CEO insights: Nestlé China subsidiaries share twin strategies for boosting business growth

At the closed-door Grand CEO Meeting held at the Food and Beverage Innovation Forum (FBIF) 2019 in Hangzhou, Mayank Trivedi, CEO of Xiamen Yinlu Foods Group and David Zhang, CEO of Shanghai Totole Foods, outlined the different strategies for each company.

For Yinlu Foods, the goal is to help Nestlé localise and meet China’s needs, while that of Totole is to drive Nestlé’s sales by pushing its products from China into the global stage.

Totole is a condiment and sauce maker, more notably the largest chicken stock manufacturer in the world. It has been nurturing its overseas markets for 20 years.

Xiamen Yinlu Foods, on the other hand, manufactures plant-based beverages, porridge, and later added the Nescafe range after it was acquired.

“Success in local markets cannot be based on the global brands, but needs to be localised.​

“Thus we need to partner and work with local firms to expand our international footprint. Thus, the role of Xiamen Yinlu Foods, is not to become global, that is not the aim, but to balance Nestlé’s portfolio in China,”​ Trivedi said.

Whereas for Totole, its purpose is to enter new fields. In the past 20 over years, its chicken stock products have entered into 30 countries, and the US is its biggest market, even exceeding the home ground China.

The Chinese diaspora community in the US is its core supporter, contributing hundreds of million each year.

Caveat

Both speakers cautioned that entering new markets could be a daunting move and advised firms to be prudent and assess its objectives of doing so before making any moves.

“(Chinese firms need to ask themselves) what is the purpose of going overseas since the Chinese market is already so big.​

“If they were to go, they would need to be prepared for challenges. It is not easy to understand the overseas consumers’ food habits and culture. Even if you understand the demands, it is difficult to generate good consumer insights, and the routes to market are different,”​ Trivedi said.

He believed that the solution would lie in acquiring local talent, stressing that “the biggest killer would be to do a wholesale cut and paste of strategies.”​

Zhang echoed the viewpoint, emphasising that it was “definitely not easy”​ to foray into new markets.

“It is not easy, definitely not easy (to go global). Just like what Mayank has said, many brands are performing overseas because we have Chinese diaspora living in countries such as the US and Europe. These products are performing well in China, which then prompted the diaspora to look for these brands.​

“Coca-Cola from the US is a global brand present in many places, and has earned a place in consumers’ hearts. (However), there is almost no such equivalent for Chinese brands, or rather, there are very few,”​ he said.

Some of these challenges of stepping into foreign grounds, he explained, arose from different regulatory requirements, language barriers, and even different time zones.

“The product formulation for the export and domestic markets are different. For example, we are not allowed to add chicken meat in products exported to the US, and so, you will need to think of a solution.​

“Every country has its own regulatory boundaries. Even if this issue has been addressed, the change in taste would result in the need for consumer education. This is in fact, a very tormenting process.”​

Reputation​

Ultimately, food safety reputation is a key issue that Chinese firms must address for Chinese brands to be well-accepted overseas, since the country has suffered huge blows to its food safety reputation for years.

In this case, both Trivedi and Zhang agreed that collective effort was needed to rebuild confidence in Chinese food brands.

“You need to build up your own reputation, this is not something that others could give it to you. The reputation of the Chinese food brands will only improve if all companies do the same (in improving food safety and quality),”​ Zhang said in response to a question raised from the audience.

Trivedi echoed the viewpoint, adding that the averse attitude to Chinese food brands was not unique to the overseas audience, because the Chinese themselves also carried the same perception that local foods are bad.

On a positive note, he noted that some brands have managed to turn the tide, for instance, the indiscriminate import of overseas dairy has dropped.

He called for the industry to shoulder the “collective responsibility”​ of improving the country’s food safety reputation.