China Real Time Report
Local companies quickly roll out products, marketing campaigns appealing to China’s over 1.3 billion consumers
A shopper looks at products at a Wal-Mart in Shenzhen, in southern China’s Guangdong province, in November 2015. ENLARGE
A shopper looks at products at a Wal-Mart in Shenzhen, in southern China’s Guangdong province, in November 2015. Photo: Associated Press
Jun 29, 2016 12:02 pm HKT
Domestic consumer-goods brands are gaining market share faster than foreign companies in China as they move quickly to launch products and marketing campaigns that appeal to the country’s more than 1.3 billion consumers.
A report released Tuesday by Bain & Co. in partnership with Kantar Worldpanel said that while sales by foreign brands declined an overall 1.4% in 2015, sales by local companies increased 7.8% in certain fast-moving consumer-goods categories such as personal care products in the same period.
In general, domestic consumer-goods companies are becoming “better and more competitive” against foreign companies in business strategy and marketing, said Bruno Lannes, a Bain partner and co-author of the report.
Still, some foreign brands, including those selling fabric softener, infant formula and instant noodles, continue to gain market share in China because of marketing investments and safety concerns about local products, according to Mr. Lannes.
The Bain report–which looked at 26 categories spanning packaged food, beverages, personal care and home care–suggests that companies in these sectors are moving on two tracks in China, either growing sales rapidly as they adapt their strategy to a slower Chinese economy, or stagnating and losing market share.
The report said local companies were gaining the upper hand in categories including skin care, baby diapers, shampoo and toothpaste. For example, Shanghai Jahwa often rolls out personal-care products, such as those incorporating Chinese herbal therapy, in response to consumers’ demands, according to Bain.
“Domestic firms have become more aggressive about fine tuning products to suit what consumers are asking for,” said Ben Cavender of China Market Research Group. “As a result, they have become more nimble than foreign companies.”
Mr. Lannes also said that domestic companies were still led by first- or second-generation entrepreneurs who can act quickly to get products to market, while large multinationals may have to check with headquarters for product-approval decisions. Local shampoo brand Seeyoung’s introduction of silicone-free products to China last year was quickly copied by foreign companies, according to Bain.
Chinese companies are also sponsoring television shows and spending more on commercials than some foreign companies. For example, dairy company Yili Group promoted its QQ Star milk brand by sponsoring a reality TV show in 2014 for fathers and children called “Where Are We Going Dad?”
Local brands have also generally been faster than foreign multinationals in partnering with e-commerce sites, such as those owned by Alibaba Group Holding and JD.com, to sell their products online in China, according to Mr. Lannes.
Bain said it was encouraging its foreign clients to localize their decision-making and product innovation, as well as to do more sales online. For many multinationals, winning globally isn’t possible if they don’t win China, according to Mr. Lannes.
– Kimaya de Silva