Nestle has been forced to revise its marketing strategy for the
Chinese ice cream market for the second year running after failing
to wrestle a sufficient market share in the low-priced product
market from domestic producers in 2006, Monday's Economic
Observer reports.
Multinational brands like Nestle and Walls turned to low-end
products in 2006 by switching from selling ice creams worth 2-3
yuan to ice creams retailing for 1-1.5 yuan in a bid to gain a
bigger market share.
However, the foreign brands were unable to beat the major
domestic brands like Mengniu and Yili in the low-price range as
they had less powerful distribution networks, failed to cater to
local people's tastes and came up against hikes in the prices of
raw materials.
"As we don't have an edge in low-priced products, we will turn
to develop products with a higher added value under our global
developing system," Dong Haoqin, operation director of the ice
cream division for Nestle Greater China told the Economic
Observer.
It's generally acknowledged in China that low-end ice creams are
priced below one yuan (around US$0.13), with mid-priced ice creams
at around two yuan and high-end products priced above two yuan.
About 70 percent to 80 percent of the sales in 2006 came from
products priced in the 1-1.5 yuan range.
The production cost of ice creams was pushed higher by the
soaring sugar price, which reached 5,800 yuan per ton from the
rock-bottom 2,500 yuan, and a near 20-percent increase in the price
of milk.
Yili raked in around 1.3 billion yuan from sales of ice creams
in the first half of 2006, while Mengniu earned about one billion
yuan during the same period. Yet, the figure for Nestle in China
was not revealed.
Nestle has introduced a large number of new ice creams priced
above two yuan for 2007.
(Xinhua News Agency March 13, 2007)