Andrew Gaule discusses with marketing expert Ashley Dudarenok how China leapfrogged over the past 15 years in innovation and marketing, leaving many of the Western competitors behind, often forcing them to leave China.
Ashley Dudarenok is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers’ request form.
Are you looking for more innovation experts at the China Speakers Bureau? Do check out this list.
Domestic competition for foreign fast-moving consumer goods (FMCG) in China is growing, but branding expert Ashley Dudarenok expects there will still be a market for those foreign brands, she writes in Dao Insights. “To sum it up, the FMCG market in China in 2023 is very fluid,” she writes.
Ashley Dudarenok:
FMCG brands have had a difficult journey in China since the onset of the COVID-19 pandemic. The pandemic has resulted in wide-ranging disruptions to the FMCG industry in China, from supply chain disruptions down to decreasing demand for products and services. While the pandemic has harmed foreign FMCG brands in China, the good news is that the market is beginning to recover in 2023 and is projected to continue to do so in the years ahead.
In 2023 the Chinese government seems to also start encouraging foreign investment and brands to enter the country to cater to its rapidly growing market. While there is an ongoing rise of the national wave or “Guochao,” one simply cannot deny the value and quality that foreign goods can still offer.
Despite the challenging environment, foreign FMCG brands in China adapted to the changing market conditions quickly. Companies such as Unilever, Nestle, and Procter & Gamble were able to quickly ramp up production and introduce new products to meet the changing consumer needs.
Additionally, they expanded their online presence via virtual shopping experiences and delivery services, as well as offering discounts. This allowed them to continue to reach consumers and maintain their market share despite the pandemic. Foreign FMCG brands are still often seen as premium and appealing to Chinese consumers seeking high-quality products…
To sum it up, the FMCG market in China in 2023 is very fluid. The market itself, ever-changing consumer preferences and trends, and domestic or foreign competitors are always changing. You can learn more about the Chinese market and how the market has changed during the pandemic in the recently released 650-page-long 2022 Mega Report: China E-Commerce & Digital Space. International brands must watch and monitor the relevant trends in the Chinese consumer market to have a baseline on what sticks or what doesn’t. Foreign FMCG companies will remain a strong player in the Chinese FMCG scene, and it’s on its way to steady recovery.
Ashley Dudarenok is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers’ request form.
Are you looking for more branding experts at the China Speakers Bureau? Do check out this list.
Some investors have been suggesting that the latest political changes in China have made India an easier place to invest. VC veteran William Bao Bean, with major experience in both countries, disagrees, he tells in the South China Morning Post. He believes the government’s efforts to break the duopoly of Tencent and Alibaba makes China for him even more attractive.
The South China Morning Post:
William Bao Bean, general partner at SOSV Chinaaccelerator, a Shanghai-based firm that helps investors in China and India, said India is not an easy place to access for foreign investors. “India is very hard to invest in for foreigners, in terms of tax rates and regulation,” Bean said. “In fact, it remains harder for foreigners to invest in India than it is to invest in China.”
Bean said his capital exposure in China accounted for roughly 25 per cent of his portfolio over the past three or four years. “Now, with the recent changes. I’m actually looking to increase my exposure to China,” said Bean, pointing out that China’s antitrust drive is breaking the duopoly of Alibaba and Tencent, opening the way to more competition and investment opportunities.
Bean said regulatory change has always been part of China’s market environment and investors need to adapt. The current change in China also comes as the market has matured, with 71 per cent of the population already connected to the internet compared with 50 per cent in India, according to government data.
More in the South China Morning Post.
William Bao Bean is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.
Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.
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| Shaun Rein |
Nestle SA is losing buzz to an Indonesian coffee brand famous for brewing civet-cat feces, and L’Oreal SA is losing face to a Chinese skincare brand favored by President Xi Jinping’s wife.
Asia traditionally was considered easy money for Western multinationals, with beverage makers, cigarette brands and fast-food giants capitalizing on rising incomes and weak local competitors. A survey by China Market Research Group in 2011 showed 85% of Chinese consumers preferring foreign brands.
Those days are over. That preference dropped by half last year, and it goes beyond China: brands of Indian toothpaste, Vietnamese laundry detergent and Japanese flavored water are picking up market share with lower prices and by catering to local tastes.
Rising stars such as Indonesia’s Luwak instant coffee and China’s Pechoin moisturizers spell trouble for global titans at a time when Asia-Pacific’s economic growth is projected to outpace the world’s through 2019.
“Multinationals underestimated local competition,” said Shaun Rein, managing director for China Market Research Group. “Local players have moved very fast on emerging trends that multinationals have missed, like healthy and e-commerce.”
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| William Bao Bean |
In China, since the consumer market is dominated by very large players, it becomes difficult to compete, Bean insisted. However, India is a mixed bag of everything — on one side you have internet giants like Google, Facebook and Amazon offering one size fits all products for the world. On the other, you have startups that are backed by Chinese investors like Softbank, Alibaba Group and Tencent, and Chinese companies like Xiaomi and ByteDance directly foraying into India, Bean explained.
This, in a way, makes the Indian business ecosystem a bit of a battleground, thereby complicating life for early-stage entrepreneurs to survive.
“The truth is, no one can compete with the elephants,” he added...
Bean said that India is a land of multiple opportunities due to its vibrant ecosystem, ethnicity, social and economic diversity. “We believe in helping companies work together — advice and mentor them to be competitive in the Indian market. In fact, India is a complicated market. It is not just about the big players versus the small players.
Interestingly, India is not just one market, it is a cluster of many markets,” he added...
There are many reasons why startups fail in India and across the world. Apart from the founders and investors getting along. Most challenges can be eliminated by focusing on companies that are backed with data.
“A lot of times, entrepreneurs focus on gut instinct, instead of data. Ideas are like noses, everyone has it,” quipped Bean.
More in Inc42.comBean said MOX takes those ideas, tests them and make decisions based on data. “Since we are a cross-border internet platform, we don’t have 10K hours of experience to find out things by doing guesswork. We focus on data — we invest in startups backed on data, talk to customers through data, make changes that show data and then iterate quickly based on data. This pretty much solves the hassles and complications from occurring in the future.” Bean asserted.
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| Sara Hsu |
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| Harry Broadman |
At first glance, the proposed merger between Germany’s Siemens and France’s Alstom to fight off the future intrusion of the giant state-owned Chinese rail industry into the European Union market might appear to be in the public interest. After all, what better way to combat size than to scale up.
The EU Competition Commissioner, Margrethe Vestager, had the wisdom — if not the courage — to make the correct call in blocking Siemen’s acquisition of Alstom.While competing against firms from China is becoming tough going in virtually every sector across the globe — in large part because Chinese enterprises can get away by not having to play by the same rules as most businesses of other nationalities — sound public policy must be based on deftly balancing the welfare of a country’s consumers, workers, and businesses.
The fact is that businesses and the governments of the countries in which they operate need more innovative strategies to compete effectively with the Chinese — or anyone else — than simply increasing scale. Ask any Chinese boss of a lumbering state-owned-enterprise (SOE) he or she runs if they wish they had more agility to enhance their firm’s competitiveness against rivals.
Don’t be surprised if the answer is a resounding “yes”.
Indeed, for Siemens and Alstom the answer won’t be scale. That’s looking through the wrong end of a telescope.
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| Ben Cavender |
In May, Luckin sued Starbucks, arguing that the U.S. chain had signed exclusive contracts with commercial property owners that barred other coffee shops from entering the space if a Starbucks was already there.
It’s not going to be easy to oust Starbucks, which has 3,400 stores in more than 140 cities in China and plans to nearly double that by 2022.
Ben Cavender, senior analyst of China Market Research, a consultancy based in Shanghai, estimates that it has a 70 per cent share of the market, blazing past other coffee chains like McDonald’s McCafé and Costa Coffee. But the company must prove it can stay on the cutting edge.
“The challenge is that consumers are much pickier about the experience they get now; they have other good options that have standardized quality and potentially a more interesting environment,” Cavender said. “So Starbucks has to do a better job. It’s not a clear win anymore.”More at the New York Times.
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| Shaun Rein |
Asia traditionally was considered easy money for Western multinationals, with beverage makers, cigarette brands and fast-food giants capitalizing on rising incomes and weak local competitors. A survey by China Market Research Group in 2011 showed 85 percent of Chinese consumers preferring foreign brands.
Those days are over. That preference dropped by half last year, and it goes beyond China: brands of Indian toothpaste, Vietnamese laundry detergent and Japanese flavored water are picking up market share with lower prices and by catering to local tastes. Rising stars such as Indonesia’s Luwak instant coffee and China’s Pechoin moisturizers spell trouble for global titans at a time when Asia-Pacific’s economic growth is projected to outpace the world’s through 2019.
“Multinationals underestimated local competition,” said Shaun Rein, managing director for China Market Research Group. “Local players have moved very fast on emerging trends that multinationals have missed, like healthy and e-commerce.”More in Bloomberg.
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| Jeffrey Towson |
A large population used to drive China’s economy through cheap labor. But it is now benefiting the country’s technology in a particular way.
Jeffrey Towson, professor of investment from Peking University, believes China’s tech giants can beat US companies “fair and square,” both within the domestic market and abroad.
Supporting his view is the large scale of native tech companies and consumers.“When a company like Huawei, which has 170,000 employees and 70,000 of them are in R&D, that’s bigger than Cisco (a world leading IT company based in the US), which has 70,000 for the whole company, that’s incredibly difficult to compete with,” Towson said...
More (including two videos) at CGTN.New groups of labor and expertise have also helped China’s tech industry thrive.“If we talk about gaming, we’d also be talking about artists, people coming from design schools and animation schools, of which there are a lot now. So there's population migration on top of government action – sometimes things just happen,” Towson said.Let’s now argue against that opinion from The Economist – if the Chinese government drops censorship and restrictions on foreign tech companies, will they win?
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| Jeffrey Towson |
Chinese Wanda is openly challenging Disney. Uber spent $2B fighting with Chinese DidiChuxing. Adidas has been fighting Chinese Li-Ning and Anda for decades. And Apple is now struggling against multiple rising Chinese competitors,(Xiaomi, Huawei, Oppo, etc.). One thing you can always count on in China: A successful international company will inspire serious domestic competitors.
So why doesn’t Starbucks have a serious competitor in China? I’ve been asking people this for months and I still can’t get a good answer. It’s weird.
Starbucks has been in China since 1999 and currently has about 2,400 outlets. They have likely had the majority of the China retail coffee market for years. And CEO Howard Schultz has recently announced plans to open 500 new outlets per year. That will get them to 5,000 China stores by 2020.
Also, on Starbucks’ November 3, 2016 earnings call, Schultz said “our newest class of Starbucks stores in China is delivering the highest AUVs, ROI and profitability of any store class in our history in the market.”
So Starbucks in China has big market share, rapid growth and apparently attractive economics. Although they are breaking the #1 rule of doing business in China as a foreigner: If you are doing really well, keep it quiet.
Starbucks does have some smaller competitors in China. There is Costa Coffee from the UK. Costa is planning to have 900 China stores by 2020. There is CaffeeBebe from South Korea and Coffee Bean from Los Angeles. Both are fairly small in China. There is UBC Coffee (originally from Taiwan) but this is really more of a restaurant. And there is Pacific Coffee of Hong Kong, which has been majority acquired by China Resources.
You could also consider convenience stores like Family Mart and 7-11 as competitors. Certainly lots of coffee is sold there and they both have huge operational footprints. Also, there is McDonalds which has its McCafes. But these are a stretch as direct competitors I think.
Overall, I just can’t point to any serious Chinese competitor for Starbucks. I don’t see a China Mobile, Alibaba, Suning or Wanda-type company fighting them for their customers.More possible answers at Jeffrey Towson's weblog.
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| William Bao Bean |
“The focus for the partnership with 99 is on developing the enormous, untapped potentials of Brazilian and Latin American markets,” said Didi, adding that it has “a very firm commitment to a globalisation strategy”.
“The war on one front is now being fought everywhere, globally,” said William Bao Bean, partner at SOSV, the Chinese software start-up accelerator. “Before it was fine to be the top app in China or in the US. That’s no longer enough for Uber or Didi.”
Didi has also invested in Lyft, Uber’s main US rival, as well as GrabTaxi, which is popular in Southeast Asia. The three car-sharing apps are part of a global anti-Uber alliance in which users of one app can hail the others’ cars when travelling abroad.More in FTChinese.
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| Kaiser Kuo |
Uber didn’t just bumble into the China market without a good map of the pitfalls that doomed so many other U.S.-based Internet companies trying to make it in China. In fact, they studied the failures of their predecessors carefully, and avoided many of their missteps. They created a highly autonomous China entity and gave their people on the ground extensive decision-making power, allowing them to take the gloves off where needed—not that Uber as a company has ever shied from doing so. They partnered with, and received investment from, China’s largest search engine (Baidu), and leveraged not only Baidu’s market position (by integrating Uber directly into Baidu Maps) but also its deep experience with government relations. Uber committed huge amounts of capital, and paid out billions in subsidies to win market share. They offered services tailored to the Chinese market.
And all things considered, they didn’t do at all badly: They rolled out aggressively into many Chinese cities, and for a while even enjoyed a market share lead in some of those cities, like Chengdu and Xiamen.
That despite all this Uber ultimately surrendered to Didi Chuxing shows just how tough local competition has become, and should give would-be entrants even greater pause. I doubt that within my lifetime I’ll see a major U.S.-based Internet company win a market share lead over domestic Chinese competitors. (Conversely, I doubt even more strongly that I’ll see a Chinese Internet company make significant inroads into any major Western market).
The China Internet market will prove elusive to American Internet players even when censorship and other Chinese government policies aren’t significant factors—and just to be clear, they weren’t real factors in Uber’s case: some municipal governments may have played favorites, but Beijing mostly kept out of the ride share war that’s raged on for the last few years. This was a fair fight—or more precisely, both parties were free to fight dirty.
But it was an uphill fight for Uber from the beginning. A manager is, after all, always at a natural disadvantage when competing with an entrepreneur; the entrepreneur always has more skin in the game. And when that entrepreneur is focused on a single market, has nearly inexhaustible resources, can draw on the strength of China’s two largest Internet companies (Tencent and Alibaba both, since Didi’s absorption of Kuaidi in February 2015), and is determined to destroy its competition by any means, you know who to bet on.
Uber got good terms of surrender, though. The devotion of that much time, attention and capital by Uber’s senior management toward a market destined to bleed money for the foreseeable future just didn’t make sense. Now Uber ends up with 20 percent of the merged entity, and that’s nothing to sneeze at.More opinions in ChinaFile.
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| Marc van der Chijs |
A few weeks ago Joop Dorresteijn pinged me about a service he had found that does something similar for cities in China: city8.com. You select the city you want to look at and then you get a streetview-like interface. It works pretty well, but because it’s hosted inside the Great Firewall it is quite slow outside China or when using a VPN.More at Marc van der Chijs' weblog.
I tried it out for Shanghai and Beijing and like the functionality and the quality of the pictures. Not only the city center has been covered, but also the suburbs. Even some of the expat compounds are part of the database (ours did not let the camera car in though, so I can’t see my own house), so you can check out most addresses in the city. Just type in the address in Chinese in the search bar and you get to the location right away. You can then move around with the cursor just like in Google Streetview.
Image via Wikipedia
