Nestle plans to launch a new line of baby formula in China this year under an ex...
LONDON/BEIJING - Nestle plans to launch a new line of baby formula in China this year under an existing brand, targeted at smaller cities, as the world’s largest packaged food company tries to lengthen its lead in the world’s biggest baby milk market.
But the baby milk units of Nestle, France’s Danone and Reckitt Benckiser enjoyed years of prosperity mainly just targeting parents in big cities like Shanghai and Beijing, banking on their appetite for ever-pricier premium formulas and foreign brands following a domestic 2008 tainted milk scandal. She is not alone. Some 55 percent of respondents in a survey by the User Research Institute of BabyTree, China’s leading parenting website operator, said domestic brands better understood Chinese consumers.
That balance of international brand trust and local tailoring is what Nestle is aiming for with its new line. The major metropolises of Beijing, Shanghai, Guangzhou and Shenzhen are traditionally seen as Tier 1 cities, with the following tiers made up of smaller, fast-growing cities that still boast of millions of inhabitants.
Sub-brands are a common tactic used by marketers to take advantage of the cachet of a premium brand while selling something more affordable. In China, they are often used in lower-tier cities or rural areas, along with smaller package sizes, to make products that are more affordable. At the same time, investments by domestic players in premium brands and special formulations are helping to overcome safety concerns, said analysts at Citi Research. They predict Chinese brands could reach 53 percent market share by 2022, up from 40 percent in 2015. That is because in an overall market expected to grow about 7 percent, they see domestic brands growing 11 percent and foreign brands growing only 4 percent.
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