Multinationals losing battle for Chinese consumers

International brands in China are losing market share to domestic companies in everyday items ranging from fruit juice and make-up to toothbrushes, according to a large-scale survey released on Tuesday, as multinationals struggle to adapt to changing tastes in the world’s largest consumer market. 

White-collar Chinese consumers with rising incomes are switching to pricier premium brands in categories of fast moving consumer goods ranging from water to juice and shampoo. The trend has even reached toilet tissue, where there has been a switch from two- to three-ply. 

But domestic companies have been quicker to capture the premium market, with brands owned by multinationals such as Nestlé, Procter & Gamble and Unilever losing market share in 18 of 26 FMCG categories last year, and gaining in just four, according to a survey of 40,000 households by Bain and Kantar Worldpanel. 

While China’s urban FMCG market grew 3 per cent in 2016 to about $190bn, Chinese companies expanded their sales by more than 8 per cent while foreign brands grew by just 1.5 per cent. “Multinational brands are moving backwards while local brands are jumping on the premiumisation wagon quite well,” said Jason Wu, general manager of Kantar Worldpanel China.

The shift to domestic brands has been most pronounced in categories traditionally dominated by foreign companies, such as cosmetics. The tables have been turned by little-known Chinese companies such as Seeyoung, which launched a silicone-free shampoo ahead of overseas rivals. 

In the juice market, local players such as Huiyuan and Nongfu have scored hits with expensive not-from-concentrate juices packaged as health drinks, which have resonated with growing middle-class interest in fitness and left overseas brands such as PepsiCo’s Tropicana behind. 

Domestic players also have benefited from a shift to online purchasing, which drove three quarters of value growth last year. “Local brands are moving fast in these…

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