The ice cream market has seen increasing competition between
international brands and leading local makers - and this year might
be a turning point for both players.
Mengniu from Inner Mongolia has seen a rapidly growing market
share due to its successful sponsorship of Super Girl, based on the
hit American Idol show, launched by Central China's Hunan TV last
year.
At the beginning of the year the world's largest ice cream brand
Wall's started the Magnum 2007 Blog Competition. The foreign
company's quick reaction and ability to learn has impressed the
market.
Traditional flavors, such as chocolate, fruity and beans will
continue to be popular this year, but new products, designed for
freshness or low calories, will become the summer's new
attraction.
Nestle announced in March that it will develop more than 10
kinds of ice cream products.
Foreign companies all find China too big and the market too
diversified. Dealing with China is like operating in several
different markets. Although Wall's has spared no effort in
promoting its brand in China, losses are still unavoidable. This
year might be a turning point for the company after six consecutive
years in the red.
Wall's is now more and more familiar with the Chinese market.
Its strategy is developing markets around China, such as Vietnam
and Thailand and making neighboring countries influence China. It
signed a three-year contract with the convenience store chain
7-Eleven in Thailand for the exclusive sale of its products. The
company now has a 50 percent market share in Thailand, with Nestle
in the second spot with a share of about 10 percent.
As a global leader, Nestle makes use of the company's global
strategy and resources. It plans to sell ice cream at retail prices
of 10 to 20 yuan at Starbucks outlets, with long-term plans to
reach out through other channels such as airplane catering,
corporate activities and even food for those under medical
care.
Competition for outlets
China's ice cream market was chaotic for many years. Yili and
Mengniu are the only domestic producers that have the potential to
compete against foreign rivals, while there are a large number of
local brands that "are busy for one season, and enjoy the whole
year".
Meanwhile, an increasing number of ice cream shops have opened
in recent years, with the concept of offering freshly scooped ice
cream and do-it-yourself combinations. Some have attracted a large
number of young and fashionable consumers.
With many small brands eliminated last year, the premium ice
cream market will be a hot spot for competition. Having outlets
means gaining an advantage in the battle.
Wall's, after many years in operation, has penetrated to
multi-level markets. It is reported that Wall's already leads the
market in large parts of the country. Owning distribution channels
is Wall's advantage.
However, Wall's refrigerated retail display cases did not turn
out to be satisfactory as they also carried various other brands of
ice cream.
This shows that domestic ice cream brands still have
opportunities. China's ice cream makers, although experiencing
rapid development in recent years started from a poor base, so
there are potential risks in rapid growth.
Strengthening their advantages and enhancing market scale are
important for them.
During a time of globalization, Chinese firms should enhance
their advantages in cost, price, distribution channels and
geographic resources.
For example, Yili and Mengniu have the potential to develop
high-end products due to their leading positions in the country's
dairy market.
They can build their own ice cream stores. They can actively
develop local markets and retail terminals. By owning outlets in
hotels, airports, pubs and clubs, Yili and Mengniu have a large
room to develop.
Competition for retail outlets is even fiercer in peak season.
The commodities displayed on today's shelves can easily be replaced
by other brands tomorrow.
So, local brands, are you prepared for this years' battle?
The author is the deputy general-manager of Hubei Yuehua
Pharmaceutical Co Ltd.
(China Daily July 19 2007)?
