Chinese consumers prefer own products
Thursday, 1 November 2007
Geoff Dyer
MOST Chinese consumers say they trust domestic brands more than foreign ones, according to a McKinsey survey that amounts to a stark warning for multinational companies about nationalist sentiment in China's booming market.
In spite of the furore this year in the US and Europe about the safety of China-made goods, the survey also shows that Chinese consumers are increasingly confident about the quality of products made in their country.
Andrew Grant, head of McKinsey's China practice, said the results indicated that multinationals that sought to make a virtue of the fact that their products come from a specific foreign country could struggle in the Chinese market.
"That model might have worked 10 years ago when companies were aiming at wealthy consumers in Shanghai," he said. "But now that there is a broader affluent class, that strategy is much less effective."
According to the survey results, 53 per cent of the 6,000 respondents said they preferred Chinese brands, up from 46 per cent when the same survey was conducted in 2005.
McKinsey, which conducts similar surveys in a number of countries, said this was an unusually large change in sentiment for such a short period of time.
Only 11 per cent of consumers said they had a "strong" or "moderate" preference for foreign brands - and nearly half of those people said they would shift to a domestic brand if offered a product of similar quality or price.
The only sectors where support for foreign brands matched or exceeded domestic products was in consumer electronics and cars - although in the latter category Chinese brands are rapidly becoming more popular.
The good news for multinationals is that there is considerable confusion about the national identity of some products, with many Chinese consumers believing that brands produced by multinationals are actually home-grown.
In the case of two well-known US toothpaste brands, for instance, more than 80 per cent of respondents said they thought they were Chinese.
"The successful foreign companies have usually made a real effort to listen to Chinese consumers and create local brand management teams, rather than import approaches from other markets," said Mr Grant.
McKinsey said companies also needed to be more aggressive in introducing new products to the Chinese market.
"In developed countries, companies will often seek to refresh their brand around every three years," said Mr Grant. "In China, you need to do something new every six months."
In the past, many Chinese companies had often been happy to make products that were cheap and of reasonable quality, he said.
However there was now a big opportunity for those companies to invest in establishing brands that appeal to Chinese consumers.
(Under syndication
arrangement with FE)
MOST Chinese consumers say they trust domestic brands more than foreign ones, according to a McKinsey survey that amounts to a stark warning for multinational companies about nationalist sentiment in China's booming market.
In spite of the furore this year in the US and Europe about the safety of China-made goods, the survey also shows that Chinese consumers are increasingly confident about the quality of products made in their country.
Andrew Grant, head of McKinsey's China practice, said the results indicated that multinationals that sought to make a virtue of the fact that their products come from a specific foreign country could struggle in the Chinese market.
"That model might have worked 10 years ago when companies were aiming at wealthy consumers in Shanghai," he said. "But now that there is a broader affluent class, that strategy is much less effective."
According to the survey results, 53 per cent of the 6,000 respondents said they preferred Chinese brands, up from 46 per cent when the same survey was conducted in 2005.
McKinsey, which conducts similar surveys in a number of countries, said this was an unusually large change in sentiment for such a short period of time.
Only 11 per cent of consumers said they had a "strong" or "moderate" preference for foreign brands - and nearly half of those people said they would shift to a domestic brand if offered a product of similar quality or price.
The only sectors where support for foreign brands matched or exceeded domestic products was in consumer electronics and cars - although in the latter category Chinese brands are rapidly becoming more popular.
The good news for multinationals is that there is considerable confusion about the national identity of some products, with many Chinese consumers believing that brands produced by multinationals are actually home-grown.
In the case of two well-known US toothpaste brands, for instance, more than 80 per cent of respondents said they thought they were Chinese.
"The successful foreign companies have usually made a real effort to listen to Chinese consumers and create local brand management teams, rather than import approaches from other markets," said Mr Grant.
McKinsey said companies also needed to be more aggressive in introducing new products to the Chinese market.
"In developed countries, companies will often seek to refresh their brand around every three years," said Mr Grant. "In China, you need to do something new every six months."
In the past, many Chinese companies had often been happy to make products that were cheap and of reasonable quality, he said.
However there was now a big opportunity for those companies to invest in establishing brands that appeal to Chinese consumers.
(Under syndication
arrangement with FE)