With a population of 1.2 billion, one of the fastest rates of
growth in the world and, so far at least, immunity from Asia’s economic
crisis, China is a mouth-watering prospect for western marketers.
Some are already making lucrative inroads but it’s early days, and those
hoping to penetrate China lack the kind of market intelligence they are
used to in the West. This makes many brand owners cautious, such as
Heinz, which is launching its baked beans into China: in its first year,
it will export 100,000 cases - equivalent to just one day’s UK
’The country is changing very fast. But it doesn’t have good databases
and there isn’t much IT,’ says Derck van Karnebeek, Heineken’s field
marketing manager for China. ’So there is little dependable information
available.’ Not surprisingly, the research industry is booming, up 25% a
year for the past five years, but marketers are bombarded by excessive
and inconsistent data.
Another problem is the difference in laws and regulations between the
regions - as Carlsberg found when it tried to produce promotional beer
mugs centrally. By law, the mugs had to have the volume marked on them,
but each region wanted it measured in a different way.
Distribution channels are also fragmented. Edward Tse, vice-president of
management consultancy Booz Allen Hamilton China, says the skill levels
of distributors have been poor and western brands have suffered as a
Further down the chain, 77% of retail outlets have less than 20m2 of
space. Tse says most cities have tens of major department stores,
hundreds of supermarkets, thousands of grocery stores and tens of
thousands of ’mom-and-pop’ stores. But neither the mix nor the
participants are ever the same.
All this creates huge problems for marketers, who need to amass the
market knowledge to enable them to target and conquer each region
individually, while building a nationwide brand.
International research giant BMRB thinks it has come up with a tool to
help: last month it launched the first TGI data on the Chinese market.
The report, called ’China Marketing and Media Survey’, was carried out
in partnership with Sino Monitor, a private enterprise spun off from the
State Statistics Bureau.
Responses were compiled from a sample of 50,000 people aged between 15
and 59 across the 12 largest cities. BMRB believes this is the largest
piece of integrated research ever into the Chinese market, giving an
insight into the spending habits of 24 million city-dwellers.
The TGI data breaks down geographically. It explains, for example, the
lure of Guangzhou, the city in which Cadbury Schweppes Beverages is
setting up a dollars 20m (pounds 12m) joint venture. The company
launched into the market with fruit drink Oasis last month.
In fact, the soft drink market is set for a very western battle royal:
later this year, Coca-Cola is introducing tea in cans under its local
brand Tian Yu Di, which was launched as fruit juices in 1996.
Guangzhou has the highest average personal and household income of the
12 cities and the fourth biggest monthly combined spend on grocery and
household goods. TV is the most popular advertising media in China, with
spend topping dollars 5bn (pounds 3bn) in 1996. It is now the ninth
biggest market in the world.
Second in terms of wealth is Shanghai, China’s most cut-throat market
because so many brands are tested there. Next richest are Beijing and
Fuzhou. Guangzhou is the closest geographically and culturally to Hong
Kong so, not surprisingly, it is one of the cities to show a strong bias
toward foreign goods and western lifestyles.
Domestic vs foreign
The data also highlights a distinct segmentation among consumers, which
corresponds to three different types of products: traditionalists buy
local brands; young, fashionable consumers are attracted to western
brands and lifestyles; and those in between, who have aspirations but
not the income to support them. The latter category chooses either
competitive local products, built up as brands in a western way, or
foreign brands that have been around for so long to have become almost
Adidas and Carlsberg are both ’naturalised’ brands. The former, which is
number four in the mature sports-shoe market, has supported Chinese
national sport since 1979, 12 years before Nike got into
Carlsberg advertises on TV, while its rival, Heineken, which is imported
from Holland, relies on point-of-sale material, and appeals to the top,
smaller, consumer segment. The beer market is crowded, with every major
foreign brewer up against locals in every market.
According to the data, the carbonates sector is also becoming more and
more competitive: 75% of Chinese consume fizzy drinks. Coca-Cola has
employed all its customary western-style marketing clout - its media
budget is rumoured to be dollars 24m (pounds 14m) this year - as well as
nurturing official contacts.
It persuaded members of both the Shanghai neighbourhood committees and
the unemployed from reformed state enterprises to distribute its
The core brand duly takes the top slot. Coca-Cola-owned Sprite is number
two, with less than half the brand share, followed by Pepsi. But fourth
on the list, ahead of both Fanta and 7-Up, is a Chinese brand, Jian Li
Western brands may create new categories, as Coca-Cola has with years of
technology transfer to its bottlers, but its per capita consumption is
only about a seventh of what it is in Hong Kong and locals rivals are
eyeing the slack.
Lack of consumer confidence in home-grown high-tech products has created
opportunities for western brands. Penetration of mobile phones is 13.5%,
similar to that of the UK, and another 9.3% are considering buying one
this year. But all the top ten brands are foreign. According to BMRB,
Ericsson is number two, with a market share two-thirds the size of
Motorola’s, even though it carries a significant price premium over
every other brand except Philips.
But this is not about yuppies going western for the sake of it:
consumers did not fall into neat categories through attitude statements.
And, in any case, Ericsson has begun to localise its products with
market- specific software and Chinese characters. The company has won
itself exactly the positioning it has been trying to achieve all over
the world: the price reward for being a’leader in high-quality
’If you’d asked the question six-to-12 months ago about how far
consumers in China understand changes and development in, say, packaging
and future marketing directions, I would have said they were behind,’
says Alan Nicholas, Ericsson’s marketing director for Asia.
Now Nicholas claims Chinese consumers are so aware of technological
developments that he can spend less on advertising than in other
Over the next two to three years, Ericsson will launch models with data
capabilities, which have yet to make it big in Asia.
’Our research suggests the Chinese have actually been changing quicker
than the rest of the world. They have picked up our values. Everything
used to have to be black and gold to turn the Chinese on, now they are
becoming interested in lifestyle images rather than the perception of
Getting a headstart
Procter & Gamble has been strong in China for long enough to have
dropped its ’western’ image back in the early 90s. Now it dominates the
haircare market, producing the three most popular products: 63% of
consumers who had used a shampoo in the past year expressed a preference
for either Rejoice, Pantene or Head & Shoulders (BMRB).
With Head & Shoulders, P&G marketing created the perception of dandruff
- not as important an issue in China - as being a social stigma. The
shampoo was then advertised as being able to deliver a health benefit.
This was reminiscent of packaged goods’ advertising in the UK in the
Rejoice is the Chinese brand name for Wash & Go. P&G changed the
original’s selling point of convenience, which didn’t suit Chinese
cultural attitudes to hair. Sales of Rejoice exceed those of Wash & Go
in the US.
Dennis Fong, managing director of Leo Burnett in China, says: ’P&G
established it as the brand which represents the most beautiful hair.
They spent a lot of money and homed in on one platform: the quality
perception is much higher than the price premium commands.’
P&G also dominates the soap-powder market with Ariel, has obtained state
endorsement for Crest, and will launch more new products this year,
helped by Saatchi & Saatchi in China.
Marketers used to complain that because Chinese has no word for brand,
people had no grasp of the concept. Now both advertising agencies and
other market researchers report that one of the key preoccupations among
their clients is trying to understand their brand equity and how to
Indeed, AC Nielsen launched a new brand equity management tool, Winning
Brands, this month in China, to be integrated into other media and
If properly understood, the opportunities are enormous. Current
deregulation designed to increase home ownership is likely to give a
fillip to both household products and home furnishings.
The Chinese spending spree on white goods is probably falling off now,
but refrigerator penetration - fridges are often put in the living room,
which is why Electrolux markets its version as the quietest one around -
may generate interest in prepared foods.
This also presents opportunities for western retail entrants, such as
Wal-mart, Dutch supermarket groups Ahold and Metro, as well as chains
from Hong Kong.
Currently, China is the biggest recipient of foreign investment out of
all the developing nations. If investors continue to take a long-term
view, it will remain so. And with better planning tools at their
disposal, the prospects for western marketers are looking better than
BRAND SHARE CHINESE MARKET
% SHARE BEERS
Brand (manufacturer) %
1 Yanjiing (Yanjiing) 12
2 Tsing Tao (Tsing Tao) 10.3
3 Blue Ribbon (Zhoaquin Blue Ribbon) 7.6
4 Reeb (Shanghai Mila) 6.6
5 Five Star (Beijing Shuangheshenj Five Star) 5.7
6 Budweiser (Anheuser-Busch) 4.8
7 Becks (Scottish & Newcastle) 4.3
8 San Miguel (San Miguel) 4.1
9 Zhu Jiang (Zhu Jiang) 2.7
10 Carlsberg (Carlsberg-Tetley) 2.3
11 Hao Men (Tangshan Ou Lian Hao Men) 2.1
12 Heineken (Heineken) 1
13 Blue Girl (n/a) 0.9
14 Guinness (Guinness) 0.7
15 Tiger (Asia Pacific) 0.6
16 Foster’s (Scottish Courage) 0.6
% SHARE MOBILE PHONES
1 Motorola 35.3
2 Ericsson 21.2
3 Nokia 10.4
4 Siemens 7.1
5 Panasonic 3.3
% SHARE FIZZY DRINKS
Brand (manufacturer) %
1 Coca-Cola (Coca-Cola) 47.3
2 Sprite (Coca-Cola) 18.6
3 Pepsi (Pepsico) 12.5
4 Jian Li Bao (n/a) 6.4
5 7-Up (Pepsico) 5.4
6 Fanta (Coca-Cola) 5.2
7 Chivalry - 3.4
8 Mirinda (Pepsico) 3.2
9 Asia (n/a) 1.4
10 Red Bull (Red Bull) 1.1
% SHARE SHAMPOOS
Brand (manufacturer) %
1 Rejoice (Procter & Gamble) 32
2 Pantene (Procter & Gamble) 16.4
3 Head & Shoulders (Procter & Gamble) 14.7
4 Lux (Elida Faberge) 10.2
5 Kao (Unilever) 4.3
% SHARE DETERGENTS
Brand (manufacturer) %
1 Ariel (Procter & Gamble) 22.7
2 Omo (Unilever) 16.6
3 Tide (Procter & Gamble) 9.9
4 Jia Mely (n/a) 8.6
5 White Cat (Shanghai White Cat) 8.3
Source: China Marketing and Media Survey 1998 (BMRB/TGI).