In 1874, just eight years after its founding, Nestle started selling condensed milk in China. It has since introduced Western products such as Nescafe, ice cream and KitKat bars. While those haven’t sold badly, the Swiss company is now asking the Chinese what they really want.
Nestle has formed alliances with three Chinese food and beverage producers in the past three years and has set up research centers to improve local comestibles such as peanut milk, spicy Sichuan sauces, and congee, a rice porridge typically eaten for breakfast.
Rivals often modify existing products for China, such as PepsiCo Inc. (PEP)’s potato chips with Asian flavorings and Kraft Foods Inc.’s green tea Oreos. Nestle goes further by creating new offerings to win over consumers deep into the hinterland.
“Nestle takes the view that all food tastes are local,” said Jon Cox, head of Swiss research at Kepler Capital Markets. “You can’t necessarily tweak a product and assume it’ll have the same success in other countries.”
With plans to double its research capacity in China, Nestle will soon have the biggest R&D infrastructure of any food company in the country, according to Cox. China is poised to become the Swiss company’s No. 2 market, after the U.S. Nestle expects revenue from China to exceed $5.3 billion this year as rising living standards boost consumption…
Nestle realized several years ago there was untapped potential in China’s coffee market because most Chinese find Western coffee too bitter. The company spent more than a year working with consumer panels in Beijing to find an appealing brew. Panels of retirees and housewives met up to three times a day in a testing room. Food scientists across the corridor used their input to develop Smoovlatte, a cold milk-based coffee that’s less bitter.
“Nobody in Switzerland, and probably not even a foreigner based in China, will understand that,” said Nestle China head Roland Decorvet. “In China, you need Chinese people to develop products for the local market.”
Which all makes the greatest sense in the world to me. Bravo!