There are relatively few products from European-based brands that reach Chinese consumers before making the same journey to shoppers in the US. Magnum bars, an ice cream bar wrapped in thick chocolate shells, were one of them. Brought to China in 1996 by Anglo-Dutch conglomerate Unilever, they have long been marketed as a premium product. But a recent exposé on the nutritional composition of the treat has chilled some of its appeal in China, in one of Unilever’s fastest-growing markets.
The crisis began with a weibo post by an unknown netizen, who claimed that the ingredients used in the Magnums sold in China were inferior to those sold internationally. “The chocolate coating is likely to be made of the same cocoa butter from Belgium. However, the ice cream inside is largely formulated with vegetable oil (which hasn’t been through the hydrogenation process) and a small amount of milk powder,” the netizen alleged, adding that the bars sold outside China are made of genuine milk. He supported his claims with screenshots of various nutrition labels.
The revelations immediately caused a stir in a market where Magnum bars are generally sold at higher prices compared to a lot of local brands. While ice cream from Yili and Mengniu can be purchased for as little as Rmb2-3, Magnum bars can cost at least Rmb10. “Magnum is usually the most expensive ice cream you can find at convenience stores. I can’t believe its ingredients are similar to other low-end brands,” lamented another netizen on social media.
Boycotts of foreign brands by consumers have more typically been triggered by perceived slights of China’s national interests or demeaning mentions of Chinese culture. H&M, the NBA, the Korean supermarket chain Lotte Group, the fashion house Dolce & Gabbana and the farmers of the Norwegian salmon industry are just a few of the businesses to run into furious flak with consumers, often with frightening financial consequences.
Another longstanding suspicion from shoppers is that they are being treated differently to customers in other markets, perhaps feeding from the same perception that some of the foreign brands can’t curtail a tendency to look down upon Chinese consumers.
As a result the hashtag “Magnum allegedly uses different ingredients for China market” had soon pulled in 75.8 million views on Sina Weibo – terrible PR for Unilever, the European food and personal care giant that recorded double-digit growth in ice cream sales in China for the first half of this year.
In response to the consumer backlash Magnum issued a statement two days later, acknowledging that it used vegetable fat in its ice cream. However, it explained that the choice was driven by environmental reasons. “To make sustainable living a norm, we have been exploring plant-based options. While striving for great flavour for our ice cream, we would also wish to lower the impact on the environment,” it said, noting that it has been rolling out more plant-based products in a new offering targeting vegans since May.
Consumers weren’t placated, preferring to be outraged by the brand’s behaviour. “What Magnum is doing is really despicable! Don’t they know that such greenwashing isn’t fashionable? It would be easier if they just apologise,” thundered another weibo user.
“Clearly they think that the Chinese are dumb,” noted another and the controversy soon prompted another hashtag “Magnum practices double standards” that accumulated another 44.5 million views.
In a poll of 20,000 netizens, 95% said they would never buy a Magnum bar again.
Although it is not uncommon to see products under the same brand name differ in content in China to other markets due to regulatory differences, most consumers have assumed that they were getting the vegetable oil version of the ice cream because it reduces the production costs for Unilever. Even factoring in additives such as artificial flavours, the local costs of using vegetable fats is still about a third of those of animal fats, according to International Finance News, a state media agency.
The brouhaha comes at a time when foreign ice cream brands are facing fiercer competition. Häagen-Dazs, Magnum and Nestlé have dominated the high-end segment for some time, accounting for 26% of total ice cream sales in China, said Sohu, a local news portal.
But the rise of homegrown brands since 2015 has altered the landscape, with the newcomers often catering better to fast-changing local tastes.
During last November’s Singles’ Day (see WiC518) Shanghai’s Chicecream (see WiC514) displaced Häagen-Dazs as the top-selling ice cream brand over the shopping bonanza. Best known for having ice cream popsicles shaped like the roof tiles in traditional Chinese architecture, Chicecream has prospered by impressing Gen-Zers (see WiC550). Known locally as Zhongxuegao (a homophone for “Chinese ice cream”), it offers a wide array of new flavours (e.g. a jasmine tea bar) that play to homegrown sensibilities. Chicecream has even been setting new trends at the top of the market, with prices that extend to Rmb66 or more.
Even its Belgian chocolate ice cream retails for Rmb32 per piece, the Shanghai Daily notes, or “enough money to buy half a kilo of pork short ribs”.
Investors have also taken notice: the company completed a Series A financing round of Rmb200 million ($30 million) led by Genesis Capital early this year.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.