Why Nestle lets customers mess with Kit Kat

Sue Mitchel
Nov 6 2016
AFR
Nestle Oceania’s head of confectionery, Martin Brown, realised the power of personalisation when the global food giant opened a pop-up Kit Kat store in Sydney last August.
Customers could make their own Kit Kit to order, choosing white, milk or dark chocolate, add extra ingredients such as salted caramel, toasted macadamias and honeycomb, and have it wrapped in customised packaging.
“I saw someone come in collect the end result of their choice of three chocolates and assortment of ingredients and their own packaging and they said ‘I can’t believe you’re letting us mess with your brand in this way’,” Mr Brown told The Australian Financial Review.
After 78 years protecting and maintaining the integrity of the Kit Kat, one of the world’s biggest selling confectionery brands, Nestle had given customers a licence to literally take it apart and put it back together to their own recipe.
Customers can select from dozens of ingredients and see their customised Kit Kat being made.
Customers can select from dozens of ingredients and see their customised Kit Kat being made. Supplied
And customers couldn’t get enough of it.
The first Kit Kat Studio sold more than 5000 custom-made Kit Kats in seven days and customers queued for hours to design their own creations.
While chocolate sales are rising about 3.5 per cent a year, sales of Kit Kat have risen 10 per cent (CAGR) over the past five years, and growth spiked even higher while the studio was trading.
At a second pop-up store in Melbourne last October Nestle added even more ingredients, such as freeze-dried raspberries, dried rose petals, pretzels and cocoa-nibs, and watched sales – and social media sharing – go through the roof.
Relationship with the consumer
Some Chinese shoppers paid as much as $88 for an eight-finger Kit Kat encrusted with gold leaf.
“We learned how to capture more value through even more sophisticated product and customisation,” said Mr Brown.
He says the retail stores have enabled the food giant to build a more intimate relationship with consumers by empowering them and tapping into changing consumption trends.
“This was fundamentally a significant transition from a mass produced, mass distributed product for a large brand to a more intimate relationship with a brand,” Mr Brown said.
“When we saw the number of Instagram shares we realised this opportunity for co-creation of a known brand was an invitation they put huge value on.
“We were inspired by millennials – they’re great food explorers and are keen to try innovative and new foods – food plays a vital role in their social networks and discovering new food is a social currency for them.”
Last week Nestle opened the world’s first permanent Kit Kat store, at Melbourne Central, and plans for a permanent Sydney store are under development.
Expanding on direct-to-consumer models
This month the company will open its first pop-up store/lolly bar for the 125-year-old Allens brand.
Customers will be able to order a customised jar of Allens lollies, such as an entire jar of Black Cats or Chicos or a mixed jar of old fashioned favourites including Milk Bottles, Pineapples and Snakes.
Nestle is also bringing back discontinued lollies such as green frogs and developing new products such as multicoloured teeth and chocolate-dipped bananas.
Unlike most fast-moving consumer goods companies, Nestle is no stranger to retail and selling directly to consumers – it started selling Nespresso capsules online in 1996 and opened its first Nespresso store in 2000.
As brands face increasing competition for shelf space in supermarkets and consumers become more accustomed to buying online, more FMCG companies are exploring direct-to-consumer models.
For example, Unilever outlaid $US1 billion in July for online razor-blade merchant Dollar Shave Club and has experimented in Australia with Magnum icecream pop-up stores.
Adapting the brand
Mr Brown says Kit Kat retail stores have changed the company’s approach to innovation.
“Nestle is 150 years old, it has developed great confidence in its products, everyday high-quality products … when you turn that on its head and produce personalised and customised products in small batches … you have to break a lot of things that have been part of the way you work,” he said.
“You have to be agile and have a fast-moving team, you have to be open to mistakes and you need different people, creative people and problem solvers who like disrupting processes.”
But retail stores will never replace Nestle’s relationships with its major customers – supermarket chains Woolworths and Coles, convenience stores and corner stores – and retail sales will be incremental rather than a source of potential conflict.
“It’s not about bypassing major customers – we’re bringing our major customers to Kit Kat studios to show them what we are doing and to inspire them about the potential for the brand and the category,” Mr Brown said.
“We have the same ambitions for them.”
He says there is scope to take learnings from retail stores into supermarkets, but won’t give details, citing intense competition in the confectionery sector.
“Success will not just be building a vibrant direct to consumer business but bringing new ideas to mainstream retail – that’s what we’re about,” he said.
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