Unilever subsidiary Wall’s has made deep inroads into the Chinese market, largely thanks to a low-price strategy.
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But in one area, Guangzhou, it failed to invest sufficient resources, with the result that archrival Nestlé has got its feet firmly under the table by acquiring market leader Five Sheep.
“A pricing war has turned the ice-cream industry into a lousy one. The former brand-name market has become a market for generic products. There is no money to be made. But, of course, we can blame no one but ourselves,” said Peter Ter-Kulve, chairman of Wall’s (China) Co., who went to Guangzhou recently.
According to a report on China Online, Ter-Kulye is shifting away from a low-margin pricing strategy that saw products that retailed at less than 2 yuan (US$0.24) account for 20% of total output.
Wall’s entered China in 1994 and has achieved market leadership in most areas, with the notable exception of Guangzhou, where it plays second fiddle to Nestlé’s Five Sheep. The company is now shifting its attention to Guangzhou and moving from an expansion stage to a “brand-building phase,” says Ter-Kulye.
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By GlobalDataThe group says it will up its advertising and brand promotion budget by 50% this year, from a level that is already the highest in the industry. Last year Wall’s spent 100m yuan on product promotion.
It is possible that Wall’s will attempt to grow via acquisition, although many of the once 4,000 ice-cream factories in China have already been swallowed up or have gone out of business. As in other emerging markets, the Chinese ice-cream sector is fast becoming a game for a small number of multinationals and leading domestic players.
