If you ask a Chinese consumer for their thoughts on imported food, you’ll get countries described with a dreamlike reverence. Australia and New Zealand conjure images of endless green fields and roaming livestock taking in the crystal-clear air and water. The clean paddocks assisted by efficient systems and leading technology denote European farms, with North America associated with strong regulations that make for well-policed and protected farmland. These perceptions have contributed to imported food growing 17% last year to $39.4 billion.
An exploration of similar thoughts on domestic produce sees the collective opinion quickly sour. Abundant pesticide usage, corrupt supply chains, cadmium-laced paddocks, toxic additives and the constant concern of morsels masquerading as something they are not plagues the Chinese consumer mindset.
Foreign brands hold all the aces – so why are they struggling to keep up with their local counterparts? Amazingly, when it comes to fast moving consumer goods (FMCG) categories (mainly food), local brands are growing much faster than multinational brands and in many cases charging more than their international competitors.
A report released by Bain/Kantar last month illustrates that domestic players continue to erode multinational brands’ shares. China’s urban FMCG market grew 3% last year, with domestic players’ sales soaring 8% and foreign players’ growth limping along at just 1.5%. Brands owned by multinationals lost share in 18 of 26 FMCG categories last year, gaining in just four.
Whilst growth in premium food products is faster than non-premium in every category, foreign brands aren’t riding the wave quite like their Chinese competitors. The perception advantage of imported brands is being negated by the fact that many foreign brands do not understand the Chinese market as well as they could, their marketing strategy isn’t tailored enough and they don’t move as nimbly as domestic brands.
Like in almost every category in China, domestic products are becoming better quality, increasingly priced at a premium and backed by marketing that resonates with the local target market. In many cases foreign brands’ natural advantage can be enhanced by learning from savvy local brands about how to best appeal to Chinese consumers. Agencies such as China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.