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In 2008 at least six babies died and 300,000 fell ill after drinking made-in-China infant formula contaminated with toxic chemicals. In response, many Chinese parents embraced foreign baby food brands, catapulting the likes of Danone SA’s Aptamil and Nestlé SA’s Illuma to the top of the market. Yet for the past two years, the leading formula brand in China has been made by China Feihe Ltd., a Beijing company that emphasizes its local roots rather than seeking to obscure them. “More suitable for Chinese babies,” the company’s advertising boasts.
In categories ranging from baby food to sportswear and skin cream, Chinese brands are putting pressure on global rivals that depend on the country for much of their growth. While increasing nationalism has boosted the momentum of domestic products for the past couple of years, the covid-19 pandemic is speeding up the shift. With prices typically lower than foreign brands’, domestic products have increasing appeal in times of constrained household budgets, and the growth of online sales has weakened the multinationals’ advantages in distribution and marketing.
Foreign brands aren’t finished in China, of course. They dominate categories such as expensive handbags and luxury cars. Kentucky Fried Chicken (KFC) — still the biggest fast- -food chain in China — is supplementing its fried chicken with products such as fast-cooking snail noodles to cater to diners stuck at home in the pandemic. “The attitude of big international brands is changing significantly,” says Wu Wenmi, founder of Wenzihui MCN agency. “They are more humble now and willing to hear our opinions of how to play the game.”
One way Chinese companies are playing the game is with marketing that resonates for locals. While foreigners’ ads stress the nutritional value of their infant formula, Feihe nurtures relationships with consumers via loyalty programs and new-parent support groups. And Chinese brands are increasingly tailoring their products to domestic tastes. China Mengniu Dairy Co., for instance, is stepping up sales of innovations such as pineapple-flavored cheese in addition to its lineup of basic milk and fruit yogurts. “Foreign brands were so innovative three decades ago when they first came to China,” Mengniu CEO Lu Minfang says. “But now they’re developing slower than local brands.”
(Bruce Einhorm and Daniela Vrei.
Bloomberg Businessweek. 07.12.2020. Adapted.)
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