Brands such as P&G and Unilever are struggling in China because the organisational structures do not enable localisation, according to Kantar Consulting’s North Asia managing partner Bernhard Wessels.
Wessels told The Drum, the brands that will succeed in China are those which adopt a local flavour or localise elements of their marketing or branding but also maintain the nuances of western brands, such as Starbucks or Coca-Cola.
“The China market has come full circle over the last ten years,” says Wessels. “Where previously, people were buying foreign goods and international retailers did particularly well, as just being a British or German brand gave you a lot of credibility and people would buy into that. Now, there is an element of scepticism and people are looking for something, that could be defined as Chinese cultural heritage or Chinese flavour but with the western brand wrapped up in that.”
“The brands that will succeed are those that position themselves as being in-touch with China but are also modern, evolving and have a sense of western credibility. They are the ones who do well.”
Wessels points to Coca-Cola’s Share a Coke campaign, which put names on the brand packaging, as a simple example of how brands can create strong connections with consumers.
“This was something very simple but that resonated really strongly with Chinese consumers and while it wasn’t unique to the China market, it was very successful.”
However, he says global giants P&G and Unilever are struggling to make these connections and losing out to smaller, niche brands that can leverage strong local market knowledge to gain market share.
“The brands that have struggled are the ones that still feel very foreign, they haven’t done anything to connect to a local consumer base. I think P&G is a company that is a testimony to that. It executes well but it doesn’t have a lot of good branding ideas. Unilever has struggled equally like P&G, with too much focus on bringing big global brands to China rather than trying to see how they can make those brands resonate with Chinese consumers.”
Wessels says local brands, such as Walch, and niche regional brands are gaining share from the likes of P&G and Unilever and are forcing the big conglomerates to invest heavily in a bid to defend and retain market share, but, “it comes at a high cost and it’s not necessarily a good return on investment”.
China’s booming e-commerce market is another area that brands need to exploit to ensure success.
“Niche players that use e-commerce well have achieved great success in China,” says Wessels, who points to China’s Craft Beer category as a great example.
“Craft beer has a massive online presence but when you look at the top five beer brands, it’s not what you would expect. Sure, there’s Budweiser but the others are brands you have never heard of. These smaller players are exploiting e-commerce as a distribution and go-to-market channel really well, while Carlsberg and Heineken etc have been asleep at the wheel.”
“Knowing how to exploit Alibaba’s ecosystem is crucial for brands and it’s funny that you have companies like Unilever that are still structured with a traditional sales organisation looking at offline trade and e-commerce team is tiny. Of course, it’s fair for brands to say that this just 10% of their business, but it’s the 10% that is growing and in the context of that, your competition is also growing.”