Mark Tanner
14 August 2019 0 Comments

Here are this week’s news and highlights for China:

Consumers,  Chinese Consumers

From Givenchy to Versace, Big Brands are Apologizing to China: Versace, Coach, Givenchy, Asics and Calvin Klein all apologised to China over their references to Hong Kong, Taiwan and Macao being independent countries on their websites and on items of clothing. The online backlash and calls to boycott the brands come at a highly sensitive time for China, with Hong Kong rocked by protests and a number of KOLs endorsing the brands have parted ways with the labels.

US Trade War Drives China’s Producer Prices into Deflation, as Pork Prices Send Consumer Inflation Higher: China’s Consumer price index (CPI) rose 2.8% in July, the highest reading since February 2018, largely due to pork prices rising 27%. Similarly, fresh fruit prices rose by 39.1% from a year earlier and eggs, chicken, lamb and fresh vegetables rose between 5.2%-11.4%.

The Chinese Internet is In Love With Budweiser’s Qixi Ads Featuring Same-Sex Couples: Many brands try and tap into Chinese Valentine’s Day Qixi with lovely-dovey commercials, but this year Budweiser delivered some bold and refreshing ads featuring same-sex couples under the theme “All Love is Love.” Its packaging features illustrations of individual men and women, who can be paired to look like they are kissing each other. The reaction online was overwhelmingly positive.

Online: Digital China

Cooling of Chinese Ecommerce Sector Continues as Slowdown Takes Hold: China’s online retail sales increased 17.8% year on year to ¥4.8 trillion ($684 billion) in the first half of this year, down from a 32.4% jump for the same period last year. Rural ecommerce and cross-border e-commerce continue to be the main drivers of sales. B2C sales – which account for a little over three quarters of online sales – grew just 4.1%. Fresh food, cosmetics, and pet goods are the most popular categories for online buyers in big cities, while apparel, automobile accessories, and home appliances are favoured in rural markets.

Premium Food & Beverage

Aldi and Costco Test China’s Retail Appetite with Fresh Approaches: While Carrefour is retreating from China, and Metro is likely to follow suit, America’s Costco, Germany’s Aldi, and the Netherlands’ Spar are launching new stores in the market, although they are testing the waters rather than making a big splash. Costco is optimistic about its Shanghai stores based on high incomes and a catchment area of 7 million people within a 45-minute drive. The retailer’s line-up will focus on imports in packaging sizes geared for families and small businesses, but also will include high-quality domestic produce such as strawberries and watermelons. Aldi located its stores in close proximity to both residential districts and office areas to supplement customers’ lives on their way to and from work with ready-to-eat, ready-to-cook and fresh produce categories. It also taps into delivery services. Foreign hypermarkets and supermarkets in China delivered a sound performance in 2018, with profit margins reaching an average of 23.2%, higher than the sector’s average of 21.5%, yet fortunes depend on their ability to adapt to local consumer preferences.

Growing Appeal Raises Bar for Wine Buffs in China: Pouring a glass of wine to have with dinner was once a rare sight in Chinese households, yet within the space of just 10 years, wine is now a popular evening tipple around the country. According to Wine Intelligence, only 32% of Chinese consumers actually drink wine for the taste – most imbibe it for health or beauty reasons. People now try to mix local dishes together with wine,” says Cheers CEO Claudia Masueger, “riesling goes well with hotpot, as does moscato.”

Chinese Agriculture’s Eco-Transformation: Many farmers in China trying the eco approach can’t put prices up or things won’t sell, although the cost of production is significantly higher. A big reason for this is that many consumers don’t trust that produce is actually organic. The majority of China’s farmers still have a blind faith in chemical fertilisers and pesticides, and a desire for more mechanisation and automation to reduce the manual labour they need to do.

Starbucks and Nestlé Partnership Expands Brand Presence in China’s Homes and Offices: Starbucks will enter the at-home and food service segments in China for the first time, rolling out 21 products across China, as well as the first-ever Starbucks capsules using Nespresso and Nescafé Dolce Gusto proprietary coffee and system technologies.

Does the Next Starbucks Make Cheese Tea?: From humble beginnings in Guangdong province, ¥9 billion ($1.3 billion) tea company Heytea now has 226 stores charging $3.50 a drink – 25% higher than its utilitarian bubble tea competitors. “We don’t spend on marketing, and put more money into the product. My hope is that our products bring their own ‘taste memory points’, which is the best advertising we can hope for,” says founder Neo Nie whose focus is taste, colour and texture. The chain is constantly putting out new products making it difficult to copy.

Overseas Chinese Tourists

Chinese Tourists More Wildlife-Friendly, Reject Elephant Rides: 13% fewer Chinese tourists rode elephants and 26% fewer watched elephant shows in Thailand from 2016 to 2019. 37% of Chinese tourists think that riding an elephant is acceptable – 8% less than in 2017 and lower than the global average of 41% according to a study by the World Animal Protection. 77% said they would rather see animals in the wild.

Shanghai Disney Sued for Snack Food Policy: Four Chinese university students are suing Shanghai Disney Resort for banning visitors from taking food into the park. They are seeking ¥46.3 ($6.60) for the food and to abolish the ban. Disney only bans food at its Asia parks, which has Chinese net users crying foul about double standards in Asia. They also used the opportunity to complain about the high food prices inside Shanghai Disney such as a 500ml Pepsi costing ¥20 ($2.80), seven times the normal price.

Overall Beauty

Korea Loses out to Japan in China’s Cosmetics Market: Japan exported $770 million worth of cosmetics to China in Q1 this year to take the top spot, ahead of France on $730 million and South Korea at $720 million. South Korea slipped to third place from top spot last year. Shiseido’s China revenues grew 32.3% last year on the back of Japanese cosmetics gaining popularity in 2017 amid the unofficial Chinese boycott of Korean goods. Korean cosmetics are known to respond quickly to consumer needs and trends, but Japanese products are more consistent in terms on quality. Chinese cosmetics brands also continue to grow from strength to strength, now accounting for 56% of the market.

Chinese sport Sport

‘We Needed a Bigger Microphone’: K-Swiss is Acquired by Chinese Sportswear Giant: Chinese sportswear giant Xtep announced its acquisition of K-Swiss and its sister brands Supra and Palladium for around $260 million. The acquisition allows them to tap into two important trends: consumers’ current fascination with 1990 sportswear brands and hunger among Chinese consumers for heritage American brands.

Autos and Cars

Audi Reports Record Sales in Chinese Luxury Market in Jan-July: Volkswagen-Audi saw a record 368,094 vehicles delivered in China in the January-July period, including 56,223 Audis – 6.1% more than a year earlier. 36,454 imported Audi cars saw the largest growth, increasing 27.1%.

That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.

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