Summary of Key Points
General Mills (the parent company of Häagen-Dazs) has sold its offline store operations in China to the consortium owned by Ningji, while retaining the retail and food supply businesses. Ningji, a local lemon tea brand, aims to expand into the high-end ice cream market by acquiring Häagen-Dazs in order to find a second growth trajectory. This move reflects the strategic adjustment of foreign brands in China (retreating to their core businesses and letting local players manage the stores) as well as the clash between new and established consumer brands.
1. Why is Häagen-Dazs Selling Its Stores?
Häagen-Dazs is not selling all its operations; it is only disposing of the “offline stores and gift business,” while keeping the “retail packaging for sale in supermarkets/convenience stores” and the “food supply channels for restaurants.” Why make this move?
- Stores are a liability: Offline stores require renting prime locations in shopping malls, hiring staff, and conducting renovations, resulting in high fixed costs with low profits. Additionally, customer footfall has been declining in recent years. The brand once had 550 stores at its peak in 2019, but now only 171 remain, with 92 closures in one year. Management stated, “Our store business is experiencing double-digit declines, so we are closing the less profitable stores.”
- The retained businesses are more profitable: The retail packaging (such as small boxes sold in supermarket freezers) and food supply to restaurants, which fall under General Mills’ strengths in “production and large-scale distribution,” have higher profit margins and do not require the hassle of managing stores. In essence, Häagen-Dazs is shedding its “heavy burden” to focus on its “light-asset, high-profit” core business.
2. Why is Ningji Buying the Stores?
Ningji, a lemon tea brand established in 2021, has opened more than 3,000 stores through franchising and digital strategies, but there is a ceiling to its single product category (the lemon tea market is limited). By acquiring Häagen-Dazs’ stores, Ningji hopes to “break through” to a higher segment:
- Häagen-Dazs has an elite image: Despite the poor performance of its stores, the brand’s premium reputation remains, and consumers recognize it. Ningji can use this brand to enter the high-end ice cream market.
- Ningji has efficiency advantages: The brand is skilled in online marketing, delivery, membership management, and digital strategies. For example, while Häagen-Dazs relied on natural mall traffic, Ningji can help with delivery, pre-sales of gifts, and corporate group purchases to increase store profitability.
- The ice cream market is booming: Brands like Xicha and Bawang Chaji are adding ice cream products, and Ningji wants to capitalize on this trend.
3. The Changing Landscape for Foreign Brands:
Foreign brands (such as Häagen-Dazs) no longer rely solely on their “imported” and “high-end” images to command premium prices:
- Consumers are more discerning: They now value freshness, innovative flavors, and reasonable pricing. New ice cream brands like Mr. Wildman and DQ’s franchising efforts are competing with Häagen-Dazs in the market.
- Strategic shifts by foreign brands: Foreign brands are shifting to a more behind-the-scenes approach—retaining the brand, product formulas, and supply chains (which generate core profits) while entrusting store operations to local companies that better understand Chinese consumer habits. Häagen-Dazs’ sale of its stores is a typical example of this trend.
4. Opportunities and Challenges for the New Partnership:
This collaboration is not just a simple transaction; there are many areas where both parties need to adapt:
- Opportunities: Joint distribution channels: Ningji can sell Häagen-Dazs ice cream in its own stores, creating combos like lemon tea with Häagen-Dazs snowcream, which can attract customers and increase average order values (similar to Mixue Ice City’s strategy).
- Challenges: Balancing high-end image and efficiency: Häagen-Dazs’ core strength is its premium reputation. If Ningji tries to make the products more accessible (e.g., by lowering prices or opening stores in less affluent areas), it may damage the brand’s image. On the other hand, if it maintains high average order values and relies on mall traffic, it may struggle with profitability. Ningji needs to use digital tools (such as membership programs and delivery) to improve efficiency while preserving the high-end feel of the brand—this is the biggest challenge.
In Conclusion
This transaction represents a necessary step for foreign brands in China to become more “grounded” in the local market, as well as an attempt for local brands to leverage international resources. In the future, those who can effectively revitalize established assets using local strategies will be the ones to succeed in the consumer market.