Candy Crush

How Mars is pioneering new digital techniques to dominate in the China market

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Ask any selection of people what they know about Mars, and the answers will almost certainly revolve around candy: the eponymous Mars bar, of course, plus traditional treats such as Skittles, M&Ms, Twix, Snickers, and others. What they may not know is that, over the past decade, the company has also become a leading pet food manufacturer. But, perhaps most surprisingly, developments at the company have been driven through a cutting-edge approach to digital innovation, with the China market now leading the way in many areas – with lessons learned there applied to all of their markets worldwide. 

“China has a different type of complexity,” says Mars’ Ian Burton. “I used to run the European region, where we had 38 markets who all told me they were different. So we had 57 different types of strawberry flavor chewing gum, for example, because they all insisted they were so different. It was much easier to simplify and take that complexity out. But the difference in China is that you have to embrace that complexity, harness it, leverage it, and recognize that the fragmentation of the China market can be an advantage.”

Before becoming both GM and President of the China business a year ago, Burton had been running the Asia Pacific region for three and a half years. For someone relatively new to the region, he’s quickly embraced the peculiarities of the firm’s China business and learned to cope accordingly.

Ian Burton, President & GM for China at Mars Wrigley Confectionary, speaks to media at a recent event.

“As a westerner working in China, we are wired to think that complexity is a bad thing. But China is a complex market. If you need broad distribution, as an example, you can’t do that by simplifying. You would instead be making a trade-off on the depth of distribution that you’d be able to achieve. Recognizing the role of complexity and treating that as something that you can make into a competitive advantage is, I think, the fundamental difference between China and other markets.”

China’s lead in digital transformation is unprecedented and has arguably been underestimated, as the country has evolved from traditional retailing to new retailing in a remarkably short period of time.

Like many companies, Mars has had to respond to the tremendous change going on in the world, implementing a transformational agenda that is changing the face of their business. 

“I think digital and data are absolutely paramount to success in China,” says Burton. “The reality is that there is so much data out there and the richness of that data in China is far greater than it’s ever been before because of the digital nature of the economy. The fact that WeChat has such high penetration, plus the growth of Alipay and WeChat Wallet, and of course all these other start-ups. A fact I heard recently was that there are 33 million start-ups in China today. They are not all in digital business, but I’m pretty sure that a lot of them have been digitally enabled. If it hadn’t been for the digital revolution in China, I don’t think that there would be as many, because the barrier to entry has just dropped tremendously in so many different industries as a result.”

A Mars "Digital Demand" display demonstrates the company's data analytics and AI capabilities.

“For us, it’s just another wave, to use a surfing analogy. We are either going to paddle into the wave or we’re going to get behind it and get on it very, very quickly. We’ve made mistakes before by not recognizing those waves coming along, and in the past we’ve been slow to react. So the efforts that we’ve been taking are to really make sure that we jump on that wave as fast as possible. We’re challenging our traditional mindset and trying to do a few things differently to how we’d normally have done them.”

Freya Peng, who leads Mars’ digital business team in the Asia-Pacific region, further explains: “The China market is driven by the digital side and the entire digital ecosystem is dominated by Alibaba and Tencent. At the same time, there are a lot of technology innovators that are driving things forward. Based on that, we need to make sure that whatever we do remains relevant in this ecosystem. But we also have to stay future-oriented, so that our products are relevant not only today but also for a few years, especially when the technology revolution in China is moving so fast. The difference in China is that you can’t just have one solution for all kinds of scenarios. The pace of change here is unique. We have to keep frequently checking and scanning what is happening in the market, and what new technology there is. It could mean new possibilities for us.”

Learning from Mistakes

Burton says that two decades of growth came to a halt for many industries in 2014-15, adding that it took a long time for multinationals, in particular, to recognize why it was coming to a halt. In-store sales in more established cities started to decline as shopping habits changed and e-commerce blossomed, but Burton says the slowdown was disguised by expansion elsewhere.

“I don’t think that we were asking ourselves the right questions, such as what’s going on in the developed parts of China. Developing parts were doing very well – and making up for the slowdown in the more developed parts – but we probably should have been interrogating ourselves much harder then, and adjusting our business models accordingly.”

Learning from the past is important, but a more pressing challenge is to stay ahead of the curve. Those at Mars say that the company’s family ownership structure is a key enabler for transformation, due to a long-term focus on generations, not quarters, that allows the company to reinvest in changes. That ability to transform becomes ever more crucial in China, which is now pushing the boundaries itself.

Ian Burton and Freya Peng judge contestants at the 2018 Mars Hackathon.

“China is definitely leading and pioneering, and I see it continuing to do so,” says Burton. “At the same time, instead of exporting products, China is now exporting capability. Our colleagues from the US and rest of the world are absolutely blown away when they come and see the things that we’re doing in China. It’s very useful for them to be able to replicate for what will be the future in other markets.”

“For example, the UK is incredibly densely populated. To pick up something from your corner shop is not much of an inconvenience. Much of the US, though, is sparsely populated, so markets won’t necessarily develop at the same pace. Our lives are becoming easier due to technology, with people becoming more cash rich and more time poor. We now have access to things that we never had before to use up that precious time as best as we can, and that’s a trend that I think will continue.”

In order to leverage the existing ecosystem of Chinese companies, Mars has formed several partnerships, including one with Alibaba in 2016, which focuses on big data and aims to create a “one-stop” shopping experience. Under the terms of the agreement, all of Mars’ brands in China are available on Alibaba’s e-commerce platforms including Tmall.com, while the company can also leverage Alibaba’s marketing services, media properties, mobile reach, big data, and consumer insights to directly engage with consumers. Additionally, Alibaba’s supply chain management and logistics network helps to expand Mars’ efficiency and reach.

But, as Burton says, Mars is able to test things in China in a way that other markets are simply not able to do. “Mars was one of the first companies to really put some science behind advertising and return on investment. We used a star rating that was based on the quality of the advertising, such as the recall, the reach, and so on.  Using traditional TV, that was a six-month process, so you had to spend on that TV ad for six months before you can get a quantifiable measure that will tell you your return on investment. We can do that in China in two weeks now.”

Dialing up Digital Innovation

To better leverage their partnerships and maximize online earnings, Mars recently established a Global Digital Innovation Center in China, which focuses on several areas including integrated data and analytics, marketing and technology, and product innovation. Following an investment of more than US $10 million, the center aims to deliver the right content, to the right consumers, at the right times, and through the right channels, as well as better understand the company’s consumers to drive product innovation.

A collaboration between the analytics powers of Mars and the massive data and user engagment of Alibaba produced the "Spicy Chili Snickers".

Another example of innovation through collaboration came through a partnership with Tmall's innovation center, with the company setting up a Mars X TMIC Innovation Hub to explore more market opportunities, identify trends, and unearth consumer insights. Earlier this year, Mars teamed up with Alibaba to create a chili-infused Snickers bar for the China market – the direct result of the integration of analytics from Mars’ consumer research, the 500 million-plus users of Alibaba’s online marketplaces, and a customer survey aimed at finding a new flavor to bring to the market. The research showed that not only do Chinese consumers love spicy food, but that they were willing to try chocolate with an extra kick to it. And so the Snickers Spicy was born, with the entire “idea-to-shelf” journey taking only one year.

Mars also uses AI and machine learning to analyze an estimated 40 million comments through consumer ratings and reviews. This allows the confectionary company to understand how people perceive not just their products and services, but to look at the entire chocolate sector in China.

“A product like Maltesers is well known around the world,” says Peng, “But when it comes to China, we need to understand what that brand stands for here. Globally, consumers like their chocolate to be crunchy and that is a key concept for Maltesers. But when we looked into the data for China consumers, we found that they don’t see that as a real benefit. Instead, they want to be able to enjoy chocolate, while not feeling guilty about their own health. So we changed the entire value proposition for Maltesers from something that is crunchy to something that is light. People here are much more likely to enjoy the product as a result, and it’s all based on the consumer data that we identified and analyzed.”

Bridging the US-China Divide

China is the largest market for Mars outside of the US, with the company first establishing operations here 30 years ago. The rapid technological development happening all around the world is sometimes framed as yet another prong in the ongoing US-China conflict, but Mars, as with many AmCham China members, is invested in both sides and looks to stay above the fray.

“If you go back to Mars’ philosophy,” Burton says, “We’ve always spoken about ‘Think global, act local’. We’ve always been very decentralized, recognizing that the closer we can be to our consumers and to local businesses is the best way to have the insights that you need to be successful in local markets. What’s different about Mars – and where we do probably differ from some of the things that are being discussed at the moment – is that we really do believe in collaboration. Our five principles, which date back to 1947, spoke about mutuality long before anybody else was ever talking about collaboration or any of these other things.”

“So collaboration is very much in our principles, and in our philosophy and our values. A great African proverb says, ‘If you want to fast, go alone; if you want to go far, go together.’ I think that’s why I’ve stayed with Mars for 20 years, because I really do believe that a shared benefit is a mutual benefit, and a mutual benefit endures – that’s what our mutuality principle says. Working together and having more interdependency among markets is part of a successful global economy. If you’re working in isolation, I think you’re just missing out.”

Ian Burton awards the winners of the 2018 Mars Hackathon with their cash prize.

For less well-traveled executives than Burton, who was born in the UK, before growing up in Zambia and Zimbabwe, and started his career in South Africa, the China market can seem like a daunting place. But an even greater challenge can be communicating the particulars on the ground in China back to head office on the other side of the world.

“There’s an Einstein quote that says, ‘Not everything that counts can be counted, and not everything that can be counted counts.’ Our accountants don’t like hearing that! But there are some things that happen in China that you cannot explain. There simply isn’t a logical explanation for why it is what it is. Being able to live with that ambiguity is a skill that you need to have to be successful in China.”

“I sat in a technology lunch in Shenzhen recently and the view from the western side of the table was that, in China, people try to do too many things and they’re not focused enough. But the response was that this is a very western way of thinking. The way of doing things in China is to do multiple things, and that, by doing multiple things, you can be more successful. You’ve just got to find a way of working at it and that’s what China does very, very well.”

“I find that when executives come to China, they all feel the energy and are very excited, but then they get on a plane and, once they’re outside this environment, they just go back into their usual habits and thought processes. I’ve worked really hard at getting more people with an informed view of China in the places where they need to be. So, for example, we now have 13 or 14 Chinese associates actually based in Chicago at our confectionary headquarters across different functions. Now, when a conversation comes up and a China opinion is needed, I feel more assured that there is a relevant China opinion being offered.”

“That needs to happen across all different levels of our organization. The good news is that this is recognized, but it is a change to what happened before. Previously, the attitude was that the China market is very successful, but it’s run by Chinese people and we don’t want to interfere because they don’t need our help to deliver superior business results. What I’ve tried to bring about as the first western leader in the China confectionary business is to try and embrace both and to recognize what’s great about China and what’s different about China. I have to represent China to Mars Incorporated and, at the same time, represent Mars Incorporated to China. Getting the best of both is very much what I’m trying to do.”

 

This article was originally published in the pilot of the upcoming AmCham China Quarterly, an executive-targeted periodical focused on policy, business, and technology, driven by C-suite perspectives and insights. The AmCham China Quarterly is set to launch early 2019  to subscribe or contribute to the Quarterly, contact our editor: jpapolos@amchamchina.org

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