Summary of Key Points
On June 2nd, the multinational food giant General Mills announced that it had granted the rights to operate Hagen-Dazs stores in mainland China to an investment group led by Ningji. General Mills aims to shed the burden of managing physical stores and continue to maintain its retail (such as selling ice cream in supermarkets) and dining businesses for Hagen-Dazs in China; Ningji, on the other hand, hopes to leverage Hagen-Dazs' premium shopping mall locations and brand image to achieve a significant leap forward. However, there are substantial differences between the two companies in terms of brand positioning, operational models, and supply chains, making integration extremely challenging. Whether this partnership will be successful will only become clear after 2-3 years of operational data.
Detailed Analysis
#### 1. Hagen-Dazs: From a Luxury Ice Cream Brand to a Burden
When Hagen-Dazs entered the Chinese market in 1996, it was a true symbol of luxury—with an average monthly salary of only 500 yuan at that time, its ice cream cones were priced at 25 yuan each. The brand cultivated a romantic association by promoting the idea of "taking your loved one to Hagen-Dazs," and with its high-quality ingredients and exclusive stores, it opened as many as 550 outlets, becoming a staple in the premium shopping areas of major cities. In 2017, the Chinese market contributed half of Hagen-Dazs' global revenue. However, in recent years, its shine has faded: customer traffic has decreased, rental costs in first-tier cities have risen sharply, cold chain logistics expenses have remained high, and new products have failed to appeal to younger consumers (for example, by not offering low-sugar or low-fat options in a timely manner), resulting in only 171 stores remaining. General Mills is therefore looking to divest itself of the operational responsibilities associated with these physical outlets.
#### 2. Ningji: A Young Brand on the Rise, Seeking to Upgrade
Ningji is a startup launched in 2021 that focuses on lemon tea priced at around 13-16 yuan. By avoiding competitors like HiCha (high-end) and Moxue Ice City (low-price), the brand has expanded rapidly with investments from Tencent and ByteDance, reaching over 3,000 stores. However, it is now facing limitations: the lemon tea market is nearing its saturation point, with competitors like LINLEE competing fiercely, and larger brands like Moxue Ice City and GuMing also entering the lemon tea category, diluting Ningji's unique selling proposition. Additionally, most of Ningji's stores are located on street corners, preventing it from entering premium shopping areas. Therefore, Ningji aims to leverage Hagen-Dazs' premium resources to elevate its brand status.
#### 3. What Are the Complementary Benefits of This Partnership?
- General Mills' Needs: To reduce the operational costs associated with physical stores (rentals, labor, cold chain logistics) and focus on more profitable retail activities (such as selling Hagen-Dazs ice cream in supermarket refrigerators).
- Ningji's Needs: To gain access to premium shopping mall locations that it cannot afford on its own and to use Hagen-Dazs' luxury brand image to elevate its own product range, moving from a mass-market tea brand to a mid-to-high-end one.
#### 4. Major Challenges in Integration
- Brand Positioning Conflict: Ningji targets a budget-conscious, fast-paced consumer group (students and young professionals), while Hagen-Dazs is associated with high-end social settings (ice cream cones priced over 50 yuan each, appealing to couples and business professionals). These target audiences largely do not overlap, and trying to combine the two brands would likely undermine their respective values.
- Incompatible Operational Models: Ningji relies on a franchise model for rapid expansion with minimal capital investment, whereas Hagen-Dazs operates directly with a focus on high-quality service and store aesthetics. Ningji may struggle to maintain Hagen-Dazs' member programs and create the desired shopping experiences in its stores.
- Supply Chain Challenges: Hagen-Dazs uses imported ingredients with strict cold chain requirements and higher costs, while Ningji's products (lemon tea and tea) have completely different supply chains, making it difficult to share resources and reduce costs in the short term.
- Authorization Issues: Ningji only has the rights to operate the stores but does not own the brand. There may be conflicts if Ningji introduces lower-priced products, which would go against General Mills' efforts to maintain Hagen-Dazs' luxury image.
#### 5. Future Prospects: Short-Term Benefits, Long-Term Balance Required
In the short term, both parties can benefit—Ningji gains access to premium locations, and Hagen-Dazs can reach a younger consumer base. However, the long-term success of this partnership depends on their ability to balance changes that do not compromise either brand's core values. If too many changes are made, it could harm Hagen-Dazs' luxury reputation, and if too few changes are made, the partnership may not be effective. Only after 2-3 years of operational data will it be clear whether this collaboration is a success.
This cross-business partnership is akin to an adventure: Ningji hopes to use Hagen-Dazs as a stepping stone for growth, while Hagen-Dazs seeks to sustain its presence in the Chinese market. Whether they can achieve their goals depends on their ability to develop a new approach that suits the Chinese consumer landscape. After all, combining two completely different brands is not as simple as adding one plus one.