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Mengniu improves the Chinese diet, adding healthier, higher quality foods

Mengniu improves the Chinese diet, adding healthier, higher quality foods

Dairy leader intends to pursue this mission outside of China

David Wang

President Assistant

Mengniu Group

Mengniu Group is a leading manufacturer and distributer of quality dairy products in China, with Mengniu as its core brand. Mengniu’s diversified product range includes liquid milk products (such as UHT milk, milk beverages and yogurt), ice cream, milk formula and other dairy products (such as cheese).

THE CHINA MARKET AND CONSUMERS

What is the core purpose of Mengniu, and how does it relate to quality and premiumization?

When most businesses talk about premiumization, their motivation is higher price, better profits. At Mengniu we want more and more consumers to have a healthier, more nutritious diet. We want to have affordable pricing with a premium image. In terms of the premium image, we are thinking about several things. First, our involvement with FIFA and other well-known international sports organizations definitely will improve the Mengniu image. Second, going abroad is a milestone, which also proves that the quality of Mengniu dairy can stand the test of various countries’ standards. Last, but not least, is the product itself. To many consumers, all milk seems the same. But we still want to invest a lot in R&D to ensure quality and provide consumers with greater choice. For example, in China we are getting our milk mainly from high-quality milk sources. We try our best, even incurring higher costs, to ensure we have a better milk. From a short-term standpoint this approach may not helpful, but for the longer term, we believe sooner or later the consumer will appreciate the difference.

Mengniu may be the most digitalized food and beverage brand in China. Mengniu can even track milk in a container back to the cow that produced it. How will digitization continue to improve your products, operations, and marketing? 

We believe that we need data to better understand and improve the consumer journey, from the time people encounter the brand message, and at each touchpoint until they decide to buy our product. And we want their feedback. We want to know why they purchased our brand, or why they chose another brand. Why did they decided to drink more milk or less milk? Why did they buy here, not there? What kind of promotion, advertising copy, or celebrity impressed them? Is the Olympics appealing to them or not?

Will digitization help Mengniu remain relevant to young consumers who are growing in influence?

Yes. For the older generation, as I said, milk is just milk. But young people have other ideas. Older people just like to purchase and go. Young people like to comment on the purchase and share the experience online. To understand this behavior requires data and analytics that leads to insight. This is our challenge. We believe that we need understand the young generation. We believe that we need to be in touch with young people to gain the consumer insight necessary to guide our entire business, including our ideas, product development, design, marketing communication, and celebrity endorsements.

What initiatives is Mengniu planning to better understand and serve young consumers?

We are rebuilding and reforming our structure a little bit to ensure the presence of more and more young people in decision-making positions, especially in digital channels. This is the biggest marketing challenge for long-established companies like Mengniu or even other famous companies. Most marketing decision-makers have long and valuable experience, but there is a generation gap.

How important is the e-commerce channel for reaching young people?

E-commerce is a very important channel, and its importance will increase, especially with 5G. Then e-commerce will be an opportunity to communicate with speed and engaging content, where you can easily go to the e-commerce store and experience our products with VR or AR. We expect 5G to open more opportunities to communicate with young people, who are mostly living life online.

GOING GLOBAL

What is the key brand challenge for Mengniu when expanding globally?

We face the challenge of associating the new brands under the Mengniu umbrella. Unlike a global brand that uses the same brand in all countries, the dairy business is historically local. Different countries have different brands, which reduces economies of scale and adds the cost and the complication of building and sustaining multiple brands. That’s why we want to create at least regional mega-brands, if not global brands, to increase marketing efficiency. With the internet, we believe that communication among countries, especially with young people will become very easy.

What is the most important business priority going abroad?

The most important priority is people. We are—and will stay—a Chinese company. But we cannot rely only on Chinese employees. You need local people to really understand local consumers. However, you still need to have many Chinese workers to ensure that local teams understand the Mengniu brand values and working process and can interpret the Mengniu brand for the local market. Success requires a balance of Chinese and local people working together.

How can the overseas experience of Chinese brands like Huawei help Mengniu accelerate its global expansion?

We need to think carefully about the product and category requirements, which vary by country, and setting up the supply chain. Mistakes require changes that waste a lot of time, effort, and money. We really need to become a local company, like Huawei has done. Huawei is a global company but actually you can see that Huawei is learning how do business differently according to the countries where it competes. Sustaining a global business over time, despite the inevitable challenges, requires being seen as a local company.

What else will you do to achieve localization? Will you open factories in each country? How will you staff the operations?

We will open a local factory when exporting from China does not make commercial sense because of distance. But it’s not necessary to have a factory in all countries. We could serve the whole Southeast Asian market from a factory in Indonesia, for example. Staffing depends on several considerations. In terms of staffing, we generally adhere to the concept of local staff, with variation by country or region. In Oceania, for example, the dairy industry is very mature and full of talent at all levels, so we can rely more on local staff. In Indonesia, the foundation of the dairy industry is relatively weak, and there is a relative shortage of talent, so we will send more managers and technicians in the early stage. But at the same time, we also train local staff, especially young staff, in various ways. Before the opening of the factory in Indonesia, recent graduates from local universities visited Mengniu's factory in China for internships and training, and then returned to Indonesia to devote themselves to their respective jobs.

Is it easier to expand in Asia because of the cultural similarities, or are the challenges the same regardless where you expand?

We are going to Southeast Asia and Oceania first, but Huawei went to Europe first and to Africa. Honestly, I don’t think one option is easier; it’s all challenging. In Africa, you may find less local competition, but local income is lower, the dairy industry supply chain is difficult, and the currency fluctuates. In Europe, you will encounter tough local competitors that sometimes have been established for over 100 years. And people are loyal to local brands. But the supply chain and currency are more reliable. So, there are always opportunities and challenges. Our strategy is to choose areas that can better coordinate with existing businesses.

Do you have plans to expand to Europe or North America?

Not at this moment.  Our plan is to establish the Southeast Asian market first, then expand further into parts of the Middle East and Africa. Logistics influences our expansion priorities. Logistics is a difficult barrier. Transporting milk from country to country is time consuming and costly. We want to develop new products that are relatively easy to transport. We are pretty reliant on the supply chain. We are not like a mobile phone company that ships phones from China to Iceland. Costly research and investment are required regardless of the size country we’re considering. Consequently, we typically prefer to enter larger markets where the ROI is greater.

Do you think that introducing overseas brands to China will help ease residual concerns about food safety and improve the Chinese public’s perception of dairy quality?

We don’t think we have a quality issue, but overseas dairy brands enjoy the perception of higher quality among some Chinese consumers.  It needs long-term efforts to eliminate these gaps in consumer perception. And mastering more high-quality overseas resources and products will help us to continuously enhance consumer trust in Chinese dairy brands.

BRAND BUILDING

How will your brand building activities evolve to sustain Mengniu’s great consumer acceptance and fully develop the brand’s future potential?

We rely on celebrities, especially to reach young people. Women are our primary consumer target, and they love to watch entertainment programming. These initiatives are important for raising awareness. However, they are not enough. They do not communicate about product and what the brand stands for. Compared with some of the leading global brands, we could do a better job communicating about both the product advantages and the brand spirit. Therefore, we are also involved with FIFA and other global sports events because we believe that these global sports events are more consistent with our company and brand image. Milk products contribute to having a healthy body, which is necessary to be active in sports. We will strengthen the brand link with sports while we also continue our celebrity and entertainment involvement.

How do you leverage the strong equity of Mengniu, the parent brand, to benefit the individual sub-brands?

We began with the Mengniu brand and later added Milk Deluxe, a premium brand. Then we added a few more brands. However, we did not consider the relationship between each sub-brand and the parent brand, Mengniu. But the market has changed. In the future we definitely need to consider how all the brands in the Mengniu portfolio fit together. We may need to slightly modify the positioning of certain individual brands to better fit with the corporate image. To be fair, we are in the process of creating this coherent portfolio under the umbrella brand.

How do you plan to continue building the Mengniu brand and communicating its meaning in China and to the rest of the world?

In the future, we need to increase the meaning of Mengniu, the parent brand. We need to consider how Mengniu respects the environment and in what other way it contributes to the improvement of society. We need to advance health education, especially for children. Childhood education is important and brand relevant. It is an area in which China can improve relative to some Western countries. In China, we’re facing increased childhood obesity, perhaps because parents, remembering times of material scarcity, encourage their children to eat more than they need. We are focused on educating children to eat a healthy, balanced diet. Also, we want to introduce some of the highest-quality overseas foods to China. We are in the process of acquiring a new brand in Australia. Then we may bring this product to Indonesia, Singapore, or Thailand. We intend to help improve the diet of people outside of China by bringing high-quality products to many countries.

Based on your extensive marketing experience, what key insights would you share about building strong brands in China?

There must be a balance of gaining attention and communicating about the brand. But I see a lot of brands just go to the first part, gaining consumer attention. When one top celebrity represents 10 or 20 brands, the message doesn’t always sound credible. Obviously, it should not be that way. It should not be one celebrity fits all brands. Brands need to think about not only gaining consumer attention, but also about communicating about products and the core spirit of the brand.