How to capitalize on the unexploited link between brand and country of origin for US food and beverage brands in China

 

Written by Joel Bacall, Senior Client Manager @ The Silk Initiative

Welcome to this, the first in a special three-part US brand case study series where we share insights drawn from our experiences helping American food and beverage brands navigate the complexity of the Chinese marketplace.

In our numerous engagements, ranging from US global food and beverage giants to SMEs, we have discovered that brands from different countries require different positioning strategies in order to successfully compete with the rising strength of local Chinese brands.

For example, the effectiveness of positioning around an emphasis on origin varies between say Australian and American brands, and savvier brands can capitalize on this to set themselves up for success and take their China strategy to the next level.

So how can US companies get their China market entry strategy right from the get-go?

Localizing your competitive advantage

Despite the fact that a successful market entry into China often serves as a cornerstone of multinational companies long-term international growth strategy, success often remains elusive. Even FMCG giants, like Coca-Cola and Pepsi, faced difficulties cracking the rapidly changing and dynamic climate of the Chinese marketplace. Competition from local brands is toughening and foreign brands now need to work harder to stand out in an ever increasingly competitive environment.

For instance, TSI’s Managing Director and founder Andrew Kuiler recently spoke to media about the need for Australian brands in China to think beyond just playing to a ‘clean and green’ positioning and instead seek to differentiate themselves by tapping into unique brand stories, Australian ingredients and sophisticated processing technology.

Aussie bush tucker

[Above: Australian bush ingredients have worked well in some of the product innovation The Silk Initiative (TSI) has been working on for Australian brands making their way into China.]

In comparison, the USA as a reputable country of origin for food and beverage brands is relatively misunderstood still in China, even after all these years of big brand players in the market. Countries like Australia, New Zealand and Scandinavian countries are hot right now in the Chinese psyche when it comes to more ‘reliable’ (i.e. safer) food and beverage brands. With this said, US brands may have to do some homework, now more than ever, when it comes to thinking about how to make their way into the hearts and homes of Chinese consumers. Being a famous, old, US brand probably isn’t enough in today’s dynamic Chinese market where food safety and the quest for more interesting ingredients has become more prevalent.

US brands can learn from the kind of work we completed with a major US children’s cracker brand during which we discovered an opportunity to lead with imported, quality credentials from the kids snacking space in the US.

Our work with this client is a classic example of how to launch an international brand in a way that resonates with unique local Chinese mother needs and their ‘buying and brand selection criteria’, resulting in a strategy that utilizes the company’s brand equities from back home whilst simultaneously adapting the product to the Chinese marketplace.

Fish Crackers Swimming

Moving beyond the ‘foreign product’ image

Another key takeaway from our work with this Client is that US brands can no longer ride the wave of a Chinese consumer demand that in general has viewed imported goods more favorably than domestic products. Despite the fact that this mentality is still present to some extent, the market landscape is rapidly changing.

So what exactly are we saying? Don’t assume a strong brand name back home automatically will outcompete the local competitor. In fact, Chinese consumers are developing a stronger sense of identity and national pride and no longer want to be ‘just-westernized consumers’.

Starbucks China Street

Chinese brands, such as Bright Dairy, Danisa and Pan Pan, are becoming savvier at brand building and innovation and Chinese consumers are becoming more refined and sophisticated in their purchase decisions.

panpan bread & bright milk

 

These insights also echo what we often glean from some of the qualitative research that we do here at TSI where we increasingly find the standards that Chinese consumers are demanding are becoming much higher when it comes to items that they like to buy. In a previous article, we revealed how foreign brands can stay ahead of the curve by capturing the attention of the Chinese consumer.

Simply put, brands that don’t take this into account may “fail to launch” or suddenly find themselves yesterday’s choice.


Stay tuned for the next installment in this case study series where we continue to share our key insights from our work with US brands who are already in China and turning to The Silk Initiative for a range of strategy assistance.

Contact us for a free Consultation

If you are a US food and beverage brand that has your eyes set on China, we’d love to hear from you. Email us at info@thesilkinitiative.com with your biggest unanswered questions about how to get your food or beverage brand ready for China market entry for free 20-minute initial consultation with one of our experienced brand strategists.