If you’re already exporting to China, we’re guessing you’re probably also selling to a host of other countries – markets like Dubai and the other six emirates could be on the list. In the UAE, there’s a good chance you’ve engaged some localisation for the country – culturally sensitive and resonant branding & communications, legal & regulatory allowances, logistics & distribution, and possibly even some new product development and packaging. In China, it’s probable that you’ve also localised the mix. But how local is your localisation?
Few people come to China without hearing that the country is like Europe; made up of varied and diverse regions. Yet in the same moment of acknowledgement, many will turn around and ‘localise for China’ with a homogenous strategy that they hope will win the hearts of consumers spanning the country.
China Skinny does a lot of research across different cities and provinces in China, and we usually find notable variances between the regions. There are the obvious differences in food tastes, climates, lifestyles, pollution and even body size, but it is the emotional cues that are often the most pronounced. We only need to look at one of the most common themes in Chinese advertising – families. Even in Guangzhou and Shenzhen – two tier 1 cities just 30 minutes apart on the fast train, the reality for families can be quite different: a large share of millennials in Guangzhou live with their parents and see them most days. In Shenzhen – a city built by domestic migrants – many millennials may only see their parents every few months, or just once a year during the Spring Festival.
Whilst some overarching localisation should be implemented across China, there is often a case to get city-specific with marketing and other initiatives. Take Shanghai, it has population greater than Australia, and a 13% larger GDP than the UAE, yet unlike the UAE-specific localisation, many brands will roll out the same strategy for Beijing, Guangzhou, Shenzhen and many other cities across China.
China’s metropolises are of a scale and affluence that they justify an element of localisation. The hyper-competitive nature of marketing in Chinese cities is finding it increasingly harder to connect with consumers without it. That means localising messaging, and even sometimes the digital platforms you use to share it. In certain demographics in some cities, digital channels aren’t always the best option to reach Chinese consumers, highlighting the need to have regionally-specific plans.
Over the past few years, brands have become increasingly focused on cities beyond tier 1, and even tier 2, with good reason. These ‘smaller’ cities are often much less contested and less apathetic to interesting, new foreign products. Half of the 50 million Chinese households entering the middle to affluent classes between 2016-2020 are expected to reign from cities outside of the top-100 cities according to BCG. They’re buying more imported products, and travelling abroad more which influences more purchases. The number of direct flights between cities in China and Thailand grew from 69 to 148 over the past three years for example. Yet with such variances between lower tier cities, brands would be wise to do their due diligence before entering and localising for them.
On the subject of cities, China Skinny has launched a new tool on our site to help you make sense of it all. We’re often getting questions about which cities fall into which tier, so we have created out City Tier Calculator which provides detailed information about which tier Chinese cities are, some of the key indicators, their rankings in that tier, and even how many Starbucks they have. Use the tool here. The tool is part of an overall redesign of chinaskinny.com, which is long overdue – we’d suggest you take a look. Go to Page 2 to see this week’s China news and highlights.
Welcome to the final part of China Skinny’s Food and Beverage Trends in China series. Part 1 covered developments in China’s health trends, flavours and frozen products. Part 2 touched on the continued trend of premiumisation and packaging innovations. Today we’ll discuss some of the bigger changes we noticed.
More Diversity Among Countries Represented
SIAL brings together food and beverage products from the world over and this year saw more countries represented than in previous years. Not only did the number of countries represented grow but there was a strong presence from less well-known countries such as Slovenia and Estonia, who offered goods like crisps, puffed cheese and beer. Their eastern European fellow Russia took up a large section of the show exhibiting confectionery, condiments, wines, water and of course vodka. The increased interest in China is spurred by China’s growing consumer power but is also likely helped by the developments of China’s One Belt, One Road efforts.
The Guest County of Honor this year was Argentina, who showcased their meat and food options. Argentina’s presence was surrounded by other lively Central and South American countries such as Mexico, Belize, and Brazil. The diversity of countries represents the pull of Chinese consumers looking further afield for products and the growing interest in selling to Chinese consumers.
Local Branding on the Rise
Local brands have been stepping up their branding efforts in the past few years. This can be seen in their design, packaging and products. Chinese consumers choose a brand or product for many reasons, not only country of origin. Domestic players are making efforts to understand their target consumer and are using emotive marketing to grab attention and hearts. They are quickly learning that this type of marketing goes much further than typical functional marketing. An example of this is a variety of spicy snack food (‘la tiao’) marketed by Weilong Food (卫龙食品). The brand’s social media presence uses an unexpectedly modern approach to connect with millennials, surprising their target consumers that the brand is so interesting. Overall, domestic brands are upping their game, but this doesn’t come without mishaps and face palms such as the latest advertisements for Coconut Palm, a Chinese coconut drink.
At the trade shows, many of the mega-booths were represented by domestic brands and at first glance the booths were indistinguishable from the those of North America, Europe or Australasia brands. Chinese brands coupled their slick booths with smart marketing and engagement. VR, photo opportunities, live streaming and interesting dispensers caught and kept show goers’ attention.
More Cartoons & Cutesy Characters
Along with the sophistication of branding among Chinese companies, more are incorporating fun, adorable and cartoony characters. Chinese love cutesy characters and many brands are riding on the success of local snack brand Three Squirrels by adding fun and engaging personalities to their marketing.
Action figures, princesses, animals and other cute characters were all present in branding and marketing. To Western eyes these mascots may seem childish but Chinese welcome them and the imagery and personalities help them relate and connect to a brand. China’s Air Force even turned their machines into cute cartoon characters to celebrate Chinese New Year! When using characters there are plenty of opportunities to get it wrong in China so best to test and verify that a certain image, brand or name will resonate with the target audience.
Always fakes: Nutella, Super Mario
Much like last year, there were bad copies and even fakes that innovated on established brands. A few that caught our eyes were a take on Super Mario and a variation of Nutella. While there was only fake Nutella last year; this year offered several new Nutella-like spreads, including one made from dates. While consumers may initially be fooled, they are bound to find out the truth sooner or later.
Conclusions to Food & Beverage Trends in China Day 3
China’s fast-moving food and beverage industry is growing rapidly and allows for abundant opportunities. But it is also getting more competitive, something we see firsthand through our research and experiences in China. The competition from domestic brands and among other imported products is tough. Getting China right means taking a strategic approach to geographic locations, products, packaging, branding and marketing. Get in touch with China Skinny to see how we can help you succeed in China.
The China Skinny team was out and about this past week taking in the latest trends, innovations and happenings in China’s food & beverage and craft beer scene. Attending last week’s SIAL China and Craft Beer China gave us the opportunity to reflect on how the industry has developed since the 2016 editions. Through this three-part series we will share our observations and insights into the notable trends driving the market.
China’s Health Trend is Still Going Strong, but Diversifying
The health trend is still going strong in China. With 72% of consumers last year worrying that the food they eat is harmful to their health, brands are quickly adapting to offer healthier products. With the health trend well-established for several years now, new products trying to capture untapped healthy niches caught our interest.
From quinoa crisps to fruit snacks, organic offerings to natural, healthy desserts, the range of healthy food and snack options was bigger than before. Meat products were a particularly contentious area, with Canadian meat producers touting superiority over their U.S. counterparts, which they attributed to healthier farms and safer processing. Health is clearly being promoted across a wide variety of products with more detail and attention given to individual selling points.
Nuts and dried fruit are healthy and popular snacks in China with 40% of urban Chinese consumers eating more nuts and seeds this year compared to Fall 2016. Nuts and dried fruits were ubiquitous this year but compared to last year flavoured products were far fewer. Past years touted a swathe of flavour combinations, from honey butter almonds to chili pistachios and candied walnuts. This year, the field was dominated by plain, shelled nuts. Additionally, the nut exhibitors lacked slick marketing with many staffing booths operating solely on hired helped, displaying unattractive bowls of nuts and QR codes with no added engagement. Fun mascots, WeChat connected games, and cool sample dispensers were all absent; a missed opportunity for B2B marketing.
Fun Flavours and Product Innovation in Honey, Oils & Drinks
Innovative flavours in oils, honeys and drinks were prevalent. From orange, avocado and cedar nut flavoured honey to creamed honey in a tube, honey was one of the most experimental categories. Oil had a strong showing with flavoured olive, hazelnut and walnut oils. Flavoured olive oil was also presented in a convenient spray-able canister. When it comes to oil use, Chinese consumers re-purpose it well beyond just eating. However, we spotted only one olive oil booth that also displayed their olive oil based skincare. The brand manager noted that the skincare products had received positive reviews from the Chinese audience but hesitation regarding the ‘boutique’ price.
Fusion drinks were popular with many touting the health card by adding nutritious ingredients to make the offerings more interesting. Many of these drinks combined their products with home-sourced ingredients to give brands provenance as a further avenue to market. Maple syrup infused cranberry juice from Canada, Australian fruit cocktails and fresh French fruit and vegetable smoothies were all available. One of the more innovative products was Dip and Sip straws from Hungary that delivers flavour that stays in the straw until you suck. Straws were available for both water and milk.
China’s Frozen Food Market is Evolving
Frozen products were more prevalent than years prior. Russian ice cream, Italian gelato and Californian ice pops were all available and luckily giving out samples! The ice cream was typically marketed as a treat whereas the ice pops took the note of healthiness, offering dairy-free and fruit and vegetable variations. Domestic players also had a strong showing in frozen categories. Most of the products present were straightforward with little experimentation.
The variation of frozen products coupled with a complete hall dedicated to cold chain logistics demonstrates how serious China is taking logistical development. Increasing demand of fresh food, particularly through B2C ecommerce, continues to drive growth in the cold chain industry. It is expected that by 2020 the cold chain industry will be valued at RMB 400 billion allowing delivery to both big and small cities all over China.
Conclusions to Food & Beverage Trends in China Day 1
China’s fast growing and dynamic market offers abundant opportunities, but consumers are diversifying along with brands. The health trend still going strong. Ever-growing product innovation and introduction means a more crowded market. That requires a smart entry or expansion. Get in touch with China Skinny if you’d like to know more about how we can assist in your specific product category, product innovation or China plan.
With over a month since inauguration day, we can all agree that the Donald Trump administration has been anything but routine. Although threats of tariffs and the ensuing trade war remain unrealised, the ripples of Trump’s tumultuous tenure have reached Chinese shores. As history tells us, when fluctuations in Chinese consumer sentiment materialise, the resultant effect on trade can be “yuge”.
Chinese consumers’ sensitivity to geopolitical issues cannot be understated. In the wake of the Diaoyu Islands dispute in September 2012 Japanese brands felt the full force of this phenomenon. Japan’s top three auto companies saw their sales plummet 35%-49% y.o.y. in a market that was growing overall. South Korea is currently dealing with a similar backlash. With news of the THAAD missile deployment reverberating throughout China, state media has called for a boycott of South Korean goods, with Lotte hit particularly hard.
America’s soft power has long been its greatest asset for many of its exporters, so China Skinny teamed up with Findoout in a joint study to quantify how this has been impacted by Trump after his first month as President. The survey of 2,000 consumers across China found that 41.2% of Chinese had a more negative view of America than before he was president with 8.1% more positive and 50.7% neutral.
The categories most negatively impacted were investing in U.S. property and stocks, travelling to America, and studying there, with a net 17.7%, 13.9% and 10.0% of consumers respectively. Whilst the U.S. education industry benefitted from the 329,000 Chinese students who studied in America last academic year, and the travel industry from the 3 million Chinese tourists, countless other exporters benefitted from food to fashion to Fords. Many Chinese students and visitors develop an affinity with US brands; sharing them on social media, giving them as gifts, promoting them through the daigou trade and buying them after returning to the Mainland. It’s in America’s interest to ensure they hold favour with Chinese students and tourists.
Nevertheless, Trump hasn’t been all bad news for American exporters. Of the 15 categories we evaluated, Chinese were more positive about four of them: movies (11.8%), music (5.4%), media (3.5%) and sport (1.5%). It appears Trump has piqued curiosity among Chinese consumers and increased interest in American culture overall.
In an obscure way, this could help American brands who understand these motivations and can tailor their marketing mix to them. Hyatt did great job of tapping into Chinese consumers’ interest in Hollywood. Utilising commercial breaks during the Oscars they launched their 12-month campaign all-the-while cleverly highlighting that they don’t agree with some of Trump’s policies – hence the theme song, “What the world needs now is love”. China is a main focus of the campaign. Agencies such as China Skinny can ensure that you understand and appeal to Chinese consumers too. Go to Page 2 to see this week’s China news and highlights.
One month in office and Trump’s practices remain one of the hot topics on Chinese social media. China Skinny have partnered with Findoout to gain insights into how Trump’s presidency is influencing the Chinese consumer market for American brands. While the overall consumer sentiment is declining, some categories profit from the current developments and have increased in interest. We hope you are among the lucky ones.
Few markets have experienced changes in the way that China has over the past few decades.
Just 35 years ago, more than four in five Chinese were living in the countryside, typically tending small, family-sized plots with animals and crops. Now around half of the population live in city apartments, surrounded by conveniences that they could have only dreamt of a generation ago, and earning over three times what they would if they still lived rurally. Since 1990, China’s average incomes have grown more than 10-fold, and those extra earnings usually only need to support one child, unlike the large families a few decades earlier.
China’s social changes are almost matched by its market transformation. There were no foreign FMCG brands in China until 1979 when Coca Cola launched in the Middle Kingdom, although it was only allowed to sell to tourists. Nowadays, China has truly become internationalised with products from Italy’s Moleskine stationary, to New Zealand apples, to Belgian beer all vying for China’s lucrative consumers’ wallets. More than 500 new products launch every day on average in China.
How Chinese learn about products and services has also transformed. Until recently, propaganda messages made up the lion’s share of marketing in China. Most consumers learnt about things through the traditional state-run media channels such as radio, newspapers and later, television. Now the average urban Chinese consumer is bombarded by advertising messages across a wide range of mediums, unrivalled in other markets.
China’s 668 million Internet users have become the most rampant users of social media and ecommerce globally, using online channels more than any other medium for research before and after buying things. In addition, over 100 million Chinese travel and study abroad each year, and together with the networks they influence, have created a massive consumer population that is more aware, astute and internationally-minded than ever before.
Such remarkable social, economic and market changes have created a unique consumer class. Their consumer journey and retail market are unlike the West and other Asian markets. But there are also a number of fads, social habits, fashion trends and food that are a result of this dramatic change and China’s unique culture and history. We’ve listed a few to give you a taste of just how different some Chinese consumer trends are. We hope you enjoy this week’s Skinny.
Buzzwords: Unique Chinese Consumer Trends: Those unique fads, social habits, fashion trends and food that all make China a little more interesting.
4 Strategies For Reaching The Chinese Consumer: As consumerism becomes more entrenched in China, companies will have to 1) segment more and more precisely; 2) extend modern trade channels and distribution networks to reach consumers outside the biggest cities; 3) communicate benefits of products that are unfamiliar to consumers; and 4) develop the products and services that are underpinning increases in consumer spending, and which remain relatively scarce in China.
Italy’s Luxury Firms Set Their Sights On China: On the back of a 44.7% increase in net income for the first half of 2015, high end notebook maker Moleskine will open most of its new stores in China in the second semester, a market it describes as “very interesting”.
19,470 Firms Sign Up For Three New FTZs: Three months since free trade pilot zones were launched in Tianjin, Guangdong and Fujian in April, almost 20,000 firms had signed up.
Big Brands Like Michael Jordan Are Still Losing Trademark Battles In China; Here’s How to Win: If you’re planning to launch a legal challenge against a trademark squatter in China, don’t delay, and register your Chinese brand name if you have one.
Internet & Ecommerce
PayPal Aims to Connect More US Merchants with Chinese Consumers: One of two pieces of research by Paypal studied how Chinese consumers learn about products they purchase cross border. Search engines were the most common way, followed by word of mouth and social media. Alibaba has just recruited a former vice chairman at Goldman Sacks to lead its cross border drive. The company has partnered with Kobe Bryant to sell his documentary and products on Tmall.
Apple Loses Top Market Share In China As Xiaomi And Huawei Take Over: After leading for two quarters, Apple has been beaten out of the top spot for market share in China by Xiaomi at 15.9% and Huawei at 15.7%. Apple’s share was estimated at 12.2%.
Food & Beverage
What’s Going Wrong With Chinese Juice?: After accounting for 61% of global juice volume growth between 2009-2014, the volume of juice sales declined last year, with value only slightly growing. A few big safety scandals didn’t help. There has also been an overall shift to healthier beverage options with better ingredients such as fortified/functional juices and reduced sugar juice.
China’s Top Wine And Beer E-Tailer Nabs $80M Funding To Get Everyone Drunk: Jiuxian adds $80 million funding to take its total funding to $225 million since 2011. It comes at a time when China overtook Japan to be the top consumer of Belgium beers in Asia, with imports growing 140% last year and 850% since 2008.
Ctrip Goes On A Round The World Trip: China’s largest online travel agent faces challenges in expanding globally, in addition to more aggressive domestic competitors backed by the big boys such as Tencent and Baidu. 53% of Chinese travelling internationally book on websites or over apps.
Fakes Are Costing Europe’s Fashion Industry 10% Of Its Sales And Thousands Of Jobs: Two thirds of the worlds fakes are said to originate in China, with Chinese counterfeits are estimated to cost European fashion brands €17.5 billion ($19.2 billion) a year and result in 242,000 lost jobs according to OHIM. Italy is the hardest hit, followed by Spain, the UK, Germany and France.
Chinese Consumers Most Satisfied With Their Looks Among Asians: 9.8% of Chinese consumers are completely satisfied with their looks, while 44% are fairly satisfied, making them the most contented among the AsiaPac countries surveyed by GfK.
China’s Once High-Flying Internet Money Market Funds Are Now Barely Better Than Traditional Banks: Interest rates on Internet funds are less than half what they have been since 2013. In early 2014, Chinese International Capital Corp estimated that online money-market funds could soak up 8% of total consumer deposits in three years. Jack Ma’s Yu’ebao, is the market leader with more than $98 billion in assets and 200 million users to date.
Chinese Consumers More Upbeat On Buying Cars: Despite the slowdown of car sales in China, 20.7% of respondents in an MNI Indicator survey said they were planning to buy a car in the next 12 months – the highest rate since the series began in March 2012.
Luxury Consumer Price Index Falls For First Time In Eight Years: Price declines in luxury properties, overseas trips and products drove the overall luxury price index down 1.8% this year according to Hurun. Yachts and private jets witnessed the largest price drops of 10.5%, as a result of foreign exchange differences.
The impact of the spectacular rise and fall of China’s stocks is anyone’s guess. It would appear that China is imploding if you read some news reports – stories of a weaking China attracts readers in some countries. Discuss it with Chinese consumers buying food for their kids in high end supermarkets, and they will shrug it off, unphased; China has made it through bigger economic challenges.
Of course some consumers will be feeling less confident, but it is unlikely to have the same impact on consumer spending as a crash would in markets like America. In January this year, following a 122% rise in the Shanghai Composite Index over 12-months, retail sales grew at their slowest rate in five years. At the time, just 6% of Chinese households owned stocks versus 55% of Americans. The latest spike would have drawn a few more in with Beijing’s encouragement, but as a whole, fewer Chinese consumers gamble on stocks – China’s reputation for being conservative with their high savings is well deserved. Although consumer investors make up a large portion of the owners of China’s stocks, their share of the overall market value is estimated to be 5% or less.
China needs healthy capital markets to finance the ongoing development of its economy, and will need a different approach to what we have seen recently. Nevertheless, the biggest impact on consumption growth in both the US and China is wage growth, which has been rising faster than GDP in China. IMF is keeping its pre-crash China GDP forecasts from April, as it believes China’s stock exchanges are so disconnected to the wider economy, and are small relative to the overall economy.
The rate of growth across many categories is slowing in China, but that was happening before the market meltdown. We expect Chinese consumers, particularly those born post-80s and 90s, will carry on in the consumer groove. Consumption will continue increasing in areas such as premium food and beverage, tourism and experiences, health and wellbeing, affordable and some niche fashion, overseas investments and anything to do with the precious only child – food, clothing and education – just look at the 50% growth that Lego has experienced in China over the past two years, despite counterfeits costing a quarter of the price.
China’s affluent and middle class base will continue to grow -an extra million USD millionaires came on board in China last year, despite the reports of doom and gloom. One loser will be state media who have been cheerleading the stock market, further eroding trust in traditional media and driving even more consumers to objective digital channels. We hope you enjoy this week’s Skinny.
The Chinese Stock Market and the Chinese Economy Have Literally Nothing To Do With Each Other: “We don’t see it as a major macroeconomic issue,” said IMF’s research chief Olivier Blanchard referring to China’s recent market meltdown, citing many examples of the disconnect between China’s stocks and its wider economy. Despite the recent drop, Shanghai stocks are still up more than 80% over the past year, and the Chinese stock market is small compared to the overall economy, the world’s second biggest.
Landmark Trademark Victory for Menswear Designer Michael Bastian in China: A trademark squatter has lost its ability to use the Michael Bastian brand that it registered in China. It is the first time a trademark registration application has been rejected in China in favour of a non-Chinese individual or entity. Nice work Foley & Lardner!
Megalopolis: the Future of Urban Planning in China: A massive new economic area encompassing 100 million people living Beijing, Tianjin and the province of Hebei is likely to become a model for China’s future urbanisation. One joint plan will cover economic and social development; urban and rural planning; and land use for the area larger than Uruguay, with a population roughly the size of Japan.
Uber Said to Seek Up to $1 Billion Funds for China Carveout: Uber has been claiming a $7 to $8 billion valuation for its Chinese unit, which has been marred by police shutdowns and volatile regulations. Investments from local, Beijing-connected firms such as Baidu will help their cause.
Foreign Brands Losing Lustre in China: Local FMCG brands gained more ground than foreign brands last year, with local market share growth strongest in skincare, fabric softener, colour cosmetics and infant formula, juice and biscuits. Foreign brands increased their share in the toilet tissue, beer, chewing gum, hair conditioner and chocolate segments.
Lego Builds on Strong Success in China as Playful Children Discover Their Creative Side: Lego’s Mainland sales have surged more than 50% over the past two years as parents recognise that playing with interlocking plastic bricks boosts inventiveness.
Internet, eCommerce & Mobile
A Significant Group of Consumers is Ditching Android for the iPhone: 53% of Chinese who own an iPhone switched from an Android according to a CLSA survey. 32% of Android users who plan to buy a new phone in the next 12 months will switch to the iPhone. This is representative of Chinese consumers upgrading their products across a number of categories. It comes at a time when Android-based Samsung is facing more bad news in China, with lawsuits for loading its mobiles with unneeded and unwanted apps.
Chinese E-Commerce Loophole Set to Close: Many Western companies have been avoiding strict Chinese consumer laws, such as the requirements for animal testing, by selling to consumers for “personal use” directly via e-commerce. This loophole is likely to be closed by the Chinese Government.
Food & Beverage
McDonald’s, KFC Go High-Tech In China With Customization, E-Payments: KFC is hoping to resonate more with China’s lucrative youth segment by accepting Alipay, rolling out Wifi and launching a menu app. Likewise, McDonald’s is piloting its “Create Your Taste” burger customisation in three Shanghai stores.
Top Chinese Wines Have Gone From Bad to Good. Will They Become Great?: China now has more acres of vineyards than France. Locally grown wines are getting more impressive too.
Xu Jinglei Being Sued for Making False Health Claims About Cookies: Actress and director Xu Jinglei is being sued for endorsing “river monkey mushroom stomach cookies,” claiming they are good for the stomach, when they are no different from other cookies.
JD.com’s Richard Liu Buys Into Australia’s Biggest Milk Processor Murray Goulburn: JD.com snapped up 4.6% of Australia’s dairy cooperative trust for A$20 million, not long after launching an “Australian Mall” on the platform while CEO Richard Liu was in Australia.
U.S. Tops Chinese Tourists’ Satisfaction List in Q2: Chinese travellers are most satisfied in the United States – 3.1 points higher than the average rating of 77.86 for 24 countries, according to a China Tourism Academy survey. Singapore topped Asia, with Mongolia and India reaching record highs. Complaints mainly focused on public services and travel agency services, such as a lack of Chinese translations of public information and poor transportation.
Opportunities for Growth In Challenging China Market: Chinese consumers expect to spend more on children’s clothing, women’s casual, shoes, men’s casual and health, beauty & accessories over the next 90 days according to analysis by Prosper China.
Have Chinese Consumers Started to Look Beyond Beauty Products?: By 2013, only 5 million Chinese women had some form of cosmetic surgery. By the end of this year, an estimated 7 million will have, and 11 million by 2018. 15% of Chinese women are considering using plastic surgery for anti-aging, with the highest rates in Tier 1 & 2 cities.
Eight Surprising Facts About The Chinese Luxury Consumer: Eight characteristics about Chinese luxury consumers: 1. They’re younger than you think; 2. They’re not as well off as you’d expect; 3. Most are married and have children; 4. They’re mobile natives; 5. They all have WeChat; 6. They prefer Chinese brand names; 7. They like to shop at retail; and 8. Alipay is an important method of purchase.
WeChat has taken China by storm. It is an important part of everyday life for the 550 million monthly active users who are largely Mainland residents, and a vital channel for millions of business accounts hoping to lure Chinese consumers to buy the wares.
Yet for many brands, harvesting a WeChat account is little more than giving away some free stuff and sending regular messages that get lost in the sea of promotions in the Subscription folder, or weekly Service messages that are seen, but often mean little to the audience.
Unfortunately, just translating Facebook and Twitter posts, or even regurgitating a Weibo strategy typically won’t bare much fruit on WeChat. Chinese are unlike consumers in other markets and WeChat is different to any other social network, so it’s a good idea to devise a WeChat marketing plan from the ground up.
WeChat has its limitations. It isn’t an open platform like Weibo, which means it’s less viral. Although some stories have been viewed over a hundred thousand times on WeChat, there are less viral sensations like the female armpit hair, touching belly buttons and Tasmanian lavender bears that spread on Weibo. WeChat Service Account messages will display in a user’s main feed – the same place their friends and family messages arrive – so it’s even more important that they are personal and relevant than other social media accounts where messages show on a generic feed.
What makes WeChat exciting and unique are some of the plug-in features that can provide engagement opportunities. As every WeChat user is on a smartphone they can access it at any time, wherever they are, allowing businesses to take advantage of features such as geotargeting, beacons and a host of other add-ons that are available to official Service Accounts. China Skinny has put together an infograph that gives an overview of some of WeChat’s features that are available for businesses.
Chinese spend more than half of their mobile Internet time on WeChat, and it has become the default preference for consumers interacting in their everyday life, rather than native apps. From service enquiries, to ordering food and cabs, it can be an integral part of campaigns at online and offline touch points. Despite the hype, WeChat commerce is still tiny compared to China’s traditional online shopping channels. A big reason is because there are less opportunities for consumers to review, compare and provide feedback effortlessly like on Taobao/Tmall or JD. Nevertheless, WeChat payments are growing, particularly for brands that have established trust and engagement from their WeChat followers. China Skinny can assist with that. We hope you enjoy this week’s Skinny.
The Rise of China’s Middle Class Will Create Opportunities the World Has Never Seen Before: By 2030, China’s middle class will reach about 93% of the urban population according to ANZ. Factoring in both income growth and urbanisation, 326 million new middle class will emerge in China’s urban areas from 2014 to 2030. The total middle class population will reach 854m in China’s urban areas.
Three Myths About Growth in Consumer Packaged Goods: Over the next decade, growth in the consumer packaged goods sector will bring the world an additional 81 Procter & Gambles or 458 equivalents of Kellogg’s. A frequent comment that is it too late to enter China is unfounded according to McKinsey, with plenty of growth for fact-based, micro market launches. The juice market, for example, will grow three times faster in Shanghai than all of Malaysia. Premium products are one of the fast growing categories in emerging markets.
A Tale of Two Chinese Consumers: Rising incomes are driving consumption growth in China. According to a BCG survey, households whose income growth exceeded 5% in the past year are twice as likely to spend more in the coming year than households with slower income growth. The average affluent household is expecting nearly 11% income growth this year, versus 6% for the less affluent. Of today’s 81 million ‘high-speed’, optimistic households, 46 million are located in lower-tier cities. By 2020, 84 million of the projected 142 million high-speed households will be located in those cities. Companies currently need a presence in 530 cities to reach 80% of these households. By 2020, they will need to be in 615 cities.
What Rumsfeld Can Teach Us About China Business: For many China is the land of ‘unknown unknowns’ – we don’t know what we don’t know, so it’s a good idea not to approach China as just another developing Asian country, another Japan or even a different country, but a different planet.
Defying Tough Times, These Four Foreign Brands Are Successful in China: While many brands are struggling to retain high growth rates in China’s “New Normal”, brands like Ikea, Starbucks, Coach and Apple have localised and adapted well by understanding the changing Chinese consumer.
Internet, Social Media & Ecommerce
Infograph: WeChat’s Functions for Marketing: WeChat has evolved to offer a treasure trove of functions for both consumers and businesses hoping to engage them. Here’s our infograph summarising the big ones.
Alibaba’s Global Plan: Topple Walmart in 2015: Sales on Alibaba’s platforms are expected to surpass Walmart this year, making it the world’s largest retailer according to Jack Ma.
Social Networks Blamed for China’s Rising Divorce Rate: Chinese divorce rates have increased over 12 consecutive years, with 3.6 million divorces in 2014. A new study by magazine Banyuetan found the rise of social media has contributed to many separations.
Food & Beverage
LVMH Diversifies into Chinese Food as Sales Decline: Last year, the world’s largest luxury conglomerate purchased a 90% stake in the Singapore-headquartered Crystal Jade Group for $100 million. The group mainly offers Cantonese cuisine, including snacks, hand-made noodles and baked goods and operates over 100 branch restaurants in Asia, including 13 in Mainland China cities.
Sino Wines: Industry Tackles China Taste Test: The Australian Wine and Grape Authority is launching a postcard-sized flavour “wheel” for Chinese retailers and Australian cellar doors to teach Chinese consumers about the qualities of Australian wine with Chinese descriptors. Research showed Chinese are three times more likely to use generic wine descriptors such as mellow, lingering or fruity than specific wine terminology.
Zombie Chicken Feet Strike Fear into Chinese Snackers: Chicken feet can be dubious at the best of times, but try the snack soaked in hydrogen peroxide to make them appear healthy and fresh, and extend their shelf life.
Internet Companies Writing New Prescription for Health Care Industry: An increasing number of Chinese online health care information and service providers are expanding their services offline by opening physical clinics. The Chunyu mobile app’s 58 million registered users make 80,000 health inquiries per day, with almost a third requiring follow-up treatment who could use their new clinics.
One in Five Beijingers is Obese: Over 21% of permanent residents in Beijing aged 18-79 are clinically obese. China’s nationwide obesity rate was 11.9% in 2012, up from 7.1% in 2002.
EU to Simplify Visa Policies for Chinese Visitors: New European visa application centres are to be opened up in an additional 15 Chinese cities, allowing travellers to apply for Schengen and British visas without having to travel to cities with consulates or go through a travel agent.
This Quirky Campaign to Rename British Landmarks Boosted Chinese Visits 27%: A British Tourism campaign generated 13,000 place name suggestions over 10 weeks. Nearly 30 million Chinese watched the campaign’s launch video, 2 million visited the microsite, and upward of 300 million were reached via mobile channels Weibo and WeChat.
Your brand has locked in favourable deals with the top-10 retailers in China, including the best in-store placement and positioning of your merchandise and regular point of sale promotions. You’re well placed to reach China’s 1.36 billion consumers, or at least a couple of hundred million middle class customers, right? Unfortunately not.
In a market like the U.S. things would be looking peachy. Between 2010 and 2012, the top-100 American retailers made up 57% of all consumers sales. By comparison, China’s top-100 retailers accounted for 11% of sales in 2010, and just 8% last year. The differences reflect how fragmented China’s retail market is, made up by many ‘Mom and Pop’ stores and small, regionalised chains; further reiterating the need for a region-specific strategy. Most of us know how different the customer journey is in China, but we may not appreciate the extent of dissimilarities in China’s retail structure.
Ecommerce makes up 11% of China’s retail market – not yet a large share overall – but by far the biggest and only truly nationwide channel to reach China’s masses. Sales on Alibaba’s Taobao and Tmall now supersede China’s top-100 physical retailers’ turnover.
Companies such as Unilever have been caught off guard, and are now placing a significant focus online.
In some ways, online shopping levels the playing field for retailers, as everyone has the same storefront and pages to work with to woo consumers. But in many other ways, multi-platform players still have an edge over the pure play online brands. Chinese consumers often look to physical channels when making purchasing decisions, even when buying on the Internet, so it is advantageous to be present online and offline. Big brands also get ‘sweeteners’ by online retailers, such as JD wooing LVMH’s Sephora to launch its first Chinese online store on the platform and Shangpin giving Top Shop special treatment. Unilever is likely to have been given incentives to launch on JD as well.
Like any market, whether brands are big or small, it will be the nimble, creative brands who understand their customers and channels that win. China Skinny can help with that. We hope you enjoy this week’s Skinny.
Western Firms Caught Off Guard as Chinese Shoppers Flock to Web: Consumer-goods sales from the top 100 retail chains dropped from 11.2% of total sales in China in 2009 to 8% in 2014 – less than 80% of overall ecommerce sales.
China’s JD.com Adds Unilever to its Stable of Global Brands: Unilever launches on JD Worldwide giving consumers access to products not formerly available in China. It follows Sephora launching its first online store in China on the platform – the brand was likely to have had all sorts of incentives from JD to do so.
Why Louis Vuitton, Gucci and Prada Are In Trouble: Changes in consumer tastes which took 20 to 30 years in the U.S., took two to three years in China.
Internet, Social Media & Ecommerce
How To Borrow Mobile Moments To Engage Chinese Consumers: ‘Borrowed moments’ are essential to winning over Chinese consumers according to Forrester research because: 1) WeChat and a few mega apps dominate the time Chinese spend on their mobiles; 2) “Owned” mobile moments are less likely to work in China; and 3) Top Chinese apps have evolved to provide more features that marketers can borrow from.
Digital Commerce in China: Cheap Tricks or Deep Love?: “If managed skilfully, digital commerce can enhance – rather than degrade – value perceptions. High-tech cheap tricks can morph into deep love. When marketers harmonize digital and offline assets, online transactions blossom into intimate relationships,” says Tom Doctoroff.
Food & Beverage
Why China Shops Online for Groceries: Online grocery sales grew almost 50% last year in China, versus hypermarket and supermarket’s 6.7%, with much of that growth coming from new store openings. 40% of Chinese buy food online versus 10% in the U.S. according to McKinsey. Online shopping and delivery suits many urban Chinese consumers who still don’t have cars.
Chinese Wine Drinkers Prefer Contemporary Labels: Although traditional wine labels donning gold and red and pictures of castles and chateaux dominate Chinese wine aisles, Wine Intelligence research found consumers are becoming more inclined towards original, contemporary labels for both formal and informal occasions.
Cainiao Launches Three Fresh Food Distribution Centers: Alibaba’s logistics affiliate Cainiao will establish fresh food distribution centres in Beijing, Shanghai and Guangzhou to support cold chain delivery within 24-hours. The news comes soon after Alibaba’s announcement that it will seek more Latin American food suppliers, particularly fresh fruit and vegetables. Last month there were 10,000 orders for avocados on Alibaba’s platforms.
The Increase In ‘Artificial’ Intelligence: More than half of Chinese consumers say they prefer snacks to meals, compared to just 9% in Japan according to Innova Market Insights.
The New Conquistadors: Chinese Tourists Turn to Latin America: Chinese tourists to Latin America are increasing rapidly, albeit from a low base. Tourists to Mexico grew 58% last year to over 75,000 arrivals. Interest in Latin America is rising, with exposure like leading Chinese online travel agency Ctrip naming Peru as its destination of the year this January, and China’s Top Travel magazine selecting Chile as its featured destination of 2015.
Airbnb Says Chinese Travelers Are Fastest-Growing Users: “The future of international travel is really the Chinese tourist,” says Airbnb CTO.
German Fashion Brand Under Fire For Racist Slur On Chinese: Philipp Plein’s plans to expand in China took a knock after social media users reminded their peers of the brand’s limited edition T-shirt from 2007 which contained the words “F**K YOU CHINA.”
Health & Beauty
Waist Wars: China Belly Button Challenge Gets Trending: China’s Weibo sensation this month is checking if you can touch your belly button by reaching behind your back and around your waist. The topic has been mentioned almost 150 million times, with more than 100,000 active discussion threads. Many have posted photos trying it, while others claim it promotes eating disorders and those who could do it haven’t completed the evolution from monkey to human. Following on, is the collarbone challenge, urging women to snack coins in the gap beside their neck to indicate how defined their collar bone is. The topic received 34 million hits in 24 hours on Weibo.
Chinese Entertainment, Tech Execs Grow More Confident: Furious 7, Avengers: Age of Ultron and Jurassic World have sold almost $750 million in tickets in Chinese theatres since April, but Chinese movies are also riding on the back of the 40% box office growth in Q1 with lower budget local movies like The Taking of Tiger Mountain and From Vegas to Macao 2 grossing about $150 million each. Chinese movie execs are walking with a swagger these days with little talk of co-productions or partnerships with U.S. studios, and a lot of focus on leveraging Internet technology to understanding consumer tastes, crowdfunding, marketing, ticket sales and streaming.
China is made of many unique markets. Chinese consumers not only vary by geographical location but also by generation. The young in China receive a lot of airtime, and for good reasons; but there is a consumer group in China that many brands, products and services are missing.
In China, the older generation often gets overlooked when it comes to foreign products and services. There are over 200 million Chinese over the age of 60, making China’s elderly population the largest in the world. This number is expected to rise to 243 million by 2020 and 400 million by 2050 according to China’s National Committee on Aging, yet this huge and growing segment remains relatively untapped and often wrongly marketed to. Life expectancy in China has risen from 40 years old in 1950 to around 70 years old today; with indications the trend towards longer life will continue.
The spending power of Chinese over 60 is not something to overlook. In 2014 elderly spending accounted for USD $643 billion or 8% of China’s GDP. This is expected to reach USD $17 trillion by the end of 2050. Well-intended but ineffective marketing highlighting and reinforcing the debilitating effects of aging are not going to make this group want to buy a product or service.
Chinese above 60 want to live their lives fully, and opportunities exist for well-marketed brands that can speak to these unique consumers. Whether it be about health products, health care, travel, investments, FMCG or fresh food and beverage, reaching and communicating with this target market is quite different than addressing the young and affluent.
In research China Skinny completed for a dairy product targeting elderly, one recurring theme was how to best reach this age group. Not as active online as their younger counterparts, and often times less trusting, makes many traditional digital marketing tactics less effective. Getting smart about targeted online channels and influencers can be effective. With this group not as familiar with foreign brands, Chinese brands have a foot up as of now, but there are ample opportunities for foreign goods and services.
One positive caveat is that like younger Chinese, older Chinese are becoming more aware of, interested in, and proactive about their health and are choosing products for health reasons. Products meeting these needs are often imported as they are usually trusted to be safer. Emphasizing this point from the younger to older Chinese is pragmatic but these are two different demographics that vary not only by age, but also by geographical location and a number of other factors. For example, Mintel research found that 96% of Shanghainese 55 and older planned to eat more healthily compared to only 33% in Beijing. That’s a huge variance and doing due diligence to fully understand your target market by both age and location will go a long way. If China Skinny can assist in market research or marketing execution be in touch today.
Women power is nothing new in China. From Empress Cixi, ruler of the Qing Dynasty to Chairman Mao proclaiming that “women hold up half the sky,” females have long contributed to all aspects of life in the Middle Kingdom. In modern day China, their influence is ever-increasing. Supporting the growth of female power, Alibaba is currently hosting their inaugural Global Conference on Women and Entrepreneurship in Hangzhou. And rightly so, unlike many male-dominated tech companies globally, 40% of Alibaba’s employees are female.
As China’s women receive more equal employment and education opportunities, the playing field is flattening. Today’s ladies have come to expect more than their predecessors. Their influence is being felt on all levels including the consumer market.
Women’s average contribution to household income jumped from 20% in 1980 to 50% in 2013. 86% of Chinese mothers believe the future holds new opportunities and financial stability for their daughters, according to Nielsen. With this blooming confidence, women now have a louder voice in financial decisions. Women have become the CFO’s of the household, handling the purchasing decisions for everyday goods like family groceries and to big ticket items such as finances, electronics and even automobiles.
Of China’s huge population, 640 million are women consumers. Not only are they shopping, but also creating change and driving China’s economy. Whether it be dancing grandmas or online entrepreneurs the “She-era” is the backbone of the China century. Capturing these women is going to take more than just being a foreign brand or feminine branding – slapping a pink label on a product doesn’t mean it will resonate with Chinese women.
Marketing to the modern woman in China is communicating with someone who is balancing work and family – which often consists of their parents and children. Women in China, as elsewhere, are looking to streamline their lives and online shopping is one example of how they’re doing this. 86% of China’s internet users access through mobiles with women browsing and buying on their way to and from work and picking up the kids.
Consumers are not the same from province to province and of course vary even more between gender. Whether you are targeting consumers from tier-1 cities or specific demographics such as young urban females, without understanding and speaking to consumer needs and desires, there is little chance of standing out in China’s fiercely competitive market.
Kudos to Alibaba for bringing women into the spotlight and raising the profile of women in China and abroad. A stronger and more confident female market in China is good for the country, and for Alibaba.
If China Skinny can assist you in understanding or reaching a specific China market whether females, or another consumer segment, be in touch today.
It’s nothing new that Chinese consumers are opting for food and beverages that are better for them. In 2013, after a decade and a half of mouth-watering growth from its Oreo cookies, Mondelez discovered that wealthy urban consumers were turning to healthier alternatives. Likewise, earlier this year Nestle announced it was revamping its food and beverage business in China due to the shift towards nutritious items.
Whilst China’s affluent urban consumers have been the most prepared to pay premiums for healthy food, even lower-income Chinese preferences are changing.
Chinese munch their way through half of the world’s instant noodles – more than 40 billion packets a year. But appetites appear to be waning, with sales dropping by billions of packets last year. The traditional strong-hold for noodle companies – low income earners – are increasingly forgoing cheap food for higher-priced, more nourishing options.
Food safety is another factor concerning 84% of Chinese consumers according to Mintel research. That’s reflected in soaring growth for products like imported fresh milk, and increasing awareness for healthy foreign products such as cranberries, avocados and olive oil. Similarly, China’s organic food market grew 12-fold in the past six years.
While nutritious, safe food is one of the big shifts in China’s food and beverage sector, other trends include convenience food, online shopping, sharing, product and packing innovation, food origin/provenance and the ever-present localisation. China Skinny can work with you to ensure that your product fits into the mix. More info here. Go to Page 2 to see this week’s China news and highlights.
WeChat, the main means of communication for most online Chinese, offers a viable way to reach consumers who regularly use this application. For many, WeChat is the start and end of their phone usage. In China, 90% of smartphone users now use WeChat, with heavy daily activity.
WeChat is used both as a messaging app and a social media platform as well as evolving to be an important place for brand positioning. On 30 September 2014, there were 468 million active WeChat users – most of them in China. Due to the inclination of Chinese to discuss and research brands, products and services on social media, WeChat is an important piece of the puzzle for brands.
There are many questions regarding setting up an Official WeChat Account. One big decision is whether your brand should use a Subscription or a Service WeChat account. These two types of accounts are quite different and are mainly characterized by different functionalities and varied methods of engagement with the audience. Before making a decision about WeChat ensure that your target market can view your account. Your content must be engaging and relevant to the recipient. Below is a breakdown of the different types of WeChat accounts for companies.
A service account is allowed to send four messages per month. This is well suited for companies that want to spread brand awareness and more in-depth messaging. A service account includes custom-menu components that work as a mini-site embedded in the WeChat platform.
When using a service account your followers receive a notification in their main message feed, as if they receive a message from a friend and you are able to provide more detailed content within each message. Further options allow for payment as well as customization including games, mini-sites and much more.
Subscription accounts are less personal with less advanced functionalities. This account is a rather basic way to reach followers who receive notifications. One message can be sent every 24-hours, although large and well-known accounts can send up to 3 messages a day. A subscription account is useful for companies with daily deals or frequent updates. In addition, all subscription accounts users follow are bundled together under the ‘subscriptions’ icon, so they are not as likely to notice new messages as with Service messages.
Subscription accounts are less likely to create a deep brand impression or unique experiences that are capable through service accounts. Although subscription accounts could be useful for promoting daily deals or content that is engaging enough that followers will seek out and open your messages.
As WeChat evolves more opportunities will present themselves as they have in the past: payment options, gamification, microsites, apps within WeChat and paid advertising opportunities. Pursuing the evolvement of the app is vital to gaining the most benefits possible. Another reason to keep up is the constant development of rules and regulations in the platform such as what content is or is not permitted. As one example, WeChat accounts can get suspended for using certain language or asking too much of their followers.
With new innovations launching constantly, brands on WeChat are able to interact with their followers and drive sales in new ways. WeChat users are capable of using many different aspects and functions without ever having to leave the app. As WeChat grows it will continue to innovate and meet customer needs which is one more touch point that could be relevant for your company.
If you’re looking for a way to get deals to your followers, a subscription account could be for you. If you want more in-depth and interactive platform to connect with followers, a service account may be more beneficial. Determining your company’s WeChat account type is an important step to reach Chinese consumers in a relevant way.
WeChat or Wei Xin (微信 or wēixìn), the wonder kid of Chinese apps, is a major part of the ever-evolving app and social media landscape inside Mainland China. WeChat is now seen as one of the dominant ways to reach and interact with Chinese consumers, particularly on a personal level. A WeChat strategy is a vital part of an overall China marketing plan.
International Accounts vs. Mainland China Accounts
WeChat is not only a China phenomenon – it is aiming to become as ubiquitous worldwide as it is in China. In an effort to internationalize, WeChat now allows foreign companies to submit a proposal to apply for an Official WeChat account. The submitted proposal should outline how the company intends to use the official account. There is a big catch though: an Official WeChat account set up outside of Mainland China is only viewable to International WeChat users and is not viewable to WeChat users in Mainland China.
For foreign companies, setting up an Official WeChat account outside of China means that their account won’t be seen inside China. If any group of the changing and diversifying Chinese consumers are your target market then setting up an Official WeChat account outside of China won’t do. To reach your target market you must be where they are.
Both International and Mainland China WeChat users can view official WeChat accounts set up inside Mainland China. This is another heads up for Chinese brands who are strengthening their brands and experiencing a growing acceptance from Chinese consumers.
Applying for an Official WeChat Account in Mainland China
To apply for an Official WeChat account inside of Mainland China one must first have a legal Chinese entity such as a Wholly Foreign Owned Enterprise (WOFE) or work with a trusted partner who has a Chinese entity and is willing to apply for an official WeChat account on your behalf. Once the Chinese entity or WOFE is settled the initial step to getting an official account requires business documentation and a Chinese staff ID, among a number of other items.
Setting up an Official WeChat account inside Mainland China is just the first step. Deciding whether to use a subscription or service account, creating shareable content that portrays your brand’s message without shouting, developing dialogue and interaction among your fan base and possible customers, and creating a seamless online and offline experience are among a number factors to take into account after you have set up.
A well thought out strategy on how WeChat can fit into your overall China marketing and sales is necessary. If you’re interested in how China Skinny can help you develop a great China strategy including the essential Chinese social media for your company, be in touch.
China is growing at an exponential rate, both in terms of the middle class population and their purchasing power. However the majority of this growth is coming from China’s lesser known cities. A blanket approach for China isn’t feasible in most cases, so it is important to identify which cities are best to focus your marketing efforts. As the City-Nator illustrates, there’s plenty of cities in China to choose from.
Our friends at Fashionbi have evaluated the buzz on Weibo as a way to pinpoint locations where Chinese consumers love certain brands and their potential for physical store openings. For example, 19.1% of Forever 21’s Weibo page engagement came from Guangdong province, exceeding Beijing’s 13.8% and almost as high as Shanghai’s 19.7%. Forever 21’s only two Mainland China stores are in Beijing and Shanghai, but it appears that there could be enough buzz to look into an increased physical presence to service Guangdong’s large population.
Coach is just another brand where there’s a lot of buzz on Weibo in Tier 2 and Tier 3 cities. In August, 43% of buzz on Coach’s Weibo page came from minor cities, with consumers from cities in Sichuan and Jiangsu being particularly vocal on social media. Just 7% of Coach’s engagement came from Beijing and 15% from Shanghai. There are countless examples of consumers in the lesser known cities creating more buzz than the traditionally targeted markets like Beijing and Shanghai.
As the middle class continues to emerge and grow in China, we will see emerging cities that are buzzing about brands from the Luxury segment to the mass-market segment. Now is a crucial time for brands to understand which locations present the greatest opportunities for expansion in China, and they may not always be where you thought or in places you’ve even heard of.
Any business with a presence in China or thinking about one, should be identifying which cities are best to target. China Skinny and tools such as Fashionbi are a good place to start to better understand consumers’ behavior and gage the potential growth of cities that will provide the most potential growth for your brand. By 2020, 75% of China’s 220 million affluent consumers will be living in China’s ‘smaller’ cities, so it’s a good idea to start planning for them now.
See how your city compares at chinaskinny.com/tools/city-nator.