Multinationals underestimate local Asian competition - Shaun Rein

Shaun Rein

Multinationals knew they were up for a hard time in fighting local brands in China, but local brands all over Asia are becoming more successful, says business analyst Shaun Rein to Industry Week. Consumers are changing their preferences to local brands.

Industry Week:

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.”

More in Industry Week.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more consumption experts at the China Speakers Bureau? Do check out this list.  

How Nestle´s localization strategy failed - Shaun Rein

+Shaun Rein 

Localizing has been the mantra of many foreign firms in China, but in Nestle´s dairy milk case that failed. In his book The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia Shaun Rein explains what the Swiss company did wrong. A snippet from his book.

Shaun Rein:

 Vanessa responded, "I just don´t trust dairy products made in China, domestic Chinese or foreign brands. The supply chain is a mess. I will spend more if I trust the brand and quality." Fears over another melamine scandal, or a botulism scandal, which struck New Zealand dairy company Fonterra in 2013, linger for years, and parents do not want to take any risks. 

Her answer mirrored respondents on social media China Market Research Group (CMR) tracked and explained why foreign brands with cheap dairy products lost market share. For instance CMR did for a hedge fund analyzing baby formula, we found mothers correlated high price with safer products. 

Many mothers responded they did not trust Nestle baby formula, for instance. Nestle located its dairy farmland in northeast China, a region known as China´s rust belt. From Nestle´s perspective, establishing operations there introduced international farming and quality standards and helped local farmers and the local community. Nestle instituted a cheaper price position than other international players. 

But Nestle´s strategy backfired. Chinese mothers feared unsafe chemicals from decades of industrial runoff contaminated the soil, poisoning the grass, the cows, and finally the baby formula. 

Users commented that Nestle´s price level, often 50 percent cheaper or less than competitor products, such as domestic player Biostime, slumped so low that they worried about quality control. Nestle´s problems in infant formula show the dangers of competing in China as a foreign brand - consumers perceive that foreign brands from Western developed markets, such as Switzerland, should be more expensive than local ones, or ones from developing regions, such as Thailand or eastern Europe.

A first excerpt of Shaun Rein book has been published in CampaignAsia.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you interested in more experts on innovation at the China Speakers Bureau? Do check our latest list here.

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• NZ babies miss out - New Zealand Herald
• Ten Companies That Control The World's Food

Hershey joins chocolate war in China - Shaun Rein

Shaun Rein

US chocolate maker Hershey currently has two percent of the China market, and is small compared to bigger players like Mars and Nestle. Business analyst Shaun Rein explains at the Wall Street Journal the China premium chocolate market is growing 20% per year,  but domestic competition is making life tough. But Hershey wants a market share of 27% by 2017.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

+China Weekly Hangout
 Many foreign firms in China fail, and the China Weekly Hangout discussed some prominent failures in January with +Richard Brubaker of Collective Responsibility and +Andrew Hupert, expert on conflict management in China. Moderation: +Fons Tuinstra of the +China Speakers Bureau. Including references to Apple, Mediamarkt, Foxconn and many others.  A full overview of all our hangouts, you can have here.

Coming Thursday the China Weekly Hangout will discuss the changes in China's labor force, especially the blue collar workers with +Dee Lee (Inno), running since 2007 a workers' hotline at Inno in Guangzhou. Expected is also economist Heleen Mees from New York. Moderation by +Fons Tuinstra, president of the China Speakers Bureau. Our first announcement is here,and you can register for the hangout here.

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Can Nestle succeed where Coke failed? - Shaun Rein

Nestle's anticipated mega deal brings back the US$ 2.4 bn deal by Coke, rejected in 2009 by the Ministry of Commerce for fears the new company would dominate the market. While Nestle's deal is huge, it has not Coke's problems, tells Shaun Rein in Fortune.

Fortune:

Nestlé, the world's biggest food company known for brands such as Haagen-Dazs and Nescafe, is one of many big Western companies that have been looking to increase sales in emerging markets amid slower growth in the U.S. and Europe. The company's interest in Hsu Fu Chi, which is worth around $2.6 billion, could very well go in any direction. And admittedly, large-scale takeovers are complex and rarely easy to pull off.

But it makes little sense for skeptics to bring the memory of Coke's failed $2.4 billion bid into the picture, says Shaun Rein, managing director of China Market Research Group. Whatever issues killed the Coke deal likely won't happen with Nestlé's bid to buy China's biggest confectioner.

For one, Rein notes, there likely won't be a monopoly at issue because Hsu Fu Chi's dominance in China's confection market is not as big as Huiyan's control of the fruit juice market. When Coke pursued Huiyuan, the Chinese juice maker controlled about 42% of the country's pure juice market. By contrast, Hsu Fu Chi commands about a 5.5% share of China's confectionary market. That's still a sizable chunk given that the market is very fragmented, but local and foreign players have been doing well.

"I don't see it getting the same scrutiny and raising the same red flags," Rein says about Nestlé's interest in Hsu Fu Chi.

More in Fortune

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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