China is an attractive market for global food and beverage brands, however it has become extremely competitive to the extent that they need to partner with locals to better tackling the market.
Recent activities saw big names like General Mills selling its Häagen-Dazs shops in mainland China to a Chinese investor group that includes Ningji, a fast-growing local tea chain. General Mills will keep the brand and continue supplying ice cream through retail and food-service channels, but the shops are owned by locals. In another move, Starbucks sold a majority stake in its China retail operations to Boyu Capital while retaining a minority stake and control of the brand. The partnership will help Starbucks to enter a new growth period driven by ‘hyper-localization’ through locally relevant drinks, food, merchandise, digital engagement, and store environments.
These foreign brands are not leaving China but they are forced to become more Chinese through ownership structures, pricing, menus, store formats, and work culture.
China is no longer a market where global consumer brands can rely on foreign cachet, premium pricing, and imported management playbooks. Local rivals are faster, cheaper, more digital, and often better at reading shoppers who are still spending, but more cautiously. Chinese consumers have more options whether in terms of variety or prices. There seems to be no boundary to the level of creativity in marketing. As an example, China’s Luckin Coffee has turned coffee into an app-driven, coupon-heavy, delivery-friendly daily purchase, forcing Starbucks to defend its position and eventually find a local partner to protect its market share.
For Western brands, the winning model in China has departed away from consolidated ownership to licensing, joint ventures and partnership. At the same time, this comes with challenges as brands seek to protect their product quality and integrity while giving their partners enough freedom to compete in the huge market.
