Global marketers can no longer rely on “foreignness” adding premium values. But in some categories, health and safety concerns have seen a comeback in foreign brand relevance.
It’s important to understand the historical context to understand where we are today with regard to the foreign-local brand dynamic in China.
Flashback more than 20 years ago to when there was a black and white distinction between ‘premium’ foreign and local brands in most categories.
In the 1970s and 80s low quality, local products were the norm and Chinese consumers had to accept that reality, they literally had ‘not much choice’.
As foreign brands – usually everyday FMCG products – entered China in the 1980s they initially had a kind of rarified status, with sexier packaging, exotic names a promise of better quality and of course status. But these brands had a high price-tag to match, becoming aspirational but out of reach.
For example 20 years ago there was high demand for Lux Bar Soap ‘grey’ imports over the locally made version. While there was no real difference in the product, people were willing to pay an imported premium.
Colgate Toothpaste was widely available and had extremely high preference ratings linked to its ‘foreignness’, (it was fully imported) but at 13rmb compared to the local price for toothpaste of around 2rmb few consumers could justify the price gap.
Over the last 2 decades, there have been many changes to this foreign-local dynamic.
International brands have had to make themselves more relevant by making themselves more accessible in pricing and they have invested a lot in making themselves culturally appropriate. They have become ‘more local’.
At the same time, many Chinese brands have got their act together.
What was once a gulf between foreign and local brands has become a grey area in terms of product quality and importantly consumer perception.
In the mid-90s Chinese Department stores were full of bland boxes posing as TV sets or washing machines while the foreign brands positively dazzled next to them in contrast. These days however you’d be hard pressed in a blind brand test of the actual products to tell the difference. The real difference remains in the price tag between a TCL and a Sony and of course the brand’s status, but the pragmatic Chinese consumer has largely woken up to that.
It’s important to note is that every category has its own unique story in the foreign-local dynamic.
Luxury remains almost exclusively the domain of European brands – not unlike the rest of the world.
There are now a dizzying array of configurations which have muddied the whole, once simple divide in the ‘foreign-local’ dynamic.
In many categories Chinese consumers now have these ‘grey area’ choices:
- Foreign brands – including prestige brands – that are now made locally
- Most models from the ‘big three’ German luxury brands, Audi, Mercedes and BMW are made in China. Consumers know this but it has not dented the prestige foreign association of the brand.
- Foreign brands with unique Chinese characteristics
- In the race for relevance, many foreign brands have adopted Chinese ingredients. Pantene (and others) with Black Sesame – a traditional Chinese essence believed to make ‘black hair blacker’.
- Foreign brands launching locally competitive Economy versions
- Colgate set the pace with the launch of a 3.9 RMB ‘basic’ Anti-Cavity paste in the late 1990s which made them directly competitive with local brands. Since then Nestle has launched a 1RMB ‘wafer’ and P&G’s Tide launching a locally priced ‘White’ version to go head to head with improving local brands like Diao Pai.
- Foreign Brands that have been bought by Chinese companies
- Roewe is a vehicle marque created by the Chinese automaker SAIC Motor in 2006. Roewe vehicles were initially based on technology acquired from defunct British carmaker MG Rover. SAIC was unable to purchase the rights to the Rover brand name and created the Roewe marque as a replacement.
- Chinese brands that have been ‘bought’ by, and now manufactured by, International companies
- Zhonghua Toothpaste, China’s ‘national’ toothpaste brand has been made under license by Unilever for decades. Unilever as a recognized brand in its own right in China has merchandised the fact that the brand is now made to International standards.
- Chinese brands with internationally sourced Ingredients
- This is relatively recent phenomena driven heavily by recent food and safety scandals particularly in milk, general dairy and infant formula. For example Biostime, a Chinese milk formula company sources all its product from France – and heavily promotes that fact. It also shows the financial power of many cash-rich Chinese companies as they seek brand credibility.
- Chinese brands that are developing International Stature (or at least attempting to do so)
- Lin-Ning endorses a number of athletes and teams, both in China and around the world and has/had sponsorship deals with stars like Shaquille O’Neal (retired), José Calderón of the New York Knicks, Cleanthony Early of the New York Knicks, Glenn Robinson III of the Indiana Pacers, Evan Turner of the Boston Celtics, and Dwyane Wade of the Miami Heat. Then there’s Haier and Lenovo who leverage their global popularity to reinforce their credentials within China.
There’s another notable perspective on how Chinese consumers see ‘foreign brands’.
Chinese consumers see the presence of Foreign Brands as a positive competitive force (even if they don’t buy them) because they drive improvements in Chinese Brands
Many Chinese consumers support for the presence of foreign brands, but not necessarily because they offer better status or (especially not) value, but because their competitive ‘quality’ presence has actually pushed local brands into improving.
In contrast to some Western markets where ‘foreign’ brands are often politically demonized for ‘taking away local jobs’ and in general compromising local brands and businesses, the Chinese see foreign brands as having an important role in improving life in China.
Stephen Drummond is part of the advisory board for the Access China Summit, a conference designed to facilitate sharing of knowledge and networks that help businesses succeed in the Chinese market.
Visit accesschinasummit.com.au to view the full agenda which includes speakers from Alibaba Group, Publicis Media China, Weibo, Tourism Australia and more.
Stephen oversees the Beijing, Shanghai and Guangzhou offices of Y&R China whose clients include Danone, Dell, Gap, Bel, Bosch, Burger King, Nuchev, Coolpad, Quaker Oats and China Unicom. Stephen originally arrived in Shanghai 1996 to establish one of the first Planning Departments in China with JWT having begun his advertising career in Y&R Adelaide in the 1980s. He has also worked with Lowe, JWT and Nitro in senior planning and management roles in Australia, Hong Kong and Mainland China. Stephen rejoined Y&R in 2015 after over 4 years at Coca-Cola in Regional and China Communications Leaderships roles Over his agency career he has worked with many of the leading International brands in China including Audi, Unilever, J&J and Bacardi Group. Stephen has won major Effectiveness Awards and been a Judge for Media Asia Effectiveness Awards. He is on the Global Editorial Board of the Journal of Advertising Research.