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)?