Magnum's Important Chinese Lesson with Ingredients Double Standards

As much of China swelters in the summer heat, staff at companies selling chocolate-laden ice cream on a stick or tub should be skipping around the office. But even with the AC blasting, the folk in Unilever's ice cream division are likely to be sweating more than usual.

China is the largest market for Unilever's Magnum ice creams. The rising appetite for ice cream in China, coupled with Magnum's clever marketing, collaborations and promotions had seen sales growing at around 20% annually for some time.

Over the years Magnum has engaged a host of popular brand ambassadors such as Li Bingbing, Gao Yuanyuan and Ayanga. It's collaborated with strategic partners such as the Family Mart convenience store chain, having Family Mart-specific QR codes on ice cream sticks directing consumers to the retailer's WeChat account for discounts on more Magnums. Quirky, timely collabs have included popular milk tea brand Lelecha, to launch a limited menu of ice cream beverages and bread for summer.

Magnum was an early adopter of pop-up stores, theming them with summer campaigns every year since 2013. In 2019, its Magnum Beauty Store pop-up partnered with cosmetics brand Benefit, aiming to fuse ice cream with alluring beauty services. It's campaigns have incorporated many on-trend themes and technologies from Augmented Reality to personalisation through DIY ice creams and segment-targeted flavours.

Over time, Magnum managed to hike prices for a simple ice cream on a stick from a mere ¥5 (77c) at the Family Mart in 2011 to as much as ¥12 ($1.85) today. For a while there, it felt like they were nudging the price up ¥1 every summer, symbolic of their clever marketing and the premiumisation trend that has happened across almost every category in China over the past decade.

Yet much of this good work in building brand equity is likely to take a back seat for a while as the freezer burn sets in, following the exposé into Magnum's ingredients list in China. Whilst Magnum claims 100% imported Belgian Chocolate in China, it turns out that they contain milk powder and a higher proportion of vegetable oil than European Magnums which are made with concentrated milk. This clearly hasn't gone down well in China, with the topic attracting over 400 million views on Weibo within hours last Friday, tagged with topics like "double standards for ingredients." This year's brand ambassador Jing Boran has terminated his relationship with the brand.

Unilever's response highlighted the difficulty of transporting fresh milk from Europe to China, also noting domestically-produced milk would cause a "supply problem." It didn't elaborate as to whether this was due to the quality of local milk but should be something brands consider when evaluating on-shoring their production to China.

Although many products in China use powder such as the popular milk teas, the issue for Chinese consumers are the double standards from overseas brands. We've seen it come up with brands like Starbucks, which charges more for a cuppa in Shanghai than Seattle, which turned out to be one of the drivers for Luckin Coffee's push ... before its fall from grace.

Chinese are already vigilant with ingredient lists. This scandal will only further motivate consumers to study the labels, rewarding those products that have quality inputs. As the runaway success of Chicecream and its $10+ ice creams attests, consumers are prepared to pay for what they believe is good quality. It is yet another area to watch for with sensitive Chinese shoppers, and another area where China Skinny can assist - drop us a line to learn more.

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