Can't "Didi fragrant" Maxwell coffee be mixed in China?

Known for its fragrant Didi, Maxwell, which entered the Chinese market as early as 1984, may be planning to close its plant in Guangzhou, China.

Jacobs Douwe Egberts (hereinafter referred to as JDE), which owns the Maxwell coffee brand, said the company decided that from 2017, the Guangzhou plant in China would no longer produce, while products in the Greater China market would be supplied by the Bangkok production base in Thailand, the Daily Business News reported. JDE also said that in order to promote growth and create long-term value in Asia, it will form a strategic partnership with Hillhouse Capital Group, a Chinese investment fund company, and appoint Beatrice Chan as the company's general manager for Greater China. He will be fully responsible for the integrated retail and professional channel business of the new company, and strive to have a larger market in China.

According to JDE's reply, Maxwell does not seem to have any plans to withdraw from the Chinese market. But in China, life for the brand is not easy. Maxwell's factory in Guangzhou was put into production in 1984, when Maxwell was still called "Maxwell Coffee" and officially changed its name in 1997. Although it entered China four years earlier than Nestle Coffee, Maxwell's market share is less than 11%, while Nestle Coffee, the absolute leader of the instant coffee market, has a 70% market share. In addition to the slogan "Didi is fragrant, the meaning is not enough", Maxwell's most famous promotion was the placement in du Lala's promotion in 2009.

In addition to the challenges from competitors, the growth of the entire Chinese instant coffee market is also slowing. In the past five years, the market share of instant coffee has fallen from 80.7% in 2009 to 71.8% in 2014, and will continue to decline, according to a report by Mintel, a consultancy. According to forecasts, the market share of instant coffee will fall to 66% by 2019. In contrast, the market share of instant coffee and freshly ground coffee is expanding. In the past five years, the freshly ground coffee market, represented by Starbucks and COSTA, has grown by more than 38.6%, far exceeding the 13.5% growth rate of instant coffee.

In July 2015, Mondelez decided to divest Maxwell Coffee. The company said it had completed a merger of its coffee business with D.E.Master Blenders 1753. Mondelez took a stake in its coffee brand and Diyi, which specializes in coffee and tea, to form a new coffee company, which became JDE.

JDE acquired coffee brands such as Jacobs, Carte Noire, Gevalia, Kenco, Tassimo and Millicano from Mondelez International, and Douwe Egberts, LOR, Pilao and Senseo coffee brands from Diyi, of which Tassimo is a capsule coffee brand jointly owned by Mondelez and Bosch. Meanwhile, Maxwell House, which is outside the US market, is managed by a new company.

For Chinese consumers, Maxwell is the only familiar brand and the only one of JDE's many brands to enter China. After the merger, according to industrial and commercial data, Mondelez China and Diyi established Zhenyin Trading (Shanghai) Company in April 2015, while Guangzhou Zhenyin Coffee Co., Ltd., where the Guangzhou factory is located, is the shareholder of the new company. The new company began operation on July 1, 2015, while Maxwell's sales and market were all transferred to the new joint venture.

Instead of producing Maxwell locally in China, JDE's intention may be to introduce more instant coffee brands. In JDE's brand library, there are some brands that occupy a certain market position in Germany and the Netherlands, and the company is also recruiting trade import and export specialists. However, it is more difficult to introduce new brands than to continue to expand Maxwell's popularity.