Nestle moves to Congee from KitKat for Chinese palates

 

Geneva

In 1874, just eight years after its founding, Nestle started selling condensed milk in China. It has since introduced Western products such as Nescafe, ice cream and KitKat bars. While those haven't sold badly, the Swiss company is now asking the Chinese what they really want.

Nestle has formed alliances with three Chinese food and beverage producers in the past three years and has set up research centers to improve local comestibles such as peanut milk, spicy Sichuan sauces, and congee, a rice porridge typically eaten for breakfast.

Rivals often modify existing products for China, such as PepsiCo's potato chips with Asian flavorings and Kraft Foods's green tea Oreos. Nestle goes further by creating new offerings to win over consumers deep into the hinterland.

"Nestle takes the view that all food tastes are local," said Jon Cox, head of Swiss research at Kepler Capital Markets. "You can't necessarily tweak a product and assume it'll have the same success in other countries."

With plans to double its research capacity in China, Nestle will soon have the biggest R&D infrastructure of any food company in the country, according to Cox. China is poised to become the Swiss company's No. 2 market, after the United States. Nestle expects revenue from China to exceed 5 billion Swiss francs ($5.3 billion) this year as rising living standards boost consumption.

Since 2010, Nestle has formed a bottled water venture with Yunnan Dashan Drinks and bought controlling stakes in candy maker Hsu Fu Chi International and Yinlu Foods Group, producer of congee and a peanut-milk beverage. Through the alliances, Nestle has tripled its China headcount to 47,000 employees. With 31 factories across the country, 90 percent of the products it sells in China are made there.

Nestle plans to build R&D centers at facilities owned by Hsu Fu Chi and Yinlu, where researchers will focus on ready-to- drink beverages and baked goods. The Swiss company already has a research center with Totole, a Chinese bouillon maker in Shanghai in which Nestle has an 80 percent stake. Another facility in Beijing focuses on nutrition and food technology.

The labs are "closer to the consumer, closer to the raw materials and closer to the marketing and are therefore better able to respond to consumer needs much faster," said Rebecca Lian, Nestle's head of R&D in China.

Nestle realized several years ago there was untapped potential in China's coffee market because most Chinese find Western coffee too bitter. The company spent more than a year working with consumer panels in Beijing to find an appealing brew. Panels of retirees and housewives met up to three times a day in a testing room. Food scientists across the corridor used their input to develop Smoovlatte, a cold milk-based coffee that's less bitter.

"Nobody in Switzerland, and probably not even a foreigner based in China, will understand that," said Nestle China head Roland Decorvet. "In China, you need Chinese people to develop products for the local market."

That's important for Nestle because its primary rivals in the country are domestic companies with a deep understanding of local tastes. Nine of the top 10 packaged food producers are Chinese, led by China Mengniu Dairy Co., according to Euromonitor International.

"The local players are getting stronger and have better access to the market," said Sanjay Dhiri, a partner at Bain & Co. in London. "They're extremely strong in the traditional trade such as local stores," whereas foreigners have focused on supermarkets and other more modern outlets.

Nestle, tied with Bright Food Group Co. as the ninth- biggest packaged food company in China, has market share of 1.7 percent, up from 1 percent in 2010, the second-fastest rate of expansion in the industry, according to Euromonitor. Mars Inc., at No. 11 the next-biggest foreign player, has seen its share stagnate over the same period.

Yinlu had 750 million francs in 2010 revenue and has seen sales grow tenfold over the past decade. The company's offerings appeal to lower-income consumers in China where the population has shifted to urban areas from the countryside as workers chase economic growth.

"A lot of people just don't have the time these days to prepare food themselves," said Yu Meiling, who runs a small grocery on the outskirts of the central Chinese city of Wuhan crowded with multicolored boxes of liquor, snacks, and sodas. Among them are cans of Yinlu's congee with a plastic spoon inside the lid so workers, students and others on the go can eat it without access to a kitchen.

PepsiCo's approach differs from Nestle's in that it has largely adapted existing products to Chinese tastes. The company, which this month opened a research center in Shanghai, its largest such facility outside North America, seeks to fuse flavors from various cultures, said Shank Hu, PepsiCo's China R&D chief.

Among the offerings: Quaker oatmeal with red dates, wolfberry and edible white fungus as well as Lay's potato chips with fish-head soup flavoring. There's even one variety of crisps based on a recipe for chicken cooked in Pepsi.

"We told the chef, 'Hey, give us some fusion ideas. How do you get the best of the east and the west mixed together?'' Hu said. ''It has a very traditional taste, similar to Chinese- style stewed pork.''

 

— With assistance from Liza Lin in Shanghai.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Operations Manager

competitive: Progressive Recruitment: I am currently recruiting for an Operati...

Project Coordinator/Order Entry, Security Cleared

£100 - £110 per day + competitive: Orgtel: Project Coordinator/Order Entry Ham...

Senior Digital Marketing Executive

£35000 - £45000 Per Annum: Clearwater People Solutions Ltd: Our client based i...

Junior Developer- CSS, HMTL, Bootstrap

competitive: Progressive Recruitment: A leading company within the healthcare ...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz