2. Agenda
1. China: Land of Opportunities
2. The China Market is Different, Differentiated, and Complex
3. Form an Effective Insight‐Driven Strategy
4. Overall Thoughts / Q&A
1
3. China versus Denmark
Copenhagen
Denmark
China Shanghai
By 2025, China will have 219 cities with more than one million inhabitants – 219 Copenhagens!
and 24 cities with more than five million people – 24 Denmarks!
Source: McKinsey Global Institute: Preparing for China’s urban billion 2
4. China will be Consuming More and More
CAGR of Domestic Consumption per Person
%, 2007‐2020
9.0% 8.3%
8.0%
7.0% 6.3%
6.0%
5.0%
3.8%
4.0%
3.0% 2.3% 2.2%
1.9%
2.0% 1.5% 1.5% 1.3% 1.2%
1.0%
0.0%
China India Brazil Mexico US Canada UK France Japan Germany
Source: Global Insight, February 2009; McKinsey Global Institute China model, in February 2009; McKinsey Global Institute analysis
3
5. Chinese Consumer Prefer Global Brands
Chinese Cosmetics Market Share Top Cosmetics Brands in China
By Sales 2008
2008
Brand Loyalty1 Market Share
%
Maybelline
20.27
77.63
Chinese Avon
8.04
Brands 64.22
L’Oreal
7.93
20% 64.23
6.94 Olay
51.77
4.46 Aupres
62.08
Foreign & Joint 3.02
47.6 Yuesai
Venture Brands
2.70
80% 57.95 MaryKay
2.47
48.85 Shiseido
All foreign brands!
Source: 2009 Report on China Consumer Goods Markets Monitoring and Analysis; Sinomonitor.com
1Definition of brand loyalty: (# of consumers who will choose Brand X next time / # of current Brand X users) * 100% 4
6. You Can Influence Chinese Consumers
Whisky was Danone The first PizzaHut • China is becoming the biggest
imported to introduced yogurt restaurant opened Whisky import country.
China. • KFC opened 3,000 restaurants
and created a huge western fast
2010
The first food market in China.
The first KFC
Starbucks • Pizza Hut is one of the most
restaurant
opened common dating restaurant in
opened
China.
• Starbucks has successfully
helped increase the consumption
of coffee among Chinese
1980 1987 1990 1999 consumers.
• Yogurt accounted for 11.7% of
China’s dairy industry in 2008.
Source: SmithStreet Research 5
7. Agenda
1. China: Land of Opportunities
2. The China Market is Different, Differentiated, and Complex
3. Form an Effective Insight‐Driven Strategy
4. Overall Thoughts / Q&A
6
9. China is not one Market
Common Breakfasts Breakfast in North China
Chinese pancakes
Ingredients: Wheat
flour, and variations
of egg, green onion,
sweet/spicy sauce,
fried bread.
Fried dough Porridge
& soy milk (Zhou/Congee)
Ingredients: Wheat flour, soybeans Ingredients: Rice, meats, preserved eggs
and vegetables
Some Chinese like to dip the fried The northeast prefers adding salted Breakfast in South China
bread sticks into soy milk. vegetables whereas the south prefers have
preserved eggs. The southern version also
has more water in it.
Guilin’s rice noodles
Ingredients: Rice
noodles, green onion,
meat (pork, beef, or
lamb)
Starchy rice
dumpling wrapped
in reed leaves
Steamed buns (Mantou) Steamed bun (Baozi) Ingredients: Sticky
Ingredients: Wheat flour Ingredients: Wheat flour, meat rice, meat (pork or
Northerners prefer a steamed bun (pork) , vegetables, bean paste, beef), egg and/or
without any filling while the south mushroom, are all common fillings bean paste
prefers minced pork or vegetables
fillings.
Source: SmithStreet Interview and Analysis, photo (bbs.tom.com; China Commercial Online Tourism Services; www.hljcyw.com, mm616.com) 8
11. The Chinese Consumer is Changing Rapidly
Priorities Fashion & Style
Maintain Apartment Material
Family & Car Loan Goods
Life
Don’t Care Natural
Dolled Up
Much Beauty
Running Lost at the Internet
out of Time Crossroads Dominated
Source: SmithStreet Research 10
12. China has its own Forms of Creativity
“I know a factory that
“This bag is pretty!” “This bag is not sold in
can make it. Who wants
China.”
Post on online to buy it?”
forums
User Responses
Get responses
Reply
Users check and
critique sample Factory makes a “Count me in!”
Factory sends sample
quality
sample Contact the factory
Send sample back for
improvements
Deliver
bags to
users
Pay deposit Users receive product “Great bag!”
Product delivery Comment online
Source: SmithStreet Research 11
13. Social Media has a Huge Influence on Brand
P&G’s “Homework” for 2008.12.28 P&G distributed a market research questionnaire
disguised as homework assignment to Hangzhou
Primary School Students primary school students which required them to
use P&G tooth paste.
A parent’s blog + a local community forum
600 comments within 3 hours
2008.12.29
Journalists conduct interviews
P&G denies involvment
Chinese netizens showed strong disapproval
2008.12.30 The education department of Zhejiang Province
announced that it would cease cooperation with
P&G effective immediately.
Source: q.sohu.com 12
14. Agenda
1. China: Land of Opportunities
2. The China Market is Different, Differentiated, and Complex
3. Form an Effective Insight‐Driven Strategy
4. Overall Thoughts / Q&A
13
15. Define your Brand or the Market will do it for You
Brand A and Brand B are the first line and second line brands of a global fashion company, respectively.
Brand A
Millions Most people will search
for Chinese Name A for
both the first and second Differentiation between
2.0 line of products Google sina blog Baidu the first line and the
1,686,805
Taobao Total
1.5
second line is very low
1.0 Most people search only
559,403
for the name of the first
0.5
129,446 40,356 22,780
line
0.0
However, search items
Chinese Name A Chinese Name B Chinese Name C Chinese name D Chinese Name E
skew heavily towards
Chinese Name F. 7 out of
every 10 results are
Brand B Chinese Name F related
products or news.
200,000 Search results for Brand B
172,852 in Chinese on major search Google sina blog Baidu
150,000 engines and portals is only
9.3% of total searches for
the brand in China. There is a lack of
100,000
understanding of the fashion
50,000 company’s brands and the
7,261 1,369 614 21 differences between product
0 lines
Chinese Name F Chinese Name G Chinese Name H Chinese name I Chinese Name J
Source: Google; Baidu; Sina; Taobao; SmithStreet Primary Research 14
16. Understand the Market at a Deep Level
Rated China Hospital System Pricing Analysis
7,000
Market Share of Foreign Brand
1st Class 100% Device B
6,000 2nd Class
90%
Device A
Market Share of Foreign Brand
80%
5,000 3rd Class 70%
60%
Device C
4,000 3,662 50%
40% Device E
Device D
3,000 30%
20%
2,000 2,610 10%
0%
1,000 2,246 0 1 2 3 4 5 6 7
722
328 474 Price Multiple (Price of Foreign Brand/Price of Local Brand)
Price Multiple (Price of Foreign Brand/Price of Local Brand)
‐
Grade III Grade II Grade I
Purchasing Decisions Nominated by Doctors
Price 15
After‐sale service 7
Relationship with supplier 3
Colleagues’ recommendations 5
Overall quality 18
Source: China Ministry of Health 15
17. Governments often Determine the Size of the Market
Beijing, Shanghai and the Chinese Government all pay attention to nursing care and
disease control for Disease X.
• More Channels
• More Aged Care
• More Professionals
Market of Rising Governmental New
Disease X in Awareness at National Market of
China and Local Levels Disease X in
Original Market China
• Public Education
of Disease X in
• Professional Education
China
Source: SmithStreet Research 16
19. Agenda
1. China: Land of Opportunities
2. The China Market is Different, Differentiated, and Complex
3. Form an Effective Insight‐Driven Strategy
4. Overall Thoughts / Q&A
18
22. China is a Freeway…
Shanghai, China
20 Jinchuang Road, 10th Floor
Yangpu, Shanghai 200433
+86 (21) 6565 6533
New York, USA
521 Fifth Avenue, 17th Floor
New York, NY 10175
+1 (212) 292 4420
www.smithstreetsolutions.com
21
