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PepsiCo Lay’s must tantalise Chinese taste-buds further: Analyst

By Kacey Culliney , 17-Jul-2012

PepsiCo’s strategy to localise its Frito-Lay brand in China is ‘crucial’ but will need to be pushed further as it expands into central and western regions, says an industry analyst.

Last week the giant and its snack arm Frito-Lay opened its sixth manufacturing facility in China to delve further into the surging RMB70.3bn snacks market. It is expected to produce 15,000 tonnes of Lay’s potato chips annually.

PepsiCo Chairman and CEO Indra Nooyi said the focus will be on catering to local taste preferences as it attempts to expand its hold across central and western China. See HERE .

Jacob Jiang, analyst at China Market Research (CMR), said that this line of development – understanding and meeting local demands – is “crucial” but will need to be pushed further.

“When addressing areas in central and western China like Wuhan or Sichuan, one thing PepsiCo may need to do is consider regional variations in tastes and localise further,” Jiang told FoodNavigator-Asia.

“Consumers in these regions especially like spicy food and tend to like stronger flavours than in the south and east of China,” he said.

The strength of the flavour, including how salty or sweet it is, will also need to be a core product development focus, he added.

“So far, PepsiCo has been doing well for years already at developing new localised flavours that Chinese consumers are familiar with, like Fresh Cucumber and Peking Duck flavour crisps,” he noted.

“Aside from Original, you really don’t see most of Lay’s Western flavours on the store shelves in China,” he added.

However, what is important when localising flavours, is to keep the culture and essence of the brand intact, he warned.

Localisation – more than just taste…

“For companies who want to achieve long-term success, they need to constantly make efforts to understand the differences in local markets and changing demands,” Jiang said.

But ‘localisation’ of products is much more than just taste, he said, it includes packaging, branding and product form.

“It’s very common for Chinese consumers to buy snacks to share with one or more people, so they want sizes and designs that make sense to serve in groups,” he said. Sharing is especially common in the workplace, he added.

“So companies like PepsiCo need to do research to understand what context their customers are using their products in and design packaging to fit those situations,” he added.

Variety is also crucial, he said, as “consumers view the number of choices a brand can offer them as a form of value and like exploring and trying out new flavours every once in a while.”

PepsiCo’s Lay’s brand is sold as ‘Le Shi’ in China – which means Happy Things/Happy Moments – and Jiang said that use of a Chinese brand name alternative is an “effective way to create good associations with the brand and build an emotional connection with consumers”.

Coca-Cola also does this successfully in China, with Kekoukele – ‘delicious and happy’ as well as Tropicana’s brand name Chunguole – ‘pure fruit happiness’, he said.

However, Jiang warned that brands need to take care when choosing a Chinese brand name as the language has a large number of homophones.

“Given the population and demand, if brands can successfully localise and adapt to how locals use snacks, there is huge potential for them to grow and succeed,” he concluded.

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