BEIJING (BLOOMBERG) - Foreign brands are falling from favour in China, the world's biggest consumer market, according to reports by Nielsen Holdings and Bain & Co.
Domestic companies producing consumer goods such as food and beverages or personal care products are slowly but steadily eroding market share from foreign competitors, leaving them with 30.2 per cent of the market last year versus 33.5 in 2006, according to Nielsen. Bain found foreign companies increasing their market share in just four of 26 categories.
That's notable because Chinese consumers are more concerned with brand origin than any other country aside from the Czech Republic, according to Nielsen's survey of attitudes in 70 countries.
Chinese consumers are interested not only in low prices but also higher quality, and there's an increasingly noticeable trend of consumers upgrading, Vishal Bali, a managing director at Nielsen in Shanghai, said in the report. Domestic brands get a sale boost as they embed the concept of natural and healthy in their products, he said.
The stable economy, robust wage growth, and the convenience of e-commerce have underpinned consumption as the main driving force for economic expansion. Consumption contributed 77.2 per cent to economic expansion in the first quarter, up from 64.6 per cent the prior year.
China's digital-savvy upper-middle class is fueling a consumption boom that will add $US1.8 trillion in new consumption by 2021, about the size of Germany's consumer economy today, according to a report last week by Boston Consulting Group.
Chinese companies are making more inroads because they know their customers better, can make faster decisions than multinational entities, and are better adapted to fast-growing online sales, according to the report from Bain and consumer research firm Kantar Worldpanel based on responses from 40,000 urban households equipped with scanners to track their purchases.
Domestic companies, however, still have a long way to go as consumers tend to opt for foreign products in sectors such as personal care where quality is more valued, Nielsen said.