China’s ice cream is growing – and, with per capita consumption low, has room to expand further. Peter Peverelli takes a look.
The oldest story about ice cream originates in China where people reportedly mixed flour, camphor and buffalo milk with ice.
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By GlobalDataIn spite of this, ice cream as we know it only took off in China in the 1980s. Ice pops were sold in various flavours since during the first three decades of the People’s Republic, but ice cream was mainly available in Western (Russian) styled restaurants.
However, once Chinese consumers woke up to the frosty treat, they did so with great enthusiasm.
According to data published in China Market Regulation News – a publication of the State Administration for Market Regulation – in March, the country’s ice cream production has been increasing with more that 10% annually for several years, exceeding five million metric tonnes in 2018.
That said, the current Chinese per capita consumption is around 2.5 litres a year, some way from the 9.8 litres reported for their US counterparts. However, with incomes in China still rising, there is potential for growth – but manufacturers and brand owners need to understand the particular characteristics of the market.
Different consumption patterns
Chinese consumption habits differ from what we are used to in the West. In China, ice cream is something you enjoy on the spot where you buy it, preferably in an ice cream parlour located in a buzzling shopping mall. This is partly due to the late development of a reliable cold chain in China.
This is changing but the dramatic increase of online shopping in China has created a related issue: how to deliver ice cream to the consumer. When Chinese consumers purchase ice cream in a bricks-and-mortar supermarket, it is typically for consumption that day or a single item for children to eat right after checking out. I have a geographically and demographically broad network in China, but can’t name any acquaintance with a regular supply of ice cream in their fridge.
What are the leading brands?
These consumption trends are also reflected in how ice-cream brands are ranked in China.
Ronghong Internet Services operates the China Top 10 site, where you can find the ten currently most popular products of a huge variety of consumer goods. This ranking is not based on financial figures like turnover or profit. They have been composed on the basis of online feedback by consumers.
In the table below, Ronghong’s data is compared with a top ten compiled from sales through major online seller Jingdong.
In the Ronghong data, only brands are mentioned, not specific products. Six of these are international brands. Of the four domestic brands, three belong to top dairy companies. Only Zhongjie 1946 is a dedicated, domestic ice-cream maker.
The Jingdong figures also include four domestic brands, though a different set (Chicecream, Yili, Bright and Madie’er). Poonmanee is brand from Thailand. Mengniu, Nestlé, Zhongjie and Dairy Queen do not appear in the Jingdong list, so are apparently less sold online.
The quarterly list of top ice-cream brands in physical supermarkets compiled by the site National Supermarket Chain Information (statistics of March 2019, published in the China Food Newspaper of 13/6/2019) shows again quite different top ten lists by region. Here are some figures covering the major Chinese cities of Beijing and Shanghai.
The number of brands is significantly smaller than in the those of Ronghong and Jingdong. Bud’s and Yili are leading, followed by Wall’s products. Shanghai consumers buy considerably more local products than those in Beijing. Chinese consumers who buy ice cream in supermarkets prefer larger packaging.
Russian challenge
With the improving economic relations between Beijing and Moscow, it is no surprise Russian ice cream has been rapidly gaining popularity in China. President Putin brought a few boxes of ice cream as a gift for his Chinese counterpart Xi Jinping during the 2016 G20 Summit in Hangzhou.
What Chinese consumers like about Russian products is that they are reportedly made from milk from the Urals and contain no artificial additives. The Russian export of ice cream to China in 2017 was worth US$2.7m – but still up 13% on the year.
Three generic strategies
Any global player will realise the potential of the Chinese market. The key question is how to reach the shelves of Chinese supermarkets. I see three different strategies, represented by Häagen-Dazs, Wall’s and Bud’s, a US-based brand licensed in China to Beijing Faxi Ice Cream Co.
Häagen-Dazs’ strategy in China has been to sell through ice-cream parlours but consumers can also buy the brand’s products in supermarkets.
This strategy works in the sense that Häagen-Dazs is, per the Ronghong data, China’s third most-popular ice cream and fifth on Jingdong’s list. It does not, however, turn up in the top ten of ice cream brands sold through physical supermarkets in Beijing and Shanghai. Baskin-Robbins and Dairy Queen are also following this strategy.
The strategy of Unilever-owned Wall’s is to aim for the retail channel but to actively increase brand awareness through various activities. Emphasis is put on the top-end products, which suits the Chinese perception of ice cream as a luxury product.
Wall’s has opened DIY experience shops in shopping centres in major Chinese cities. You can pimp your Magnum with various sauces, and sprinkle it with chunks of different colours and flavours. The Beijing and Shanghai data above indicate this strategy is proving effective.
Bud’s strategy is getting as many products in as many retail outlets as possible with the least marketing expenditure. I recall that Bud’s suddenly appeared in China and that I kept encountering Bud’s products at various places, without seeing any advertisements. This suits another aspect of Chinese cognition: what is available everywhere must be good. This strategy has been effective again for Bud’s. Domestic brands are also following this strategy.
Choose strategy carefully
China is the promised land for ice cream producers. However, new entrants need to carefully select a strategy. It will not be easy for a market follower to duplicate Bud’s success. And there is fierce competition among the chains of ice-cream parlours.
Newcomers could introduce the unique properties of their products, e.g. by pop-up stands in popular shopping malls. They could then place a consignment of those products in supermarkets in the same malls, so interested consumers can buy them immediately.
Not one brand owner in China can yet say they’ve got the ice-cream market licked.
