Just showing up is no longer enough for global brands to win in China

Western brands are having to work harder to win over customers in China.Where American or European co...

Posted: Sep 26, 2018 11:15 AM
Updated: Sep 26, 2018 11:15 AM

Western brands are having to work harder to win over customers in China.

Where American or European companies could once expect to find an enormous market hungry for their products, changing tastes and the challenge from new Chinese rivals are forcing them to adopt new strategies to succeed in the world's second biggest economy.

The sterner challenge facing big names such as Starbucks and Apple has nothing to do with the trade war. At least, not yet. It's about new competition and increased wealth.

"It doesn't work to just show up anymore," said Benjamin Cavender, a Shanghai-based analyst at consulting firm China Market Research Group, referring to brands that are household names in the West. "Chinese consumer tastes are evolving rapidly."

Coca-Cola is one of the top companies that's having to adapt to this new reality.

"We've seen a tremendous change in the consumption patterns," Curtis Ferguson, the company's China CEO, told CNN at last week's World Economic Forum in the Chinese city of Tianjin.

Coke has launched more than 30 new drink brands in China in the past six months and now has about 275 in total, Ferguson said. They range from regular Coke to more exotic varieties with flavorings like yellow bean and apple fiber. Coke even has its own line of teas in China.

That's a big change from the Atlanta-based company's previous approach of relying on the strength of its brand.

The philosophy was "let them drink Coke," Ferguson said. He argued Western companies can't afford to treat their brands as sacrosanct.

"Either you destroy your own brand in China, or someone else is going to do it for you," he said.

Starbucks scrambles to keep up

Starbucks learned the difficulties of shifting Chinese consumer habits the hard way.

The coffee chain has about 3,000 stores in the country, making it one of its top markets. But in June, the company reported a sudden slowdown in growth in China, just weeks after it had announced plans for rapid expansion there.

That's partly because it faces growing competition from an upstart local competitor. Luckin Coffee opened its first store in China less than a year ago. Now it has more than 500. Many of its customers order coffees online for delivery or takeout. Chinese consumers are also increasingly turning to delivery apps, like Meituan Dianping, for food or drinks.

"Starbucks has always been slow adopting technology in China," Cavender said. Its customers "were tired of waiting in line to place orders."

The global coffee giant is now trying to correct course. In August, it teamed up with Alibaba, China's largest e-commerce company, to launch delivery services.

Automakers face 'big challenge'

Global carmakers are also scrambling to keep pace with changes in China's auto market, the world's biggest. It's being shaken up by the rapid spread of electric vehicles, which have been promoted through government subsidies, resulting in a crowded market.

Francois Provost, Asia-Pacific chairman of Renault, said the French carmaker is now fighting competition from both traditional rivals and new upstarts in China. Local player Nio, for example, sells an SUV in China that costs about half the price of Tesla's Model X.

Sticker price is crucial in China, Provost said, as most customers are first-time buyers. But drivers are also demanding electric vehicles with longer battery life as networks of charging stations are still being built out across the country.

"The big challenge is increasing the efficiency of the range and reducing user costs at the same time," Provost said during a panel discussion at the World Economic Forum. That will be tough for automakers, he predicts: "I can't honestly say we have full visibility on this."

Apple's losing the innovation race

Apple has lost market share in China to local rivals over the past two years. The iPhone accounts for less than 10% of smartphone sales in the country, analysts estimate. In the United States, it accounts for about 40%.

Apple is facing fierce competition from Chinese players such as Huawei, Oppo, Vivo and Xiaomi.

"In recent years, Apple has slid quite a lot in the Chinese market," said Canalys researcher Mo Jia. "The very aggressive tech innovation from Chinese brands is changing the high-end landscape."

The US company's latest models, the XS and XS Max, include features that could boost their appeal in the Chinese market, like dual SIM cards and a larger screen. But analysts are skeptical these will make much difference.

"Apple is fighting a bit of a losing battle," Cavender said.

-- Sherisse Pham and Rishi Iyengar contributed to this report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 159036

Reported Deaths: 3879
CountyCasesDeaths
DeSoto10563104
Hinds10414204
Harrison7397113
Jackson6655128
Rankin6057107
Lee540396
Madison5120107
Forrest394786
Jones376188
Lauderdale3663147
Lafayette341053
Washington3321108
Lamar301950
Oktibbeha255262
Lowndes252867
Bolivar248084
Panola237353
Neshoba2280122
Marshall225051
Leflore211191
Monroe209778
Pontotoc208131
Lincoln200566
Sunflower194155
Warren183058
Tate180451
Union172926
Copiah170840
Pike166760
Scott161330
Yazoo161340
Itawamba159936
Alcorn159328
Pearl River158969
Coahoma155943
Prentiss154931
Simpson154053
Adams147252
Grenada145445
Leake141844
Holmes134461
Covington130040
Tippah130030
George129525
Winston128726
Hancock127641
Wayne123024
Attala122834
Marion121447
Tishomingo114043
Chickasaw110732
Newton110529
Tallahatchie99427
Clay96127
Clarke94853
Jasper87023
Stone82015
Calhoun79513
Walthall79330
Montgomery78426
Carroll75515
Lawrence74614
Smith74216
Yalobusha74228
Noxubee73317
Perry68726
Tunica63019
Greene62422
Jefferson Davis59617
Claiborne59216
Amite57615
Humphreys55219
Quitman5107
Benton50418
Kemper48018
Webster47714
Wilkinson40722
Jefferson38312
Choctaw3637
Franklin3635
Sharkey32917
Issaquena1214
Unassigned00

Alabama Coronavirus Cases

Cases: 256828

Reported Deaths: 3711
CountyCasesDeaths
Jefferson34214511
Mobile20299366
Madison13925150
Tuscaloosa13591156
Montgomery12659238
Shelby1095877
Baldwin9163137
Lee792566
Morgan710851
Etowah677467
Calhoun6695121
Marshall665757
Houston548239
DeKalb504738
Cullman472043
St. Clair451857
Limestone447546
Lauderdale436054
Elmore427564
Walker3818111
Talladega374457
Jackson350723
Colbert336443
Blount310043
Autauga287342
Franklin259734
Coffee254115
Dale242054
Dallas232932
Chilton230841
Russell22813
Covington227934
Escambia206131
Tallapoosa189191
Chambers185950
Pike162214
Clarke161819
Marion146136
Winston141924
Lawrence135336
Pickens127720
Geneva12638
Marengo125224
Bibb123938
Barbour120629
Butler118842
Randolph105922
Cherokee105524
Hale99732
Fayette96316
Clay93525
Washington93319
Henry8946
Monroe83811
Lowndes82129
Cleburne79914
Macon76522
Crenshaw72930
Conecuh72414
Lamar7138
Bullock70919
Perry6927
Wilcox64918
Sumter58922
Greene44218
Choctaw43519
Coosa3724
Out of AL00
Unassigned00
Tupelo
Overcast
45° wxIcon
Hi: 50° Lo: 42°
Feels Like: 45°
Columbus
Overcast
46° wxIcon
Hi: 55° Lo: 43°
Feels Like: 46°
Oxford
Overcast
41° wxIcon
Hi: 43° Lo: 36°
Feels Like: 41°
Starkville
Overcast
43° wxIcon
Hi: 53° Lo: 39°
Feels Like: 39°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather