In an age when digital networks connect almost everyone and everything all over the world, could one just label oneself as an 'internationalised' (国际化) company if one's products are sold on these networks? And what is the difference between that and a 'globalised' (全球化) company?
That was a rudimentary question on the minds of outbound Chinese brands speaking last week at the Food and Beverage Innovation Forum 2018 (FBIF) held in Shanghai, mulling their responses to calls by the Chinese authorities to 'step out' (走出去).
An internationalised company is one that is manufacturing in a certain place and selling the produce in other parts of the world, said Edward Zhu (朱演铭, pictured below), CEO and co-founder of CHIC Group, a Chinese exporter of processed fruit. China has nearly 20,000 exporters of food and agricultural products to more than 180 markets every year, according to the Certification and Accreditation Administration. This situation mirrors China's OEM (original equipment manufacturer) days, before electronics manufacturers started to build their own brands.
The corresponding word, 'globalised', has a much more ambitious meaning. Such a company is physically located in every market possible, where factories are set up, where teams are hired, where marketing and branding are meeting needs of previously unsatisfied, hungry consumers.
Semantics aside, the definitions form the basis for strategy, said Zhu. Get it wrong, and you'll be miles away from any semblance of globalisation. "It's not just about brazenly venturing out to Europe and selling your products to Europeans, which is hard to do."
There are few domestic Chinese food and beverage brands seen on the global, mainstream, stage, barring those serving the overseas Chinese diaspora. Why? Most raw materials in China are more expensive than those of foreign countries, while agricultural technology is less advanced, pointed out Zhou Li (周力), secretary of the board at Nongfu Spring, a Chinese bottled water brand. "We have to spend a long time making up for this shortfall. Once we do, the globalisation of Chinese food enterprises will naturally come."
Zhu disagreed. The first necessity during globalisation is to draw upon local food resources and then use Chinese manufacturing prowess on them, he asserted. "You can't globalise China's agriculture."
In fact, you can't even control it sometimes. In Zhu's case, a blueberry nearly broke his career, when he planted 50 acres of the finest varieties of the fruit in the Jinan area of Shandong. "Do you know what happened? The next morning, all the blueberry bushes were gone. They disappeared overnight."
What went missing was the "mother species" of all blueberries, acquired for a "huge" price by Zhu's CHIC Group. Whoever got their grubby hands on this species will be able to grow better blueberries and develop their rival fruit-orchard businesses. Little wonder. "Agriculture has no borders or fences in China, unlike industrial sites that are walled in."
First defend the home market
Out of Interbrand's 2017 ranking, the top three—Apple, Google, Microsoft—are arguably all products of industrialised output, from supplying software to manufacturing mobile phones that set the agenda for both consumers and businesses. In the fourth place is (finally) a food conglomerate, but it's not Chinese. It's America's Coca-Cola.
"None of the top brands on Interbrand are doing badly at home. All these brands are either first or second in their own country," reminded Wah-Hui Chu (朱华煦), founder of Innovative F&B Limited, a Hong Kong-based consultancy and investment firm specialising in the food and beverage sector. Quaker, Master Kong, PepsiCo, HJ Heinz, and Monsanto were all food-related employers on Chu's very transnational CV.
"Before we even want to go abroad, we should first do well in the market we are most familiar with: China. Otherwise, if we run outside, our base is compromised and we will be overwhelmed," said Chu. "Why do we let multinational corporations 'run in' while we 'run out'? They have already established strong foundations in their home markets to then 'attack' China as the last frontier."
"Why do we let multinational corporations 'run in' while we 'run out'? They have already established strong foundations in their home markets to then 'attack' China as the last frontier."
While a mobile phone brand can sell the same portable worldwide with minor adaptions on operating system language and an aeroplane, whether Boeing or Airbus, can travel anywhere after painting the livery to suit the airline, a food brand must be very local in its product offerings. Food preferences and tastes differ from country to country, and even within 100-kilometre circumferences of the same country, stated Mayank Trivedi, president and CEO of Nestlé Xiamen Yinlu Foods, a 60%-owned subsidiary of Nestlé S.A.
One of Yinlu's flagship products is its Eight Treasures Porridge, a convenient rice alternative containing wheat, glutinous rice, green beans, peanuts, speckled kidney beans, red beans, wolfberry, longan, collectively referred to as "eight treasures". However, it's a food concept lost on non-Chinese eaters, plus Nestlé didn't try to woo foreign consumers over to this sometimes sweet, sometimes savoury congee.
Yoghurt is a successful food category in China, with local dairy giants Mengniu and Wahaha launching drinkable, red-date flavoured versions that are quite different to what Western consumers are used to. "If we were to take this Chinese yoghurt in a Tetra Pak and sell it in Switzerland, will it work? We cannot cut and paste successes from China to overseas markets," said Trivedi.
What Trivedi frets about is a matter of adapting to local taste buds that any consumer insights and research agency will be able to help solve. The biggest bottleneck currently, may still be the upstream end of the mainland agricultural industry. Numerous pint-sized plots owned by individual growers and farmers make it tough for food brands to coordinate big orders or ensure consistent quality. The next problem is how the food production cycle is too long, currently. This casts doubt on the financial sustainability of any Chinese food brand aspiring to go global. "Everyone sees the end-products. They do not see the process of farming more than a decade ago," said Nongfu Spring's Zhou.
Take oranges, for example, the best ones come from Spain or Florida, and not from China, declared CHIC's Zhu. If he were to hypothetically export a new Chinese juice brand, the ingredient [Chinese-grown oranges] will neither be the finest, nor produced with the lowest costs.
To be a globalised food brand of Chinese origin is a very difficult task, added Chu. "Because you are going against the wind. We have a saying in politics that 'weak countries have no diplomacy to speak of'." Weak brands are also the same.