China’s fixation with Hollywood movies has driven American culture in the Mainland and helped many Western brands along the way. It’s aided Nike to become the top-selling and most loyally followed fashion brand in China. It’s why many consumers are prepared to pay ¥27 ($4.40) for a medium sized Starbuck’s latte – a third more than the equivalent cup in Chicago, and why planes are full of Chinese tourists visiting their favourite movie settings around the globe.
While Beijing tries to limit Hollywood’s influence by restricting the number of foreign films shown to 34 a year, those blockbusters, coupled with the billions of pirated Western movie downloads every year, have penetrated China’s consumer culture.
Hollywood’s reign doesn’t go unchallenged in the Mainland. The sway of South Korea’s and Hong Kong’s popular culture is strong, as is the rising home-grown movie scene. Domestic films’ share of China’s box office grew from 47.6% in 2012 to 54.5% in 2014. Even with it the declining share, Western movies’ total revenue rose 60% in 2014 on the back of soaring growth.
Box office revenue in February this year saw China overtake the U.S. for the first month ever, helped by the 1,000 new cinemas that opened in 2014. That momentum continued in March, with takings 73% higher than in 2014. Chinese consumers spent more on movie tickets in the first three months of this year than all of 2010, and earlier this month, Fast & Furious 7’s release in China almost doubled the previous opening day record and broke the $250 million mark in just eight days.
China’s box office growth and influence has caught the attention of some of China’s wealthiest and highest profile individuals, including Alibaba’s Jack Ma, Tencent’s Pony Ma and Dalian Wanda Groups’ Wang Jianlin, who are investing billions into China’s movie industry. Its allure has also tempted industry execs from all corners, with Hollywood inserting ever-more Chinese actors and backdrops into its blockbusters, Netflix pressing on with its China launch, and the world’s biggest short film making contest, My RØDE Reel, allowing budding film makers to concurrently enter on Youku and Youtube for the first time this year.
Depsite the growth of the local film industry, it’s unlikely Hollywood will lose its stature in China any time soon, which is good news for foreign brands who cleverly tie in Western cultural elements. Contact China Skinny for help with that. We hope you enjoy this week’s Skinny.
What Are China’s Shenzhen Shoppers Buying in Hong Kong?: HK is restricting Mainlanders with multi-entry visas to one visit a week. Goldman Sachs expects trips to Hong Kong to shrink by 4.6 million a year – 10% of total Mainland visitors – and reduce retail sales by 2%. Around 90% of multi-entry visas are used by day trippers who go to buy cosmetics, food, alcohol and tobacco, with Hong Kong goods typically considered safer and cheaper.
Once-Prized Tibetan Mastiffs Are Discarded as Fad Ends in China: Sales of another luxury item have been hit by China’s austerity campaign and fakes – Tibetan Mastiffs. The breed once sold for as much as $200,000 in China, with some even having plastic surgery to increase their value. Nowadays, there are reports of the surplus pooches headed to the slaughter house to be used in hot pots and as glove liners.
‘Furious 7’ Shows Rise of China’s Consumer: Fast and Furious 7 has smashed the record for China’s biggest one-day box office takings at $63.2 million, doubling the previous record holder Transformers 4, further reinforcing China’s move to a consumption-based economy.
Netflix CEO Says Will Stick With Ad-Free Model in China Push: Netflix is pursuing a subscription video streaming service without commercials for the Chinese market, keeping with its traditional subscription model. It will be a tough sell with Chinese consumers used to watching entertainment for free that is either supported by ads or illegally pirated.
JD.com Making it Easier for Foreign Brands to Sell Directly to Chinese Consumers: JD Worldwide is allowing foreign brands, and even eBay vendors, sell directly to its 97 million active users. The runaway demand for cross-border eCommerce in China is outstripping supply of bonded logistics space.
Unsafe Product Alert: Be Very, Very Careful What You Buy on WeChat: WeChat’s aspirations to challenge Alibaba’s leadership for online shopping have taken a step backwards following a damning CCTV report about dodgy facial cleansing masks bought on the platform. The masks had 6,000 times more of the hormones than legally allowed. “Taobao has fake products but at least there’s platform supervision. On WeChat you just have to trust that [the seller] has a conscience. It’s unreliable,” one online commentator stated.
Is Apple Betting Big on The Chinese Market?: Chinese consumers are having a big influence on Apple’s product development with features such as big screens, gold iPhones, gold Macbooks, and $10,000 bling gold iWatches. If any market is going to buy the expensive gadgets, it’s China, with 73% of Chinese luxury watch buyers thinking the brand is most important, versus 38.7% in the U.S. and 50.1% worldwide. Downloads on Apple’s iOS in China have surpassed those in the U.S. for the first time.
Chinese Consumers’ Demand Drives Up Imported Food Sales: Sales of imported food to China grew 14% last year, almost three times FMCG’s 5.4% growth, with overseas purchases and online shopping the two fastest growing channels. 86.7% of urban Chinese families have bought imported food at least once according to Kantar. The biggest sales growth in China’s food and beverage sector came from tier three and four cities.
China Considers Ban on Infant Formula Ads: China is considering banning mass media and public advertisements for its $18 billion infant milk formula market, in a bid to tackle low levels of breast feeding. This will further increase the importance of targeted digital media to reach mothers. Less than a third of babies are exclusively breastfed in China and the number is falling.
Make the Most of FTAs, Fonterra Executive Tells Farmers: “If you don’t have an offering, a proposition to take to consumers, one that will be wanted, then the free trade agreement has not a lot of use,” Fonterra advises at the Global Food Forum [subscription required].
Coke to Buy China Multi-Grain Drinks Maker for $400 Million: Coke is buying China’s Culiangwang, a drinks company that specialises in multi-grain beverages with flavors such as red bean, walnut and oats. Coke is hoping the acquisition will help bolster its disappointing 2% volume growth last year. Soda represents around 70% of Coke’s sales in China, but it is diversifying into faster growing categories such as plant-based protein drinks.
Chinese Affluents Research at Home Before Purchasing Abroad: Hurun Exec: China’s affluent consumers are underpinning the global luxury market and are unlikely to have their supremacy challenged in the next five years at least. Chinese luxury shoppers travelling abroad do a lot of research at home before they leave. Apple’s rise in the affluent consumer segment represents an increased desire for affordable luxury, particularly in the gifting space.
Understanding the Chinese LGBT Traveler: An estimated 40-70 million Chinese are lesbian, gay, bisexual or transgender. More than one-third of Chinese gay men surveyed online travelled abroad in the past year, with 72% preferring to travel with close friends, although 90% are reportedly married to women. Scenery, quality of food and culture influenced destination decisions the most.
Why eCommerce is the New Gold Standard for Jewelers: Greater China is now the larest market outside of the U.S. for online diamond and fine jewellery retailer Blue Nile, and it grew 37% last year. There are more than 10 million new Chinese brides each year, with many wanting traditional Western-style engagement rings.
China Rethinks Its Car-Sales Model: China’s parallel car imports, or grey market, is having an impact on its auto industry, particularly at the high end. It reportedly contributed to BMW’s decision to reduce prices of its X5 an average of 14% across China last month. At the other end of the market, a low pricing strategy has seen China-branded SUV sales more than double in the first quarter of 2015, to overtake foreign brands and hold 56% of the market.