Foreign brands losing ground to domestic firms

By WANG ZHUOQIONG (China Daily) Updated: 2014-07-02 07:12

A key reason for the growth deceleration was that premiumization (the move toward luxury products) slowed noticeably over the past year, said Jason Yu, general manager of Kantar Worldpanel China.

"With premiumization, retailers were unable to easily push through the price increases that helped drive growth in previous years," Yu said.

Foreign brands losing ground to domestic firms

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Bruno Lannes, a partner at Bain's Shanghai office who leads the firm's consumer products and retail practice division in China, said: "Market implications for both foreign and domestic consumer goods companies in China are clear and direct: Growth must come from share gain, and share gain comes from penetration gain.

"Building penetration means treating each consumer as a new consumer and recruiting them at each purchase occasion," he said.

To increase market share and penetration for both domestic and foreign brands, Lannes said that "it is vital to create mental and physical availability of their products in stores through enhancing consumers' memory structure and streamlining selective innovations of products to avoid confusing consumers".

He also suggested that companies enhance store activation as shoppers need to be confronted by the brand to trigger purchasing decisions.

Speaking on the outlook for foreign brands in China, Lannes said that 40 percent of foreign brands still gained share in the market last year.

"Results from this year show volatility and the challenges of maintaining consistent share-gain strategy in China," he said. "This year, more foreign brands are losing share. But next year, it might be the other way around.

"It is true that the market is more complicated," he said.