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Are foreign brands dead in China? — Q&A with Mark Tanner

As news of Nike and Adidas performing poorly in China this year contrasts with the growth of their local rivals, are Chinese consumers turning away from foreign brands? How are Chinese people feeling with all the economic gloom and doom in China? Has the metropolis of Shanghai lost its swagger after months of strict lockdowns and no prospect of an end to COVID zero?

To discuss these questions and more, I called up Mark Tanner, who founded China Skinny in Shanghai 2011 to offer marketing, branding, and research services to consumer brands in China. Some of the things I learned: Foreign milk brands have got their package sizes wrong in China, and while Chinese women prefer local weight loss brands, if they want to put on muscle, they turn to foreign products!

We chatted by video call on August 24. This is a lightly edited transcript of our conversation.

There’s been so much negative news about the Chinese economy in the last year, and the gloom has intensified in the last few months. When you’re on the outside, the gloom and doom tends to be amplified.

So, put it into context for someone who’s outside of China: What’s the mood in China right now with consumers and among the companies that are your clients?

It’s definitely less rosy than it’s been in the past. I’m not going to pretend it’s not. I think consumer confidence is lower than I’ve seen in the last decade. And I think that’s down to a number of reasons. Obviously, the big one is COVID-zero and the uncertainty around that. But the other one is property.

As you know, property wealth has contributed to almost all of the wealth growth for individual Chinese over the last generation. And now property is not growing. It’s really impacted the way consumers feel about their growing affluence. Then there are other contributors such as youth unemployment and slowing headline data that is impacting confidence.

But still. I remember a long, long time ago in South Africa, I met some business buddy of my uncle’s, a really offensive nouveau riche guy…the first time I’ve ever met somebody who aggressively ordered the most expensive thing on the menu at a restaurant just to show off.

But he was a successful business guy who had all kinds of companies. I remember him saying something to me like, “I don’t believe in recessions. It doesn’t matter if the economists are unhappy. People still need to eat and play.”

Totally. And I think Chinese people are very resilient. They bounce back really quickly, as I’m sure you’ve seen over the years. They’ve been through some tough times over the generations, but return to their inherently positive perceptions quicker than people do in most countries. But I think right now COVID-zero has rattled a few of them. They can’t go on holiday without worrying. They can’t go to Ikea without worrying about getting locked in.

So, it’s had some impact on things. But yeah, people are still spending, they still need to buy. You look at car sales, which have obviously been nudged along by Beijing’s policies, but that increased 17% last month. Chinese people are still buying the big-ticket items. It’s not quite the lipstick economy that everyone talks about.

Are you noticing changing trends in the way companies are marketing to consumers or in consumer preferences? Is there something you can point to, like people are not buying durian fruit anymore, they’re buying regular bananas? Are you noticing consumer habit changes?

Something I’ve noticed is that the gap between foreign brands and Chinese brands has increased since 2020. Some of that’s due to nationalism. Everyone’s talking about nationalism, but I think the weighting is far too much. A lot of the decision makers at foreign companies haven’t been to China since then. They’re disconnected, and China has obviously changed dramatically since COVID. And as a result, a lot of these decision makers and stakeholders are a little bit lost and really not understanding what’s happening in the market.

Are you saying that people are blaming the poor performance of foreign brands on nationalism? But there are also other factors?

Yeah. I remember we were doing some work in the dairy industry, and it was quite some years ago, before COVID. A lot of decision makers from foreign brands will come to China and they’ll go into a store and they’ll look at ecommerce sites and they’ll find all these one-liter Tetra Pak dairy products from all the other foreign brands. So, they’re like, “We’ve got to have a one-liter Tetra Pak.”

But if you look at the way Chinese consumers are consuming, they don’t drink milk in the same volume that people do in America, or in New Zealand. They much prefer a smaller portion that’s fresh on opening, and that they can carry around in their handbag or whatever. If you look at the way Chinese are buying milk, 70% of them are buying 250 ml or smaller portions, whereas 98% of all the one-liter Tetra Paks are foreign brands. It’s a disconnect. They are not localizing enough.


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