---
title: "What Should Maxwell House Coffee Do Next After Falling to the Point of Suspending Production and Closing Factories?"
description: "In 1984, Mondelez International (formerly Kraft Foods) officially started its development in China and began producing Maxwell House instant coffee. 33 years later, it was reported that Maxwell House's production plant in Guangzhou, China, had suspended production with employees on leave. Jacobs Douwe Egberts (JDE), the trademark holder of Maxwell House, publicly responded that starting from 2017, the Guangzhou plant would cease production, and the Greater China market would be supplied by its production base in Bangkok, Thailand."
author: "陆兴元"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-02-05"
language: "en"
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# What Should Maxwell House Coffee Do Next After Falling to the Point of Suspending Production and Closing Factories?

> In 1984, Mondelez International (formerly Kraft Foods) officially started its development in China and began producing Maxwell House instant coffee. 33 years later, it was reported that Maxwell House's production plant in Guangzhou, China, had suspended production with employees on leave. Jacobs Douwe Egberts (JDE), the trademark holder of Maxwell House, publicly responded that starting from 2017, the Guangzhou plant would cease production, and the Greater China market would be supplied by its production base in Bangkok, Thailand.

**Click to read the original article for details**
In 1984, Mondelez International (formerly Kraft Foods) officially launched its development in China and began producing Maxwell House instant coffee. 33 years later, it was reported that Maxwell House's production plant in Guangzhou, China, had suspended production with employees on leave. Jacobs Douwe Egberts (JDE), the trademark holder of Maxwell House, publicly responded that starting from 2017, the Guangzhou plant would cease production, and the Greater China market would be supplied by its production base in Bangkok, Thailand.

Why has Maxwell House coffee, once praised by U.S. President Roosevelt with a thumbs-up for its "rich and lingering aroma," fallen to such a state? Over the 30-plus years of China's reform and opening-up, what entanglements have occurred between this Mondelez International brand and its fellow multinational giant Nestlé? What experiences and lessons can the rise and fall, and the battle between Maxwell House and Nestlé in the Chinese market, offer us today?

**Initial Success → Positioning Deviation**
Maxwell House's parent company, Mondelez China, formerly Kraft Foods China, owns well-known brands such as Chips Ahoy!, Oreo, Kraft, Prince, Tang, Halls, Trident, and Maxwell House, and is a leader in biscuits, gum and candy, and powdered beverages in China. Kraft Foods China entered China in 1984, six years earlier than Nestlé, another multinational group, which opened its first factory in Shuangcheng in 1987 and started production in 1990.

Like most foreign companies entering China, these multinational brands had the natural advantage of strong brand equity. However, compared with developed markets in Europe and the U.S., the Chinese market at that time was still in a pioneering stage and required differentiated treatment. In 1984, after Kraft, Maxwell House's parent company, entered China, it positioned Maxwell coffee as high-end, using the American advertising slogan "Good to the last drop," targeting the newly affluent class in China's first-tier cities.

In reality, for the Chinese market of the 1980s-90s, Maxwell House overestimated the wealth of ordinary Chinese people and their recognition of high-end brands. Its consistently aloof and arrogant tone did not receive a warm market response, far less down-to-earth and approachable than competitor Nestlé's slogan "Tastes great."

Maxwell House's "acclimatization issues" after entering the Chinese market left it stagnant.

**Territorial Expansion → Channel Deficiency**
As a "foreign import" brought by China's modern opening of ports and reform and opening-up, local Chinese brands had little advantage in coffee. In the early 1980s, foreign goods and brands poured in. Nestlé (China) Ltd. is affiliated with the world's largest food and beverage company headquartered in Switzerland; Kraft Foods, the predecessor of Mondelez, was a global leader in chocolate, biscuits, gum, candy, coffee, and powdered beverages, and was the largest food company in the U.S. and the second largest globally. In a thriving blank market, the clash of two giants was bound to stir up a storm.

The continued downturn in European and American markets made Nestlé headquarters place more emphasis on the Chinese market. The acquisition maniac Nestlé's M&A activities in mainland China were quite vigorous. In August 1999, it acquired 80% of Shanghai Totole, the top chicken essence brand in China, and its sales increased tenfold in the decade after the acquisition; in 1999, it acquired 97% of Guangzhou Wuyang, the largest ice cream brand in Guangdong; in 2001, it acquired 60% of Sichuan Haoji, the second-largest chicken essence producer, and established Nestlé R&D Center in Shanghai; in 2011, Nestlé's acquisition of Yinlu and Hsu Fu Chi was approved by the Ministry of Commerce. After successively acquiring local Chinese FMCG brands, Nestlé evolved into a huge FMCG empire in mainland China, with more product tiers and more sales channels, allowing its coffee product lines to be laid out across channels and deeply penetrate the vast third- and fourth-tier cities and townships, seizing more business share and leaving Maxwell House far behind.

Clearly, compared with Nestlé, Mondelez did not pay much attention or investment in China. Since 2002, Maxwell House coffee has been in a maintenance mode in the Chinese market, without much effort, and its dealer cooperation model leaned towards a "contract system," leading to a continuous decline in market share over the years, now less than 10%.

**Corner Overtaking → Incomplete Product Categories**
The business world is like a battlefield; with the right strategy and favorable timing, location, and harmony, the small can defeat the large, and the weak can overcome the strong. In business warfare, representative methods include developing new products that cater to the next consumption trend, such as bottled herbal tea Heqizheng, Blue Moon laundry detergent, and Yunnan Baiyao toothpaste; or laying out in newly emerging consumption scenario channels, such as online brands like Three Squirrels and HSTYLE.

In fact, the consumption of instant coffee has many limitations: it requires a cup for brewing and hot water, making it more suitable for home or office drinking. If you want to drink it on the go, it becomes quite "troublesome." As Chinese people become wealthier and economic activities become more frequent, when "troublesome" instant coffee becomes expensive, people need more convenient products that cater to immediate consumption. But this opportunity was not seized by Mondelez; the foreign giants were still indulging in the gains and losses of instant coffee, allowing local Chinese companies to seize the initiative.

One day in 2004, Jiang Jianqi, who had been entrepreneurial for years, had a sudden idea: why not make street milk tea convenient and branded? He acted immediately, inviting the Hangzhou Agricultural Science and Technology Research Institute to help develop the formula and a design company to design the packaging. After more than half a year, the product was successfully trial-produced and given a new name: Xiang Piao Piao. In terms of sales strategy, they distributed to bus stations, train stations, and small convenience stores in schools, conveniently satisfying travelers and students with a warm cup of milk tea in winter.

On the other side, Uni-President's Yaha coffee was launched in 2003, relying on Uni-President's channel network in mainland China, quickly filling the streets and alleys and capturing the daily ready-to-drink coffee beverage market.

One rises, the other falls. In winter, Maxwell House's instant coffee business was deprived by cup milk teas like Xiang Piao Piao and Youlemei; in summer, coffee beverages like Uni-President Yahha and Nestlé Smooth Latte further diverted the market. The troubled Maxwell House instant coffee naturally couldn't fare well.

All this is because consumers have changed, and the overall category trend is declining! Even Nestlé, another instant coffee giant, saw revenue growth below expectations. According to a research report by Mintel, over the past five years, the market share of instant coffee fell from 80.7% in 2009 to 71.8% in 2014, and it will continue to decline. It is predicted that by 2019, the market share of instant coffee will drop to 66%. With the popularity of cup milk tea and ready-to-drink coffee beverages, more and more companies are joining the ranks of producing coffee beverages, which is undoubtedly adding insult to injury for Maxwell House. In hindsight, Maxwell House's 2010 endorsement by Wang Luodan from "A Story of Lala Du" was merely a last-ditch marketing effort.

> **What Can the Declining "Maxwell Houses" Do?**
1. Cater to consumption development trends and continuously lay out emerging categories.
Just like the white-collar women represented by Wang Luodan in "A Story of Lala Du," we in the workplace will continue to drink coffee! But we will more often choose to drink freshly brewed coffee in places like Starbucks and Costa Coffee to meet social needs; or directly buy high-quality coffee beans, capsule coffee, or coffee powder, such as the popular UCC job coffee and Nestlé rich roast instant deep-fried coffee on cross-border e-commerce platforms. If Maxwell House can lay out in new categories, it is believed it can still perform well.
2. Based on China's unbalanced development, carry out channel sinking and transfer.
China has a vast territory and a population of over 1.3 billion, with relatively unbalanced economic development. The Chinese market is actually a combination of: "first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen (economies equivalent to moderately developed European countries) + most third- and fourth-tier cities (economies equivalent to Latin American developing countries) + vast rural areas (economies equivalent to underdeveloped countries in Asia and Africa)." Often, FMCG products that are not popular or sell poorly in first-tier cities or provincial capitals can still sell well in third- and fourth-tier cities or more remote areas through channel sinking or strategic transfer.
This is the "rural包围city" strategy that most domestic Chinese brands were good at in the past. Is it still worth referencing for the "Maxwell Houses" that are now forced to suspend production and close factories?
3. Channels differentiate with consumption scenarios, and attention should be paid to the Internet dividend.
The more developed the social economy, the more abundant the material desires that can be satisfied, but the total time of 24 hours a day remains unchanged, making each person's relative time more precious!
In the 1990s, with relatively ample time, we were accustomed to one-stop shopping at hypermarkets, enjoying the convenience, product variety, and good value. With time fragmentation and shopping scenario differentiation, driving to these KA hypermarkets and queuing at checkout has become increasingly inconvenient and uneconomical for the younger generation. For white-collar workers in first- and second-tier cities, a day's consumption schedule might be: buying breakfast at a 7-11 convenience store in the morning, shopping online on Taobao or JD.com during work hours, visiting community convenience stores or specialty shops after work, and shopping on WeChat mall recommended by friends at home in the evening.
As consumers increasingly value convenience, experience, time-saving, and effort-saving, the scenarios for consumer shopping become more dispersed and fragmented, leading to continuous differentiation of terminal retail stores. For a major brand like Maxwell House coffee that wants to occupy consumers' minds as much as possible, it must carry out omni-channel and multi-scenario layout. At the same time, if it can seize opportunities in online or other new channel development, the "Maxwell Houses" can still radiate new life like "Three Squirrels" and "Jiang Xiaobai"!

Lu Xingyuan: Formerly worked for well-known FMCG and maternal and infant brands, now researches channel marketing power and management improvement under the new normal to help manufacturers and distributors win together. Author's WeChat: xingyuanlu.
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