The Amazing Success of Haagen-Dazs in Shanghai
Business Research Methods Date: December 6th 2010 The Amazing Success of Haagen-Dazs in Shanghai Haagen-Dazs ice cream, why is it so popular among Chinese people? The main purpose of this research is to understand the reason of Haagen-Dazs being so famous and popular in China, Haagen-Dazs’s success comes from how they managed to sell the Ice cream to the Chinese consumers, the brand is not selling just ice cream they are also selling luxury and status.
Some important elements for this research are to have knowledge about the ice cream market in China and also to know who is the competition for Haagen-Dazs in China. The competitions are brands that offer the same quality and same range of prices but that don’t offer an extra thing to the consumer. With the help of this information the point of this research will be proven: The success of Haagen-Dazs in Shanghai is more because of the status and luxury that the brand gives than for the product itself because Haagen-Dazs is seen in China as a place of luxury, a place to impress.
This research will begin with a very brief analysis of the ice cream market in China, followed by a small comparison of Haagen-Dazs with Cold Stone creamery, which is considered as his competition; to finish there will be an analysis of the participation of Haagen-Dazs in the Chinese market. 1. The Chinese ice cream market. China is a country that is changing rapidly, is emerging and taking a place in the world as a consumer society, each day there are new products, brands and companies appearing in the life of people in China (Farrell, Gersch and Stephenson).
In this occasion the topic is ice cream, some years ago it was considered as a very luxurious snack but nowadays with the increasing disposable income and big economic growth of the population the consumption of ice cream has become very popular (Farrell, Gersch and Stephenson). 1. 1 Ice cream in China. Ice cream is a product that has become very known and popular among Chinese consumers, everyday there is more people that likes ice cream and also there are more brands and options of ice cream to consume, In China the market is divided in four segments of ice cream: artisanal, frozen yogurt, impulse and take-home.
In 2009 the segment with the biggest market share was the impulse ice cream with 70. 1% of the market share, followed by the artisanal ice cream (18. 1%), then the take-home ice cream (11. 7%) and in the last place the frozen yogurt segment (0%) (“Ice Cream in China”). This numbers show that is more common for people in China to go to some restaurant or store to consume a scoop of ice cream rather than buying the ice cream and eating it at home.
According to an industry profile about ice cream in China done by Datamonitor in 2009 the market generated total revenue of $5. 6 billions, this represents an annual growth rate of 8. 6% for the period 2005-2009. A forecast says that in the period from 2009-20014 the growth of the ice cream market will increase a lot achieving a value $8. 6 billion, this growth in the market is related to the growth in the consumption of ice cream in the country. 1. 2 Ice cream consumption in China. The consumption of ice cream in china increased heavily the last twelve years.
A report from the China Marketing and Media Study database (Sinomonitor) showed that from 70,000 consumers between the ages of 15 to 64 years that were followed to know about their consumer behavior more than 73% of them ate ice cream during 2003 the year in which the report was done. The market experienced the highest growth time between 2005 and 2009; the market consumption increased 7. 3% in the period 2005-2009 reaching a total of 1. 5 billion liters in 2009, the market is expected to increase to 2 billion liters by the end of year 2014; this will represent a growth of 6. % for the period 2009-2014 (“Ice Cream in China”). The market will continue growing, everyday there are more customers and more consuming power for the middle class consumers (Farrell, Gersch and Stephenson), the ice cream market in China is full of brands and companies both national and international that compete for the customer’s attention. 1. 3 Companies that control the ice cream market in China. There are three main leading companies that have the biggest percentage of the Chinese ice cream market share, Inner Mongolia Yili Industrial Group Co. Ltd. , Unilever and Nestle (“Ice Cream in China”). There are other smaller companies and although they have influence in the market this is minimal, for example Hangzhou Wahaha Group Corporation, Baskin Robbins, Dairy Queen, Cold Stone Creamery, Haagen-Dazs and Swensons Ice Cream among others (“Research and Markets”). There are approximately 1. 3 billion people in China (The World Factbook, China) and it is becoming one of the largest ice cream markets on earth, the industry entered a period of rapid development since 2004 and the growth is oing to continue. There are many local and foreign brands competing in the market and selling different types of ice cream, consumers can find options for every taste and budget. This research will be focused mainly on Haagen-Dazs ice creams compared against its main competition in China Cold Stone Creamery, these two brands might not be the biggest actors in the Chinese ice cream market but they have managed to become popular and fashionable among Chinese consumers. 2. Competition.
Although there are many ice cream brands competing in the market there are only some that represent a direct competition against Haagen-Dazs, one of those is Cold Stone Creamery; in order to reach the main point of this research a comparison between these two brands will be done. 2. 1 Who is the competition? Cold Stone creamery is an American company dedicated to produce and sell ice cream, it was first established in Tempe, Arizona in 1988 (The Cold Stone Creamery Story).
The Cold Stone company expanded all around the United States in 1995, and then became an international company opening stores in Japan, Taiwan, South Korea, Thailand, Mexico, Qatar, Bahrain, Denmark and China (The Cold Stone Creamery Story). Although in Asia Cold Stone is not as popular as Haagen-Dazs it is still known as one of the franchises that’s growing really fast and it is considered as a competitor to Haagen-Dazs.
Cold Stone’s story started in China in November 2006 when the company reached an agreement with the President Chain Store Corp. to open 105 stores in China and 60 stores in Taiwan over the seven years after the opening of the first store (Clark, Jami). On April 26 2007 Cold Stone Creamery opened its first store in Shanghai and almost four years after the opening of the first store Cold Stone has opened 42 stores in China. 2. 2 A small comparison.
Although Cold Stone is relatively new in China the company has managed to enter the market and to make the Chinese population become their clients, the brand offers fresh ice cream made daily in the stores with ingredients of the best quality and also gives the client the opportunity to create their own ice cream with many flavors and toppings to choose, the stores in China also sell a variety of baked goods and different types of drinks. The location of the stores especially in Shanghai are not the most ashionable; most of them are small stands in the basements of big shopping malls like Raffles City near People’s Square and the Super Brand Mall in Lujiazui. In the other hand we find Haagen-Dazs a brand owned by General Mills, it is an American company created by two polish immigrants back in 1920, the brand entered China in 1996 (“Haagen-Dazs History”) and since that year it has gained popularity among the Chinese consumers, it has managed to maintain their customers and most important it has created an image that attracts more customers.
Like Cold Stone, Haagen-Dazs also offers ice cream made with the finest ingredients and they have many special ice cream creations at their stores that are known as Haagen-Dazs cafes. The locations of the Haagen-Dazs cafes are very fashionable, they are generally found in famous streets and important places. The stores are characterized by having a very big space, a lot of tables and comfy sofas to seat and enjoy the fancy treats that the brand offers; there are also well-trained waitresses to serve the customers like in a restaurant.
The price for a scoop of ice cream is similar in both brands, but the difference relays on Cold Stone offering creations with different ingredients while Haagen-Dazs offers a single flavor scoop of ice cream, the amount of ice cream received in Cold Stone is much bigger than the one received in Haagen-Dazs, hereby the price paid in Cold Stone gives more value to the money of the customer than the value given by Haagen-Dazs when it comes to quantity.
With this brief comparison between Haagen-Dazs and Cold Stone Creamery we can see that the quality of both products is really good and sometimes the price paid for a scoop of ice cream in Haagen-Dazs might be a little too much, but this might allow to prove the point of the research, Haagen-Dazs more than selling ice cream sells status and luxury for the people who consumes their products. 3. Haagen-Dazs.
Haagen-Dazs is an ice cream brand originally from the United States of America and it is owned by the company General Mills, is a well-known and popular ice cream franchise in the world (“Haagen-Dazs History”). In 1996 Haagen-Dazs ice cream began operations in China using two main distribution channels: supermarkets/small stores as a take-home ice cream and in their fancy cafes located all around China (“Haagen-Dazs History”). 3. 1 Entering the Chinese market.
Haagen-Dazs entered China in 1996 as a non-franchising wholly foreign-owned enterprise, the first store was established in Nanjing Road in Shanghai, the brand was so successful that by the year 2004 the 34th shop was opened in China; the company opens on average a new store every month, there are also more than 2,500 Haagen-Dazs freezers in different supermarkets and small stores, but the main sells of Haagen-Dazs come from the product consumed at their fancy cafes (“Haagen-Dazs in China”).
When Haagen-Dazs first started in China nobody tough it was going to succeed because is expensive and very difficult to distribute the brand faced some challenges while setting up in China like training staff, obtaining fresh milk and logistics, but almost 14 years after its first appearance there are 80 cafes in China’s main cities like Shanghai, Beijing, Hangzhou, Shenzhen and Guangzhou (“Positioning Pleasure”).
Haagen-Dazs cafes in China are created around the adult experience, what the brand wanted to create was a place for young adults to feel comfortable in their free time. The location of the stores is chosen very carefully because they must be in fashionable spots. (“Hagen-Dazs in China”). 3. 2 Looking for a target market. When Haagen-Dazs ice cream entered China the brand focused completely on creating a product for the Chinese people, they never intend to create a place for foreign people to go.
Haagen-Dazs is considered a very luxurious and important brand worldwide so the target market that the brand was looking for in China was mainly young professionals from the upper-middle class with a disposable income that were interested in a way of living that involve the consumption of expensive and fashionable brands (“Haagen-Dazs in China”). Chinese people have no problem with the high prices of Haagen-Dazs because it is sells to them no only ice cream, it also sells fashion and indulgence, it is considered as a food and fashion brand (“Positioning Pleasure”). . 3 Positioning in the Chinese market. Haagen-Dazs conquered the Chinese market by creating an image of luxury and giving status to the Chinese people that was able to consume there. Everything in Haagen-Dazs is stylish from the very well trained staff that serves the customers to the dishes used to serve the ice cream which are imported from England (“Positioning Pleasure”). The cafes are full even when the weather is cold, there is eople everyday of the week but the days with more customers are the weekends. Haagen-Dazs has worked really hard to please the Chinese consumer, it has created special products for them, there are some exclusive ice cream flavors like green tea, lychee and red bean, some treats for the traditional holidays like Moon cakes and things that are closer to the Chinese culture and customs like a special ice cream creation that resembles to hot pot a Chinese traditional meal (“Haagen-Dazs in China”).
The brand has also created a VIP club with more than 50,000 registered customers, this club gives special benefits to the customers, they receive newsletters with information and news of the brand and also emails with announcement and promotions. (“Positioning Pleasure”). Thanks to al this things the brand has positioned itself in the Chinese market, creating a large group of consumers and getting more on the road.
Is a brand that has managed to make history in China selling not only high quality ice cream but also selling a luxurious and fashionable lifestyle. Conclusion. With the information gathered it can be concluded that Haagen-Dazs’s success in China does not come entirely for the product that they sell, it comes from the interest of Chinese people for foreign brands and mainly for the status that they gain for being able to purchase something that has a very good name and is considered to be fashionable.
After making a comparison between Haagen-Dazs and Cold Stone it was proved that Haagen-Dazs in fact is a place to impress being there gives a high status to the people, Cold Stone does not have this and even though it is a very known brand and is successful in China, Haagen-Dazs has a bigger control of the market. With all this information the main point of the research is proven. Works cited “China is Big on Ice Cream. ” Dairy Industries International 70. 8 (2005): 11. Business Source Premier. Web. 29 Nov. 2010. Clark, Jami. Cold Stone Creamery Announces Expansion Plans for Mainland China and Taiwan”. Cold Stone Creamery Press Release. 2006. Web. 16 Nov. 2010. The Cold Stone Creamery Story. Coldstonecreamery. com. Cold Stone, n. d. Web. 22 Nov. 2010. Farrel, Diana, Ulrich A. Gersh and Elizabeth Stephenson. “The Value of China’s Emerging Middle Class. ” The Mckinsey Quarterly. 2006. Web. 18 Nov. 2010. Haagen-Dazs History. Haagendazs. com. Haagen-Dazs, n. d. Web. 22 Nov. 2010. “Haagen-Dazs in China. ” China Business Review 31. 4 (2004): 22.
Business Source Premier. Web. 29 Nov. 2010. “Ice Cream in China”. Data Monitor (2010): 7-14, 22-33. Market Line. Web. 27 Nov. 2010. “Positioning Pleasure. ” Business China 25. 20 (1999): 2. Business Source Premier. Web. 30 Nov. 2010. “Research and Markets: Ice Cream in China”. Business Wire (2004). Web. 19 Nov. 2010. Sinomonitor International. China Marketing and Media Study’s database. Sino Monitor International (2006) Web. 21 Nov. 2010. The World Factbook, China. Cia. gov. Central Intelligence Agency, 2010. Web. 20 Nov. 2010. Appendix.
Participant observation. For the accomplish of this research I did a participant observation, I visited two different Haagen-Dazs stores in Shanghai: Xintiandi and Super Brand Mall. Xintiandi, I went there on Sunday November 7 of 2010 and just seat pretending to be customer, I observed the people who went in and even though the weather was really cold the place was crowded, in the two hours that I spend there I saw an average of 70 customers. The customers were mainly adults, I didn’t saw a lot of kids and there were a lot of young couples.
The things that the Chinese clients consume in Haagen-Dazs surprised me, while I was having a small scoop of ice cream they were eating this fancy desert creations that seem delicious but I though that the price was very high, this observation helps me realize what kind of people goes to Haagen-Dazs and also what are the things that they order. Super Brand Mall, I went there on Sunday November 28 I didn’t seat pretending to be a customer, I just stayed outside of the place to observe the people that went inside, this time it was also very cold outside and the place was not as full as the one in Xintiandi.
I saw only one foreign couple in the local and the rest of the clients were Chinese people. This time I saw more kids with their parents. The people that were there had just gone to do some shopping because they had bags from the different stores found in the Mall. In this location people was also consuming the expensive and luxurious creations that are offered in the Haagen-Dazs menu. Both of the locations are big and beautiful, located in special places surrounded by other foreign franchises like Starbucks and The coffee bean and tealeaf.
I believe that the location is very important for Haagen-Dazs and it is something that gives them the status that they have. The Haagen-Dazs store are always located in very fashionable places, were they can be seen bye the people that passes near them. It was really important for my research to do this observations because it gave me the opportunity to really understand the dynamic and function of the Haagen-Dazs cafes in Shanghai, it helped me to have a better idea of what I was talking about and also helped me realize that the point that I was trying to prove was close to reality.