Big global players have struggled in the past to make major inroads in China because of a lack of openness to foreign investment. But that picture is changing as consumers turn to foreign brands in the wake of domestic food safety scandals, according to a new report on soft drinks in China, published by Datamonitor.
Report author Saritha Pingali told BeverageDaily.com: “The current trends show that most of the big international players are readily welcomed by consumers as trust in the domestic players is eroding due to the recent food scams in the country.”
This is being seen by the likes of Nestle, PepsiCo and Coca-Cola as an opportune moment to invest in what is anyway a growing market (Datamonitor predicts 14 per cent CAGR growth in soft drinks to 2014).
A local twist
But success in China is not guaranteed and international brands are realising it requires a good understanding of local preferences.
A typical strategy has been to take big well-known international drinks and then give them a local flavour twist. Examples include Sprite Green Tea and Minute Maid Pulpy Super Milky from Coca-Cola and Gatorade Sport Drink in Berry and Honey Green Tea from PepsiCo.
In addition, there have been some entirely new brands launched exclusively to fit with local flavour trends. As examples, Pingali mentioned Pepsico Herbage Chrysanthemum & Lotus Leaf Plant Beverage and Guowei C+ Orange and Lemon by Nestle.
Packaging design has also been modified to suit the Chinese market. For the 2008 summer Olympics in Beijing, PepsiCo, for example, introduced a red-themed can to reflect the Chinese national colors.
Knowledge gathering
To get to know the Chinese market, companies have sought out local partners and invested heavily in their own research work.
In such a large emerging market the potential brand benefits of a good move and risks of a false move are likely to be felt a long way down the line. There is therefore a readiness to invest in order to be sure that launches are on target.
Before it launched Sprite Tea, for example, Pingali said Coca-Cola set up sampling stations across China and offered 15 million free drinks to domestic consumers.
But before reaching the consumer testing and launch phase, a lot of work is also going on to establish the right products for the Chinese market. Coca-Cola has joint ventures with Chinese local firms for several of its brands and PepsiCo is working with local chefs to better understand local preferences and consumption patterns.