Perhaps there are eternal romances in this world, but there will never be a match that evolves with circumstances. The meticulous you might have noticed that the familiar Nestle milk on KFC's tables has been replaced by Mengniu since the beginning of this year - China KFC has officially switched its milk supplier to the domestic Mengniu company.
No matter how you react, Mengniu Dairy has already accomplished its initial task; Mengniu milk has added over 2000 KFC stores as a sales channel. During the Spring Festival this year, the liquid milk and milkshake products sold in KFC stores have been switched from Nestle to Mengniu, and other dairy products are gradually being replaced.
"The iron-clad alliance between KFC and Nestle milk globally is undergoing a change. And what is driving this change is the domestic brand Mengniu," said Yang Wenjun, President of China Mengniu Dairy Company Ltd. He said that by collaborating with KFC, a multinational brand known for its caution, we can tell the public that Mengniu's products are now capable of competing with multinational brands.
Just like "two innocents" who stick together since childhood, the small packets of Heinz ketchup in KFC restaurants and the Coca-Cola-branded colas have almost become a fixed combination. However, even the super combinations tested by time such as Pepsi and KFC, or Coca-Cola and McDonald's, are changing. Currently, the 30,000 McDonald's worldwide are the largest buyers of Coca-Cola, a partnership that dates back to McDonald's inception in 1955. However, in March 2007, Pepsi products began appearing in McDonald's restaurants in the United States.
Even the "three musketeers" sweeping the world market - McDonald's, Coca-Cola, and Disney - may see interlopers. In 2006, pressured by criticism of McDonald's high-calorie foods, Disney announced that fries and soft drinks would no longer appear in children's meals within the U.S., and in the future, it would only partner with healthier food companies.
There are no permanent friends in business. For a long time, Nestle has been the global milk supplier for KFC. "Why can't Mengniu try breaking through?" explained Yang Wenjun regarding the original idea.
Mengniu was born in 1999, and in just eight years, it has risen alongside Yili to become one of the leading players in China's dairy industry. Starting without a factory and outsourcing production to other enterprises, one of its driving forces has always been daring to think what others dare not. And the next step is, "Mengniu wants to become an international brand," said Yang Wenjun.
Collaborating with multinational brands is, of course, the best choice to enhance brand recognition. Similar to how Kappa chose to collaborate with Pepsi, incorporating Pepsi's popular elements into clothing designs and providing prizes for Pepsi's canned lottery — it's simple: far more people know about Pepsi Cola than Kappa. But Mengniu's move was somewhat unexpected, given that internationally, far more people recognize Nestle, the world's largest food company, than they do Mengniu, the market leader in China.
In 2006, Mengniu beat numerous dairy suppliers, including many multinational brands, to become Disney's designated milk supplier. Since 1995, Coca-Cola had been the sole beverage supplier for Disney parks. This did not change until Hong Kong Disneyland opened grandly on Lantau Island in 2005.
China's Mengniu still boldly inserted itself. "Besides beverages, there’s also milk." In April 2006, Mengniu announced a partnership with Hong Kong Disneyland, becoming the designated milk supplier, providing milk products for the theme park, the Hong Kong Disneyland Resort Hotel, and the Disney Hollywood Hotel.
Mengniu's price was merely to support some of the mobile dining carts at Hong Kong Disneyland. These carts were distributed along "Main Street USA" and other themed areas, featuring designs characteristic of their respective themes. The carts sold various snacks, Mengniu milk, and other beverages. Images bearing the Mengniu logo also prominently appeared within the Disney park.
"The examination process for Disney suppliers is very strict," Yang Wenjun introduced. Being able to pass Disney's inspection already proves Mengniu's quality.
In 2007, Mengniu also became Starbucks' milk supplier. Starbucks' other long-term partner was Nestle. Of course, because branded products weren’t visible in-store, almost no one knew that the milk added to the coffee came from Mengniu.
However, in the partnership with KFC, the product bore Mengniu's logo. For a brand like KFC, known for its caution, passing its supplier inspection was no easy feat. Besides meeting KFC's rigid supplier qualification criteria, KFC conducted several surprise visits to Mengniu. Before Mengniu's products officially hit KFC's shelves, KFC had already piloted Mengniu products in selected stores in certain regions.
"The market response has been good," said Zhu Zongyi, Brand General Manager of KFC.
"Among KFC's supply chain, local suppliers have reached 90%, some of which are subsidiaries of multinational companies in China, and some are domestic food companies," Zhu Zongyi stated. Currently, among KFC's 8-51 long-term product lines, bread, chicken, and vegetables all come from China, with chicken sourced from over 30 domestic suppliers.
KFC's localization in raw material supply and flavor development is seen as the treasure behind its growth lead over McDonald's in China. A relevant official from the Chinese Culinary Association believed that the localization of raw materials supports Western fast-food companies in reforming their products to suit Chinese tastes, introducing Chinese-style fast food that fits the dietary habits of Chinese consumers, while also reducing operating costs and increasing profit margins. By November 2007, KFC had opened 2000 stores in China, expanding rapidly while maintaining cost control and improving profit calculations.
When multinational food companies first entered China, due to the gap between the standards of local raw material supplies in China and their own requirements, to ensure their brand image, most opted for imported raw materials or partnered with subsidiaries of multinational companies in China.