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.

Start your day with The Independent, sign up for daily news emails
Sport
Super BowlAfter Katy Perry madness it's back to The Independent's live coverage of Super Bowl 49!
News
See what Twitter had to say about the first half of the Super Bowl
News
people
News
people
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
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

Tradewind Recruitment: PMLD Teacher

Negotiable: Tradewind Recruitment: PMLD Teacher A specialist primary school i...

Recruitment Genius: Online Media Sales Trainee

£15000 - £30000 per annum: Recruitment Genius: Now our rapidly expanding and A...

Recruitment Genius: Public House Manager / Management Couples

£15000 - £20000 per annum: Recruitment Genius: Are you passionate about great ...

Recruitment Genius: Production Planner

£20000 - £30000 per annum: Recruitment Genius: This fast growing reinforcing s...

Day In a Page

The super-rich now live in their own Elysium - they breathe better air, and eat better food, when they're not making beans on toast for their kids

The super-rich now live in their own Elysium

They breathe better air, eat better food, take better medicine
A generation of dropouts failed by colleges

Dropout generation failed by colleges

£800m a year wasted on students who quit courses before they graduate
Entering civilian life 'can be like going into the jungle' for returning soldiers

Homeless Veterans appeal

Entering civilian life can be like going into the jungle
Sam Taylor-Johnson: Woman on top

Sam Taylor-Johnson: Woman on top

Fifty Shades of Grey director on bringing the hit to the screen
Shazam! Story of the $1bn 'what's that song?' app

Shazam: Story of the $1bn 'what's that song?' app

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch