Foreign Woes in China & Dealing With It
It will be interesting to see how the Fonterra milk fiasco pans out in China. Not just for those peddling dairy products, or New Zealand businesses trading on the 'clean green' brand, but for any businesses operating on scale in China and those whose marketing builds on their country's image - which makes up a large portion of foreign businesses in China.
Although Chinese consumers buy ¥9.8 billion ($1.6 billion) worth of Fonterra’s dairy products annually, Chinese consumers aren't buying it because of their love for Fonterra, or its specific brands, they're buying it for its 'pure' New Zealand origin. With milking New Zealand's clean and green brand, comes the responsibility for Fonterra to ensure they play their part to ensure that image isn't put at risk. As the latest bacteria scare and a number of other issues in their homeland show, Fonterra could do better shouldering this responsibility.
Fonterra got off lightly from its 43% ownership of Sanlu and the Melamine scandal in 2008; in fact, the resulting soaring demand for foreign milk imports actually helped their business. But their luck in China may not continue with the latest scare. China is a vastly different place than it was five years ago - consumers are much more aware and discerning, helped by the huge rise of social media and the Internet. With food scares occurring almost weekly in China (as you've read in the Skinny), Chinese consumers take food safety more seriously than anyone. Old wounds die hard in China - consumers are still reeling over the Melamine scandal five years on. Fonterra's troublesome trio of botulism, January's DCD residue in milk, and recent price-fixing allegations are unlikely to be forgotten quickly. Although global dairy trade auction prices barely fell and China banned only a small portion of NZ dairy imports, the real damage is to New Zealand's brand, and to a degree, the perceived superiority of all foreign products in China. That will only help the Chinese Government's push for local products.
We only need to look at Apple as how to not deal with crises and serious Government allegations in China. The brand was as aspirational as brands get in China just six months ago, but their slippery slope began to gather momentum after the negative press they received for being arrogant and offering poor after-sales service. A survey that followed shortly after, found 60% would rather a Samsung Galaxy S4 to an iPhone 5, undoubtedly influenced by the bad press. In Q2 2013, the iPhone's market share in China fell to 5%, down from 9% a year ago.
With Apple losing street cred so quickly in China, it sends a warning about how carefully and smartly we have to act when handling crises in the Mainland. Chinese consumers are pragmatic and know mishaps can happen, but when they do, marketers need to make the most of the short window of opportunity to demonstrate they've learnt from the troubles and everything they're doing to show that they are now safer/better than ever.
On a lighter note, for anyone interested in a trip to Sydney in late October, China Skinny's founder Mark Tanner is presenting at the China Digital Marketing & Social Media Summit, the largest conference on the subject in the Southern Hemisphere. Early bird rates are available until the end of the month. More at thechinagap.com.
We hope you enjoy this week's Skinny.
See below highlights of the news this week:
Chinese Consumers
What Chinese Women Want: A 20 min vid on Chinese women, who have an absolute desire for financial independence across all city tiers, but especially in the higher Tiers. 30% of senior positions in China are women, but there is a strong entrepreneurial and can-do spirit, right from a young age. Different life stages were a defining factor in motivations for women.
Survey on China’s Middle-Class Consumers: 81% of Chinese consumers bought international products with 75% buying foreign garments. 37% bought luxury items costing more than a month's salary.
Empowered Consumerism: Why Developing Countries Represent the Greatest CSR Opportunity: 86% of Chinese consumers have bought products with a social/environment benefit and 43% researched a business' social practices. 90% used social media to engage with companies about corporate social responsibility.
Chinese Consumers Shall Chart Country’s Economic Course: China's disposable personal income is 45% of GDP, versus 77% for the consumer-led US economy. The Government is working towards getting this up, as you'll read in the Government mouthpiece, The Global Times.
Ten Forces Forging China’s Future: McKinsey's Ten Forces Forging China's Futre: 1) The Great Rebalancing - the consumer goods sector stands to be one of the main beneficiaries; 2) Infrastructure Advances - 8.5% of GDP; 3) The Green Challenge; 4) Manufacturing's Makeover; 5) Rise of the Upper Middle Class; 6) E-tailing Extraordinaire; 7) Innovation's New Spark; 8) Financier to the World?; 9) Investor Confidence; and 10) Cultivating Human Capital.
Internet, Mobile & Social Media
Alibaba Bans Messaging App WeChat, Pushes Weibo Instead: The Alibaba - WeChat Duel: let the games begin - Alibaba has blocked a function that allows sellers to subscribe WeChat and increased integration with Weibo. There has been some negative experiences for Weibo users being bombarded with ads, related to searches on Alibaba. The new Weibo-Alibaba integration, which launched last week, should hopefully improve data analytics, to make product matching a little smarter. Taobao shop owners can now get Weibo follower analysis & visitor stats to help with better targeted Weibo marketing. In other Weibo news, daily active users increased 8.3% to 54 million from March-June.
China's 'Silver Surfers' Could Mean Big Business for Online Shopping: Although the number of Chinese over 50 is expected to hit 200 million this year, just 1.75 million say they have shopped online. Those that do, are spending 6.9 hours a day on online, regularly shopping for convenience and lower prices. As China's population continues to age and use the Internet even more, this market segment could be a boon for online selling.
China’s Top Flirting App Momo Users Reached 50 million: Online Chinese are a sociable bunch. Momo hits 50 million users in two years with 70K groups.
Case Study: Coca Cola’s Weibo Marketing: Case study about how Coca Cola used key opinion leaders on Weibo to sell it's personalised bottles using Weibo Wallet.
Kindle Enters China, and the Plot Thickens: Interesting views on why Kindle has a good chance of succeeding in China, challenging the common concerns of price, competition from the iPad Mini and sourcing content.
Baidu’s Guide to the Eight Biggest Internet Scams in China: 21m websites were deleted in China in 6 months for shams. Top offenders included financial management, value recharge, pharmaceuticals, online shopping, ticket bookings, after-sales services, express delivery and prize draws. In 2011, 60 million online Chinese lost ¥30 billion ($4.9b) from scams. Baidu recently announced that it would reimburse anyone who gets scammed on a site found in their search results.
CIO Mobility Survey 2013: 30% of Chinese companies are active in developing B2B and B2C mobile apps versus the 23% global average. 90% of IT execs in China think mobile will impact their business as much or more than the web did, compared with a global average of 73% according to Accenture.
Xiaomi Shifts Into Low End of Mobile Sector: Xiaomi launches a feature-rich smartphone for ¥799 ($130). A good market to be in - 61% of mobiles sold on Taobao and Tmall are less than ¥1,000 ($163).
Food and Beverage
Fast Food in China: Independent fast food operators still represent 98% of outlets and 84% of the market in China [subscription required].
60-70% of Honey in Jinan is Fake: China, the land of milk and honey? Not quite. Anyone for diluted beetroot/rice syrup?
Danger in Supermarket Plastic Wrap: Oh golly, if the Chinese honey doesn't get you, the plastic wrap for meat and veges may - said to contain banned toxic plasticisers that could "impair male sexual function and lead to premature sexual development in females".
DNA Key to the Perfect Meal: Nature of nurture? Kiwi scientists find predispositions to certain flavours lie within our DNA. Further reason to ensure your food & beverage is tested/localised for Chinese palates.
Why Spanish Wines are Best for Chinese Palates: Wine from Spain and France's Languedoc region are best suited to Chinese palates according to a wine expert, due to their softer, sweeter reds with low acidity.
Does Champagne Have a Sparkling Future in China?: An interesting view into why cultural differences in China will need Champagne to rethink its China strategy.
Chinese Tourism
WeChat: A Shortcut To Mobile Relevance And Loyalty Among Chinese Travelers: WeChat is an effective content driver and CRM magnet for businesses selling to Chinese consumers at home and abroad. It's mobile, social, fun and private, allowing users to keep tabs on their real friends.
Paris Ramps Up Tourist Security Amid Chinese Concerns: Security is on the rise in Paris following spate of muggings on Asian tourists. 1.4 million Chinese visited France last year and Chinese millionaires rate Paris is the number-1 destination. Petty crimes against Chinese tourists in the first quarter jumped 22% - that's China style growth rates.
That's The Skinny for the week! China Skinny would love to discuss how we could help with your marketing, online initiatives or research to take advantage of China's opportunities. Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.
If you've missed earlier news or need to learn more, there's a library of information about Chinese consumers in prior China Skinny Weekly's right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed. If you have any feedback or suggestions for future articles, please let us know.
