeathasincreasedfrom6%to9%.11Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsSample total51Italy59Germany59France57Austria51Netherlands49Poland48Spain48Romania48UK48Denmark48SELF-REPORTED ANNUAL MEAT REDUCTION(TOTAL MEAT EATERS,BY COUNTRY,PERCENTAGES)Q8:Comparedtoayearago,howmuchmeat(e.g.beef,pork,chicken)areyoueatingatthemoment?|Singlechoice|TotalReduction:Slightlyless:lessthan50%involume Alotless:Morethan50%involume|Total2023n=6679|Austrian=639|Denmarkn=649|Francen=682|Germanyn=639|Italyn=688|Netherlandsn=663|Polandn=675|Romanian=695|Spainn=699|UKn=650Percentage of consumers who have reduced their meat consumption(e.g.beef,pork,chicken)(a lot less slightly less)Acrosscountries,Italy,Germany,and France lead the way in terms of people who report reducing their meat consumption compared to one year ago,with 59%of respondents in each of these countries.Conversely,Poland,Spain,Romania,theUK,andDenmarkhavealowerpercentageof consumersreducingtheirannualmeatintake,althoughstillshowingalargeamountofconsumers(47%)ineachofthesecountrieswhoarereducingtheirmeatconsumption.12Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsItsinterestingtonotethatreportingareductioninannualmeatconsumptionvariesacrosscountriesandmaybeinfluencedbyconsumersawarenessoftheiractualmeatintake.Forinstance,Francestandsoutwitharelativelyhighernumberofrespondentsacknowledgingtheirhighmeatconsumption(15%reporteatingbeeforporkmorethan3timesperweek,whichis2ovetheaverage),whilealsoexpressingadesiretoreduceit(58%,7%morethantheaverage).Incontrast,Spainhasfewerconsumersacknowledging theirhighmeatconsumption(11%reporteatingbeeforporkmorethan3timesperweek,2lowtheaverage)andshowslessmotivationtomakeachange(48%,3lowtheaverage).MOTIVATIONS TO REDUCE MEAT OR DAIRY PRODUCTS(TOTAL MEAT REDUCERS,PERCENTAGES)Health47Animal welfare29Environment26Taste15Concerns over antibiotics15Other12My social environment10Major outbreaks of animal-to-human diseases(e.g.COVID-19)9Q10:Whichofthefollowingreasonsbestdescribeswhyyouhavechosentodecreaseyourconsumptionofmeatordairy products?|Multiplechoice|Total:n=3442Health is the primary motivator for reducing meat consumption overall(47%),followed by animal welfare(29%)and the environment(26%).GiventhataconsiderableportionofEuropeanconsumersassociatehealthwithreducingmeatcon-sumption,foodinnovationcanserveasaplatformtopromotehealthierdietarylifestyles.According to the World Health Organization,promoting a healthy food environment,encompassing food systems that encourage diversified,balanced,and healthy diets,requires collaboration among various sectors and stakeholders,including government,public,and private sectors.1212 WHO(2020):Healthydiethttps:/www.who.int/news-room/fact-sheets/detail/healthy-diet13Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsTOP 3 MOTIVATIONS TO REDUCE MEAT OR DAIRY PRODUCTS(PERCENTAGE OF TOTAL MEAT REDUCERS,BY COUNTRY)Q10:Whichofthefollowingreasonsbestdescribeswhyyouhavechosentodecreaseyourconsumptionofmeatordairyproducts?|Multiplechoice|Total:n=3442|Austrian=331|Denmarkn=311|Francen=393|Germanyn=376|Italyn=404|Netherlandsn=321|Polandn=326|Romanian=336|Spainn=334|UKn=31Given that almost one-third of Europeans arereducing their animal consumption due to animal welfare concerns,its important to note thatadopting a plant-based diet for just six months is estimated to save approximately 180 animal lives.13 This highlights the significant impact ofplant-baseddietsinaddressingconsumerscon-cernsaboutanimalwelfare.Simultaneously,the fact that many Europeanconsumers are eager to reduce their meat con-sumption for environmental reasons,presentsanopportunitytonotonlyalignwithconsumerpreferences for more sustainable products butalsotomakestrategicinvestments.Interestingly,the alternative-protein sector is estimated to deliver the most significant CO2e(carbon dioxide equivalent)savings per dollar of investment compared to other sectors.14 This suggests that businesses investing in thissectorcannotonlycatertoconsumerdemandsbutalsodistinguishthemselvesthroughcircularinvestments.13 HOWMUCHHAVEYOUSAVED?https:/ GFI(2023):Adeeperdiveintoalternativeproteininvestmentsin2022:Thecaseforoptimism.https:/gfi.org/blog/alternative-protein-investments-update-and-outlook/Intermsofanimalwelfare,whichfunctionsasthesecond-mostimportantdriverforreducingmeatintakeacrossEurope(29%,onaverage),theNetherlandsandGermanystandout,with40%and39%,respectively,ofconsumersmentioningit.14Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivations“Other”motivesaremoreprominentinFranceandtheUKat21%and19%,respectively.Pricemightfallintothecategoryof“otherfactors,asaccordingtorecentstudies,thealmostunprecedentedriseinpricesofmeatanddairystapleshaveforcedconsumerstocurtailtheirconsumptionofsuchproducts.15 Consequently,consumershavebeenforcedtofindwaystoeconomise,suchasbuyingless,choosingmoreaffordablebrands,andshoppingatbudget-friendlystores,particularlyintheseregions.DIETARY LIFESTYLE BY COUNTRY(TOTAL SAMPLE,PERCENTAGES)16Q3:Whichcategorybestdescribesyourcurrentdietarylifestyle?|SingleselectionQ4:Howlonghaveyoubeenfollowingyourcurrentdietarylifestyle?|Singlechoice|Total:n=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=75015 EsheNelson(2023):WhyAreFoodPricesSoHighinEurope?Europeanconsumerscutbackonfoodcoststocopewith shortages and rising prices.https:/ 16 Theanalysismadebydietarylifestylesisbasedontherespondentsself-identification,ratherthanbystrictlyfollowingthe officialdefinitionsofeachdietarylifestyle.Thisapproachwasadoptedtoensuretheresultsalignascloselyaspossiblewith real-worldbehavioursandavoidthecreationofartificialorunrealisticoutcomes.Sixty-two percent of European consumers identify as omnivores,while 27%identify as flexi-tarians,being the second-largest group in the countries surveyed.Afterflexitarians,5%oftotalEuropeanconsumersarevegetarians,followedby4%pescatarianand3%vegans.The largest flexitarian populations are found in Germany(40%)and Austria(37%),where being an omnivore is no longer the norm.TheNetherlandsfollowswith35%ofconsumersidentifyingasflexitarians.Incontrast,Poland,France,andItalyhavesmallerproportionsofflexitarians,with16%,25%,and23%,respectively.27%of Europeans identify as flexitarians,being the second-largest consumer group.15Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsDIETARY LIFESTYLES(2021 VS 2023,PERCENTAGES)20232021Omnivore6261Flexitarian2730Pescatarian43Vegetarian55Vegan32Q3:Whichcategorybestdescribesyourcurrentdietarylifestyle?|SingleselectionQ4:Howlonghaveyoubeenfollowingyourcurrentdietarylifestyle?|Singlechoice|Total2023:n=7500|Total2021:n=7559|Highlightedingreenandred:significantlydifferentacrossyearsata95%confidenceintervalGermanys success in promoting plant-based products can be attributed to its multifaceted approach,whichincludesintegratingthemintoretailproductexpansionstrategies,implementingtheminschools,featuringtheminculturalevents,andactivelyaddressingconsumerdemandformoreaffordableoptions.17,18,19Asaresult,Germanyhasthebiggestsalesinplant-basedretail20 and the largest segmentofconsumersadoptingplant-basedlifestyles.Thisholisticapproachstandsasaninspiringmodel for other regions aiming to increase adoption and acceptance of these products.Intermsofotherdietarypreferences,Austria has the highest percentage of respondents iden-tifying as vegans(5%),followedbyGermany(4%).TheUKhasthelargestnumberofvegetarians(7%)andDenmarkthelargestpercentageofpescatarians(5%).17 Rewe(2022):VeganeinkaufeninBerlin.https:/mediacenter.rewe.de/rewe-vegan-einkaufen-berlin 18 TheGuardian(2021):Berlinsuniversitycanteensgoalmostmeat-freeasstudentsprioritiseclimate https:/ 19 Vegconomist(2022):VeganVersionsofClassicDishestoBeOfferedatOktoberfest2022 https:/ https:/gfieurope.org/market-insights-on-european-plant-based-sales-2020-2022/In 2023,there are notably fewer flexitarians compared to 2021(3%less),but there is a signi-ficant increase in the number of pescatarians and vegans across selected European countries(1%more).Theincreaseinthenumberofvegansisapositivesignforthefutureofplant-baseddiets.However,giventhedecreaseinself-identificationwithmainstreamplant-basedlifestyles(flexitarian-ism),itiscrucialtomaintainafocusonhighlightingthebenefitsofadoptingplant-basedlifestyles.Thesebenefitsshouldbeclearlyalignedwithconsumerconcerns,andthemessagingshouldremainasapproachableandappealingaspossible.16Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsBoomers(1946-1964)Gen X(1965-1980)Millennials(1981-1996)Gen Z(1997-2012)Flexitarians29272826Omnivores64646158Pescatarian3335Vegetarian1234Vegan3457Total100100100100DIETARY LIFESTYLES BY GENERATIONS(TOTAL SAMPLE,PERCENTAGES)Q3:Whichcategorybestdescribesyourcurrentdietarylifestyle?|Singleselection|Total:n=7500|Boomern=1013|GenXn=2238|GenZn=1811|Millennialn=2438|Highlightedingreen:highestscoreperrowFemaleMaleDiverse*Flexitarians312343Omnivores586626Pescatarian344Vegetarian2313Vegan6313Total100100100DIETARY LIFESTYLES BY GENDERS(TOTAL SAMPLE,PERCENTAGES)*Samplesizebelow30,shownonlyforreferenceQ3:Whichcategorybestdescribesyourcurrentdietarylifestyle?|Singleselection|Total:n=7500|Femalen=3750|Malen=3750|Highlightedingreen:significantlyhigherbetweenrowsata95%confidencelevelOurresearchshowsthatthereisaminimal variation in flexitarianism across generations(26%to29%),indicatingthattheintention to reduce meat consumption transcends generational bound-aries and represents a cross-generational interest.GenZstandsoutwiththehighestadoptionratesofvegetarians(7%),vegans(4%),andpescatarians(5%).Ontheotherhand,omnivoresaremore prevalentintheBoomerandGenXgroups,at64%.Theseresultssuggestthattheremaybeanoppor-tunityformarketingandproductdevelopmenttailoredtospecificneedsacrossagegroups.17Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsFlexitarianism appears to be more popular among girls and women(31%),while omnivore diets are more common among boys and men(58%).Veganismissimilarlyskewedbygenderandismorecommonamongwomenandgirls(6%).Thosepeopleidentifyingasdiverseseemtobeparticularlyskewedinaplant-warddirection.However,furtherresearchisneededtoconfirmthistrendsince conclusionscannotbedrawnfromsuchasmallsamplesize.Vegetarianandpescatariandietsare equallylikelytobeadoptedbyallgenders.CURRENT DURATION OF DIETARY LIFESTYLE(TOTAL SAMPLE,PERCENTAGES)Q4:Howlonghaveyoubeenfollowingyourcurrentdietarylifestyle?|Singlechoice|Total:n=7500|Whileitsnosurprisethatomnivoreshavebeenfollowingtheirdietsformanyyears,itsinterest-ingtonotethatvegetarianshavebeencommittedtotheirdietforthelongestofthosefollowinganalternativedietarylifestyle,with28%havingbeenvegetarianformorethanfiveyearsandanaddi-tional24%fortwotofiveyears.Furthemore,45%of flexitarians have already spent more than two years being committed to their diet.Most vegans,ontheotherhand,havebeenfollowingthedietarylifestyleforlessthansixmonthsanduptotwoyears(63%).45%of flexitarians have already spent more than two years being committed to their diet.18Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter I:Exploring meat reductionand its motivationsExploring the transition towards a plant-based lifestyleChapter IIAccordingtorecentresearchstudies,21itswidelyacknowledgedthatindividualsmayfindthemselvesatvariousstagesofreadinessandmotivationwhencontemplatingchangestotheirdietaryhabits.There-fore,gaining insight into the psychological stages that people navigate during dietary lifestyle changes enables the development of personalised support systems,targeted interventions,and more effective goal-setting strategies.Thetransitionstagesmentionedbelow(outsider,denier,reachable,considerer,committed,won,flightrisk,lapsed)arederivedfromtheTranstheoreticalModel(TTM),whichisoneofthemostaccessibleframeworksforunderstandinghumanbehaviour.22DIETARY-TRANSITION STAGES(TOTAL SAMPLE,PERCENTAGES)Q5:Whichofthefollowingphrasesbestdescribesyourcurrentdietaryhabitsorsituation?|Singlechoice|Total:n=7500|17 JOProchaska1,WFVelicer.:Thetranstheoreticalmodelofhealthbehaviourchange.https:/pubmed.ncbi.nlm.nih.gov/18 NahrainRaihan;MarkCogburn.:StagesofChangeTheory.https:/www.ncbi.nlm.nih.gov/books/NBK556005/19Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter II:Exploring the transition towards a plant-based lifestyleLookingatthepictureonthepreviouspage,itisworthnotingthatthelargestsegmentsofEuro-peanconsumersarefoundwithintheOutsider(27%)andtheReachable(27%)segments.Alsoofinterest,isthefactthat17%ofrespondentsindi-cated that some people in their social environ-mentencouragethemtoeatmostlyplant-basedmealsbuttheythemselvesdonotwanttochange.DIETARY-TRANSITION STAGES(BY DEMOGRAPHICS,OUTSIDERS AND REACHABLE PERCENTAGES)Q5:Whichofthefollowingphrasesbestdescribesyourcurrentdietaryhabitsorsituation?|Singlechoice|Total:n=7500|Highlightedingreen:significantdifferenceat95%confidencelevelperdemographicOutsidersReachableFlexitarians1630Omnivores3428Boomers(1946-1964)3727Gen X(1965-1980)3027Gen Z(1997-2012)2128Millennials(1981-1996)2428Female2629Male2826In addition,about 8%of Europeans are eithercommittedto,planningtotakeactiontoward,oralreadyfeelconfidentaboutadoptingandmain-tainingaplant-baseddietoverthelongterm.Itsencouragingtonotethatonly4%oftherespond-entssaidthattheyfounditchallengingtomain-tain a long-term plant-based diet or have lostinterest in doing so.Omnivores have significantly less exposure to social environments that accept plant-based life-stylescomparedtoflexitarians.Amongdifferentgenerations,boomersstandoutashavingtheleast exposure to contexts where plant-based lifestyles are adopted.This emphasises the potential importanceofsocialacceptanceindrivingdietarychangesinEurope.Acrossgenders,thereareno significantdifferences.20Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter II:Exploring the transition towards a plant-based lifestyleAssociations driving plant-based alternatives:The COM-B ApproachIn addition to the transtheoretical model,weconducted an in-depth analysis employing theCOM-BFramework.23Thisframeworkcategorises consumerattitudesandbehaviourstowardplant-based alternatives into three key components:capabilities(referringtoanindividualspsycho-logical and physical ability to perform a par-ticular behaviour);opportunities(representing theexternalandsocialfactorsthatfacilitateorhinder a specific behaviour);and motivations(relating to the individuals emotional and psy-chologicaldrivetoengageinthebehaviour).Insummary,thedatasuggeststhatwhileEuro-peans are increasingly open to plant-basedoptions,there is a need to enhance physical opportunities,such as availability at points of purchase and consumption,better integrate plant-based foods into cultural contexts,and provide more educational and accessibility support to facilitate a smoother transition toward plant-based lifestyles.Theseeffortscanhelpmeetconsumerexpectationsforhealthier andmoresustainableproductswhiledrivingtheadoptionofplant-basedalternatives.23Michie,S.,VanStralen,M.M.,&West,R.(2011).Thebehaviourchangewheel:anewmethodforcharacterisinganddesigning behaviourchangeinterventions.Implementationscience,6(1),1-12.Physical capabilities-Total Sample (%)-Top 341I find it easy to locate plant-based food alternatives in(online)supermarkets and stores48I find it easy to get reliable information about plant-based food alternatives44I find it easy to locate plant-based food alternatives in restaurants37Psychological capabilities-Total Sample(%)-Top 347I know the benefits of consuming plant-based food alternatives54I find it easy to prepare a plant-based meal46I find it easy to come up with meals that are plant-based44Q23/Q24/Q25“Pleaseindicateyouragreementtothefollowingstatementsregardingeatingandcooking/yourfoodconsumption/regardingfoodconsumptionandcooking.”|Singlechoice(7pointscale)|Highlightedingreen:highestscore%persegmentCAPABILITIES:21Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter II:Exploring the transition towards a plant-based lifestyleEuropean consumers demonstrate stronger psychological capabilities(47%),like understandingthebenefitsofplant-basedalternatives(54%),thanphysicalcapabilities(41%),suchasconveniently locatingtheseproducts(36%)whenitcomestoconsumingplant-basedalternatives.Thesefindingshighlightthatconsumershaveagoodawarenessofplant-basedfoodbenefits,butneedimprovedproductaccessibilityandvisibilityatpointsofpurchaseinordertofeelmorecapableofadoptingaplant-basedlifestyle.Physical opportunities-Total Sample(%)-Top 344are on sale often enough59.are easily available(e.g.in supermarkets,restaurants)47are located in easy-to-access places47Social opportunities-Total Sample(%)-Top 335People who are important to me would approve if I ate plant-based food alternatives most of the time40People in my environment eat more and more plant-based food alternatives37People who are important to me think I should eat plant-based food alternatives most of the time32Q23/Q24/Q25“Pleaseindicateyouragreementtothefollowingstatementsregardingeatingandcooking/yourfoodconsumption/regardingfoodconsumptionandcooking.”|Singlechoice(7pointscale)|Highlightedingreen:highestscore%persegmentOPPORTUNITIES:Intherealmofopportunities,physicalfactors(44%),suchastheavailabilityofplant-basedalternativesonsaleorpromotion,playamoresignificantroleindrivingtheconsumptionofplant-basedproductscomparedtosocialfactors(35%),suchasthedeepintegrationofplant-baseddietsintotheirculture.22Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter II:Exploring the transition towards a plant-based lifestyleMOTIVATIONS:Reflective processing Total Sample(%)-Top 349Eating plant-based food alternatives is good for my health55Eating plant-based food alternatives will reduce negative effects on the environment54Eating plant-based food alternatives will help me to lose or maintain weight46Automatic processing Total Sample(%)-Top 339Eating plant-based food alternatives is something that is natural for me to do41Eating plant-based food alternatives is something that I do without thinking38Eating plant-based food alternatives is something that I do automatically37Q23/Q24/Q25“Pleaseindicateyouragreementtothefollowingstatementsregardingeatingandcooking/yourfoodconsumption/regardingfoodconsumptionandcooking.”|Singlechoice(7pointscale)|Highlightedingreen:highestscore%persegmentEuropeanconsumersexhibitahigherreflectivemotivation(49%)toconsumeplant-basedalternatives,whichinvolvesmakingthoughtfuldecisionsduetothebeliefthatplant-basedchoicesarebeneficialfortheirhealthortheenvironment,thananautomaticmotivation(39%),whichcanbecharacterisedbymakingchoicesnaturallyandwithoutmuchconsciousreflection.Thisimpliesthatconsumersaremoreinclinedtochooseplant-basedalternativeswhentheyactivelyconsiderthehealthandenvironmentalaspects,ratherthansimplyadoptingitasahabitualroutine.23Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter II:Exploring the transition towards a plant-based lifestyleUnderstanding consumption behaviours:Plant-based food perspectivesChapter IIIREGULAR AND OCCASIONAL CONSUMPTION OF PLANT-BASED FOODS(TOTAL SAMPLE,SELF-REPORT PERCENTAGES)Q6:Howfamiliarareyouwiththefollowingfoodproducts?|Singlechoice|Total:n=7500Whenaskedinoverallterms,66%of European consumers claim to consume legumes at least occasionally(31%regularly,35%occasionally).Followingatvisibledistance,46%claimtoconsumeplant-basedmilk,41%plant-basedfishand40%plant-basedmeatatleastoccasionally.SeitanandTempehshowthelowestfamiliarityamongEuropeanconsumers.24Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives European respondents show the highest inter-est in legumes,with43%intendingtoreplaceanimal-based foods with this type of foods,followedby 52%intending to increase their consumption and 53%their purchase.Furthermore,37%ofEuropeanswanttoreplaceanimal-based foods with legume-based foods,and41%wanttoincreasetheirpurchaseandcon-sumptionofthistypeoffood.Lastly,conventional dairy is replaceable withplant-baseddairyfor37%ofEuropeans.Similarly,conventionalmeatisreplaceablefor34%ofEuro-peanswithplant-basedalternatives.Additionally,40%of Europeans express a desire to increase their purchase and consumption of plant-based alternatives over the next 6 months,further underscoring the growing acceptance of plant-based options in Europe.INTENTION TO REPLACE AND CONSUME/PURCHASE MORE IN THE NEXT 6 MONTHS TOTAL SAMPLE(TOTAL AGREEMENT,PERCENTAGES)Q11/12/13:Pleaseindicatehowmuchyoudisagreeoragreewitheachofthefollowingstatements.Iintendtoreplaceanimal-basedfoodsinmydietbyeatingmore/consumemore/purchasemoreinthenext6months.|Singlechoice|Total:n=7500|25Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives FREQUENCY OF PLANT-BASED FOOD CONSUMPTION(TOTAL SAMPLE,SELF-REPORT PERCENTAGES)Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Total:n=7500Plant-based dairy:milk,cheese,and yoghourt Plant-basedmilkisconsumedby12%ofEuropeans on a daily basis.15%of Europeans consumeit from 1 to 3 times per week,and 9%from 4to6timesaweek.In total,36%of Europeans include plant-based milk in their weekly diets,marking it as the most consumed plant-based dairy product among Europeans.Followingplant-basedmilk,plant-basedyoghurtis consumed by 10%of Europeans on a dailybasis,14tween1to3timesperweek,and9%from4-6timesaweek.In total,33%of Euro-peans include plant-based yoghurt in their weekly diets.Plant-basedcheeseisconsumedby9%ofEuro-peansonadailybasis,13tween1to3timesperweek,and9tween4to6timesperweek.In total,31%of Europeans consume plant-based cheese on a weekly basis,markingitasthelessconsumedplant-baseddairyalternative.On average,33%of Europeans consume some form of plant-based dairy alternative on a weekly basis,indicating a significant presence of these products in European diets.26Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives Plant-based meat:poultry,beef,pork and fish Plant-basedpoultryisconsumedby5%ofEuro-peansonadailybasis,14%consumeitbetween1to3timesperweek,and8tween4to6timesperweek.In total,27%of Europeans consume plant-based poultry at least once a week,marking it as the most consumed plant-based meat in Europe.Plant-based beef is consumed by 4%of Euro-peansonadailybasis,13%consumeitbetween1to3timesperweek,and7tween4to6timesaweek.In total,24%of Europeans consume plant-based beef at least one time per week.Plant-based pork is consumed by 4%of Euro-peansonadailybasis,12%consumeitbetween1to3timesperweek,and6tween4to6timesa week.In total,22%of Europeans consume plant-based pork at least one time per week,marking it as the least consumed plant-based meat by Europeans.Plant-basedfishisconsumedby4%ofEuropeansonadailybasis,13%consumeitbetween1to3timesperweek,and7%consumeitbetween4to6timesperweek.In total,24%of Europeans con-sume plant-based fish at least once a week.On average,24%of Europeans consume some sort of plant-based meat on a weekly basis.Eleven percent of Europeans consume legumes on a daily basis,another 31%consume thembetween1to3timesperweek,and15%consumethembetween4to6timesperweek.In total,57%of EU consumers eat legumes at least once a week,marking them as the most fre-quently consumed plant-based food among European countries.Quinoa is consumed by 5%of Europeans on adailybasis,12%consumethembetween1to3timesperweek,and7tween4to6timesperweek.In total,24%of Europeans consume quinoa at least once a week.Tofuisconsumedby5%ofEuropeans,9%con-sumeitbetween1to3timesperweek,and6%consumeitbetween4to6timesperweek.In total,20%of Europeans consume tofu at least once a week,marking it as the most consumed legume-based food product among Europeans.On average,27%of Europeans consume some sort of legume-based food on a weekly basis.Seitanisconsumedby4%ofEuropeansonadailybasis,by7tween1to3timesperweek,and5tween4to6timesperweek.In total,16%of Europeans consume seitan at least once a week.4%of Europeans consume tempeh on a dailybasis,7%consumeitbetween1to3timesperweek,and5%consumeitbetween4to6timesperweek.In total,16%of Europeans consume tempeh at least once a week.Plant-based foods:Legumes&legume-based foods27Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives PLANT-BASED DIARY&CONVENTIONAL DAIRY(2023,2021)Europeans that consume.At least once a week /-pp compared to 2021Plant-based milk36 8Conventional milk73 3Plant-based yoghourt33 10Yoghourt70 4Plant-based cheese31 11Cheese78 2Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Total:n=7500| /-pp=increase/decreaseinpercentagepoint|Highlightedingreen:significantchangeata95%confidencelevelPLANT-BASED MEAT&CONVENTIONAL MEAT(2023,2021)Europeans that consume.At least once a week /-pp compared to 2021Plant-based poultry27 6Poultry60 5Plant-based beef24 2Beef40 7Plant-based pork22 3Pork43 3Plant-based fish24 5Fish42 4Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Total:n=7500| /-pp=increase/decreaseinpercentagepoint|Highlightedingreen:significantchangeata95%confidencelevelAll plant-based dairy alternatives saw a greater increase in perceived consumption compared to conventional dairy products in 2021.Thisreflectsthecontinuedriseintheadoptionofdairyalter-nativesbymainstreamconsumers.However,thereisstillalongwaytogoinincreasingthefrequencyofplant-basedfoodconsumption,asmorethan70%ofEuropeanscontinuetoconsumeconventionaldairyproductsatleastonceaweek.28Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives Across all plant-based meats,there is also a perceived increase in weekly consumption.Euro-peansclaimtoconsumemoreplant-basedpoultryandplant-basedporkonaweeklybasis( 6%and 5%respectively)thanin2021.LEGUMES AND QUINOA(2023,2021)Europeans that consume.At least once a week /-pp vs.2021Legumes572Quinoa245Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Total:n=7500| /-pp=increase/decreaseinpercentagepoint|tofu,seitanandtempehwerenopartofthe2021researchandthereforenotincludedinthetable|Highlightedingreen:significantchangeata95%confidencelevelPLANT-BASED DAIRY ALTERNATIVE ITEMS CONSUMED AT LEAST ONCE A WEEK(BY COUNTRY,PERCENTAGES)Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Daily weeklycon-sumption=1-3timesperweek 4-6timesperweek 1timeperday 2timesperday|Total:n=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750Bothlegumesandquinoahaveshownanincreaseinconsumptioncomparedto2021.Notably,quinoa experienced a more significant growth overall,increasing by a total of five percentage points,which reflects 26%growth,far surpassing the growth seen of legume consumption,which increased by two percentage points.29Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives Danish consumers lead the way in perceived plant-based milk consumption in comparison to other countries(43%).Intermsofplant-basedyoghurt,thehighestconsumptionisseeninPoland(40%)andItaly(39%).Lastly,plant-basedcheeseismostlyconsumedbyDanish(38%),Polish(37%),andSpanishconsumers(36%).PLANT-BASED MEAT ALTERNATIVE ITEMS CONSUMED AT LEAST ONCE A WEEK(BY COUNTRY,PERCENTAGES)Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Daily weeklycon-sumption=1-3timesperweek 4-6timesperweek 1timeperday 2timesperday|Total:n=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750Denmark stands out with the largest propor-tion of consumers who have incorporated plant-based meats into their regular eating habits(32%on average).InFrance,Austria,theUK,andRomania,therearenotablyfewercon-sumerswhoeattheseproductsatleastonceaweekdespitetheirleadingroleinreducingmeatconsumption.Austria,inparticular,standsoutforitshighnumbersofflexitariansandvegans,butreportslowlevelsofconsumptionofplant-basedalternatives.30Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives CONSUMPTION OF LEGUMES AT LEAST ONCE A WEEK(BY COUNTRY,PERCENTAGES)Q7:Whichstatementbestdescribeshowfrequentlyyouconsumethefollowingfoodproducts?|Singlechoice|Daily weeklycon-sumption=1-3timesperweek 4-6timesperweek 1timeperday 2timesperday|Total:n=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750LegumesarereportedlyconsumedthemostinSpainandItaly(75%and69%respectively),reflectingtheculturalaffinityforlegumesinthesetwocountries(andthusgreatopportunitiesforthemarketingoflegume-basedproductsintheseregions).Incontrast,Poland,theUK,andAustriahavethelowestlevelsoflegumeconsumption(46%,48%,and49%).Emphasisingthenutritionalbenefitsandculinaryversatilityoflegumescouldencouragegreateradoptioninthesecountries.Whenitcomestoquinoaandotherlegume-basedfoods,Denmarkagainstandsoutwiththehighestlevelofconsumption(36%and30%respectively).TheNetherlandsfollowsbutatavisibledistance(24%and20%respectively).Legumes are consumed the most in Spain and Italy(75%and 69%respectively).31Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter III:Understanding consumption behaviours:Plant-based food perspectives Market opportunities for plant-based alternativesChapter IVWhen consumers were asked where they buy plant-based foods,supermarkets emerged as the preferred purchase location foods,with60%ofrespondentsoptingforthemastheirprimary shoppingdestination.Discountstoresrankasthesecond-mostfavouredoption,withover40%of consumersexpressingtheirpreferencefortheseoutlets.Lessthan20%ofrespondentspurchaseplant-basedalternativesinotherlocations.PREFERRED FUTURE POINTS OF PURCHASE FOR PLANT-BASED ALTERNATIVES(TOTAL SAMPLE,PERCENTAGES)Q16:Whereareyoulikelytopurchaseplant-basedfoodalternativesmostfrequentlyinthefuture?|Multiplechoice|Total=7500|32Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesPREFERRED FUTURE POINTS OF PURCHASE FOR PLANT-BASED ALTERNATIVES(SUPERMARKET AND DISCOUNTER,BY COUNTRY,PERCENTAGES)Q16:Whereareyoulikelytopurchaseplant-basedfoodalternativesmostfrequentlyinthefuture?|Multiplechoice|Total=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750|Highlightedingreenaretop3countryscoresbyplaceofpurchasePreferencesforpurchasingplant-basedalternativesinsupermarketsvaryacrosscountries,withPolandat48%andtheUKat74%.ConsumersinGermany,Poland,andRomaniaaremorelikelytoshopatdiscountersthantheaverageEuropean(46%,58%,and53%).Availability and visibility at both super-markets and discounters continue to be key factors in supporting an increase in the consump-tion of plant-based alternatives in Europe.PREFERRED POINTS OF CONSUMPTION OF PLANT-BASED ALTERNATIVES(TOTAL SAMPLE,PERCENTAGES)Q17:Inwhichofthefollowinglocationsdoyounormallyconsumeplant-basedfoodalternatives?|Multiplechoice|Total=750033Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesWhen it comes to where they eat plant-based meals,most Europeans prefer to do so in the com-fort of their own homes(67%).Restaurantsarethenextchoiceforplant-basedmeals,withoptionsrangingfromthoseservingbothanimal-andplant-basedmeals(22%)tothoseexclusivelyofferingplant-basedoptions(17%).Takeawaysandonlineordersarealsorelativelycommon(16%),followedbycanteensatschoolorwork(10%).TOP 3 PREFERRED POINTS OF CONSUMPTION OF PLANT-BASED ALTERNATIVES(BY COUNTRY,PERCENTAGES)Q17:Inwhichofthefollowinglocationsdoyounormallyconsumeplant-basedfoodalternatives?|Multiplechoice|Total=7500|Aus-trian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750The majority of respondents in all countries(62%-72%)consumeplant-basedmealsathome.Given that the majority of respondents acrossEuro-pean countries prefer to eat plant-basedmealsathome,there is an opportunity for food companies and retailers to focus on promo-ting the appeal of plant-based alternatives for home cooking.Whenitcomestodiningout,theUK,Poland,andRomaniastandoutwiththehighestpercentageofrespondents(24%,27%,and27%,respectively)choosingplant-basedalternativesatrestaurantsthatofferawidevarietyoffood,incontrasttoFrance and Germany,where the percentage islower(17%).Denmark stands out as the country with the highest proportion of respondents(23%)who consume plant-based alternatives at fully plant-based restaurants,whereasPolandhasalowerpercentageofsuchrespondents(13%).34Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesPRODUCTS THAT EUROPEAN CONSUMERS WANT TO SEE THE MOST(TOTAL SAMPLE,PERCENTAGES)Q18:Whatkindofplant-basedfoodalternative(s)doyouwishyoucouldbuymoreofteninthesupermarketoratpointsof consumption(e.grestaurants,cafes,etc.)?|Multiplechoice|Total=7500|Onaverage,27%ofEuropeansexpressadesireformoreplant-basedalternativestobereadilyavailableinsupermarkets.Plant-based sweets,meat alternatives,and milk substitutes emerge as the most sought-after categories for expanding plant-based options.TOP 3 PLANT-BASED ALTERNATIVES THAT EUROPEAN CONSUMERS WISH THEY COULD BUY MORE OFTEN AT SUPERMARKETS OR POINTS OF CONSUMPTION(BY COUNTRY,PERCENTAGES)Q18:Whatkindofplant-basedfoodalternative(s)doyouwishyoucouldbuymoreofteninthesupermarketoratpointsof consumption(e.grestaurants,cafes,etc.)?|Multiplechoice|Total=7500|35Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesConsumersinRomaniaareattheforefrontwhenit comes to desiring more plant-based sweetsandsnacks,with39%expressingthispreference.As for the demand for additional plant-basedmilk alternatives,Spanish consumers lead with37%.In the category of plant-based meats,consumersinSpain,theUK,andDenmarkshowasignificantinterest,with35%ineachofthesecountriesexpressingadesireformoreoptions.The demand for more variety in these coun-triespresentsanopportunityforbusinessestoexpandtheirofferingsofplant-basedproductstomeetconsumerpreferencesandpotentiallytapintogrowingmarkets.Consumers in the Netherlands and Austria appear to be happier with the availability of plant-based options compared to the other countries.Companies in these areas might want to upgrade strategies such as further enhancingproductquality,improvingflavourorlower prices to reach mainstream affordability,newproductsinnichecategories(e.g.readytoeat),inordertoimproveconsumersatisfactionandincreasetheirmarketposition.DRIVERS FOR CHOOSING PLANT-BASED ALTERNATIVES(TOTAL SAMPLE,PERCENTAGES)Q14:Whatarethemostimportantfactorswhenchoosingplant-basedfoodalternatives?Itisimportanttomethattheplant-basedfoodalternativesIchoose|Multiplechoice(max5)|Total=7500|When it comes to buying plant-based alternatives,consumers purchasing decisions are centred around taste(53%),health(46%),and affordability(45%).Unsurprisingly,giventheincreasein inflation over the last two years,affordability gained increased prominence in 2023 compared to2021.Additionally,thefreshnessofaproductalsoholdssignificantswayoverconsumerchoices,with ethical and environmental considerations following closely behind,indicating that consumers areactivelyseekingproductsthatalignwiththeirvaluesandthattheysupportsustainablepractices.36Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesTOP 4 MOTIVATIONS FOR CHOOSING PLANT-BASED ALTERNATIVES(BY COUNTRY,PERCENTAGES)Q14Whatarethemostimportantfactorswhenchoosingplant-basedfoodalternatives?Itisimportanttomethattheplant-basedfoodalternativesIchoose|Multiplechoice(max5)|Total=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750 Taste is a crucial factor for consumers across all countries,withpercentagesranging from39%(forItaly)to66%(UK),andanover-all average of 53%Health is the second most important driver,with percentages ranging from 39%(France)to49%(ItalyandSpain),andanover-all average of 46%Consumersinmostcountriesalso prioritise affordability,withpercentagesrangingfrom27%(Italy)to53%(UK),withanoverallaver-age of 45ross all countries.The importance of freshness is consistent across countries,with percentages rangingfrom29%(UK)to48%(PolandandRomania),and an overall average of 34%.37Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesTOP 3 MOTIVATIONS FOR CHOOSING PLANT-BASED ALTERNATIVES(BY DIETARY GROUPS,DEMOGRAPHIC GROUPS,PERCENTAGES)TasteHealthAffordabilityFlexitarians.545248Omnivores 544445Boomers(1946-1964)564747Gen X(1965-1980)544746Gen Z(1997-2012)514644Millennials(1981-1996)514343Female564648Male504542Q14:Whatarethemostimportantfactorswhenchoosingplant-basedfoodalternatives?Itisimportanttomethattheplant-basedfoodalternativesIchoose|Multiplechoice(max5)|Total=7500|Boomern=1013|GenXn=2238|GenZn=1811|Millennialn=2438|Flexitariansn=2044|Omnivoresn=4635|Deniersn=1275|Committed=525|Lapsed=300Regardless of age,lifestyle,or attitudes towards plant-based eating,taste is king.Drivers by generationsAffordabilityisalsoanimportantfactor,withamajorityofrespondentsineachgroupselectingit.Ingeneral,Boomersplacethemostimportanceonthethreekeydriversinrelationtotaste,health,andaffordability(56%,47%and47%),especiallycomparedtoGenZswhoratethemasofslightlyless importance(51%,47%and46%).38Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesDrivers by dietary lifestyles Whiletastehassimilarimportanceratingsforflexitariansandomnivores,flexitarians place slightly higher importance on affordability(52%)and health(48%),compared to omnivores(44%and 45%),suggestingthatflexitariansmightbemoreawareofthehealthbenefits.Drivers by gendersForfemales,tasteismoreimportantthanitisformales(56%and50%,respectively).Healthisanimpor-tantfactorforbothfemales(46%)andmales(45%).Affordability is more important for females(48%)than for males(42%).This indicates that if certain attributes are valued by males,they might be willing to pay more than females.BARRIERS TO CHOOSING PLANT-BASED ALTERNATIVES(TOTAL SAMPLE,PERCENTAGES)Q15:Whichofthefollowingdoyouencounterasbarrierswhenchoosingplant-basedfoodalternatives?|Multiplechoice(max5)|Total=7500|When looking at barriers to choosing plant-based alternatives,price emerges as the most prominent reason not to opt for such products,with 38%of European respondents expressing concern about affordability.These financial considerations and perceptions could potentially be a significant hindrance to widespread adoption of plant-based diets,regardless of whether plant-basedfooditemsareactuallymoreexpensivethantheiranimal-basedequivalentsorifitissimplyanissue of perceptions.39Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesTOP 4 BARRIERS FOR CHOOSING PLANT-BASED ALTERNATIVES(BY COUNTRY,PERCENTAGES)Q15:Whichofthefollowingdoyouencounterasbarrierswhenchoosingplant-basedfoodalternatives?|Multiplechoice(max5)|Total=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750Tasteisanothercrucialfactor,with30%of respondents indicating that plant-based alternatives are perceived as not being tasty enough.Additionally,oneinfourrespondents(25%)expressedaneedformoreinformationaboutplant-basedalternatives,highlightingtheneedforbettereducationandawarenessonthesubject.Lastly,health-relatedconcernsareanotherkeybarriertoregularconsump-tion,with24%of respondents worried about the health aspects beyond iron and protein of exclusively consuming plant-based alternatives.Similar barriers to adopting plant-based alter-nativesareevidentacrossEurope,withconcernsincludingcost,tasteperceptions,healthconcerns,and a need for more information.Priceisalsoaprevalentconcernacrossallcoun-tries,withfiguresrangingfrom29%(inDenmark)to43%(UK).The UK has the highest level of concern that plant-based alternatives are not tasty(37%).Consumers in Italy and Austria struggled theleast with the taste of plant-based alternatives(26ch).Romania,Poland,and Spain had the high-est percentage of respondents who said that they needed more information about plant-based eating(31%,29%and 29%respectively).Interestingly,thiscorrelateswithconsumers in these countries displaying low levels of motivation to reduce their meat con-sumptionandmaketheshifttowardsplant-basedalternatives.Intermsofhealthconcerns,Romanian,German and Austrian consumers appear to be the most concerned(26ch),whileFrenchconsumers,whoexhibitloweracceptance ofplant-basedfoods,seemtobeinfluencedbyhealthconcerns(20%).40Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesTOP 3 BARRIERS TO CHOOSING PLANT-BASED ALTERNATIVES(BY DEMOGRAPHICS AND DIETARY-TRANSITION STAGES,PERCENTAGES)ExpensiveNot tastyNeed more informationFlexitarians.422828Omnivores 363224Boomers(1946-1964)383227Gen X(1965-1980)373126Gen Z(1997-2012)393024Millennials(1981-1996)362725Female412925Male343126Q15:Whichofthefollowingdoyouencounterasbarrierswhenchoosingplant-basedfoodalternatives?|Multiplechoice(max5)|Total=7500|Boomern=1013|GenXn=2238|GenZn=1811|Millennialn=2438|Flexitariansn=2044|Omnivoresn=4635|Deniersn=1275|Committed=525|Lapsed=300|Highlightedingreen:highest%percolumnperdemographicAsignificantpercentageofrespondentscitecostasabarriertoadoptingplant-basedalternatives(38%on average).Acrossdifferent groups,itisinteresting to note that flexitarians,females and GenZ members,all of whom are likely to have had substantial prior experience with products tend to find them the most expen-sive(42%,41%and 39%,respectively).Taste,thesecondmostprominentbarrier,hasasubstantialproportionofrespondentsindicatingthattheyfindplant-basedalternatives“nottasty”(30%onaverage).Acrossgroups,taste concerns are the most prevalent among omnivores(32%)and Boomers(32%).Regardingthelackofinformation,thethirdmostprominentbarrierforEuropeanconsumers(25%onaverage),notablefindingsarealsoseenacrossthedifferenttargetgroups.Lack of information is especially seen among the boomer audience(27%)and flexitarians(28%).41Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesA recent study conducted by ProVeg Nether-lands24shedssomelightonthenutritionalprofileofplant-basedmeatalternativesincomparisontotheiranimal-basedcounterparts.ProVegNeth-erlands compared the nutritional value of 130 plant-basedmeatsubstitutesfromDutchsuper-marketswiththenutritionalvalueofcorrelatingmeatproducts.Theproductsweretestedagainstthenationalcriteriaformeatsubstitutesasdeter-minedbytheNetherlandsNutritionCenter.Thefindingsrevealthat,onaverage,plant-based meat substitutes offer a more favourable nutritional profile than their animal-meat counterparts,with lower saturated fat,reduced calorie content,and significantly higher dietary fibre,allofwhichareindicatorsof being a healthier option.Moreover,the factthat a greater percentage of meat substitutesmeet the Nutrition Centers criteria related tolifestylediseasesincludinglowerlevelsofsaltandsaturatedfatscomparedtoanimal-basedproducts,reflectsthehealthiernatureofaplant-based diet,and also suggests that plant-basedmanufacturers are creating products that are healthyaswellastasty,intheireffortstoattracthealth-conscious consumers.To learn more abouttheresultsofthisreport,pleasevisittheProVegNetherlandswebsite.Health assessment of plant-based alternatives 24ProVegNetherlands(2023):Meatsubstitutesareoftenhealthierthancomparablemeatproducts https:/ appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesCHANGE IN LEVELS OF TRUST TOWARDS PLANT-BASED FOODS AMONG EUROPEAN CONSUMERS(TOTAL SAMPLE,PERCENTAGES)Q19:Whenthinkingaboutyouroverallknowledgeandexperiencewithplant-basedfoodalternatives,hasyourcurrenttrustincreasedordecreasedincomparisontothreeyearsago?Myleveloftrusthas|Singlechoice|Total:n=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750Overall,therehasbeenanotableincreaseinlevelsoftrusttowardsplant-basedalternatives,with46%of Europeans trusting these more than they did three years ago.Thispositivetrendisparticularly prominent in Italy(58%),Denmark(50%),and the UK(49%).France and Austria,however,seem to be trailing slightly behind the rest of Europes trend in terms of trusting plant-based alter-natives(36%and 42%respectively).Thisclearlypresentsasignificantopportunitytoaddressconsumer needs,giventhatbothcountrieshavesubstantiallyreducedtheirconsumptionofconventionalmeat.ASSOCIATION OF STATEMENTS OF TRUST WITH PLANT-BASED ALTERNATIVES(TOTAL SAMPLE,PERCENTAGES)Q20:Whenthinkingspecificallyaboutplant-basedfoodalternatives,pleaseindicatehowmuchyoudisagreeoragreewitheachofthefollowingstatements.Itrustthatplant-basedfoodalternatives.|Singlechoice|Totalagreementlevel(Stronglyagree Agree Some-whatagree)|Total=7500|43Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesOverall,Europeanstrustplant-basedalternativesbecausetheyare“safe”(57%),“accurately labelled”(56%),and“reliable”(55%).However,respondents were less confident about traceability(47%)and overall integrity(47%).Brandsthatprioritiseclearlabelling,transparencyaboutsourcing,andproductintegrityarelikelytobuildstrongerconsumertrustandthusgainacompetitiveadvantage.ASSOCIATION OF STATEMENTS OF TRUST WITH PLANT-BASED ALTERNATIVES(BY COUNTRY,PERCENTAGES)Across countries,there is a visible difference in the perception that enhances trust in plant-based alternatives.Italyhasthehighestleveloftrust for plant-based being“safe”to consumewith66%,Francehasthelowestwith46%.Whenitcomestotheaccuracyoflabelling,Spainstandsout with 71%agreement,whereas France lagsbehindat46%.Intermsofthethirdmostimpor-tant factor that enhances trust across European markets,Spainleadswith70%,whileFranceonceagain falls behind in trusting plant-based alter-nativesarereliable.Countrieswithhightrustlevels,likeItaly,canserveasexamplesforotherregionsonhowtosuccess-fullybuildtrustinplant-basedproducts.Learningfromthesecountriescanbevaluableforfoster-ingacceptanceinareaswithlowertrust.The low trust in plant-based alternatives by French con-sumers suggests a need for targeted efforts to improve consumer confidence in plant-based alternatives in the French market.This mayincludeclearlabellingandeducationalcampaignsofthesafetyandreliabilityoftheseproducts.Q20:Whenthinkingspecificallyaboutplant-basedfoodalternatives,pleaseindicatehowmuchyoudisagreeoragreewitheachofthefollowingstatements.Itrustthatplant-basedfoodalternatives.|Singlechoice|Totalagreementlevel(Stronglyagree Agree SomewhatAgree)|Total=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=75044Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesNO 1.RANKING OF EACH ALTERNATIVE PROTEINS(TOTAL SAMPLE 2023 VS 2021,PERCENTAGES)20232021 /-ppPlant-based protein(including cereals,pulses)4339 4Cultivated protein(e.g.cultivated meat,cultivat-ed dairy,etc.)2014 6Fungi(e.g.mushroom,mycelium,yeast)1718-1Algae-based1113-2Insect-based protein916-7Q21:Whichofthefollowingalternativeproteinsdoyoutrustthemost?Rankthemfrom1(trustthemost)to5(trusttheleast)|Singlechoice|Total2023:7500|Total2021:7500| /-pp=percentagechange|Highlightedingreensignificantlyacrossyearsata95%confidencelevelIntermsoflevelsoftrusttowarddifferentkindsof alternative proteins,European consumers express the highest level of trust in plant-based protein(43%),followedatadistancebycultivated protein(20%)and fungi(17%).Algaeand insects are perceived as the least trust-worthysourcesofprotein.Looking at the trust rankings of alternative proteins in 2023 compared to 2021,it is clear that levels of trust are solidifying.Trust in plant-basedproteinhasincreasedbyfourpercentagepoints.Trust in cultivated protein is also on the rise,havingincreasedbysixpercentagepoints.Algae-basedprotein,ontheotherhand,hasseenaslightdecreaseintrust,highlightingtheneedforcontinuedpromotionofitsuniquequalities.Themostsignificantshiftisseenininsect-basedprotein,where trust levels decreased by sevenpercentagepoints,reflectinga43creaseandindicating that there are persistent challenges in overcomingsocialbarrierstotheacceptanceofinsects as a protein source in Europe.45Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesMOST TRUSTWORTHY SOURCES OF ALTERNATIVE PROTEINS(BY COUNTRY MENTIONS*)Top 1Top 2Top 3Plant-based proteinItalyNetherlandsPoland,Spain,UKCultivated proteinDenmarkGermanySpainFungiAustriaPoland,Romania,UKDenmark,France,GermanyAlgae-basedFrance,RomaniaSpainItalyInsect-based proteinNetherlandsAustria,GermanyDenmark,FranceWhichofthefollowingalternativeproteinsdoyoutrustthemost?(trustthemost)|Singlechoice|Total:7500*Mentionsarecountedasthetotalnumberofconsumersineachcountryrankingeachsourceasthemosttrustworthysource.Italy leads in the consumption and acceptance of plant-based proteins,followedbytheNether-lands.Poland,Spain,andtheUKalsoshowsig-nificantinterestandconsumptionofplant-basedprotein sources.Denmark ranks the highest in the acceptance of cultivated protein sources,followedbyGermanyandSpain.Austria leads in the acceptance and consumption of fungi-based protein sources.Poland,Romania,the UK,Denmark,France,and Germany also show significant interest in fungi-based proteins.France and Romania lead in the consumption and acceptance of algae-based proteins.Spain andItalyalsoshowsignificantinterestinthiscate-gory.The Netherlands ranks highest in the acceptance of insect-based protein sources.Austria,Germany,Denmark,and France alsoshowsignificantinterestinincorporatinginsectsas a protein source.46Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesMOST TRUSTWORTHY SOURCES OF ALTERNATIVE PROTEINS(BY DEMOGRAPHIC TOP MENTIONS*)By dietary lifestyleTop 2 segmentsBy generationTop 2 segmentsBy genderPlant-based proteinFlexitarians,VegetariansBoomer,Gen XFemaleCultivated protein Omnivores,VegansGen Z,MillennialMaleFungi Vegans,OmnivoresBoomer,Gen XMaleAlgae-basedPescatarian,Vegan/VegetarianGen Z,MillennialMaleInsect-based proteinPescatarian,VegaGen Z,MillennialMaleWhichofthefollowingalternativeproteinsdoyoutrustthemost?(trustthemost)|Singlechoice|Total:7500*Mentionsarecountedasthetotalnumberofconsumersineachcountryrankingeachsourceasthemosttrustworthysource.In terms of dietary lifestyle,flexitarians and vegetarians show the strongest preference for plant-based protein,includingcerealsandpulses.Omnivores and vegans are the most inclined towards cultivated protein sources likecultivatedmeatanddairyproducts.Fungi-based proteins,suchasmushroomsandmycelium,areappreciatedthemostbybothvegans and omni-vores.Algae-based proteins attract the most pescatarians and individuals following vegan or vegetarian diets,whileinsect-basedproteinappeals the most to pescatarians and vegans.Looking at generation-based preferences,theBoomer and Gen X generations are the most inclined towards plant-based proteins,inclu-dingcerealsandpulses.Incontrast,Gen Z and millennials show the highest interest in cul-tivated proteins.TheBoomerandGenXgen-erations again display the greatest liking forfungi-based proteins.Algae-based proteins arepreferred the most by Gen Z and Millennials,whileinsect-basedproteinsdrawthemostinter-estfromGenZandmillennialagegroups.Considering gender-based differences,females show the highest preference for plant-based proteins,including cereals and pulses.Males,on the other hand,exhibit the most interest in cultivated proteins,fungi-based proteins,algae-basedandinsect-basedproteinsources.47Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter IV:Market opportunities for plant-based alternativesSocial medias influence on European attitudes and purchase behavioursChapter VSOCIAL MEDIA INFLUENCE ON FOOD BEHAVIOURS AND ATTITUDES(TOTAL SAMPLE,PERCENTAGES)Q35:Pleaseindicatehowmuchyoudisagreeoragreewitheachofthefollowingstatementsconcerningsocialmediaandfoodattitudes|Singlechoice|Total=7378Generally,European consumers who are exposed to social media content are primarily influenced by an increased desire to eat(44%total agreement),followedbyinfluencercontent(37%totalagreement),andchangesintheirperceptionofaspecificproduct(36%totalagreement).Conversely,Europeanconsumersexposedtosocialmediacontentshowtheleastagreementwithbeinginfluencedbypositiveassociationsregardingthehealthinessofplant-basedalternatives(34%agree-ment).These results highlight the effectiveness of social media in influencing consumers desires and perceptions but also suggest a need to focus more on promoting the health aspects of plant-based alternatives through these platforms in a more credible manner.48Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter V:Social medias influence on European attitudes and purchase behavioursMEDIA TRUST(TOTAL SAMPLE,PERCENTAGES)Q31:Ingeneral,howmuchdoyoutrustinformationaboutplant-basedfoodproductsfrom”|Singlechoice|Total=7500|While levels of trust in digital information is gen-erally fairly low,respondents trust informationfrom health-and nutrition-society websites the most,with 45%finding them very or fairly trustful.This underscores the authoritythatthesespecialisedplatformshaveintheeyesofconsumerswhoareseekingreliableinsightsinto their food choices.Search engines such as Google closely followed,with 44eming them very or fairly trustful,highlighting their roles as quick and easy sources of informa-tion.On the other hand,online forums such as Reddit and online blogs ranked as less reliable sources,with only around 25%of consumers thinking they are truthful.This demonstrates the cautious approach that consumers have towardsuser-generatedcontent.On average,over 50%of Europeans do not appear to consider information about plant-based alternatives communicated in mainstream online media to be particularly trustworthy.49Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter V:Social medias influence on European attitudes and purchase behavioursMEDIA TRUST(BY COUNTRY,PERCENTAGES)Q31:In general,how much do you trust information about plant-based food products from”|Single choice|Total=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750Whenlookingattheindividualcountries,Romania,Poland,Spain,andItalyindicatethehighestlevelsoftrustinmostofthelistedmediasources,whiletheUKandAustriashowagenerallylowertrendoftrust.Thistrendisintriguing,asthecountrieswheretrustisthehighesttendtohavelowerlevelsofflexitarianismandmeatreduction.50Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter V:Social medias influence on European attitudes and purchase behavioursEuropean opinion on food policy actionsQ22:Inyouropinion,howmuchdoyouagreeordisagreewiththefollowingstatementsregardingtheactionsthatpolicymakersshouldtake?Ibelievethatmygovernmentshould|Singlechoice|Totalagreementlevel(Stronglyagree Somewhatagree Agree)|Total=7500|Chapter VIOPINIONS ON POLICY(TOTAL SAMPLE,PERCENTAGES)Transparency certifications:The majorityofrespondents(63%)wouldliketoseeheight-ened transparency in product certifications(e.g.,environment,health,welfare,organic,etc.),thusallowingformoreinformedpurchase and consumption choices.No taxes on healthy and sustainable foods:62%ofrespondentswanttaxestoberemoved on food that has a positive impact on the environment and health.Plant-based catering in public institutions:57%of respondents support calls for policies thatpromoteplant-basedmealsinschools,hospitals,andpublicevents.Supporting farmers:59%of respondentssupport measures that encourage farmers to maketheswitchtoplant-basedagriculture.Collective action:54%ofconsumerssupport programsaimedatreducingmeatanddairyconsumption.Clarity in transition:Nearlyhalfofconsumers(49%)areinfavourofusingconventionalmeatordairyterms,thusmakingthetransitiontoalternative options easier.Levelling the playing field:45%ofrespondents supportcuttingproducersubsidiesformeatand dairy products,which would create amoreequitablefoodsectorthatisnotbiasedtowardsanimal-basedfoodproduction.In conclusion,there is a clear and resoundingresponsefromavastmajorityofEuropeancon-sumersforpolicymakerstosupporttheshiftofEuropesfoodsysteminamoresustainableandhealthydirection.51Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VI:European opinion food policy actionsOPINIONS ON POLICY-BY COUNTRY 2023Q22:Inyouropinion,howmuchdoyouagreeordisagreewiththefollowingstatementsregardingtheactionsthatpolicymakersshouldtake?Ibelievethatmygovernmentshould|Singlechoice|Totalagreementlevel(Stronglyagree Somewhatagree Agree)|Total=7500|Austrian=750|Denmarkn=750|Francen=750|Germanyn=750|Italyn=750|Netherlandsn=750|Polandn=750|Romanian=750|Spainn=750|UKn=750Looking at individual countries,Italy,Spain,and the UK have the highest number of consumers who strongly desire the implementation of various policy actions.Giventhatthedesireforpolicyactionsrelatedtoplant-baseddietsdoesnotalwaysaligndirectlywithanexplicitlystatedintentiontoreducemeatconsumption,it seems that consumers are more open to policies that discourage general meat consumption than they are to reducing their personal level of meat consumption.Theymightsupportpolicyactionsbecausetheysupportthepromotionofplant-basedoptionswithoutnecessarilymakingtheconnectiontoreducedmeatintake.All of this means that the transition to healthier and more sustainable diets involves more than just consumer intentions and actions.InordertocreateamoresustainablefoodsysteminEurope,itisvitalthatthealternative-proteinsectorreceivesupportandinvestment.Governmentpoliciesandcollectiveeffortsareessentialtofacilitatingthenecessaryshifttowardsamoreplant-basedfuture.52Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VI:European opinion food policy actionsConclusion and final recommendationsChapter VIIThissecondwaveoftheSmartProteinconsumerresearchrevealsanimportantandongoingtransfor-mationinEuropeandietaryhabits.The results demonstrate a growing trend among consumers,who are increasingly motivated to reduce their meat consumption and,at the same time,increase their acceptance for plant-based foods.Still,factorsliketaste,healthbenefits,andafforda-bilitycontinuetoplaysignificantrolesinthetransitiontowardsnewdietaryhabits.Furthermore,our research findings underscore the need for a collective effort to succeed in the transformation of the food system.This involves proactive steps not only driven by consumers motivation,but also by policymakers and businesses.Thisentailsincreasingtheavailabilityandvarietyofplant-basedproductsandaligningproductofferingswithconsumerexpectations,totakingconcreteactionsfromapolicyleveltosupporttheinevitabletransformationofEuropesfoodsystem.13 key outcomes51%of European meat consumers claim to have reduced their yearly meat intake,up from 46%in 2021.Germany(59%),France(57%),and Italy(59%)lead the way in terms of meat reduction.On average,45%of Europeans claim to have adhered to a non-meat-based dietary lifestyle(flexitarian,vegan&vegetarian)for more than 2 years.53Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VII:Conclusions and final recommendations62%of European respondents identify as omnivores,with Poland leading at 76%.27%identify as flexitarians,with Germany leading at 40%.5%identify as vegetarians,with the UK leading at 7%.4%identify as pescatarians,with Denmark leading at 5%.3%identify as vegans,with Austria leading at 5%.Flexitarians are once again the second-largest consumer group in the EU.Interest in flexitarian dietary lifestyles transcends generational boundaries,with 29%of Boomers,27%of Gen X,28%of Millennials,and 26%of Gen Z identifying as flexitarians.The primary motivation for reducing meat con-sumption is health(47%),particularly in Romania and Italy.Followed by environmental concerns(29%),predominantly in Denmark and the Nether-lands,and animal welfare(26%),mainly in Germany and the Netherlands.57%of Europeans claim to consume legumes at least once a week,with 53%expressing a desire to consume them even more frequently,making legumes as the favourite plant-based food for European consumers.Perceptions around price(38%)and taste(30%)continue to be the main barriers for many European consumers when choosing plant-based alternatives.54Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VII:Conclusions and final recommendationsOn average,28%of Europeans claim to consume at least one plant-based food alternative at least once a week,up from 21%in 2021.Plant-based milk is the most consumed plant-based alternative,with 36%of Europeans consuming it at least once a week.46%of Europeans report an increase in their trust in plant-based alternatives compared to two years ago.More than 54%of con-sumers claim to know that eating plant-based alterna-tives is good for their health or the environment.On average,over 50%of Europeans do not appear to consider information about plant-based alternatives communicated in mainstream online media to be particularly trustworthy.Cultivated meats seem to be trusted the most by omnivores and men.Denmark ranks the highest in the acceptance of cultivated protein sources,followed by Germany and Spain.63%of consumers say they would like to see increased standards for transparency in product certifications,while 62%would like taxes to be zero-rated for foods that have a positive impact on health and the environment.55Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VII:Conclusions and final recommendationsKey recommendations for the futureTargeted meat reduction campaigns:Educational campaigns are urgently needed toaddressthefrequencyandconsequencesofexcessivemeatconsumption.Thisresearchhigh-lights a substantial disparity between individuals perceptions and their actual behaviors.Therefore,sucheducationiscrucial,notonlyduetotheadverseimpactsofexcessivemeatconsumptiononhealthandtheenvironment,butalsoforempoweringindividualstomakeinformeddietarychoices.Moreover,inalignmentwithestablishedguidelinesfromtheEuro-peanCommission,institutionscanserveasrolemodelsthroughtheirprocurementpractices.This may involve prioritising plant-based meals in government offices,schools,hospitals,andworkplaces,orattheveryleast,limitingmeat-basedmealstothreeperweek.Thisapproachwillnotonlyencouragehealthierdietarychoicesbutalsocontributetothenormalisationofreduced meat content in meals.Move from adoption to sustained commitment:With 51%of European meat consumers claimingtohavedecreasedtheiryearlymeatintake,andhealthcontinuingtobeasignificantdrivingforce,itiscrucialforpublichealthcampaignstohighlightthelong-termadvantagesoftransitioningtoaplant-baseddiet.Thismessageshouldresonateacrossalldemographics,regardless of age,gender,or location.Additionally,it is time for stakeholders in the food industrytoenhancestrategiesfortheirplant-basedalternatives,includingimprovingproductquality,enhancingflavour,andreducingpricestomakeplant-basedproductsmoreaffordableforthemainstreammarket.Thisopportunityisevenmoreevidentforplant-basedalterna-tivesas29%ofEuropeansalreadyclaimtoincorporatesomeformofplant-basedalternativeintotheirweeklyroutines,and40%expressadesiretofurtherincreasetheirconsumption.Furthermore,acrucialaspectistoguaranteethatpopularplant-basedfoodproductswithinrelevantcategoriesareavailableandaccessibleatpreferredpointsofpurchaseorconsump-tion.ThesuccessoftheapproachadoptedinGermanyoffersaninspiringmodel.56Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VIII:Conclusion and final recommendationsGo beyond plant-based alternatives in order to achieve mainstream acceptance of plant-based lifestyles:Unlockingthefullpotentialoflegumesandlegume-basedfoodsinEurope is crucial,even alongside the rising popularity of plant-based alternatives.To harness thispotential,itsimportanttodevelopandpromoteawidevarietyofdeliciousandeasy-to-followlegume-basedrecipesthatcatertovaryingtastesanddietarypreferences.Additionally,offeroptionsforincorporatinglegumesintoeverydaymeals,suchasbreakfastsmoothies,snacks,anddesserts,asameansofexpandingtheirusagebeyondtraditionalrecipes.Theseeffortswillnotonlypromotetheconsumptionoflegumesbutalsocontributetoamoresustainableand health-conscious food culture in Europe.Transparency as a competitive advantage:Simplyclaimingthataproductisenvironmentallyfriendlyorhealthyisnolongersufficient.Consumersnowseekclearevidenceandcertifiedmeasurementsthatdemonstrateimprovedtraceabilityandingredientorigintracking.Thesemeasuresareessentialforbuildinghigherlevelsofconsumertrust.Inaddition,whenrelyingonthesubstantialimpactofsocialmediaonconsumerbehaviour,itiscrucialtoensurethatsharedcontentoriginatesfromreputablesourcesand,whennecessary,isbackedbycrediblecertification.Itsimportanttobecautious,asmisinformationonsocialmediacanpotentiallyharmthereputationandtrustworthinessofplant-basedproductsingeneral.Advancing the cultivated-protein revolution:Companiesthatareworkingon cultivated products should capitalise on the increasing acceptability of culti-vatedproteinbyhighlightingitsbenefitsandpotentialtoattractawiderconsumer base for animal-free foods.Promotingcultivated meat aligns with the goalsof sustainability,animal welfare,foodsecurity,and public health.Further-more,cultivatedmeatholdspromiseasa solution to meet consumers high taste expectations for alternative proteins.This is especially true for less-engagedsegmentswithplant-basedalternatives,such as omnivores and men.57Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VIII:Conclusion and final recommendationsThe transition to healthier and more sustainable diets involves more than just consumer intentions and actions:Leverage the substantial impact of social media on consumer behaviourbyinitiatingwell-designedcampaignsandinfluencercollaborationsthatprominently featureplant-baseddishes,whichcanigniteinterestandenthusiasminaproduct.However,it is crucial to ensure that shared content originates from reputable sources and,when necessary,isbackedbycrediblecertificationitsnotalluptotheinfluencerstodecide.Itsimportanttobecautious,asmisinformationonsocialmediacanpotentiallyharmthe reputation and trustworthiness of plant-based products in general.For example,alwaysincludescience-basedfactsinsocialmediaposts.58Evolving appetites:an in-depth look at European attitudes towards plant-based eatingChapter VIII:Conclusion and final recommendationsImprintEuropeanSurveyonreadinesstoadoptaplant-basedlifestyle.Afollow-uptothe2021surveyreportWhatConsumersWantis published by ProVeg International as part of the SmartProteinproject.SmartProteinhasreceivedfundingfromtheEUresearchandinnovationprogrammeHorizon2020,undergrant agreement No 862957.Date of publication:November2023Research,editorial,and project team:ElsaGuadarrama,AjsaSpahic,PalomaNosten,MathildeAlexandre,IlonaFaber,JoachimSchouteten,ListiaRini,MichaelBomFrst,HansdeSteurArt director:SophieGunterThis study was conducted by ProVeg International inpartnership with Innova Market Insights,the University ofCopenhagen,andGhentUniversity.Anyreproductionofthispublication,inpartorinfull,mustmentionitstitleandthepublisherasthecopyrightholder.Recommended citation format:EuropeanSurveyonreadinesstoadoptaplant-basedlifestyle.TheEuropeanCommissionisnotresponsibleforanyusethatmaybemadeoftheinformationitcontains.Smart Protein Project Smart Protein is a 10-million,EU-funded project that seekstodevelopanewgenerationoffoodsthatarecost-effective,resource-efficient,and nutritious.Alternative-protein sources,such as legumes and side streams from beer and pastaproduction,areusedtogenerateplant-basedingredientsaswellasplant-basedmeat,seafood,dairyproducts,andbakedgoods.ProVeg International ProVeg International is a food awareness organisationworking to transform the global food system by replacing50%ofanimal-basedproductswithplant-basedandculturedalternativesby2040.ProVeg works with decision-making bodies,companies,investors,themedia,andthegeneralpublictohelptheworldtransitiontoasocietyandeconomythatarelessreliantonanimal agriculture and more sustainable for all humans,animals,andourplanet.ProVeghasofficesintwelvecountriesacrossfourcontinentsand is active around the world.ProVeg has permanentobserverstatuswiththeUNFCCC,specialconsultativestatuswithECOSOC,isaccreditedforUNEA,andhasreceivedtheUnitedNationsMomentumforChangeAward.University of Copenhagen TheUniversityofCopenhagenwasfoundedin1479bytheDanishkingChristian1,andtodayhas37,500studentsand9,000employeesofwhomsome5,000areresearchersandrevenuesofDKK9.1billion.NineNobelPrizeshavebeenawardedtoresearchersattheUniversity.DepartmentofFoodScience(UCPHFOOD)carriesoutresearchand education that helps solving the global challenges inrelationtofoodwithfocusonthedevelopmentofnewfoodsandwaysofproducingthem.Usingsophisticatedequipment,FutureConsumerLab(FCL)investigatesthedeterminantsofconsumertransitiontowardsgreenerfoodchoices,sensorypreferences,andevaluatestheeffectivenessofbehaviouralinterventions supporting this transition.Ghent University Ghent University is a top-100 university,founded in 1817,and one of the major universities in Belgium,with morethan47,000studentsand15,000employees.The11facultiesoffermorethan200coursesandconductin-depthresearchwithinawiderangeofscientificdomains.TheDepartmentof Agricultural Economics studies social and socio-economic aspectsrelatedtofood,agricultureandthesustainableuseofnaturalresources.Theresearchconductedbythedivisionof Agri-food Marketing and Chain Management typicallyconsist of multi-disciplinary collaborations,by which weaimtovalorizeinnovations/technologiesandprovidesocio-economicevidencetothequadruplehelix(chainactorsfromfarmtofork;policymakers;researchers;andthecommunity).ProVeg e.V.,GenthinerStrae48,10785BerlinEmail:infosmartproteinproject.eu
2023-12-22
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