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The Reign of the Little Emperor
By The Nielsen Company
Little Emperors, the first wave of China’s one-child policy, are entering the workforce. Having worked hard at school with a period of unprecedented growth, this most dedicated consumer group in China is enjoying income levels unmatched by that of previous generations.
1 July 2007
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Fuelled by foreign direct investment and government liberalization, China has achieved strong economic growth over the past 10 years. Such growth is allowing more urban and rural Chinese consumers to experiment with foreign brands, broadening their tastes and expectations. They have also quickly formed a part of the burgeoning Chinese middle class that will gradually overtake the affluent segment as a key target for marketers.
Aged 25 to 44, this key consumer group is a product of an unparalleled level of support in education by the Chinese government, an investment previous generations had not enjoyed. Born and raised in a period of economic boom, Little Emperors have grown up on a steady diet of foreign brands and western notions of consumption which they have happily adopted. Their voracious consumption will be the backbone of continued growth across China, creating new market opportunities for manufacturers and retailers.
Myth to reality
The 1.3 billion-consumer myth in China is fast turning into a reality as economic growth expands all consumers’ wallets. Though the Little Emperors will potentially be the most lucrative target group with the most discretionary income to indulge themselves in lifestyle spending, they only comprise around 13 percent of the population. Simply focusing on urban centers, The Nielsen Company projects that manufacturers and retailers have an untapped market of over $111 billion ahead of them (purely based on current key city1 consumption of $213 per capita). Taking into account rising incomes, this potential market promises even greater value. Consumption growth in these areas, mirroring that of key cities2, supports the projection that these markets will be the true drivers of growth for manufacturers who have already invested heavily in capturing the minds and wallets of consumers in the main centers.
Nonetheless, companies are destined to fail if they are hoping to roll out the same strategy across China, where the market is highly fragmented by regions, languages and cultures reflecting distinct differences in lifestyle of the 1.3 billion of China population who have grown up at different stages of the rapidly growing economy.
I want it now!
There are, however, some overriding trends that marketers can leverage with confidence. As young Chinese consumers seek work opportunities in the main urban centers, the number of single-person households has increased by 25 percent over the past five years. In the absence of any family support, shopping convenience is first and foremost as they juggle their time between work and pleasure.
Close-to-home shopping convenience is a key consideration for Little Emperors and it is more important than any retailer’s particular product or promotional offerings for this group of time-poor consumers. Kedi and Lawsons, the two well-known convenience stores are good examples. They enjoy high brand equity amongst young professionals looking for grab-and-go meals. Demand for long-shelf life packaged and frozen foods is also on the rise.
An optimistic Reign
Little Emperors continue to grow and shape China’s consumer market. Moving away from traditional values and focusing on image and branding, young Chinese are time poor and cash rich. As China’s growing GDP opens up the vast but fragmented 2nd tier3 markets, marketers that manage to understand China’s regional and cultural differences will win in the China market.
Footnotes
1. Consumption based on The Nielsen Company | Retail Index total national consumption calculated only from those goods with national distribution. National distribution refers to urban areas only and does not include rural consumption.
2. Key Cities defined as Shanghai, Beijing, Guangzhou and Chengdu.
3. Tiered’ market-Each city, town and village in China is classified into ‘tiers’. The Nielsen Company’s definition of these are as follows:
1st tier: Key cities – Shanghai, Beijing, Guanghzou and
Chengdu;
2nd tier: Secondary provincial capitals of 23 cities;
3rd tier: Prefecture or county level city capitals.
++++++++++++++++++++++++++++++++++
Expanding Wallets, Not Waistlines
By Kenneth Lee,
Executive Director
Customized Research, China
The Nielsen Company
Increasingly cash rich and time poor, Chinese consumers want convenience without compromising their health.
Fuelled by direct investment from foreign companies, China is on full speed towards massive urbanization. The migration of workforces and subsequent rise in income levels on the back of increased work opportunities, have seen a proliferation of the number of urban households in China. Increasingly, shopping convenience has become key to urban dwellers who work longer hours in the absence of support from an extended family network. While they may have less time for shopping, hard-working consumers are not compromising on their health, with demand for products with claimed health benefits stronger than ever, as stressed workers look for a quick fix.
China’s urban population is swelling. Between 1950 and 2005, Shanghai saw its population grow by 7.3 million. Over the half century, smaller cities have also witnessed spectacular increases. Take Nanjing and Nanchong as an example: Their population has increased more than 10-fold, while the population of Urumqi in the far west Xinjiang province has increased six-fold. A major trend emerging from this urban migration is a growing number of single-person households, as families separate to take advantage of opportunities outside their homeland and young people choose to leave home earlier.
Mirroring this growth in the number of households is the proliferation of modern retail outlets which have become a staple of the urban landscape. Growing by 17 percent between 2004 and 2005, hyper and supermarkets have increasingly attracted the new urban shoppers, who have bought into the variety of products and convenience available under one roof. Meanwhile, local convenience stores are also drawing the young professional crowd, who look for convenient/prepacked breakfasts or lunch meals. This
increasing emphasis on convenience among Chinese consumers is further evidenced by The Nielsen Company’s studies which show ‘Close to home’ as a key selection criteria for many Chinese shoppers. Less importance is therefore being given to the difference in product offerings between stores.
This fast-paced lifestyle leaves little time for shopping, and is having a strong influence on the types of food consumers buy. Sales of frozen and processed food, instant noodles, quick frozen rice and noodles are increasing steadily.
Consumers looking for shopping short cuts are also looking for quick fixes for their health. Despite a strong tradition of herbal medicine and preventative cures, sales of added-value health products have been soaring in recent years. Yoghurt drinks and ready-to-drink teas that offer benefits such as detoxifying, beauty and better digestion with flavors like aloe vera, rose, etc., have enjoyed volume increases of over 45 and 34 percent respectively from 2004 to 2005.
With a decline in the number of nuclear families and longer working hours for couples, ‘convenience’ has become an overriding factor, not only on where to shop but also what to buy. Products that offer health benefits are well-placed to take advantage of this trend, offering time poor workers a quick pick-me-up at the end of a long day.
CHART 1
+++++++++++++++++++++++++++++++++
We Have Arrived: Retailer Brands
By Joey Chan
Director of Retailer Services
The Nielsen Company China
Chinese consumers attracted by modern retail environments are increasingly shifting to retailer’s private-label products.
Private Label (or Supermarket Own Brand) has come a long way since their low-price, low-quality introduction on supermarket shelves in the 1970s. Today, retailers are savvier and recognize the value of providing quality Private Label to secure share in a competitive retail market.
Compared to the rest of the world, Private Label is yet to present a major challenge to established brands in China, accounting for an insignificant share of the country’s retail business. However, studies by The Nielsen Company have revealed some tremendous growth potential for Private Label. Despite a general lack of knowledge about Private Label, which discourages people from trialing it, purchase rates are increasing in tandem
with retailers’ expansion across China.
Retailers have aggressively expanded their footprint in Mainland China, with the number of hypermarkets quadrupling since 2000; supermarkets have grown 6-fold and the numbers of convenience stores have increased by 23 times in the last five years alone. Similarly, less developed regions are catching up fast. With 25 percent growth in retail outlets from 2004 to 2005, the growth of the modern trade in areas outside the main centers is now on par with China’s key cities and provincial capitals.
With such rapid expansion and attractive modern shopping environments, Chinese
consumers have readily become familiar with the names and brands of some of the
world’s leading retailers such as Carrefour and Wal-Mart. However the growth and
popularity of flashy foreign retailers may not be the only reason for one in two
respondents agreeing that Private Labels are extremely good value for money as leading local retailers are also offering private label as an alternative to manufacturer brands.
CHART 2
Retailers looking to capitalize on China’s seemingly positive potential for the Private Label sector should plan carefully the categories they are looking to establish. Trends in more developed retailing countries show that Private Label is most successful in categories where manufacturer brands have lost the edge in creating real and/or perceived added value. This normally implies that price has become the only true differentiator and true innovation is limited. Retailers have a good opportunity to strengthen their offering on ‘value for money’. Private Label is often not the cause, but the consequence, of low investment in a category.
In China’s fragmented retail market, where currently the top five retailers only account for five percent of the total share, there is still a long road ahead for retailers looking
to create value and loyalty through the introduction of Private Label. Without a strong brand presence it is difficult for retailers to build brand loyalty, let alone convince their shoppers of the quality of their Private Label. Figures also show that although Chinese consumers have a generally positive view of Private Label, some negative perceptions remain, such as a perception of inferior packaging, or that they’re meant for people on tight budgets. Relative to the rapid growth in retailer outlets, knowledge of Private Label among Chinese consumers is still low, with 40 percent of those interviewed agreeing that they don’t know enough about them to trial.
Does the Private Label opportunity for retailers present spell doom and gloom for manufacturers trying to compete in an increasingly competitive manufacturer market? Not necessarily. Manufacturers can draw on the experience of Private Label introduction in their developed home markets. Research has shown that Private Label development is fairly predictable. Product innovation, a rethink about pricing models and product positioning to better differentiate themselves from retailers’ Private Labels are key to safeguarding their territory.
++++++++++++++++++++++++++++++++++
Competing with the Foreign Giants in China
By Kenneth Lee,
Executive Director
Customized Research, China
The Nielsen Company
Are local brands ready to put up a good fight?
Strong brands are the exception, not the rule. The Nielsen Company | Winning Brands1 research compiled on approximately 8,000 cases globally has found that with increasing competition and greater proliferation of market segments globally, few companies enjoy high brand equity. China is no exception, with local brands tending to have lower brand equity than the large multinationals. However local brands may just have the upper hand in the second and third tier markets.
In the more developed centers of China, local and foreign brands dominate distinct ends of the market. Multinationals invest heavily in advertising to drive awareness, and in turn, build strong brand equity through differentiating their brand from competitors. Foreign brands also tend to target the premium segment, and through their continuous advertising campaigns, to project an image of ‘quality’. In comparison, local brands tend to target the lower end of the market, competing for market share via a price proposition, rather than one of image.
Enjoying conversion rates from awareness to trial at around 30 percent higher than foreign brands, competitive pricing has certainly helped local brands generate interest.
However, without any clear brand differentiation through advertising, they are vulnerable to competitor-pricing activity and are less able to command consumer loyalty. Foreign brands also achieve significantly higher levels of recommendation; word of mouth is essentially free advertising and probably the best endorsement!
The bright side for local brands is that they can learn from their established foreign counterparts.
Foreign brands enter a developing market with an advantage because they are often introducing products yet to be developed locally. While this may create a temporary advantage for the foreign brand with local brands catching up, it also means that the foreign brand bears the cost of developing the initial consumer demand. The greatest part of this cost is often a significant advertising budget, which ultimately benefits all players in the category.
Less-developed consumer markets may also be better suited to local brands than foreign ones. Foreign brands tend to focus their market-entry strategies on the key markets of Shanghai, Beijing, Guangzhou where people of higher income support their more premium positioning. Hence, cheaper local brands have been left relatively alone to build brand equity and share in the 2nd- and 3rd-tier markets.
Massive advertising budgets may not be necessary to achieve brand preference
in the less developed cities. The Nielsen Company research has shown that there is huge potential for local brands to build market share in these areas via less mainstream marketing strategies such as in-store promotions and focusing on distribution.
With economic growth widening the wallets of consumers in both the 1st- and
2nd-tier cities, the potential consumer market outside of the main centers in
China is enormous—and local brands may just have the edge.
For foreign companies looking to expand into Chinas vast hinterland, they will need to consider the greater importance of price over brand ‘emotion’ and overcome the less-developed infrastructure and distribution networks to achieve brand awareness. This is in stark comparison to the strategy they need to focus on in the saturated key markets where brand differentiation and product innovation are critical to survival.
Riding on their International success and substantial advertising budgets, foreign brands have established higher brand equity in China than their local competitors. However, Chinese brands may yet have the upper hand in smaller markets, where a better understanding of local-market dynamics will put them in a better position to compete, and win.
++++++++++++++++++++++++++++++++++
Can China Keep Diabetes In Check?
By Eliza Leung
Current projections of the global diabetes surge are mapping out a health predicament that has the potential to overwhelm China. Second only to India, nearly 23.8 million Chinese citizens suffered from type-2 diabetes in 2003, according to the International Diabetes Federation. By 2023, that figure is expected to almost double, with 46.1 million at risk for heart disease, stroke, amputations, and blindness.
Causes
Characterized by signs of increased thirst, frequent urination, extreme hunger, weight loss, fatigue, blurred vision and slow-healing sores, this chronic condition is caused by a resistance to insulin. This body does not produce enough of the hormone that regulates sugar absorption into the cells. Left unchecked, the results can be deadly.
As the fourth most common cause of death worldwide, type-2 diabetes is concentrated in urbanized populations that may have experienced a greater degree of lifestyle change. Poor diet, obesity, age, family history, race and a lack of physical activity are all risk factors.
Prevention
While there is no cure, a healthy diet and regular exercise can help to control it. Higher dietary intake of fiber from grains and cereals and of magnesium may each be associated with a lower risk, according to a report and meta-analysis in the May 14 issue of Archives of Internal Medicine.
Matthias Schulze, Dr PH and colleagues at the German Institute of Human Nutrition Potsdam-Rehbruecke, Nuthetal, conducted a study of 9,702 men and 15,365 women age 35 to 65 years. They found that those who consumed more fiber through cereal, bread and other grain products (cereal fiber) were less likely to develop diabetes than those who ate less fiber. Participants who ate the most (an average of 29 grams per day) had a 27-percent lower risk of developing diabetes than those in the group that ate the least (an average of 15.1 grams per day). There was no association between fruit or vegetable fiber and diabetes risk.
Fiber may help reduce the risk of diabetes by increasing the amount of nutrients absorbed by the body and reducing blood sugar spikes after eating, among other mechanisms.
++++++++++++++++++++++++++++++++++
Consumers develop taste for organic foods
By the Vancouver Sun
Wang Xinqiu is prepared to pay 10 times more for organic vegetables than for regular produce in Beijing. It buys her peace of mind.
"Organic food seems safer," says the Chinese medicine practitioner, after selecting organic cabbage and ginger at a Carrefour supermarket as her daughter, eight-year-old Maria, tags along. "A big reason I buy organic is I'm concerned that my child could eat something contaminated."
Chinese are developing a taste for organically grown food as pesticides, pollution and fakes— including lard made from sewage and grease—infiltrate the food chain.
More than 60 percent of the country's 562 million city dwellers are willing to pay more for produce certified safe or organic, according to research commissioned by the Ministry of Commerce.
Wal-Mart Stores and Carrefour are among those taking advantage of the trend. Sales of organic vegetables at one Wal-Mart store in Beijing soared 88 percent in the 12 months through November, the company reports.
"Chinese consumers really are serious about safe and organic foods, and they're willing to pay for them," explains Elizabeth Harrington, chief executive officer of E Harrington Global, a Chicago firm that contributed to the Commerce Ministry research.
"Part of it is the negative publicity that has come out in recent years about everything from fake foods to contaminated baby foods to pesticides in apples."
The Health Ministry declared 144 instances of food poisoning involving 4,922 people in October through December, a 42-percent increase in those affected from a year earlier.
In the past three months, state media reported a government crackdown on meat processed from sick or dead animals, a ban on duck eggs found to contain a cancer-causing dye and the arrest of a factory manager for allegedly making lard from sewage and recycled industrial oil.
As wages and food production rise, "the issue has shifted from total supply to the quality of supply," says Huang Jikun, director of the Center for Agricultural Policy at the Chinese Academy of Sciences in Beijing. "People are concerned. There's more information available and we know what we are eating."
Food-related diseases cost China, the world's most populous nation, as much as $14 billion a year in medical treatment and lost productivity, the Asian Development Bank estimates.
Pesticide poisoning already affects half a million Chinese a year, causing more than 500 fatalities, according to government research. The World Bank blames air pollution for more than 400,000 premature deaths annually.
Song Guangxiong, a professor at North China Electricity University in Beijing, says he learned about the dangers of pesticides from a friend who runs an organic farm near the city. He now buys only organic vegetables.
"There's going to be a bill for the choices we make," explains Song, 33. "It's pretty expensive, but I think it's worth the money."
**Reprinted with permission by Organic Monitor
Aged 25 to 44, this key consumer group is a product of an unparalleled level of support in education by the Chinese government, an investment previous generations had not enjoyed. Born and raised in a period of economic boom, Little Emperors have grown up on a steady diet of foreign brands and western notions of consumption which they have happily adopted. Their voracious consumption will be the backbone of continued growth across China, creating new market opportunities for manufacturers and retailers.
Myth to reality
The 1.3 billion-consumer myth in China is fast turning into a reality as economic growth expands all consumers’ wallets. Though the Little Emperors will potentially be the most lucrative target group with the most discretionary income to indulge themselves in lifestyle spending, they only comprise around 13 percent of the population. Simply focusing on urban centers, The Nielsen Company projects that manufacturers and retailers have an untapped market of over $111 billion ahead of them (purely based on current key city1 consumption of $213 per capita). Taking into account rising incomes, this potential market promises even greater value. Consumption growth in these areas, mirroring that of key cities2, supports the projection that these markets will be the true drivers of growth for manufacturers who have already invested heavily in capturing the minds and wallets of consumers in the main centers.
Nonetheless, companies are destined to fail if they are hoping to roll out the same strategy across China, where the market is highly fragmented by regions, languages and cultures reflecting distinct differences in lifestyle of the 1.3 billion of China population who have grown up at different stages of the rapidly growing economy.
I want it now!
There are, however, some overriding trends that marketers can leverage with confidence. As young Chinese consumers seek work opportunities in the main urban centers, the number of single-person households has increased by 25 percent over the past five years. In the absence of any family support, shopping convenience is first and foremost as they juggle their time between work and pleasure.
Close-to-home shopping convenience is a key consideration for Little Emperors and it is more important than any retailer’s particular product or promotional offerings for this group of time-poor consumers. Kedi and Lawsons, the two well-known convenience stores are good examples. They enjoy high brand equity amongst young professionals looking for grab-and-go meals. Demand for long-shelf life packaged and frozen foods is also on the rise.
An optimistic Reign
Little Emperors continue to grow and shape China’s consumer market. Moving away from traditional values and focusing on image and branding, young Chinese are time poor and cash rich. As China’s growing GDP opens up the vast but fragmented 2nd tier3 markets, marketers that manage to understand China’s regional and cultural differences will win in the China market.
Footnotes
1. Consumption based on The Nielsen Company | Retail Index total national consumption calculated only from those goods with national distribution. National distribution refers to urban areas only and does not include rural consumption.
2. Key Cities defined as Shanghai, Beijing, Guangzhou and Chengdu.
3. Tiered’ market-Each city, town and village in China is classified into ‘tiers’. The Nielsen Company’s definition of these are as follows:
1st tier: Key cities – Shanghai, Beijing, Guanghzou and
Chengdu;
2nd tier: Secondary provincial capitals of 23 cities;
3rd tier: Prefecture or county level city capitals.
++++++++++++++++++++++++++++++++++
Expanding Wallets, Not Waistlines
By Kenneth Lee,
Executive Director
Customized Research, China
The Nielsen Company
Increasingly cash rich and time poor, Chinese consumers want convenience without compromising their health.
Fuelled by direct investment from foreign companies, China is on full speed towards massive urbanization. The migration of workforces and subsequent rise in income levels on the back of increased work opportunities, have seen a proliferation of the number of urban households in China. Increasingly, shopping convenience has become key to urban dwellers who work longer hours in the absence of support from an extended family network. While they may have less time for shopping, hard-working consumers are not compromising on their health, with demand for products with claimed health benefits stronger than ever, as stressed workers look for a quick fix.
China’s urban population is swelling. Between 1950 and 2005, Shanghai saw its population grow by 7.3 million. Over the half century, smaller cities have also witnessed spectacular increases. Take Nanjing and Nanchong as an example: Their population has increased more than 10-fold, while the population of Urumqi in the far west Xinjiang province has increased six-fold. A major trend emerging from this urban migration is a growing number of single-person households, as families separate to take advantage of opportunities outside their homeland and young people choose to leave home earlier.
Mirroring this growth in the number of households is the proliferation of modern retail outlets which have become a staple of the urban landscape. Growing by 17 percent between 2004 and 2005, hyper and supermarkets have increasingly attracted the new urban shoppers, who have bought into the variety of products and convenience available under one roof. Meanwhile, local convenience stores are also drawing the young professional crowd, who look for convenient/prepacked breakfasts or lunch meals. This
increasing emphasis on convenience among Chinese consumers is further evidenced by The Nielsen Company’s studies which show ‘Close to home’ as a key selection criteria for many Chinese shoppers. Less importance is therefore being given to the difference in product offerings between stores.
This fast-paced lifestyle leaves little time for shopping, and is having a strong influence on the types of food consumers buy. Sales of frozen and processed food, instant noodles, quick frozen rice and noodles are increasing steadily.
Consumers looking for shopping short cuts are also looking for quick fixes for their health. Despite a strong tradition of herbal medicine and preventative cures, sales of added-value health products have been soaring in recent years. Yoghurt drinks and ready-to-drink teas that offer benefits such as detoxifying, beauty and better digestion with flavors like aloe vera, rose, etc., have enjoyed volume increases of over 45 and 34 percent respectively from 2004 to 2005.
With a decline in the number of nuclear families and longer working hours for couples, ‘convenience’ has become an overriding factor, not only on where to shop but also what to buy. Products that offer health benefits are well-placed to take advantage of this trend, offering time poor workers a quick pick-me-up at the end of a long day.
CHART 1
+++++++++++++++++++++++++++++++++
We Have Arrived: Retailer Brands
By Joey Chan
Director of Retailer Services
The Nielsen Company China
Chinese consumers attracted by modern retail environments are increasingly shifting to retailer’s private-label products.
Private Label (or Supermarket Own Brand) has come a long way since their low-price, low-quality introduction on supermarket shelves in the 1970s. Today, retailers are savvier and recognize the value of providing quality Private Label to secure share in a competitive retail market.
Compared to the rest of the world, Private Label is yet to present a major challenge to established brands in China, accounting for an insignificant share of the country’s retail business. However, studies by The Nielsen Company have revealed some tremendous growth potential for Private Label. Despite a general lack of knowledge about Private Label, which discourages people from trialing it, purchase rates are increasing in tandem
with retailers’ expansion across China.
Retailers have aggressively expanded their footprint in Mainland China, with the number of hypermarkets quadrupling since 2000; supermarkets have grown 6-fold and the numbers of convenience stores have increased by 23 times in the last five years alone. Similarly, less developed regions are catching up fast. With 25 percent growth in retail outlets from 2004 to 2005, the growth of the modern trade in areas outside the main centers is now on par with China’s key cities and provincial capitals.
With such rapid expansion and attractive modern shopping environments, Chinese
consumers have readily become familiar with the names and brands of some of the
world’s leading retailers such as Carrefour and Wal-Mart. However the growth and
popularity of flashy foreign retailers may not be the only reason for one in two
respondents agreeing that Private Labels are extremely good value for money as leading local retailers are also offering private label as an alternative to manufacturer brands.
CHART 2
Retailers looking to capitalize on China’s seemingly positive potential for the Private Label sector should plan carefully the categories they are looking to establish. Trends in more developed retailing countries show that Private Label is most successful in categories where manufacturer brands have lost the edge in creating real and/or perceived added value. This normally implies that price has become the only true differentiator and true innovation is limited. Retailers have a good opportunity to strengthen their offering on ‘value for money’. Private Label is often not the cause, but the consequence, of low investment in a category.
In China’s fragmented retail market, where currently the top five retailers only account for five percent of the total share, there is still a long road ahead for retailers looking
to create value and loyalty through the introduction of Private Label. Without a strong brand presence it is difficult for retailers to build brand loyalty, let alone convince their shoppers of the quality of their Private Label. Figures also show that although Chinese consumers have a generally positive view of Private Label, some negative perceptions remain, such as a perception of inferior packaging, or that they’re meant for people on tight budgets. Relative to the rapid growth in retailer outlets, knowledge of Private Label among Chinese consumers is still low, with 40 percent of those interviewed agreeing that they don’t know enough about them to trial.
Does the Private Label opportunity for retailers present spell doom and gloom for manufacturers trying to compete in an increasingly competitive manufacturer market? Not necessarily. Manufacturers can draw on the experience of Private Label introduction in their developed home markets. Research has shown that Private Label development is fairly predictable. Product innovation, a rethink about pricing models and product positioning to better differentiate themselves from retailers’ Private Labels are key to safeguarding their territory.
++++++++++++++++++++++++++++++++++
Competing with the Foreign Giants in China
By Kenneth Lee,
Executive Director
Customized Research, China
The Nielsen Company
Are local brands ready to put up a good fight?
Strong brands are the exception, not the rule. The Nielsen Company | Winning Brands1 research compiled on approximately 8,000 cases globally has found that with increasing competition and greater proliferation of market segments globally, few companies enjoy high brand equity. China is no exception, with local brands tending to have lower brand equity than the large multinationals. However local brands may just have the upper hand in the second and third tier markets.
In the more developed centers of China, local and foreign brands dominate distinct ends of the market. Multinationals invest heavily in advertising to drive awareness, and in turn, build strong brand equity through differentiating their brand from competitors. Foreign brands also tend to target the premium segment, and through their continuous advertising campaigns, to project an image of ‘quality’. In comparison, local brands tend to target the lower end of the market, competing for market share via a price proposition, rather than one of image.
Enjoying conversion rates from awareness to trial at around 30 percent higher than foreign brands, competitive pricing has certainly helped local brands generate interest.
However, without any clear brand differentiation through advertising, they are vulnerable to competitor-pricing activity and are less able to command consumer loyalty. Foreign brands also achieve significantly higher levels of recommendation; word of mouth is essentially free advertising and probably the best endorsement!
The bright side for local brands is that they can learn from their established foreign counterparts.
Foreign brands enter a developing market with an advantage because they are often introducing products yet to be developed locally. While this may create a temporary advantage for the foreign brand with local brands catching up, it also means that the foreign brand bears the cost of developing the initial consumer demand. The greatest part of this cost is often a significant advertising budget, which ultimately benefits all players in the category.
Less-developed consumer markets may also be better suited to local brands than foreign ones. Foreign brands tend to focus their market-entry strategies on the key markets of Shanghai, Beijing, Guangzhou where people of higher income support their more premium positioning. Hence, cheaper local brands have been left relatively alone to build brand equity and share in the 2nd- and 3rd-tier markets.
Massive advertising budgets may not be necessary to achieve brand preference
in the less developed cities. The Nielsen Company research has shown that there is huge potential for local brands to build market share in these areas via less mainstream marketing strategies such as in-store promotions and focusing on distribution.
With economic growth widening the wallets of consumers in both the 1st- and
2nd-tier cities, the potential consumer market outside of the main centers in
China is enormous—and local brands may just have the edge.
For foreign companies looking to expand into Chinas vast hinterland, they will need to consider the greater importance of price over brand ‘emotion’ and overcome the less-developed infrastructure and distribution networks to achieve brand awareness. This is in stark comparison to the strategy they need to focus on in the saturated key markets where brand differentiation and product innovation are critical to survival.
Riding on their International success and substantial advertising budgets, foreign brands have established higher brand equity in China than their local competitors. However, Chinese brands may yet have the upper hand in smaller markets, where a better understanding of local-market dynamics will put them in a better position to compete, and win.
++++++++++++++++++++++++++++++++++
Can China Keep Diabetes In Check?
By Eliza Leung
Current projections of the global diabetes surge are mapping out a health predicament that has the potential to overwhelm China. Second only to India, nearly 23.8 million Chinese citizens suffered from type-2 diabetes in 2003, according to the International Diabetes Federation. By 2023, that figure is expected to almost double, with 46.1 million at risk for heart disease, stroke, amputations, and blindness.
Causes
Characterized by signs of increased thirst, frequent urination, extreme hunger, weight loss, fatigue, blurred vision and slow-healing sores, this chronic condition is caused by a resistance to insulin. This body does not produce enough of the hormone that regulates sugar absorption into the cells. Left unchecked, the results can be deadly.
As the fourth most common cause of death worldwide, type-2 diabetes is concentrated in urbanized populations that may have experienced a greater degree of lifestyle change. Poor diet, obesity, age, family history, race and a lack of physical activity are all risk factors.
Prevention
While there is no cure, a healthy diet and regular exercise can help to control it. Higher dietary intake of fiber from grains and cereals and of magnesium may each be associated with a lower risk, according to a report and meta-analysis in the May 14 issue of Archives of Internal Medicine.
Matthias Schulze, Dr PH and colleagues at the German Institute of Human Nutrition Potsdam-Rehbruecke, Nuthetal, conducted a study of 9,702 men and 15,365 women age 35 to 65 years. They found that those who consumed more fiber through cereal, bread and other grain products (cereal fiber) were less likely to develop diabetes than those who ate less fiber. Participants who ate the most (an average of 29 grams per day) had a 27-percent lower risk of developing diabetes than those in the group that ate the least (an average of 15.1 grams per day). There was no association between fruit or vegetable fiber and diabetes risk.
Fiber may help reduce the risk of diabetes by increasing the amount of nutrients absorbed by the body and reducing blood sugar spikes after eating, among other mechanisms.
++++++++++++++++++++++++++++++++++
Consumers develop taste for organic foods
By the Vancouver Sun
Wang Xinqiu is prepared to pay 10 times more for organic vegetables than for regular produce in Beijing. It buys her peace of mind.
"Organic food seems safer," says the Chinese medicine practitioner, after selecting organic cabbage and ginger at a Carrefour supermarket as her daughter, eight-year-old Maria, tags along. "A big reason I buy organic is I'm concerned that my child could eat something contaminated."
Chinese are developing a taste for organically grown food as pesticides, pollution and fakes— including lard made from sewage and grease—infiltrate the food chain.
More than 60 percent of the country's 562 million city dwellers are willing to pay more for produce certified safe or organic, according to research commissioned by the Ministry of Commerce.
Wal-Mart Stores and Carrefour are among those taking advantage of the trend. Sales of organic vegetables at one Wal-Mart store in Beijing soared 88 percent in the 12 months through November, the company reports.
"Chinese consumers really are serious about safe and organic foods, and they're willing to pay for them," explains Elizabeth Harrington, chief executive officer of E Harrington Global, a Chicago firm that contributed to the Commerce Ministry research.
"Part of it is the negative publicity that has come out in recent years about everything from fake foods to contaminated baby foods to pesticides in apples."
The Health Ministry declared 144 instances of food poisoning involving 4,922 people in October through December, a 42-percent increase in those affected from a year earlier.
In the past three months, state media reported a government crackdown on meat processed from sick or dead animals, a ban on duck eggs found to contain a cancer-causing dye and the arrest of a factory manager for allegedly making lard from sewage and recycled industrial oil.
As wages and food production rise, "the issue has shifted from total supply to the quality of supply," says Huang Jikun, director of the Center for Agricultural Policy at the Chinese Academy of Sciences in Beijing. "People are concerned. There's more information available and we know what we are eating."
Food-related diseases cost China, the world's most populous nation, as much as $14 billion a year in medical treatment and lost productivity, the Asian Development Bank estimates.
Pesticide poisoning already affects half a million Chinese a year, causing more than 500 fatalities, according to government research. The World Bank blames air pollution for more than 400,000 premature deaths annually.
Song Guangxiong, a professor at North China Electricity University in Beijing, says he learned about the dangers of pesticides from a friend who runs an organic farm near the city. He now buys only organic vegetables.
"There's going to be a bill for the choices we make," explains Song, 33. "It's pretty expensive, but I think it's worth the money."
**Reprinted with permission by Organic Monitor
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