“Analysis by the Environmental Working Group found that 160,000 people living in the region may be harmed by pig waste … pigs are treated with antibiotics, vaccines and insecticides, all of which eventually pass into the lagoons, which have been found to contain toxic chemicals, nitrates, parasites, viruses and more than a hundred strands of antibiotic-resistant microbes, including salmonella, streptococci and giardia. People die with distressing regularity in the waste.”
Your mind will likely jump to images of pig farms in Henan or Sichuan province, yet the exert was taken straight out of a Rolling Stone article on the hog industry in North Carolina; America’s pork-producing heartland where the country’s largest pork producer Smithfield is located. In 2013, Smithfield was acquired by the Chinese conglomerate now known as WH Group for $7.1 billion. Due to lower pig-feed prices, larger farms and loose business and environmental regulation, it is 50% cheaper to produce pork in the US than China, prompting China to outsource some of its environmental and human costs abroad. The Smithfield acquisition has been so successful, WH Group has subsequently made similar purchases in Poland and Romania.
Whilst we could fill thousands of newsletters with similar examples from toxic Chinese farms, the North Carolina exert is representative of a broad trend that is happening in China as it becomes wealthier, moves up the value chain and sees its citizens demand more.
China’s outsourcing spans far beyond food production. As China’s labour costs continue to soar and environmental regulation gets tougher, many manufacturers are looking towards South and Southeast Asia – and probably Central Asia and Eastern Europe as infrastructure improves with Belt and Road initiatives. While China celebrates its reduction in coal consumption and improving environment, it is offloading surplus coal to an outdated dirty coal plant on the coast of Kenya that it recently financed, poised to become the country’s largest polluter. China recently built a $250 million fast fashion factory in Ethiopia in addition to other significant manufacturing investments and agricultural production like in many other countries in Africa.
The trend certainly isn’t a new phenomenon. Similar outsourcing happened with the British empire, and more recently with American multinationals who ironically outsourced much of their dirty industry to China. In short, it is another indicator of how the world is pivoting.
From a purely commercial perspective, the allure of selling cheap commodities to service Chinese consumers’ ever-growing appetite while polluting lagoons, rivers, land and people may appeal in the short term, there are some factors indicating that it may not be sustainable in the medium-long term. There are the obvious hideous effects of the pollution, but also the fact that through technology and increasing infrastructure investments in poorer countries across Asia, Africa, Eastern Europe and Latin America, the market is likely to see a rise of large scale competitors bringing down the overall price of commodities.
From a branding perspective, Chinese consumers are trading up across almost every category from smartphones to dairy. Well marketed brands from developed nations are able to charge a premium based on the exemplar reputation their country has, playing well to this premiumisation trend. But this comparative advantage shouldn’t be taken for granted. Stories such as Smithfield’s pork producers will be seen by Chinese consumers and chip away at the value of Brand USA as a whole, if proposed tariffs weren’t enough already. Although Chinese place less significance on the environmental impacts of food production than their Western peers, this is changing. With origin being such an important decision driver for many Chinese purchases, it would pay to think strategically. Go to Page 2 to see this week’s China news and highlights.
Happy 2018! The year has started off on a positive note with China’s premier Li Keqiang announcing last year’s GDP growth is expected to roll in at 6.9% – north of the 6.5% target and the first acceleration in seven years; a time when GDP was less than 40% of today’s value. Consumers’ enthusiasm to shop continues to drive this growth accounting for almost two thirds of the 6.9% with retail spending growing 10%.
Although consumer anxieties persist and concerns around food safety and the cost of health and education are common, the signs are pointing to 2018 becoming another bumper year of the Chinese consumer. Whilst well-marketed foreign brands still hold significant appeal across many consumer categories, brands should be aware that shoppers are less inclined to view foreignness with the same awe and curiosity as they once did.
Chinese are showing increasing pride and interest in Chinese heritage and nostalgic themes. 2017 wrapped up with some gleaming examples such as CCTV’s show about Chinese antiques receiving millions of views, rave reviews and social posts from Chinese millennials. Even more widespread was a New Year fad which saw Chinese cluttering their social media feeds with old photos of themselves.
Few things inspire, influence and indicate preferences more than cinema. Last year five of China’s six most popular movies were domestic productions, including the overtly nationalistic Wolf Warrior which broke all-time box office records for the country.
Chinese consumers’ increasing interest in their roots was always going to happen as they matured, but it has been accelerated in light of a strong, confident and consistent China leadership and wavering heads of state in the West, amplified by the all-powerful state media.
So does this all mean that the foreignness of imported brands is becoming irrelevant? Definitely not. Foreign brands should promote the characteristics of their origin and heritage that make them special, but not with the blind swagger that some have portrayed in the past. They should also consider the opportunities to tap into the growing resonance of the Chinese renaissance through thoughtful communications, promotions and product development. Agencies such as China Skinny can assist with such initiatives. Go to Page 2 to see this week’s China news and highlights.
At the dawn of the decade China was very much a cash-based society. Most transactions were untraceable exchanges of notes and coins and it wasn’t unusual for consumers to have stacks of red bills stashed away under their mattresses.
Whereas China’s older generations have lived through austere periods that have hard-coded an inherent need to save for a rainy day, a tribe of younger consumers has surfaced who have only ever known prosperous times, lured by the bright lights of consumerism and with it, a much more liberal view towards spending.
Chinese born after 1980 are the most educated and urban consumers, and as a result earn more on average than older age groups. Whilst their incomes are rising faster than in any other major economy, their retail spending is growing even faster. Much of the gap is being filled by consumer credit. Short term consumer lending is growing at 35% annually, often unserved by traditional lending channels, providing opportunities for some 1,800 online credit platforms as at the end of July this year.
Arguably more influential in driving consumer spending has been the ease and convenience of mobile payments where daily transactions now number 50 times that of the US. Much like credit cards have done in the West, China’s mobile payments marginalise some of the visible and psychological barriers consumers faced physically taking cash from a wallet.
Mobile payments have driven spending both in physical and ecommerce stores, and also created new categories for spending. Payments are now embedded in social media and other apps allowing purchases for services, games, gifting, tipping KOLs and plenty more. Alibaba’s new ‘Smile to Pay’ doesn’t even need a smartphone to pay. Beijing is an avid supporter of mobile payments as it backs its agendas of fostering innovative industries and transitioning to a consumption-based economy, and also provides a detailed footprint of citizens’ movements and habits.
One of the relatively new frontiers for China’s mobile payment platforms is overseas. It is expanding by targeting emerging markets through investments and using the all-important 135 million Chinese outbound tourists as a Trojan Horse to penetrate mature markets. Alipay’s parent Ant Financial alone has penned 24 major overseas investments or partnerships since 2015 and is now accepted by 120,000 overseas merchants in 26 countries. WeChat Pay is hard on their tail, growing almost three times as fast overall.
So what does all this mean for brands hoping to attract Chinese consumers? Quite a lot. For a start, any ecommerce site, social media account or app would be wise to enable transactions through Alipay and/or WeChat Pay. Similarly, sales are likely to increase for physical retail both in China, abroad, and in between – Finnair has seen sales of onboard purchases increase over 200% on China routes since introducing Alipay. There are added benefits such as gaining new WeChat followers with WeChat Pay and integrating into the popular AliPay app and receiving improved consumer insights.
Payments are another example of essential triggers brands should have covered to maximise the opportunity for Chinese consumers. Agencies such as China Skinny can ensure you have them all covered off, and utilised in the most effective way. Contact us to find out more. Go to Page 2 to see this week’s China news and highlights.
A quick Google image search for ‘dogs in China’ will return row after row of horrifying snaps that you wouldn’t show your kids. Yet the reality is quite different in most of China’s cities.
Wandering through urban Chinese streets it is hard for even the most macho of men not to find China’s pets adorable. Poodles sporting puffer jackets jostle for pavement space with pugs wearing penny loafers. China’s immaculately groomed pooches would leave many folk in Western cities for dead on the fashion stakes, representative of just how much Chinese dote on their pets.
China’s pets, numbering more than 100 million, have become the centre of one of the country’s fastest growing retail categories. Last year Chinese consumers spent ¥122 billion ($18 billion) on pets and related purchases, with spending expected to rise on average 20.5% each year between 2017 and 2020 – around double retail growth overall. It is no surprise given 99.8% are prepared to spend on their pets; 40.9% take their dogs to a beauty salon, 25% pay someone to wash their pets and 4.5% have had professional photos with them. Although the hounds have more profile, average spending on felines is even higher.
China’s pet industry has a lot of similarities to other categories. For a start, the majority of owners aren’t empty nesting oldies with a lot of time on their hands, but the urban female millennials who are driving China’s overall retail sector. Two thirds of pet owners are female and 73.2% are aged 20-35 according to Goumin.
It’s little wonder pets are pampered so much in China. 41.4% of owners are single and 23.8% are married without kids, so in many ways the bichon frises and shih tzus are the child of the house. China Skinny sees pet owners showing much of the same buyer behaviour as Chinese parents do with their precious child. Pet food is a good example, where many owners have a strong resistance to additives with natural food accounting for quarter of the market and growing at 55% a year. The need for quality sees foreign brands account for the majority of the market.
Like every category, Chinese do their research to get the best product for their furry friends. 46.9% actively search for product information, with product quality and what others say about the products being what owners care about most, ahead of price.
One recent development in the pet industry is relevant across most industries in China. An online pet food vendor in China has been successfully sued by Alibaba for selling fake Royal Canin cat food on its Taobao platform. It is the first ruling of its kind and, whilst only a spit in the sea, it will hopefully be followed by many more, possibly making counterfeiters think twice before selling fakes online. Go to Page 2 to see this week’s China news and highlights.