---
title: "A Century of Ice Cream: How to Create a Hit in a Red Ocean"
description: "The ice cream market in China, now a red ocean, has seen hits like Moutai ice cream and Zhong Xue Gao fade, while Unilever plans to divest its ice cream business. Despite challenges, new players enter, and the key to success may lie in retail innovation and year-round consumption, with instant retail and winter sales emerging as potential blue oceans."
author: "叁拾代"
publisher: "New Distribution"
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published: "2024-07-24"
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# A Century of Ice Cream: How to Create a Hit in a Red Ocean

> The ice cream market in China, now a red ocean, has seen hits like Moutai ice cream and Zhong Xue Gao fade, while Unilever plans to divest its ice cream business. Despite challenges, new players enter, and the key to success may lie in retail innovation and year-round consumption, with instant retail and winter sales emerging as potential blue oceans.

# Ice Cream Returns to the 5-Yuan Era
Recently, "Ice Cream Returns to the 5-Yuan Era" trended on Weibo. Correspondingly, Moutai ice cream, once sold out in seconds, has seen multiple stores suspend operations. Lin Sheng, founder of Zhong Xue Gao, the former "ice cream assassin," has started livestreaming to pay off debts. Earlier, Unilever announced it would divest its ice cream business, which accounts for about 16% of its global sales, including top brands like Wall's, with completion expected by 2025. The ice cream market seems to have reached saturation, with sales slowing. Yet, players continue to enter. Multinationals like Mars and Nestlé have increased investment in China's ice cream market. Emerging brands from dairy and food sectors are also developing this track. In famous scenic spots, tourists taking photos with cultural creative ice cream has become standard. What is the key to selling ice cream? We return to ice cream itself, examining changes in flavors, forms, and consumer habits.

The industrialization and scaling of modern ice cream in China can be traced back to the 1920s when it was imported by Shanghai foreign firms, over a century ago. Over the past hundred years, this war in the freezer has continued. From state-owned monopoly to private sector百花齐放 and foreign influx, from multi-party chaos to a four-way standoff backed by major groups, until 2018, when emerging local internet-famous brands broke through, while regional brands that survived the decades of attrition finally completed their national layouts. For ice cream, where "old stock" accounts for about 40%, what former hits did and why they changed may offer new inspiration.

**Localization of Imported Goods**
**(1920-1996)**
The era of mass-produced ice cream began in the United States. In 1920, Shen Bao published an advertisement for Ma Yushan ice cream, stating: "With the latest ice-making machines... handcrafted by engineers who graduated from the U.S. and are experienced." At that time, any ice cream advertised was filled with American labels. In 1925, American businessman Haining Sheng's egg company, Haining Ocean, introduced American refrigeration equipment, producing 2,000-3,000 "Beauty Brand" popsicles daily—wooden sticks placed in flavored sugar water, frozen into straight shapes. A year later, American-imported Velvet ice cream advertised its paper-cup ice cream in Shen Bao—a sweet, creamy product made from milk powder and cream, placed in paper cups and eaten with a small spoon. It was later acquired by Haining Ocean, becoming one of Beauty Brand's signature products, along with popsicles and Double Bear ice cream. By 1935, Beauty Brand's distribution points were almost everywhere in Shanghai, with daily revenue reaching about 1,600 yuan.

After the founding of New China, Haining Ocean was taken over as the state-owned Shanghai Yimin Food Factory No. 1, launching the "Bright" brand in 1950. From then on, ice-like salted popsicles, square Bright ice bricks wrapped in blue wax paper with rich milky flavor, and doll-head ice cream with brown hats formed the childhood memories of this generation.

Unlike Beauty Brand, which imported 500 refrigerators as exclusive freezers and promoted with popular movie stars, the Yimin Food Factory used old cars converted into promotional vehicles, giving away free Bright products to Shanghai citizens, and mobilized family members of workers in difficulty to peddle with wooden cold drink boxes on the streets. After reform and opening up, Yimin Food Factory No. 1 focused on producing chocolate and ice cream. In an interview, retired worker Hou Yue recalled that in the thousands of square meters of factory space, the sweet smell of cream, wafers, and ice cream was everywhere. **Until 1993, Bright ice cream held the number one market share nationwide.** During that period, private enterprises flourished, foreign brands poured in, and Sino-foreign joint ventures were hot. In 1993, Unilever formed a joint venture with Qunxing Group, and Wall's entered the Chinese market. In early summer 1994, Wall's expanded from Beijing and Shanghai to first- and second-tier cities like Guangzhou, and by 2003, it had cumulatively provided 60,000 freezers to merchants.

Wall's covered streets and alleys with exclusive freezers, targeting consumers directly. Yili, also founded in 1993 and then a regional brand, chose extensive soft marketing. In 1996, Yili not only scattered leaflets over Hohhot but also sponsored the Atlanta Olympics, bringing the Torch ice cream to the world stage. This product, resembling the Olympic torch, caused a rush, and Yili went from Inner Mongolia to the whole country, appearing on CCTV. To this day, Yili is tightly bound to the Olympics, making Olympic marketing one of its core strategies. In December of the same year, Yili piloted its new Bitter Coffee ice cream in Hohhot and Baotou. Despite being the off-season for cold drinks, sales were impressive. The price of Bitter Coffee rose rapidly, from 0.65 yuan to 0.85 yuan within a month, finally priced at 1.5 yuan—while the national average for ice cream with milk and sugar was only 0.5 yuan. Despite the high price, the catchy slogan "Bitter pursuit, sweet enjoyment" continued to drive Bitter Coffee to a national phenomenon. In 1997, the single product sold 300 million yuan. **The 1990s were also the golden age of CCTV advertising.** Classic slogans like "Kangshifu, delicious and visible" (1993) and "Use Dabao morning and night" (1995) gained fame through CCTV. From 1993 to 1998, CCTV's advertising revenue grew from 560 million yuan to 4.8 billion yuan. Thus, with Wall's in sight and Yili in hearing, the era of ice cream titans clashing officially began. Niu Gensheng, the driving force behind Yili's success, secured the second-in-command position with sales accounting for 80% of Yili's total. But no one expected that two years later, after falling out with Yili's president Zheng Junhuai, Niu left and founded Mengniu with "the ten hardest heads in China's dairy industry." For a long time, milk from Inner Mongolia's grasslands was largely divided between Yili and Mengniu.

Looking at the evolution of hits in the early domestic ice cream market, consumer preference shifted from popsicles to ice cream and ice cream bars. In fact, ice cream and ice cream bars simply add milk, eggs, sugar, etc., compared to popsicles made from fruit syrup and sugar water, offering a richer, more "healthy" and mellow taste. **This naturally relies on the rapid development of the dairy industry, which drove category innovation in ice cream.** Data shows that national milk production was only 217,000 tons in 1949, but by 1983, it had reached 2.219 million tons. During this period, the UN World Food Programme's "Free Milk Aid Project" provided 1 billion yuan in free aid, with the government matching 1.7 billion yuan. Subsequently, riding the wave of reform and opening up, foreign enterprises brought modern production standards and workshops to China. From the 1990s to the early 21st century, domestic ice cream production became increasingly mature and sold well.

**Low Prices Are Not for Everyone**
**(1996-2014)**
In 2001, Wall's held 20% of Beijing's market, 37% in Shanghai, and 26% in Wuhan, but lost in Guangzhou with 15% to private enterprise Wuyang Ice Cream. Behind Wuyang was Nestlé, Unilever's old rival. While Unilever was busy expanding its northern territory with Wall's, Nestlé quietly acquired Wuyang, securing the southern market and making Guangzhou its bridgehead. At that time, even though Wall's had bypassed Guangzhou to reach Fuzhou, Xiamen, and Hainan, it struggled to crack Guangzhou.

Although Wall's, Nestlé, Yili, and Mengniu developed almost simultaneously in China, under the same background, private and foreign brands showed clear strategic divergence. **In terms of price, foreign brands targeted the mid-to-high-end market, while private brands dominated low-price, low-margin segments, using a rural-encircling-city strategy; when competing head-on, foreign brands formed competitive situations through large-scale acquisitions of high-, mid-, and low-end ice cream brands, while private brands mainly competed among themselves, such as Yili vs. Mengniu, and small regional brands in the shadow of giants.** In 2003, Yili, Wall's, Mengniu, and Nestlé finally met at the top of the industry, making domestic ice cream competition particularly fierce—a year of reshuffling. Yili and Mengniu were in a silent rivalry, often launching similar products at the same price, such as steadily cultivating the 1.5-yuan price band. While refusing to yield, their low-price territory also impacted Unilever and Nestlé, which were mainly mid-to-high-end. That year, Wall's mid-to-high-end products Magnum and Cornetto reduced retail prices to 2.5 yuan and 3.5 yuan respectively, while developing a 1-yuan popsicle called "Green Tongue." The latter was a popsicle-shaped, jelly-textured product that went from hard to soft and slippery, and could be played with by holding the stick, making it a social code among primary and secondary school students and a traffic driver for school canteens. By 2005, Wall's products under 2 yuan accounted for 50% of its range. In the same year, Nestlé increased investment in second- and third-tier markets, with more than half of its 20-plus new products priced between 1 and 1.5 yuan. However, Yili and Mengniu still had more products under 2 yuan. At that time, Nestlé wanted to save money. It replaced its own fleet of 30-40 refrigerated trucks in East China with third-party logistics, reducing average costs for warehousing, cold chain, and operations to industry average. But from then on, its ice cream transportation was constrained by third parties. In 2006, Nestlé's East China ice cream sales department formed a team dedicated to terminal management. A year later, ice cream sales in Shanghai increased by 50%. But in 2008, Nestlé headquarters cut the entire team due to high costs. Wall's, on the other hand, maintained its own fleet, which allowed rapid product dispatch, but each freezer cost up to 6,000 yuan, with at least 60,000 deployed, plus R&D, cold chain, and terminal costs, making cumulative costs unimaginable. Reports said Wall's "didn't make a penny" in its first nine years, and by the second half of 2002, its registered capital of $180 million had dwindled to $30 million. **In the early 21st century, the profit margin for the ice cream industry was only 7%.** Yili and Mengniu could sustain low-margin, high-volume sales because they had their own milk sources, their moat. Wall's pinned its hopes for the low-price market on Green Tongue, but its popularity was mainly due to its quirky social attributes, not a clear low-price advantage. For Wall's and Nestlé, hard costs couldn't be reduced, so they couldn't win the low-end market with volume, and their low-price products couldn't generate more profit. In 2005, Unilever abandoned low-price competition, raising all discounted products back to original prices, and focused on strengthening its presence in the Yangtze River Delta, Pearl River Delta, and Beijing-Tianjin area. In 2006, Nestlé's business focus also returned to high-end ice cream.

**The Former Traffic Password**
**(2014-Present)**
In the first decades of rapid development, competition among ice cream giants backed by large groups was so intense that regional brands were long overlooked. Regional brands were those popular locally but unable to expand nationally due to lack of cold chain technology, such as Modier from Heilongjiang, Daqing Hongbaoshi, Zhongjie from Liaoning, and Tianbing from Henan. **In 2014, a retro ice cream trend spread, with consumers preferring familiar childhood tastes, and regional brands began to go national.** That summer, Hongbaoshi, a regional brand from Northeast China, became famous with its product "Dongbei Daban" (Northeast Big Board). The brand, headquartered in Daqing, was founded in 1992, with sales networks covering county-level cities in the three northeastern provinces, quietly guarding its own turf during the titan clashes. In summer 2013, Hongbaoshi launched Dongbei Daban, test-marketed in the province for a year, then sold nationwide. At newsstands and small convenience stores where pedestrians often passed, there were more or less green Dongbei Daban freezers.

What is Dongbei Daban? Rich in milk, large, shaped like Bright milk bricks, with extremely simple white transparent packaging that seemed to return to the 1980s, with only four flavors like original and chocolate. The pure taste awakened the DNA of Northeasterners, and it became popular nationwide, even creating a "Daban phenomenon." Among the colorful options, Dongbei Daban's simple packaging was the most eye-catching, and the simple flavors greatly reduced decision time, while the transparent packaging let consumers see the product at a glance. Hongbaoshi's differentiated competition also involved bypassing the giants by taking a small path—it didn't sweep convenience stores and supermarkets but targeted street vendors and newsstands, providing a freezer worth 1,680 yuan for free, subsidizing 60 yuan per month in electricity, with a retail price of 3 yuan and a wholesale price of 1.8 yuan. Starting in 2014, Modier and Zhongjie Ice Cream, also from the Northeast, welcomed their spring. Modier, originally located on Central Street in Harbin, had always used a front-store-back-factory model, with ice cream placed in boxes without packaging. After expanding to Beijing-Tianjin-Hebei, Modier established a production base in Beijing, raised the retail price from 3 yuan to 5 yuan, and launched two high-end ice creams priced at 20 yuan each.

In 2015, Zhongjie 1946 was established, derived from the well-known Zhongjie Ice Cream in the Northeast. When its products first launched, despite prices starting at 5 yuan and going up to over 20 yuan, many people bought them because of the reputation of "Zhongjie Daguo" they had eaten as children. During the period of consumption upgrade, people valued not cost-effectiveness but the emotional value ice cream could provide. Dongbei Daban at 3 yuan was not particularly cheap compared to 0.5-yuan old popsicles and 1-yuan small pudding; Zhongjie 1946 anchored itself in the mid-to-high-end from the start; Modier sold 10,000 sticks a day, earning 30 million yuan annually. Similar to Haagen-Dazs's marketing of "Love her, take her to Haagen-Dazs," these brands with built-in memories told nostalgic stories that resonated with a generation. **Meanwhile, offline supermarkets and convenience stores were no longer the only way to buy ice cream; cold chains from Shunfeng and JD.com could deliver ice cream from Heilongjiang to the south using dry ice, helping regional and internet-famous brands come into the spotlight.** In 2018, Zhong Xue Gao burst onto the scene, breaking the existing pattern, and that year achieved the number one ice cream sales on Tmall during Double 11. Its Ecuador Pink Diamond ice cream was priced at 66 yuan, and despite the high price, it sold over 20,000 units on Tmall that Double 11. In the following two years, Zhong Xue Gao grew rapidly, with annual GMV exceeding 100 million yuan. Through e-commerce and social media, it told the story of imported raw materials, complex production processes, and a petty-bourgeois lifestyle behind each "Hermès ice cream," making its internet-famous reputation spread across the country, and it once became a representative of new Chinese-style ice cream. By 2023, it was the fourth-largest ice cream seller in China. Zhong Xue Gao's explosion was mainly because during the pandemic, people shifted from offline to online purchases, and when making a purchase, they saw a product detail page rather than a freezer crowded with different flavors and brands, reducing choices and competition. Moreover, in the trend of pursuing high quality and refinement, Zhong Xue Gao appeared as a new consumer brand with national trend, limited edition, and rarity, with excellent marketing and gimmicks. However, it avoided the freezer battles in physical stores, which are the must-fight fortresses for old brands. In terms of terminal control, Zhong Xue Gao was not as comprehensive as the giants that spent heavily on channels. In 2022, Zhong Xue Gao had 800 distributors; by the end of September 2022, Yili had 19,321 distributors. By the time incidents like "Zhong Xue Gao doesn't melt" and "ice cream assassin" greatly damaged its reputation, Zhong Xue Gao had only deployed about 100,000 self-owned freezers offline. When compared to similarly priced Haagen-Dazs and DQ, consumers gave a unified answer: the latter two have their own standalone stores and displays, with anchored price expectations, so they aren't shocked by high prices. An ice cream distributor once said in an interview that if Zhong Xue Gao went offline, "the price is too high, and it almost doesn't sell."

**A Brainstorm:**
**Ice Cream Retailization,**
**Is Winter the Next Blue Ocean?**
With the end of the pandemic, offline consumption has returned. According to a report by iiMedia Research, in 2023, 83.47% of consumers bought ice cream in offline supermarkets, while 50.25% chose food delivery platforms, and 38.73% chose e-commerce platforms like Taobao (multiple choices, so numbers overlap).

At the same time, consumers now pay more attention to value for money. According to iiMedia data, in 2022, 70.9% of Chinese consumers accepted ice cream prices between 3-10 yuan (excluding 10 yuan). In this context, it is indeed difficult to create hits through flavor innovation alone. In the past two years, new products have been frequent, but none have replicated the national phenomena of Bright milk bricks, Yili Bitter Coffee, Green Tongue, or Dongbei Daban. However, China's ice cream market remains the world's largest, with a market size of over 100 billion yuan, and is expected to maintain an average annual growth rate of 9.2%. With products saturated, developing new scenarios may be more suitable for the current situation. **The development of e-commerce and cold chains is gradually changing how people consume ice cream—from wholesale to instant retail.** Long ago, to eat ice cream, you had to go to an ice cream wholesale store, buy two boxes at a time, take home various flavors and brands, and freeze them in the refrigerator to eat slowly all summer. This avoided going out repeatedly in the scorching sun, and wholesale was more affordable than buying single sticks in offline supermarkets. But now, when people are outdoors, camping, or just staying home watching TV and craving something cold and sweet, a "cold-chain" delivery that arrives in 30 minutes directly satisfies the "instant" nature of ice cream. According to Meituan Flash Purchase's "2023 Instant Retail Ice Cream and Beverage Consumption Trend White Paper," **39% of consumers buy ice cream all year round.** Ice cream and beverages are expected to become a signature category for instant retail, with a compound annual growth rate of about 41% from 2020 to 2022, much higher than the overall market; among them, **ice cream has the fastest growth, at about 65%.** It is estimated that by 2026, the instant retail sales scale of ice cream and beverages will exceed 63 billion yuan.

In addition, places like Guangzhou, with hot weather and long summers, have always been ideal for ice cream sales. But in 2020, a news story about "Northeast ice cream sold on the ground" spread, bringing the Northeastern habit of selling ice cream in winter to national attention. After "Erbin" became popular in early 2024, the ice cream sold openly on the ground in Harbin became a tourist check-in spot. Similarly, in South Korea and Japan, which are at the same latitude as the three northeastern provinces, winter-limited ice cream has also created hits. As early as the 1980s, Lotte Group launched Yukimi Daifuku in Japan, which became a national ice cream. Its packaging features snowflakes, meaning you can eat ice cream even on snowy days; using warm colors also combines warmth and cold.

From the consumer's perspective, the reasons for eating ice cream in winter are similar: there's heating indoors. Eating cold food in a warm room is as comfortable as covering yourself with a quilt under air conditioning, and the wrapped texture of ice cream also caters to people's desire for warmth in winter. Recall why winter was once considered the off-season for ice cream? Because it's too cold, eating ice makes you colder, and going out in the snow to buy ice cream is as tiring as going out in the scorching sun. Now, if you only need to stay indoors with air conditioning or heating, tap on your phone, and have ice cream delivered in 30 minutes, the temperature factor limiting ice cream consumption is weakened. After all, even if it's snowing heavily outside, having an ice cream in a room with a constant temperature of 20-25 degrees Celsius is a sweet thing.

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