While there are tremendous growth opportunities for global brands in the Chinese consumer marketplace, to be successful in China, global brands must align with local Chinese culture and tastes. It is essential that multinational corporations understand the promise, the potential, and the complexity of China’s markets
In 2013, the market size of the biscuit and cookies market segment in China was estimated to be about 50.4 billion Yuan, or USD 8.3 billion. With 16% market share, Mondelez International lead this market segment with Oreo established as the country’s most popular cookie brand.
Kraft Foods, then the parent of Mondelez, launched Oreo in China in 1996. In 2012, Kraft Foods split into two distinct publicly traded companies: snack-food giant Mondelez International and the North American grocery business Kraft Foods Group. For most of its 100-year existence, Oreo has been America’s best-loved cookie, and today it is a global brand.
In 2006, however, the Oreo cookies business was a tiny $30 million business that was losing money. This was largely because executives in Kraft’s headquarters, near Chicago, expected to just drop the American sandwich cookie into the Chinese market and watch it fly off shelves. The US-parent had assumed that what made Oreo cookies successful in its home market would be a winning formula in other markets as well. Kraft Foods CEO Irene Rosenfeld admitted, “It was too sweet, too big and cost too much.” The tradition of twisting open Oreo cookies, licking the cream inside and then dunking it in milk before enjoying Oreo cookies was considered a “strangely American habit.” Kraft’s local Chinese leaders developed a regional concept—a wafer format in subtler flavors such as green-tea ice cream.
By Q1 2013, China is the second-largest Oreo market, a $600 million business growing 30% a year. Fortunes declined by Q4 in part because China’s appetite for the creme-filled sandwich cookie fell. Distributors had excess biscuit inventory and a general realization that cookies are not as healthier. Chinese consumers bore easily, so food makers need to innovate and introduce new brand to keep the market constantly hooked. Traditional techniques, such as changing the packaging often is not enough.
Recommended Reading: ‘China’s Super Consumers: What 1 Billion Customers Want and How to Sell it to Them’ by Savio Chan, Michael Zakkour narrates the underlying change in the nature of Chinese consumers and the way that they think about buying products and services.