Jenny Chan 陳詠欣
Sep 11, 2014

Nestle China: Simplicity and scale

ASIA's TOP 1000 BRANDS: Q&A with Paolo Mercado Head of Marketing & Consumer Communication, Nestle China about attracting and keeping consumer loyalty in this fast paced market.

Paolo Mercado
Paolo Mercado

What matters most about building your brand in China? 

Category growing leadership. Despite the slowdown in recent years, China is still a massive consumer market with tremendous opportunities. There are many brands competing for consumers' share of attention and share of wallet. At Nestle, we are leaders in categories such as coffee and adult milk powder. While these categories are relatively small, they have tremendous growth potential. But this will need sharper focus on a winning portfolio and greater investment that builds not only the brands, but also category consumption.

What are the unique characteristics of this market, and what is the profile of the local shopper Nestle most want to attract? 

The uniqueness of China is scale and speed. It is a very large market, equivalent in scale and complexity to doing pan-European marketing. Each region is different economically as well as culturally and one needs to understand and respect that. There are some brands, like Nescafe, that does well as a scale business with national distribution. There are others like ice cream and water where you need to play very close to your manufacturing base as it will not be profitable to ship products beyond a certain catchment area.

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Then there is speed. By speed I mean speed of consumer changing behavior.  There are categories that catch fire quickly, such as the soluble bubble teas, which also slow down as dramatically as they shot up. Or the dramatic dip in CNY gifting due to the anti-corruption drive of the government. Shopping behavior is also changing quickly. Look at the growth of e-commerce, especially for Infant Formula brands where the channel is now hitting above 25% of category sales. Brands are given little time to react to these waves of changes, as consumers tend to switch not in small trickles, but in tsunamis. 

What channels do you find most effective for getting your message out in China and why? 

Simplicity and scale. It is the first lesson I learned in China and it is still the one that works best. You first need to have a very clear idea of your target consumers' needs and then develop a very sharply focused portfolio to address their needs. If you have no more than 3 variants for one brand, that's great. If you have more than that, you will have difficulty managing focus in marketing budgets, media budgets, and messaging focus. If you have a sharp portfolio, then you can scale up.

Channel choices depend first on the consumer audience choice. Young urban China is most effectively reached through digital, especially Online TV, social and e-commerce. Senior citizens in 3rd or 4th tier cities, CCTV is still the most credible. Thus sharp target audience definition is necessary for getting to a focused media strategy where one can scale up investments.

How is China different from other APAC markets?

It is like saying "How different is the USA from Latin America?" It is a very different market altogether.

It is a scale market with a large domestic consumer base, high disposable income and digital sophistication and usage especially in key cities. China will have 750 Million netizens fully engaged in domestically built social, entertainment, search and e-commerce digital ecosystems. There is no market in the world that comes close to these domestic numbers.

It is a highly diverse market, with as much cultural differences within as the European Zone. The Beijingers & Cantonese are as different from each other as the Germans & the Spanish. 

Finally, it is both fast changing and everlasting. It is a paradox, but there are indeed counterbalancing yin-yang forces at play that as China hurtles forward to modernize, this modernization actually strengthens its rootedness and pride in their cultural heritage. My favorite example is always in entertainment. Modern blockbusters use the latest in special effects to retell immortal stories from the Monkey King, Journey to the West, or the legendary warriors of the Three Kingdoms. Jackie Chan devoted his last action film as a call to bring back the 12 Zodiac Head stolen by the British from the Summer Palace. On digital, the likes of Baidu, Tencent, Youku all do their bit to use digital as a means to preserve Chinese cultural heritage.

This is China. Modern, but respectful and reverent of tradition. Large, but fast and agile like a serpentine dragon. One nation, but as diverse as the different cuisines each region proudly represents.

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