Chinese Are Growing Weary of Domestic Brands

on May 16 2012 | in Retail | by | with No Comments

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In a recent research report Barclays Capital says that after continued double-digit wage hikes, many more mainland Chinese aren’t just getting wealthier, but also more discerning on how they spend. Increasingly, they are looking at premium products and often, foreign ones. This, they say, applies to both staples and discretionary consumers brands.

Mainland companies who haven’t invested in building strong brands, research and development, and product development stand to lose the most during these times of shifting consumer taste, says Barclays. However, multinationals that have been investing in their mainland Chinese businesses are most likely to reap the benefits of new preferences.

Both Nike and Adidas have expanded into second- and third-tier cities, taking market share from local sportswear names like Anta, Li Ning, and China Dongxiang. It is likely that foreign companies will continue to gain headway in Chinese retail, considering that sector has become considerably deregulated since entering the World Trade Organization ten years ago.

It’s not just Western companies that are succeeding in this market. Unicharm, Japan’s consumer-product company, now has 44.7 billion yen ($570 million) in sales – more than quadruple its 2006 figure of 10 billion yen. And success in the market is a two-way street: Shanghai-based Bright Foods recently purchased a 60 percent share of the UK cereal maker Weetabix for $1.89 billion. Bright Foods’s acquisition displays three key elements that are crucial to success for Chinese brands today: buying into a famous international brand, investing in advanced technology, and taking strong competitive positions in its markets.

As consumers become more choosy, it is a boon for thriving multinationals.

[marketwatch]
photo credit: kappa/adsoftheworld

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