Home>News Center>Bizchina>Business

Who will become ice cream king?
By Wang Ying (China Business Weekly)
Updated: 2005-03-20 08:40

Competition in China's ice cream sector is turning red hot, as market players are unveiling their bold expansion plans, even though the cold, windy weather of winter continues to linger.

International and domestic brands are well armed with various production, marketing and distribution tactics for the looming war that will determine the nation's 2005 ice cream king.

The odds-on favourites to sccop up the title as top ice cream firm in China are major market players Yili, Walls, Mengniu, Nestle or Meadow Gold. Those are the top five ice cream brands in terms of market share in China.

They hold a combined 57per -cent share of the Chinese mainland's ice cream market, indicates a report released last year by Sinomonitor International, an independent Sino-Japanese market monitoring company.

More specifically, foreign giants Walls, Nestle and Meadow Gold hold a combined 30 per cent of the market, while domestic brands Mengniu and Yili hold 27 per cent.

Few changes are expected this year, as the major players are well established in the market, industry insiders said.

But heated competition, among the rivals covetously eveying the creamy profits, could make the difference this year.

 "Ice cream and yogurt are the two most lucrative sectors in the dairy industry," said Dou Ming, a senior researcher with the Dairy Association of China (DAC).

"The easy storage of ice cream products makes it easier for firms to enlarge their presence in the huge mainland's market."

Nestle, the Swedish ice cream giant, surprised the market last month, when it introduced up to 29 new ice cream products, with the aim of reaching consumers of all ages.

"We expect to expand the availability on every front of the market for our ice cream, and to attract new consumers with our low-priced products as well as take-home items, which are specially designed for kids, teens and adults," said Ken Donaldson, head of Nestle's ice cream business unit for China.

Nestle's new ice cream products for this year range in price from 1 yuan (12 US cents) to 19 yuan (US$2.30).

To facilitate sales and grab greater market share, Nestle plans to consolidate its distribution networks in North China, said Zhang Rong, regional manager of the company's ice cream division in North China.

"We will prove ourselves in the second- and third-tier cities of the country, which also boast great potential for the ice cream market," Zhang said.

To date, the firm has focused its presence in China's major cities, such as Beijing, Shanghai and Guangzhou.

The growing purchasing power in China's market, resulting from the country's zooming economic development, promises an amazing host of business opportunities for the ice cream market in small and medium-sized cities, Zhang said.

Yili, China's largest ice cream vendor, who poses a major threat to Nestle, will strengthen its production capacity throughout the country, a Yili employee, surnamed Zhao, told China Business Weekly.

Yili wants to ensure it responds more quickly to consumers' needs, the employee said.

"We have almost 10 production bases across the nation," Zhao said. "This year, we will strengthen our production facilities in more places.

"We expect to reduce transportation costs and tailor our products towards various regions of the huge market."

Zhao hinted the firm will spend more on marketing, but refused to provide a detailed outline of the company's plans.

Mengniu, another major domestic player in China's ice cream market, plans to increase its investments this year, said an industry insider, who has closely watched the company.

A Mengniu official, responsible for marketing strategies, told China Business Weekly the firm this year will rev up efforts to expand its market share.

The official refused to provide exact figures.

Given China's huge market potential, a growing number of foreign firms are trying to make inroads in the country's ice cream sector.

Dou said a South Korean ice cream giant is negotiating, with a local ice cream maker in Hangzhou, capital of East China's Zhejiang Province, a possible corporate merger.

Dou has participated in those talks.

Several Chinese dairy firms are also jumping into the ice cream sector.

Sanlu Company, in North China's Hebei Province, began producing ice cream three years ago. The firm is a well-known brand, especially its milk powder products, in China's dairy industry.

Sanlu's profits topped 400 million yuan (US$48 million) last year.

Its ice cream production currently accounts for a small proportion of its profit mix, and its products are largely targetted at small and medium-sized cities and rural villages within the province.

Sanlu plans to sharpen its competitiveness by fortifying its sales network, improving technology and enhancing marketing, said a company official surnamed Miao.

The firm will pump more than 10 million yuan (US$1.2 million) into the ice cream sector, Miao said.

Sanlu expects to concentrate its strengths in the ice cream markets in north and Central China.

"In the current situation, we have advantages in the second- and third-tier markets, by fully knowing the demands of the consumers," Miao said. "At the same time, it is a wise way for us to ward off competition from the big brands, such as Nestle and Yili in the large cities."

The war within the ice cream sector is marked by the free market and the fierce competition between firms, both domestic and overseas, analysts said.

"Domestic ice cream makers have obtained state-of-the-art technologies through international co-operation, and their equipment in the newly established factories are cutting-edge," Dou said.

"Those foreign companies have achieved an equal footing within the mainland's market, through their good knowledge of the local market from years of accumulated experiences and research," he added.

  Story Tools  
  Related Stories  
Ice cream war