Welcome to our third article in this three-part series where we share insights drawn from our experience helping American food and beverage brands navigate the complexity of the Chinese marketplace.
This week’s article will address the role brand innovation can play in US companies’ ability to grow and penetrate the Chinese marketplace. This week we also have the pleasure of announcing that Susan Most Armstrong, previous SVP at Nielsen, has joined our team to lead the expansion of TSI in the US, serving those clients who are activating strategy in Asia and China.
Susan has spent a week with the TSI team in the Shanghai office, meeting with senior executives from some of TSI’s closest partners, including Campbell’s, Pepsico and ConAgra, as well as immersing herself in China’s food and beverage market through store visits.
During her time in Shanghai stores, Susan observed how more and more US brands have learned they can no longer expect to just import their brand from the States and expect to remain competitive. To be successful, they are taking stock of their brand assets, learning about local consumer usage and needs, then modifying and extending their lines by adapting local flavors and pack sizes that would have greater appeal to the consumer in China.
An observation consistent with the message learnt in her discussions with the clients she met in Shanghai:
“A recurrent theme among the US clients I’ve met with here in Shanghai is that strong year-over-year growth is no longer a guarantee by the share size of the market alone. The local competition has upped their game, and understanding the local consumer needs, being on top of trends and continuing to innovate is a necessity to win in this market”.
The ability to act upon this insight is crucial for US companies’ success in the Chinese marketplace. An ability to innovate is seen by many as the key to winning over the Chinese consumer and a failure to do so quickly makes it hard to hold the attention of an increasingly demanding Chinese consumer (which is a topic we explored in a previous blog post).
Two ways US companies can use innovation to ensure continued market penetration and growth, is through line extensions or by extending brands into new categories. Typical line extensions comprise of new pack sizes/forms, new flavors, or ingredients which typically serve to address consumer needs and trends to stay relevant and competitive.
One example of a US company that has been successful in their line extension approach in China is Dove (CHOCOLATE). They have extended their brand across the consumer need states with different pack sizes and flavors that appeal to the Chinese preferences and flavor palate.
[ABOVE: Dove Chocolate’s new Macha, Lemon and Strawberry flavors on the shelves in China]
During one of her store visits, Susan also pointed out how Minute Maid is another example of a US company that has adapted their brand and used line extensions to make themselves relevant to Chinese consumers:
“The localization of the product, is also visible in the product’s all-Chinese label and combined with new and exciting flavors, ensures the company’s relevance in the marketplace.”
Brand extensions, on the other hand, take a key asset of the brand, and extend that brand asset into a different category, leveraging the consumer equity, where it can have relevance to the consumer and positively impact the brand.
Successful brand and line extensions, rest on the US company’s ability to fully understand the needs of their Chinese customers, resulting in a custom, market specific strategy for growth. One company we helped achieve this is a US leader in breakfast cereals who were looking to expand their territories in the Chinese market.
From this project, TSI developed a pipeline of new ideas that would help the company expand its line to include products that could be consumed on the go, as an alternative to its in-home breakfast options. In order to do this successfully we had to immerse ourselves in understanding consumer needs, beliefs and behaviors, which can only be achieved by having people who understand both the consumer and brand on the ground.
Susan highlighted the value of being present in the market you are serving after a visit to one of our clients, and shared some of her observations with us:
“I was truly impressed seeing the unique capabilities and insights of our Shanghai based TSI team in action during the meeting with an Australian based food company interested in innovating their product in China. There is little doubt that an insider’s perspective helps bridge the gap between the Chinese market and our international clients” she said.
“This week in Shanghai has been very inspiring and I am truly excited about the prospect of combining my knowledge and expertise in innovation and global marketing, with the know-how of our China team, to add value to our clients in the US,” she continued.
The key takeaway
US companies cannot rest on their laurels if they want to remain relevant in the Chinese marketplace – an ‘on-the-ground’ immersion is crucial for a company’s continued success. Being present in the market that you serve is crucial and we are truly excited about the prospect of having someone with Susan’s marketing experience on board to help us better serve our US based clients.
If you are a US brand interested in learning more about how you can use innovation to grow your competitive advantage in China, contact us at firstname.lastname@example.org for a free 20-minute consultation with one of our brand strategists.