Western CPG brands are losing share in China as local brands gain in multiple price categories.
“Brands that established the market in China are now seeing their shares erode as local brands offer value and premium plays,” Danielle Bailey, L2’s head of APAC research, told an audience of corporate executives at yesterday’s Digital Leadership Academy.
Half of skincare brands with the largest Baidu search volume declines in the past year are western, a major indication of waning interest. Local and Asian brands also account for an outsized share of consumer conversations on Sina Weibo, according to L2 research.
Discounting is one reason for local brands’ success in the value segment. Most CPG products on Alibaba’s Tmall are sold at a discount, particularly in the diapers, laundry detergent, and skin care categories, where non-discounted products account for less than 10% of merchandise. While Japanese and Korean brands do not have to discount because their products are popular and considered premium, many western brands are forced to lower prices “just to keep up,” Bailey said.
Not only are local brands coming out with cheaper choices, they are also introducing more premium and innovative options. Between 2012 and 2015, domestic brands launched more premium offerings in multiple CPG categories including shampoo, skin care and toothpaste. For example, Blue Moon detergent – which launched in 2008 and popularized liquid detergent in China – has a premium positioning and challenges Unilever’s Omo and Proctor & Gamble’s Tide for market dominance.
“Western brands must pursue product and omnichannel innovation and leverage cross-platform loyalty and CRM programs to maintain their leads,” Bailey said.