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China's shoppers shift towards locally-made products

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Market is expected to remain weak

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Demand for infant health foods resilient

By Richa Naidu

LONDON, Oct 24 (Reuters) - International companies such

as Danone and Nestle have deepened price cuts

or are seeking to boost online shopping volumes to win over

China's increasingly reluctant customers, executives said.

China's economy, the world's second largest, grew at the

slowest pace since early 2023 in the third quarter.

Consumption and industrial output figures last month beat

forecasts, but a property sector crisis remains a challenge for

Beijing as it tries to boost growth.

For international players, an issue is consumers' increased

preference for locally made products, which have improved in

quality and can be cheaper than the big brands of foreign

multinationals, investors say.

Unilever ( UL ), which makes Dove soap and Knorr soup bases,

reported on Thursday that underlying sales at its China business

declined by low-single digits and that market weakness extended

across categories.

CEO Hein Schumacher said market growth in China will remain

"subdued" for some quarters yet and that the company was

revamping the way it sells products in China.

"In China, the consumer has changed shopping behaviour quite

fast, with some particular digital channels that have grown

exponentially - here, we are resetting to make sure we follow

that changing consumer," Schumacher said in a media call.

French dairy company Danone has found its more specialised

products, including infant formula and vitamin drinks are more

resilient during the downturn.

"In a consumer landscape which is relatively soft, the

consumer is still very intentional about where they believe

they're getting value for money," finance chief Juergen Esser

told Reuters.

It has also had some success by cutting prices to attract

bargain-hunters.

The company which makes Activia yoghurt, Evian bottled water

and Aptamil infant formula, cut prices by 2.2% for its business

that includes Australia, China, Japan and New Zealand, while

volumes grew by more than 10% and like-like-like sales rose 8%.

Nestle and Danone lowered prices in their businesses that

include China from the second quarter and deepened the cuts more

recently. Unilever ( UL ) did not disclose price changes for China.

Other Danone products in demand are its Chinese vitamin

drink brand Mizone, high-protein dairy and specialty infant

nutrition items such as those used by mothers who had

C-sections.

"Medical nutrition is a no brainer, because macro trends

(towards health) are in our favour," Esser said.

Nestle, the world's biggest food maker, last week said it

also cut prices - by 1.5% - in China in the nine months to Sept.

30, but drove sales volumes only by 3.9% due to the "low

inflation environment".

Echoing the trend towards premium specialised products seen

by Danone, Nestle CFO Anna Manz pointed to good performance from

infant nutrition products, citing in particular the company's

NAN baby milk for babies that have specific allergies or

challenges.