China remains one of the world’s fastest-growing economies, but the GDP growth figures that hit double digits in 2009 have declined dramatically, stabilizing at around 7.5%. Consumers still have disposable income to spend, and the middle class continues to expand, but consumers are savvier and more budget-conscious. When it comes to personal care and cosmetics products, Chinese shoppers are willing to trade up, but they demand true value.

Local FMCG brands still have a stronghold in China, and gained market share from foreign brands in 58% of all categories in the past year. They excel at passionately communicating with consumers, and are present everywhere from tier one cities to rural areas. Personal care is the only sector in which foreign brands are close to local brands, but the trend is reversing—Chinese brands are catching up, especially in value growth.

This is a tough environment in which to try and attain new consumers. There are three levers that will help personal care and cosmetics brands grow by winning the battle for shoppers’ hearts: embracing premiumization, investing in innovation, and riding the new wave of emerging channels.

Embrace Premiumization
FMCG value growth in China soared 47% in 2013, driven by price increases across categories. Price increases are very closely related to consumers’ concerns and needs —primarily, in the case of personal care and cosmetics, an increased awareness of health issues, the demand for strong functional benefits and the desire for indulgence.

If a brand can provide these things it will earn the right to charge a premium for its products, and successfully persuade customers to trade up. Consumers in China are happy to pay a higher price for a better quality product, especially moms —they want the absolute best for their babies! 

As people become wealthier they are more able to afford specialized products that provide specific, advanced benefits. Yunnan Baiyo, a local toothpaste brand, has successfully increased its footprint in China by offering extra functionality with a premium proposition supported by high quality ingredients. Invented in 1902 by Qu Huan Zhang, it differentiates itself from competitors by helping to prevent gum bleeding. Going beyond the basic function of toothpaste to offer a remedy for oral health problems has made it very popular: it gained 6.3 million new buyers between 2012 and 2013.  To build a premium brand, beauty manufacturers must connect with consumers on an emotional level.

Magic Mask MG tells shoppers that using its face masks will give them a “magical moment.” It also makes the product affordable with a mid-tier price and a single pack format that has effectively driven trial. Buyer base, purchase frequency and value sales are all increasing as a result.

Invest in Innovation
Product development is another way for a personal care or beauty brand to grow in the Chinese market. Shoppers love to try something novel; the average penetration after launch for a new FMCG product one year after launch is 1.5%, while new products bring on average 2.7% growth to the mother brand.

New launches in the Chinese cosmetics sector contribute more than 12% of the total market value, compared to 6% for the FMCG market as a whole.

To achieve incremental growth and avoid cannibalization, brands should draw on the affinity strengths of the parent while offering functional differences and meeting different usage occasions so one product is not simply used as a straight swap for another. Understanding the market, and identifying all the ‘gaps’ that will drive the growth, are crucial.

In 2013 Dove introduced a new hybrid conditioner and hair mask product that appealed to consumers’ thirst for convenience as well as added benefits, saving them time by combining two steps in the grooming routine. The launch led to a 15% increase in buyers.

The innovative positioning and promotion behind Chinese tissue brand Vinda’s new Ultra Strong tissue has helped it attract 1.86 million new households and also raised purchase frequency. The brand targets higher-end consumers with its mission to “provide high quality daily hygiene products for people to enjoy.”

The launch introduced the “strong” concept into the tissue market in China for the first time—enabling Vinda to offer consumers an upgraded product.

Its marketing campaign revolved around close consumer interactions that helped strengthen brand affinity, including touring the country in a branded bus giving out free samples and bringing the “strong” message to life with experiential marketing—for instance with a handmade tissue wedding dress.

There are huge opportunities for brands to target men with new “for men”male grooming products. Kantar Worldpanel research indicates that 85% of Chinese men care about their appearance, and sales of male grooming products are growing more rapidly (7% in 2013) than the personal care category as a whole (5%). The fastest-growing segments are shampoo, bar soap and liquid soap/shower gel.

However, use of “for men” products is low outside the shaving and fragrance categories, and only 74% of men in China currently buy at least one item. With penetration still low, there is plenty of room to launch variants designed specifically for male users, particularly in the shampoo, oral care and personal wash categories. Chinese men are also very open to international brands as 60% believe them to be of higher quality than the local equivalents.

Innovation is not enough to sustain growth on its own, however. There will always be copycats in the market looking to benefit from their competitors’ ideas. When a strong new product emerges, others will always follow—so an original brand may not be able to hold its leading market position for long before it’s knocked into second place.

Ride the Wave
In 2013, 30% of consumers in China bought cosmetics online. Online channels have not only grown organically by offering extra brand choices, shopping occasions and shopping experiences—shoppers are switching from retail channels to online because of the good prices and convenience they get.

There are also a number of popular major promotional events centered on online shopping: Singles Day in China on November 11 (11/11) has become the world’s biggest online retail event. It involves 24 hours of mad shopping, when brands and retailers target single people with the primary message of “reward yourself.”

With access to the internet and mobile devices in lower tier cities rising, and online shoppers being more likely to trade up, there are huge opportunities for brands in the digital space. They need to optimize their brand portfolio to meet shoppers’ varying needs, and get visible across all touchpoints—for instance, by introducing a mobile app. 

The characteristics of a channel and the needs of its shoppers vary greatly between online and offline, meaning that marketing strategies must be executed differently. Offline is the ideal channel for more mass, well known, relatively moderately priced products. Online works best for niche, premium and more specialized products.

To win Chinese consumers who are ready to upgrade, brands must offer high quality products with a strong image. They need to spread the word with marketing that creates an emotional bond with shoppers—telling them how a product will ease their worries and bring them a better life by helping them to be healthy, providing functional benefits, giving them a treat and saving them time.

When it comes to reaching shoppers, building real differentiation between offline channels and e-retailers is key. Most important of all is the ability to deliver an outstanding consumer experience at every touchpoint—from the product itself, to the brand’s presence on social networks, all the way through to after-service.

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Ashley Kang
Kantar Worldpanel

Ashley Kang is regional beauty director at Kantar Worldpanel, leading both local (Korea) and regional beauty business development. Ashley has elegantly made Kantar Worldpanel a trusted advisor for clients for the past 12 years—not just for local Korean players, but global heavyweights such as L’Oréal and Estée Lauder. More info: www.kantarworldpanel.com