Nestlé's products span various sectors, and its business empire is unprecedentedly powerful, but its recent moves leave observers puzzled about its layout and future direction. -01- Nestlé sells 130 billion yuan of businesses Over the past two years, Nestlé has continuously divested, selling off more than 130 billion yuan worth of businesses. Recently, Nestlé proposed selling its U.S. ice cream business to Froneri for $4 billion (approximately 28 billion yuan), drawing renewed attention. Nestlé's products cover various aspects, and its business empire is unprecedentedly strong, but its recent actions make it unclear how it is positioning itself and what the future holds. In January 2018, Nestlé sold its U.S. candy business to Ferrero for $2.8 billion. In May 2019, Nestlé reached one of Europe's largest deals of the year with Swedish private equity group EQT, selling its skin health division for about 10.3 billion Swiss francs (nearly 69.8 billion yuan). Earlier, Nestlé sold Gerber Life insurance business for $1.55 billion. Additionally, after years of trying to turn around, there are rumors that Nestlé has been reviewing its ownership of Hsu Fu Chi and Yinlu, seeking to sell controlling stakes in these two companies for over $1 billion. With continuous divestitures, Nestlé has shed over 100 billion yuan in businesses in just two years. However, through this slimming process, Nestlé is actually consolidating its strength. Non-food and beverage businesses are being divested, categories that do not align with health food trends are being abandoned, and those with declining performance are being dropped... Take the recent ice cream business: data shows Nestlé's market share in the U.S. ice cream and frozen desserts market fell from 19.3% to 15% in 2018. Earlier, Nestlé CEO Mark Schneider stated that Nestlé would sell non-strategic businesses with unresolved issues. -02- Similar decisions by giants Nestlé's continuous slimming brings to mind the actions of many big brands in recent years. In the baijiu industry, Moutai and Wuliangye have been cutting sub-brands; Moutai even reduced its distributors by hundreds in a year and trimmed its sub-brand products to a few key ones. In contrast, the decline of many big food brands is not due to a loss of brand influence but rather their failure to shed past burdens, making progress increasingly difficult. A typical example is Wahaha. At its peak, it had over 70 billion yuan in sales, with cash cows like Nutri-Express and AD Calcium Milk generating significant profits. However, beneath these products, many others survive solely on the Wahaha brand. These products are only recognized as part of the Wahaha category, relying on its channels and distributors, who sell due to various terms. Many big brands operate this way, initially driving new products, but over time, these unproven products become a burden. -03- Nestlé concentrating its strength While various industries are reshuffling, Nestlé is not only divesting but also expanding other businesses to complete internal adjustments. In 2018, Nestlé paid $7.15 billion for the perpetual rights to sell Starbucks retail and foodservice products globally outside Starbucks stores. In its traditional low-price market, Nestlé further expanded into the mid-to-high-end market it had not yet penetrated. It is reported that in 2018, Nestlé's acquisitions increased sales by about 0.7%, a slight growth, but impressive given its sales in the hundreds of billions. In the first nine months of this year (2019), Nestlé Group sales reached 68.367 billion Swiss francs (approximately 458.1 billion yuan), with organic growth of 3.7%, of which internal growth was 3.0%. However, behind these moves, we can clearly sense the pressure Nestlé faces. While slimming down and strengthening itself, Nestlé is trying to stimulate more growth potential. Traditional businesses face huge challenges, and breaking through in new businesses is far from simple. Take premium water, which has grown rapidly in recent years. Nestlé has many brands in the water market, including San Pellegrino, Perrier, and Nestlé Pure Life, totaling 50 brands covering mid-to-high-end and low-end water. However, in market competition, it will inevitably compete with brands like Nongfu Spring and C'estbon, and intense competition will become the main theme in the future. This situation is not limited to the water industry; it exists in all sectors. While Nestlé strengthens itself, its competitors are also growing to meet future challenges! -04- Big brands facing China's consumption upgrade Over the past decade, China's consumption volume has grown rapidly, while three variables—consumers, digitalization and business innovation, and capital markets—have jointly driven the "consumption upgrade" process. In the first half of the upgrade, global brands with foreign backgrounds, striving domestic products, and digital-native brands all enjoyed gratifying growth. However, according to Accenture China's latest research, if we observe the market landscape in the second half and make bold predictions about future trends, we arrive at a surprising insight: the power of China's consumption upgrade is not a tailwind for everyone, but a U-shaped array that will reshape growth patterns across multiple consumer industries. Those big brands that were once smooth sailing and held top market shares are more likely to be stuck at the bottom of this U. In other words, big brands have failed to seize the new opportunities of the consumption upgrade! Whether Chinese or foreign, big brands' performance has been lackluster, with overall sales growth trailing the market. They represent large mature enterprises in China's consumer market—for example, of the top 50 consumer brands in 2009, 21 had fallen off the list by 2018. Over the past decade, in 7 of the 10 industries tracked by Accenture, leading brands experienced a collective decline in market share, with an average drop of over 12%. The mobile phone industry was the most severe, falling 50%. Many once-famous beauty and personal care brands have seen their market share decline year after year, and the international giants behind them have fallen from their pedestals. Accenture's Global CMO Research also shows that 58% of CMOs admit that big brands are losing appeal to consumers; 66% of Chinese companies face competitive pressure from new entrants, with 14% believing that "ant-type" competitors are more formidable than "giant-type" rivals. -05- The demand for market agility For a long time, big brands have relied on customer loyalty to sustain business growth. Now, the situation has quietly changed. On average, a new product is launched on Tmall every 0.63 seconds. In 2018, 200,000 brands launched over 50 million new products on Tmall, a 317% increase from 2017. Tmall also plans to help new products achieve 100 million launches in the next three years. The business logic behind this, as Accenture's 2018 China Consumer Survey shows: nearly 30% of consumers have switched brands more frequently over the past year, a trend especially pronounced among highly educated consumers. The reason is simple: among consumers who switched brands, 67% were attracted by new brands they had never tried, not because they were dissatisfied with their current familiar brands (30%). Consumers seek novelty and change; to seize fleeting opportunities in such a market environment, companies must be agile enough. However, Accenture's research shows that it is not easy for large mature enterprises to achieve the agility and flexibility of emerging brands. Through a survey of 394 respondents from 166 multinational companies, Accenture found that the larger the company, the lower its agility score. Companies with fewer than 50 employees score an average agility of 6.5, but when the company grows to over 10,000 employees, the score drops to 3.9. Big brands, in the "fast era" of qualitative consumption upgrades, unfortunately become "slow enterprises" lacking vitality. According to Accenture's analysis, the main reasons for lack of agility can be summarized into three points:

  1. With many departments and personnel, chimney-style management creates communication barriers between departments, preventing free flow of information and forming information silos.
  2. As company size expands, problems become complex. Without clear planning, managers tend to focus on scale management of traditional processes rather than achieving agility in business processes.
  3. For large multinational companies, global decision-making is dispersed across dimensions such as time, space, culture, and demographics, making it difficult to respond quickly to new trends. -06- The difficulty of the "middle market" According to traditional theory, as a country develops to middle-income levels, a large middle class emerges, forming the mainstream consumer group and becoming the target consumers that major brands race to win over by mobilizing resources first. However, according to Accenture's tracking of market growth of major consumer companies over the past five years, it is precisely the majority of companies positioned in the "middle market" that grow below the industry average, while those positioned in the "high-end market" and "economy market" achieve higher growth. What is the basis? Accenture China dynamically tracked 712 local and overseas brands across 10 major consumer goods industries. From the correlation analysis between brand market positioning and sales growth, it is clear that companies positioned in the "middle market" mostly lack growth momentum. Compared to the upward-curving ends of the U, these former "middle-class" big brands exhibit a "middle slump" development pattern (Figure 2). These big brands, which spent much time analyzing the consumption needs of China's middle class, may not have anticipated that amid the widely discussed consumption upgrade, the fundamental growth pattern is the U-shaped array, and their own growth is stuck at a low level. Data source: Euromonitor, Accenture Research In contrast, over the past five years, 86% of "high-end market" brands and 61% of "economy market" brands saw sales growth above their industry average, while only 7% of "middle market" brands did. On the other hand, 7% of brands grew more than five times the industry average, which we call "growth leaders." Among these growth leaders, 96% come from the "economy market" (43%) and "high-end market" (53%), while only 4% come from the "middle market." This means that a company aiming for the "middle market" and wanting to lead the industry faces great difficulty. A typical representative of the "high-end market" is Dyson. Five years ago, Dyson was a little-known brand in China; now, China has become Dyson's largest market globally. From vacuum cleaners to hair dryers to automatic curling irons, almost every product is popular in China. From 2014 to 2016, Dyson's China business expanded several-fold annually, and in 2017, annual revenue exceeded 10 billion yuan. After starting in China, it reached a level comparable to the U.S. market in just four years. Today, Dyson's growth story in China continues, with the company focusing more on lower-tier markets; in 2019, Dyson's business in lower-tier markets grew 118% year-on-year. Now look at the "economy market." Xiaomi, known for breaking technological barriers and cost-effective marketing, has not only successfully entered the ranks of top domestic mobile phone brands but is also thriving in IoT and home appliance businesses. Xiaomi launched its TV business in 2013, and in less than six years, it achieved the number one position in both sales volume and shipments in China. In the first half of 2019, Xiaomi held a 19% share of China's TV market, becoming the biggest competitor to traditional home appliance manufacturers. The "high-end market" and "economy market" are growing strongly, while the "middle market" is generally sluggish, reflecting the new reality of consumer stratification in China. The affluent consumer group continues to expand; the richest 5% of China's population account for 15% of the world's richest people. Years of urbanization are releasing consumption potential in third- and fourth-tier cities, with "small-town youth" bringing prosperity to lower-tier markets. According to Nielsen research, consumer confidence and willingness to spend in third-tier cities are now higher than in first- and second-tier cities. The rapid evolution of China's consumer groups requires companies to have good foresight and agile market strategy adjustment capabilities—a dual challenge for mature brands: First, can they, like emerging brands, sensitively identify the generational characteristics of Chinese consumers? Millennials and Gen Z differ from their parents; they are more willing to consume but also more opinionated. When choosing products, in addition to brand awareness, these new-generation consumers consider whether the product's appearance, brand story, and brand culture resonate with them and express their individuality. Accenture's 2018 China Consumer Survey shows that nearly half of consumers primarily consider showcasing their lifestyle when purchasing goods, a trend especially significant among young consumers aged 18 to 34. Second, can mature brands, like emerging brands, use new marketing strategies such as "internet celebrities" and "fission" to attract traffic and position precisely based on niche markets? Many small and beautiful emerging brands have successfully monetized customer traffic through product functionality and design, achieving leapfrog growth, validating innovative business models, and transforming consumer experiences and even industry formats. In almost every consumer goods industry, we can see "internet celebrity brands" born from the digital ecosystem, but mature enterprises' big brands often lag behind in awareness. -07- How big brands can rejuvenate In fact, many large mature enterprises are eager to try agile transformation. They accelerate innovation incubation, shorten product development cycles, or use digital technology to continuously launch new products or experiences, hoping to transform from "big brands" to "fast brands." However, blindly following trends, improper methods, insufficient resources, or cultural gaps lead to unsuccessful agile transformations "from elephant to cheetah." How to make "big" and "fast" coexist while maintaining scale and reliability advantages has become an internal obstacle to rejuvenating big brands. In response, Accenture, through research on client transformation experiences, proposes four strategic action recommendations for large mature enterprises: 1. Deploy dynamic growth strategies based on agile market insights In the slow-paced era of scale consumption, companies could rely on one advantageous brand or even one product to dominate the market and consumer minds for a long time. But to become faster and more agile, large mature enterprises must keenly capture changes in consumer demand in fluid and segmented consumption environments and formulate dynamic growth strategies based on new consumption trends. Accenture believes new consumption trends include environmental sustainability, personalized emotional appeals, cultural IP, and brand stances. 2. Build agile organizational operations to cultivate soil for "big" and "fast" coexistence 73% of Chinese CMOs told us that compared to three years ago, they believe companies need to adopt more frequent, flexible, and agile operating methods, but the proportion taking actual action is not high. However, in effective cases, mature enterprises can deploy digital infrastructure for new ideas, processes, and technologies, using "responsive innovation" to capture fresh customer needs faster. The internet giants' experience of "small front desk, big middle platform" transformation is worth learning from. 3. Promote an agile innovation culture and use "small steps, fast runs" strategy to overcome shortcomings Although the cycle from R&D to launch has shortened rapidly in the internet age, the probability of new product success is decreasing in both hot sectors and red oceans. Complementing breakthrough innovation and long-term strategic new business expansion, mature enterprises can use small and beautiful agile innovation to achieve more with less and improve marketing efficiency. This requires culturally giving innovators opportunities to try and fail and more accurate incentives. 4. Operate agile marketing channels to provide customer experiences that exceed expectations For big brands to retain customers with existing products or quickly gain consumer recognition for new products and services, they must ensure every interaction with consumers provides an omnichannel consistent, highly relevant customer experience. New-generation AI technologies (such as facial recognition, emotion recognition) provide finer granularity for consumer insights. Hyper-personalization and real-time satisfaction will be the competitive tone for the next decade. Large mature enterprises already have massive data, but they must strive to embed intelligent analysis into channels and marketing systems, both realizing the value of consumption data and protecting consumer trust in the brand. Source: Tianhe Business School Tips will be paid 400-2000 yuan once adopted. If you like this article, click [Watching] and share it with friends.********************