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By
Reuters
Published
Jul 2, 2014
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Foreign brands losing battle for Chinese consumers

By
Reuters
Published
Jul 2, 2014

BEIJING, China - Foreign brands in China's consumer goods market are facing stiffer competition from domestic rivals, with about 60 percent of firms overseas losing market share last year, a private study of 40,000 households showed on Tuesday.

The China shopper report by Bain & Company and Kantar Worldpanel showed foreign producers of cosmetics, toothbrushes and skin care products lost more than 5 percent of their market share in China in 2013, as domestic players gained ground.

The survey found that foreign makers of beverages, infant formula and household cleaning products also saw their market share fall between 1-3 percent in 2013.

The survey gave no detailed explanation as to why foreign companies are losing the battle for consumers in the world's second-biggest economy, but provided several examples about the challenges at hand.

In the soft drinks market, for instance, it said Chinese beverage giant Hangzhou Wahaha Group Co Ltd. increased its share of the market by 3.8 percent last year through aggressive advertising and new product launches. In contrast, foreign firms lost 6.3 percent of their market share.

Foreign makers of shampoo and biscuits had the biggest cause to rejoice.

For example, Germany's Henkel, which produces the Schwarzkopf brand of shampoo, grew its market share by 1.2 percent last year. Mondelez International, the world's second-biggest coffee maker, saw its Chips Ahoy! biscuits grow its market share by 0.3 percent.

The survey is based on a study of 106 categories of fast-moving consumer goods, including beverages, packaged food, and personal care and home care products, which between them account for more than 80 percent of China's consumer goods market.

It showed that Chinese shoppers are more willing than consumers in other markets to buy products online using their smartphones and computers, ranking China as the world's top digital retail market.

Last year, online retail sales of goods surveyed leapt 42 percent from the previous year, with baby goods and beauty products the top sellers.

Booming e-commerce has diverted an increasing chunk of sales away from traditional stores, the survey said, though offline shopping still accounts for 97 percent of all consumer goods sold in China. It attributed the drop in store visits partly to Beijing's campaign to rein in extravagant spending by government officials, who were previously given pre-paid shopping cards as gifts.

The survey also showed growth in China's consumer goods market slowed to a three-year low in the first quarter, in line with a downbeat reading in an official measure of retail sales in that period.

China's economy, which has had a weak start to the year, has started showing encouraging signs of stabilisation since May. Indicators ranging from industrial output to retail sales and fixed asset investment have all either met or beat market expectations.

Retail sales in May logged the best showing in five months.

The National Statistics Bureau is due to release retail sales and other economic activity data for June and the second quarter on July 16.

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