Follow and star ↑↑ [New Distribution] to see how many friends are with you in following industry trends Foreword: Nestlé Group is the world's largest food company. Besides the well-known Nescafé, Nestlé has many subsidiaries and business divisions. In Greater China, through joint ventures or acquisitions, Nestlé's product portfolio covers more than 14 major categories, such as Hsu Fu Chi, Totole, Yinlu, etc. In addition to its rich food industry, it also has pet care, medical, and beverage businesses. As a food giant, Nestlé's mission is: To enhance quality of life and contribute to a healthier future. This is not only for individuals and families, but also for communities and the planet. Nestlé pursues not just profit, but also value and contribution to society. Even such a food aircraft carrier still maintains its innovative genes today. How does it do it? On August 21, 2019, the "FMCG2019 China Fast Moving Consumer Goods Conference" hosted by New Distribution specially invited Mr. Wang Sichun, Head of Incubator and Innovation for Nestlé Greater China, to share "Nestlé Innovation Trends." The following is a compiled version of Mr. Wang Sichun's speech for our readers. (The article has been slightly edited.) Our new CEO (Mr. Laurent Freixe) came to China two years ago. After deeply understanding the current market situation and the speed of change in the Chinese market, he believed that Nestlé must attach importance to innovation. Therefore, in recent years, Nestlé has made a series of innovative breakthroughs and changes. Both in speed and quality, Nestlé is accelerating. Looking at Nestlé's innovation, it can be broadly divided into four categories: First, innovation in basic core categories; Second, experiential innovation; Third, innovation in incubating white spaces; Fourth, marketing innovation. Basic Core Categories Nestlé currently has 14 business divisions that support its basic core categories. In recent years, we have accelerated the pace of innovation in core categories. In 2017, there were 34 innovation projects; in 2018, 68; and in 2019, it tripled directly, with about 170 innovation projects to be launched. Undoubtedly, to achieve such innovation speed and quality, there must be a transformation process at the backend, which can be reflected in three aspects: First, redefine the organizational structure. In the past, Nestlé had many R&D departments. Now these R&D departments have all been integrated into the business divisions to respond more quickly. In the past, these R&D departments might only do research at the backend. Now they are integrated into the business divisions, adjusting quickly with the pace of the frontline market to develop products suitable for consumers. Second, maintain focus. Nestlé has added a new organization—the incubator—which is different from the business divisions. The business divisions continue to focus on the core categories they are responsible for, concentrating on the core battlefield. The incubator organization is like a "guerrilla force" that fights in new battlefields and makes new attempts. The incubator and the business divisions each focus on their own areas. The business divisions focus on innovation in core categories, while the incubator focuses on exploring new categories and new models. Third, strengthen processes and culture. In the past, Nestlé's most criticized aspect was slow innovation, which was actually due to lengthy processes. For example, a new product process had about 100 steps, requiring more than 20 signatures, very rigorous, and placing great emphasis on food safety and quality. But obviously, this no longer fits the fast-paced era. Nestlé must redesign its processes. In terms of process innovation, Nestlé reduced its processes from over 100 to about 20, and the number of signatories was reduced to only 2. In addition, in terms of the speed of launching new products, it is better to have only 80% completion than to be 100% complete but launch a year later than others. Innovation is reflected in culture. Nestlé has established an annual "Nestlé Oscar Award" innovation gala, which has been held for 6 years. We encourage all business divisions to nominate and submit their proud innovation projects. In 2018, Nestlé also added individual awards. Nestlé has 50,000 employees, including many factory workers. Everyone can propose ideas for processes and innovation. If you win the championship, in addition to a 50,000 yuan bonus, you can directly implement your idea. In addition, we have new practices. For example, in the past, a project took several months from R&D to launch. Now it is directly "condensed" into a three-day project working group, from idea generation to implementation, completed within three days. We will gather all people related to the project, devote three days wholeheartedly, confirm the idea, implement it, and then invite consumers for product testing. Based on the test results, we quickly decide which products will be the direction for Nestlé's new products. Experiential Innovation Now consumers' consumption habits have changed, and information is exploding. The food industry needs not only product innovation but also experiential innovation. What is experiential innovation? It is to provide consumers with better services and consultation. Nestlé hopes to provide new things around health and nutrition to better understand consumers, thereby obtaining more consumer data, and ultimately helping Nestlé adjust its operating model or products. In 2018, Nestlé did about 10 experiential innovation projects. In 2019, the basic requirement for each business division is to have at least one experiential innovation project. At the same time, Nestlé encourages open innovation, which can be a small part of the production process or retail process, even a promotion link. Let me briefly introduce two of Nestlé's experiential innovation projects. First, in 2017, Nestlé launched a smart speaker box, Nestlé Xiao Ai. Smart speakers may not be very popular in China, but in the United States, almost every household now has one. Nestlé hopes to follow this trend and make some attempts. Nestlé Xiao Ai is not just a smart speaker; it can also provide you with healthy nutrition information. It is not a sales-oriented tool. Our original intention is that since Nestlé has so many databases on nutrition and health, which are very valuable information, why not open them up so that more consumers can easily access them? So Nestlé Xiao Ai is not only a smart speaker but also can provide consumers with more content and information about nutrition and health. In 2018, Nestlé Xiao Ai was upgraded, with the number of materials increasing from 5,000 to 300,000. In addition to many personalized nutrition recommendations, Nestlé Xiao Ai was also connected to shopping, allowing consumers to purchase Nestlé products by voice. In addition, Nestlé Yiyang reached a strategic cooperation with Xiaomi to launch a new APP: My Personal Nutritionist, positioned as a "nutrition consultant" for middle-aged and elderly people. Nestlé has many research institutions globally engaged in nutrition research in different fields. We think we can cooperate with these good research results and technology partners to create a deeper connection between products and consumers. Incubating White Spaces Regarding Nestlé's incubator project, this is not a formal organization. Nestlé has similar organizations in only two markets globally: one in the United States, where a new company was directly established; and one in Greater China, set up under the group's marketing department. Although the incubator is a small team, it can coordinate and leverage the resources and strength of the entire Nestlé Group. The main reason for having an incubator organization is that in the past, Nestlé's innovation was too slow. In addition to promoting innovation within the existing organization, the most appropriate way is to establish an independent organization as a model of innovation. The existing business divisions are divided by category. They have deep research on their corresponding categories, but may know little about other categories. The food field is very large, and there are many areas not yet covered. The incubator can act like a "guerrilla force" to quickly enter a blank market and try cross-category attempts. Since it is a quick entry, it naturally needs the support of top management, surpassing the original processes and time of the organization. Unlike ordinary business divisions, the incubator can even use external laboratories. In addition to quickly entering blank markets, we can also try some new models, obtain consumer information and data through new models, and finally turn them into the group's training center, allowing Nestlé's internal employees to get training here and try some innovative methods. Regarding cross-category innovation achievements, in 2018 the incubator launched two new brands: Xingshan and Jilie. Xingshan is a Chinese herbal soup drink brand. From the consumer side, there are many unmet needs for health products, such as cumbersome preparation and poor taste. Around these pain points, we made targeted supplements, making it a convenient drink with health benefits. In fact, Nestlé has done a lot of cutting-edge research, but some products were not launched for various reasons. For example, for Chinese herbal products, Nestlé has studied the formula for more than ten years. Before this, it had not been used by any business division, so the incubator launched such a brand. Xingshan has 6 products, including soups and plant-based drinks. It is also Nestlé's first ready-to-drink soup, and Nestlé holds the patent. This is a brand-new brand without the Nestlé logo. The advantage is that it has more flexibility. Frankly speaking, there are many business models nowadays, especially various internet forms, but Nestlé has rarely been exposed to them in the past. Nestlé is an "elephant," maybe not that fast, and its past products were also very mature. But through the incubator's innovative brands, we can make many attempts without too many constraints. Therefore, Xingshan's business model is somewhat different from Nestlé's past product business models, such as cooperating with vertical platforms like Dayima and Babytree. Xingshan also made some innovations in packaging. Because it is a Chinese herbal product, we made a "medicine box" packaging, hoping that this product can be given as a gift to your loved ones. The second brand is Jilie, a high-protein water. As the fitness population grows, the main supplement for fitness people is protein powder, but protein powder is cumbersome to prepare, not easy to dissolve, and has a sticky taste. These are the pain points of protein powder products. To this end, Nestlé launched high-protein water to supplement protein anytime and solve the pain points of using protein powder. The main sales channel for this product is gyms, which is a brand-new test for Nestlé. Of course, in addition, we also did some social commerce online platforms and focused on health and fitness scenarios, such as light meal restaurants. In terms of packaging, in addition to the bottle packaging, Jilie also made some gift boxes, dumbbell-shaped packaging, etc., making some innovative and interesting attempts. Marketing Innovation Marketing innovation is not just about products. Einstein told us, "Insanity is doing the same thing over and over again and expecting different results." Nestlé wants to break the mold. Nestlé once conducted an experiment and found that everyone has different needs for breakfast. We set up 11 groups of people, customized different nutritious breakfasts for these 11 groups, and jointly created 154 breakfast recipes with the Chinese Nutrition Society. According to research, in China, one-third of people do not eat breakfast or do not have a nutritious breakfast habit. Therefore, Nestlé, through external cross-industry resources and internal cross-departmental cooperation, advocates spending 15 minutes every day having breakfast with your loved family members. We hope that through this form, everyone can develop the habit of eating a nutritious breakfast. Of course, such an initiative received a lot of media attention and huge advertising value. At the same time, this project also became an internal activity of the Nestlé Group—"Boss Invites Employees to Breakfast," encouraging the CEOs of each business division to invite their employees to breakfast. Now, every month, bosses from different departments invite employees to breakfast. This is Nestlé's innovation, everywhere!