Kraft takes nuanced approach in China

05 January 2010

BEIJING: Kraft, the US food giant, is taking a nuanced approach in China, as it seeks to drive growth in what is regarded as an increasingly vital market.

During the last four years, the company has invested some $200 million (€139.0m; £123.9m) in the Asia Pacific region as a whole.

Oreo cookies are one of its best-performing brands in China at present, although they were initially seen as being overly expensive and too sweet for local tastes.

Having reformulated the product in 2005, Oreo's market share has grown rapidly, reaching 7.3% for the year to September 2009, up by around a third on an annual basis.

Figures from ACNielsen suggest Kraft receives 22% of the $1.6 billion spent on cookies in the world's most populous nation each year, treble the total of Tingyi, its nearest rival.

Alongside introducing brand extensions like wafers, "soft cakes" and strawberry crème variants, the multinational food maker has built a new research and development centre focusing on this area.

It has also launched a new cookie range, Jai-Gai – which translates as "good calcium" – in the country, costing 1.5 yuan a pack, and which offer the same amount of calcium as three glasses of milk.

Sanjay Khosla, president of Kraft's international arm, said "we view China as a market that has taught us how to focus, how to differentiate and how to innovate."

Tang, the powdered orange beverage, is another key part of the organisation's portfolio in the rapidly-emerging economy, but it too has faced obstacles in establishing a strong position.

"The local business team found that children in China think water is boring, while at the same time mothers were concerned about getting their children to drink enough water," said Khosla.

However, while "there was clearly an opportunity here", there was also a need to educate consumers used to tea and other warm drinks that the ideal way to enjoy Tang was at a lower temperature.

"We found that many in China drink Tang hot, rather than cold. So we have developed in-store promotions around this," said Khosla.

More broadly, the differences between the various regions across China are demonstrated by the fact that Ritz crackers have proved popular in Beijing, but have made less of a mark in Guangzhou thus far.
"There are also nuances in consumer preferences regarding flavor, texture and pack sizes," Khosla added.

"In Shanghai consumers like bulk-size packages, whereas in Beijing there is a distinct preference for smaller-size formats."

Data sourced from Forbes; additional content by Warc staff