China Consumer

Wanting a change

Can Want Want overcome its ‘mid-life crisis’?

Want-Want-w

Not wanted so much: canned milk

Want Want found its formula for marketing success early in China and didn’t vary it much after opening its first factory in Hunan in 1992. For decades the maker of rice crackers and canned fruit milk has festooned its products with the logo of a laughing boy – said to be a cartoon version of founder Tsai Eng-meng’s son.

The Taiwanese food group also rarely changed the format of its advertisements, which typically feature nothing else but kids enjoying the company’s snacks while shouting “Want Want” repeatedly.

Such TV commercials brain-washed a generation of young Chinese consumers. But the technique no longer looks to be working.

Indeed a lack of reinvention, say recent reports in Chinese media, is the main reason behind the brand’s slowing growth since 2014. “Like an old ox, middle-aged Want Want is exhausted,” financial magazine Caijing wrote in late June. Want Want’s annual sales revenue has steadily declined since it peaked at Rmb10.8 billion ($1.6 billion) in 2013, falling to a low of Rmb8 billion in 2017.

The decline has been reflected in Want Want’s share price. Its market value stood as high as HK$160 billion ($21 billion) in 2012, but it has roughly halved since then.

A symptom of mid-life crisis is a lack of new ideas. That said, in Want Want’s case it was not for an apparent lack of trying. In 2015, the company kicked off a rebranding strategy to target a new generation with offerings such as fruit jelly tubes, plum wine and energy drinks. It even came up with a snazzy social media campaign to show that how some of its earliest customers were still fans of Want Want’s products (one showed primary school teacher Li Ziming fondly recalling drinking its milk during his childhood).

At least 50 new products were launched in 2017 alone. But Chinese food industry analyst Zhu Danpeng told Caijing they were created “in a state of ignorance” and failed to grasp more modern consumers’ growing need for healthier food.

A Want Want employee told Sina News that a majority of the “new” products were simply existing items that were rebranded or had their packaging updated.

But perhaps a bigger problem: unlike domestic competitors, the company also provides fewer financial incentives for its regional distributors, a situation that has resulted in less local marketing exposure for Want Want’s new product launches in smaller cities.

The level of foreign and domestic competition has also greatly increased as have tastebuds over the years. Not traditionally used to taking dairy, Chinese consumers used to favour Want Want’s milk drink, largely made out of reconstituted milk – i.e. a mix of water, condensed milk and dehydrated whole milk solids.

But as increasingly health-conscious consumers recognise the benefits of drinking fresh milk and get accustomed to its taste through growing imports of foreign brands such as Nestle, demand for milk products with a creamier taste and less added sugar has also climbed in recent years.

And thanks to advancements in insulation technology and transport logistics, domestic brands such as state-backed Yili, Mengniu and Bright Dairy offer room temperature UHT milk and low-temperature pasteurised milk alternatives at competitive prices. The government is keen on the healthier option too. In May the State Council unveiled a plan to promote the local dairy industry and promote the drinking of fresh milk.

Want Want now wants a new start. It has even introduced a drastic change to its advertising strategy and has tried to depict young romance in its latest TV commercials. However, those ads were banned by state censors this month for provoking “misleading value orientation” among young people.

Still, not everyone is so pessimistic. On July 6, Chinese investment bank CICC noted in a research report that price hikes were spotted in at least 80% of sales outlets carrying Want Want items and noted that a further 20 new products were rolled out in the first half. CICC expects Want Want’s revenues to bounce back by about 5% in 2018 and is likewise bullish on the new e-commerce initiatives the group is making.

After years of declines perhaps the Taiwanese food group has finally grasped that the time for reinvention is now.


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