When localizing a brand name, companies need to pay attention to many factors, including phonetics, semantics, characters, tones, and local dialects. Daxue consulting has a proven four-step method for choosing a brand name in Chinese, which you can learn about here.

Different approaches to Chinese brand names in the pharmaceutical industry

There are several ways to choose Chinese brand names for foreign pharmaceutical brands. Just as when translating foreign names, companies can translate the name either according to its semantic meaning, or according to its phonetic sound. In some cases, it is possible to combine both methods into one translation.  

This case study includes the analysis of 10 companies in China’s pharmaceutical industry. Namely: GlaxoSmithKline Plc, Sanofi, Merck & Co Inc, F Hoffmann-La Roche Ltd, Johnson & Johnson, Bayer AG, AbbVie Inc, AbbVie Inc, Pfizer Inc and Eli Lilly and Co. It includes the analysis of how they choose a Chinese brand name, as well as the names of their products in the Chinese market.

Phonetic translations

Phonetic translation is the easiest way for translation and the most common localization method. A common slip up is when companies simply transliterate their name without thinking about the meaning and sound of the characters. As a result, the character choices, while having a good sound, may have unfit meanings or tones that do not roll of the tongue easily. However, when giving Chinese brand names in the pharmaceutical industry, companies often use this method, combined with choosing the right characters, as it is a very specific market.

GlaxoSmithKline Plc

Source: GSK, GSK website page in Chinese

Original name of this English company is GlaxoSmithKline Plc. In Chinese the brand has the name “葛兰素史克” (“Gelansushike”) / GSK.

Its antiviral medicine Viread in Chinese has the name: “韦瑞德” (“Weiruide”), which sounds similar to the original name.

Such as in this case, the original foreign name has sounds that do not exist in Mandarin, such as the V sound. However, “V” sounds in brand or product names are often transcribed to “W” in Mandarin.

Sanofi

Source: Sanofi, Sanofi website page in Chinese

The French company Sanofi in Chinese has a name “赛诺菲” (“Sainuofei”).

Its antiepileptic medicine Depakine in Chinese is “德巴金” (“Debajin”). “De” might give an impression of “Germany”. However, the French flag is on the packaging, conveying a message that the product made in France.  

Source: Taobao, Depakine in the Chinese market

Merck & Co Inc

Source: Merck, Merck website page in Chinese

The Chinese name of the American company Merck & Co Inc is “默克” (“Moke”). Their popular product Vigantol does not have a Chinese name. Some overseas flagship stores sell this product and it receives hot discussion on social media. 

Source: Taobao, Vigantol in the Chinese market

F Hoffmann-La Roche Ltd

Source: La Roche, La Roche website page in Chinese

A company La Roche from Switzerland has its Chinese name “罗氏” (“Luo Shi”). Some of their products also have names based on phonetic approach. For example, the product Rocaltrol which contains vitamin D metabolites, in Chinese has a name “罗盖全” (“Youjiale”). It uses same character “Luo” as ”Luo” in the company name. Another La Roche product Madopar in Chinese is named “美多芭” (“Meiduoba”).

Johnson & Johnson

American company Johnson & Johnson does not use phonetic approach for its brand naming in China. However, it applies this approach to some of its products. For example, Band-aid in Chinese sounds like  “邦迪” (“Bangdi”). Another product which original name is Motrin has “美林” （ “Meilin”) as a Chinese name.

Source: Taobao, Band Aid and Motrin in the Chinese market

Bayer AG

Source: Bayer AG, Bayer website page in Chinese

German pharmaceutical company Bayer in Chinese sounds like “拜耳” (“Bai Er”). Besides, some of Bayer China’s products also named based on the phonetic approach. For example, Bayaspirin has its Chinese name “拜阿司匹灵” (“Baiasipiling”). It uses same character “Bai” as ”Bai” in the company name. Its product Canesten also has a Chinese name  “凯妮汀”（ “Kainiting”), which sounds similar to the original.

AbbVie Inc

Source: AbbVie, AbbVie website page in Chinese

American company AbbVie in Chinese has a name   “艾伯维” (“Aibowei”). However, most of its products name represent “phonetic + evocative” approach.

Novartis

Novartis which based in Switzerland does not use phonetic approach to its brand name in China. However, its products Diovan has Chinese name “代文”(“Dai Wen”), which sounds close to original.  Same for Trileptal with the Chinese name: “曲莱” (“Qu Lai”).

Source: Baozhilin, Diovan and Trileptal in the Chinese market

Phonetic approach for prescription drugs

All drugs mentioned previously are  over-the-counter drugs, meaning they are aimed at ordinary consumers and their names are casual-sounding, to be clearer for customers. However, for comparison, we also looked at prescription drugs, where the marketing is not just directed to consumers, but also medical professionals. What is interesting thing is that some companies adapt their names of prescription drugs for the Chinese market in not-professional-sounding, rather casual-sounding way.

AbbVie Inc

AbbVie’s medicine Zemplar, which helps to treat secondary hyperparathyroidism in people with chronic kidney failure, has a Chinese name “胜普乐” (“Shengpule”). “Sheng” means “victory”, “Pu” means “common” and “Le” means “happiness”. As we can see, it has no connection with the effect which this drug has or with ingredients it contains.

Another drug Humira, which used to treat arthritis, Crohn’s disease and psoriasis, in the Chinese market has a name “修美乐” (“Xiumeile”). It sounds close to original and has positive meaning: “Mei” and “Le” mean “happy” and “beautiful”.

Source: Taobao, Humira in the Chinese market

Sevofrane’s name in Chinese is “喜保福宁” (“Xibaofuning”) “Xi”, “Bao”, “Fu”, “Ning” are all positive words standing for happiness, safe and good health. It is a volatile liquid anesthetic, used during serious operations. The name sounds surprisingly casual and light-hearted considering the seriousness of the product.

Eli Lilly and Co

This company produces Olumiant, which helps to reduce pain and stiffness in Chinese sounds like “艾乐明” (“Aileming”).  “Le” means “happy” and “Ming” means “bright”. The name conveys a positive message.

Pfizer Inc

Calcium channel blocker Norvasc in Chinese sounds like “络活喜” (“Luohuoxi”). “Luo” means “Merridian”, “Huo” means “alive” and “Xi” means “happiness”. “Luohuoxi” conveys a positive message and might be reliable in curing heart diseases and unblock blood vessels. It also has casual-sound name, although being a serious drug, which requires prescription.  

Source: Taobao, Norvasc in the Chinese market

Phonetic and evocative names

In case of “phonetic + evocative” method, translation covers not only the name itself, but also the signal that the product or service carries. Adaptation taking into account the meaning and sound is the most difficult and successful option, when the creators manage to preserve the pronunciation. Besides, they put the original meaning into the translation and avoid negative perception of images.

Sanofi

Sanofi also uses this approach. For example, its product Aprovel has a Chinese name “安博维” (“Anbowei”), where “an” means “safe”. 

Source: Taobao, Aprovel in the Chinese market

Merck & Co Inc

Merch also has some product names which combine phonetics and meaning. For instance, Glucophage has a Chinese name: “格华止” (“Gehuazhi”). “Zhi” means “stop”. Since the main function of the medicine is to deal with diabetes, “Zhi” means that the product can stop the disease and keep balance of body.

Another product Euthyrox has its Chinese name “优甲乐” (“Youjiale”). “You” and “Le” means great and happy. “Jia” is the same character with “Jia” in “Jiazhuangxian” (thyroid). It conveys a message that the product can do good to thyroid diseases.

Source: Taobao, Glucophage and Euthyrox in the Chinese market

F Hoffmann-La Roche Ltd

The product of this company Xeloda in Chinese sounds like “希罗达” (“Xiluoda”). It uses same character “Luo” as ”Luo” in the company name. “Xi” represents “hope”.

Source: Taobao, Xeloda in the Chinese market

Johnson & Johnson

Source: Johnson&Johnson, Johnson&Johnson website page in Chinese

Johnson & Johnson uses “phonetic + evocative” approach for its brand name in China. In Chinese it is “强生” (“Qiang Sheng”). “Qiang” means “strong” and “sheng” means “life”. “Qiangsheng” conveys a message of “make life stronger”. 

Same approach is for some products. For example, Acuvue’s Chinese name is “安视优” (“Anshiyou”).

“Anshiyou” stands for  “having stable and better eyesight”.

Bayer AG

Bayer uses this approach for Redoxon product. Chinese name is “力度伸” (“Lidushen”). “Lidu” means “strength and power”. “Shen” means “strengthen”. The name conveys a message that people can gain more power after eating the vitamin tablets.

Source: Taobao, Redoxon in the Chinese market

Novartis

Source: Novartis, Novartis website page in Chinese

The Chinese brand name of Novartis is “诺华” (“Nuo Hua”). “Nuo” means “promise” and “Hua” means “China”. Nuo Hua would like to make a promise to China, keep providing innovative products and contribute to the improvement of health and living quality of Chinese people.

Its product Lucentis’s Chinese name is “诺适得” (“Nuoshide”). “Nuoshide” adopt phonetic and evocative strategy by using the same character “Nuo” as the company name “Nuo Hua”.  “Shi” and “De” represent for “comportable”. 

Pfizer Inc

Pfizer has some products named according to “phonetic + evocative” approach. For instance, Diflucan’s Chinese name is “大扶康” (“Dafukang”). “Da” means “big”, “Fu” means “help” and “Kang” represents “a good health”. Another product Lipitor – “立普妥” (“Liputuo”) in Chinese. “Li” and “Tuo” stands for “a high speed”. “Liputuo” means that the problem can be solved in a short time.

Eli Lilly and Co

Source: Eli Lilly, Eli Lilly in the Chinese market

American brand Eli Lilly and Co is another example of combining semantics and meaning. Its Chinese name is  “礼来” (“Li Lai”).  “Li” means “courtesy and politeness” in Chinese and it is an important virtue in Chinese society.  “Lai” means “come”. “Li Lai” conveys a message that the company is gentle and is willing to do good to the Chinese society. This brand is also very special, because of its visual identity. Typography and name totally stand out from the competition in the Chinese market.  Their name is something that you would expect seeing in the hospitality industry for instance (“courtesy/politeness is coming”). Same for their typography, hand-written, as it relates to tailor-made/crafted/personalized products.

Source: JD, Ceclor in the Chinese market

Its products Ceclor’s Chinese name is “希刻劳”(“Xikelao”). “Xi” means “hope”. Zyprexa’s Chinese name is “再普乐” (“Zaipule”). “Zai” means “again” and “Le” means “happiness”. The name conveys a positive message. 

Phonetic and descriptive names

This approach to the Chinese brand names in the pharmaceutical industry means that the name gives a hint of the effect of the product. At the same time, there is a certain parallel in the phonetics of the word with the original name.

GlaxoSmithKline Plc

This company uses this approach to the Requip, which helps to treat Parkinson disease. The Chinese name is “力备” (“Li Bei”). “Li Bei” means to have the power, which can reflect the function to release Parkinson symptoms.

Source: Taobao, Requip in the Chinese market

AbbVie Inc

Its product Calcijex has a Chinese name: “溉纯” (“Gai Chun”). “Chun” stands for “pure”. Since the product is a liquid used for injection, it gives people a sense of pureness.

Descriptive

This approach to the Chinese brand names in the pharmaceutical industry adapts the brand name so that Chinese consumers understand what effect the product has. It doesn’t have to sound similar to the original name.

GlaxoSmithKline Plc

The example of this approach is company’s product Avamys. In Chinese it is “鼻眼适”(“Biyanshi”). “Biyanshi” means make both nose and eyes comfortable, which can represent the core function of the product.

Source: Taobao, Avamys in the Chinese market

Key Takeaways of pharmaceutical brand naming in Chinese

• Most of the Chinese brand names in the pharmaceutical industry apply phonetic approach. It could be explained by the fact that it is simpler and does not require spending time finding the characters that convey the essence of the product.
• Some companies in the pharmaceutical industry in China use “phonetic + evocative” approach. It helps Chinese customers to better understand what effect product has. However, it is harder to come up with the brand name which sounds similar in Chinese language and has a clear meaning.
• The descriptive approach helps Chinese customers to better understand the product, but it has little correlation with the original brand name.

Vitamin and health supplements market report by daxue consulting from Daxue Consulting

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article Chinese brand naming case studies in the pharmaceutical industry is the first one to appear on Daxue Consulting - Market Research China.

Overview of the Chinese cosmetics market

China’s cosmetics performance in the global stage 

According to Euromonitor, China’s cosmetics market occupies 12.7% of the global cosmetics market, becoming the second-largest market after the US.

Data source: Euromonitor, Top 10 cosmetics markets globally

Even after several years of market expansion, the market still seems to have a fine potential for growth in the future. According to Euromonitor, the CAGR of the Chinese cosmetics market is the highest in the world.

Data source: Euromonitor, Top 10 cosmetics market ranked by CAGR

Based on data from the National Bureau of Statistics, the yearly growing pace is remaining at about 10% since 2013 and the total retail sales reached 299.2 billion RMB in total. Hence, investing in such a large and consistent growing market can bring high revenue to the company.

Source: National Bureau of Statistics, Total cosmetics retail sales in China

Chinese domestic cosmetics brands are prospering

Cosmetics comprise a wide range of products like skincare, makeup and perfume. In the Chinese cosmetics market, skincare products are the main consumption force, and makeup products increased its market share year by year. Skincare products consistently accounted for over 50% of the Chinese cosmetics market. On top of this, makeup products have been continuously increasing since 2014.

Data source: Euromonitor, Cosmetics market distribution by category

Seven of the ten top cosmetics brands in China sare Chinese domestic cosmetics brands. The attention rate of Perfect Diary is far higher than other brands, meaning that a lot of cosmetics fans in China follow Perfect Diary.

Data source: QuestMobile New Media, Which Chinese domestic makeup brands are the most popular

Among the top 100 most popular cosmetics brands in China, 37% are Chinese domestic makeup brands.

Data source: QuestMobile New Media, Regional Distribution of top popular 100 brands

There are two cosmetics categories where Chinese domestic cosmetics brands have a strong position. These categories are essential skincare related products and eye make-up. Essential skincare products like hand cream, mask and cleanser have high daily consumption. Chinese domestic cosmetics brands could use price advantage to compete, through controlling the supply chain to lower cost. Besides, unique design helps Chinese domestic makeup brands make eyeshadow and eyebrow pencil hot products.

Data source: QuestMobile New Media Database, Origin of brands dominating China’s cosmetics market by product category

The rise of Chinese domestic makeup brands is correlated with sales promotions. According to Askci, 2 of the top 5 sales brands were Chinese domestic cosmetics brands during 618 shopping festival in 2020. Perfect Diary and Florasis ranked first and fourth respectively.

Data source: Askci, Cosmetics brands sold most during 618 shopping festival

Chinese cosmetics consumers portrait

According to data on Tmall and Taobao, consumers under 30 years old place most of cosmetics orders. Most of them are post-90 or even post-00. Students aged 18–22 made up over 25%, but their market share has decreased.

Data source: Tmall & Taobao, Chinese cosmetics consumers distribution by age

However, the share of consumers over 30 years old has an overall increase. This increase might because people aged over 30 gradually build and wake up the awareness of using skincare and makeup. Therefore, the demand for cosmetics among them goes up.

What Chinese domestic cosmetics brands consumers purchase most

According to the skincare top sales, Pechoin harvested 1,733 million RMB in sales, ranking first, followed by Chando and WIS, with 1,653 and 1,515 million RMB respectively.  

Data source: Tmall & Taobao, Top Chinese skincare brands

In the makeup market, top brands are different from top skincare brands, although some makeup brands provide cosmetics products. Perfect Diary maintained its performance and ranked first, with 2,762 million sales.

Data source: Tmall & Taobao, Top Chinese makeup brands

What makes Chinese domestic cosmetics brands different

Compared to foreign cosmetics brands, Chinese brands seem to put their eggs in more baskets. Their marketing efforts are spread through much more variety of activity and spread across many more platforms.

Creating a KOL marketing feedback cycle with short video apps, live-streams and KOLs

The rise of most Chinese domestic cosmetics brands attributes to social seeding through KOL marketing and cooperations. This feeds a feedback cycle where consumers give feedback on open platforms, where brands can then apply to their product development.

Data source: QuestMobile, Online marketing mode

Leverage traffic of multi-channel, post content in different forms

Traffic in multi-channel is other boost for the development of Chinese domestic cosmetics brands. It is common to market on Douyin, Kuaishou, Weibo, Wechat and Red, but each social platform has its own marketing strategy. On Douyin and Kuaishou, where people post short videos, brands cooperated with KOL to post makeup try-on, makeup tutorial and unbox testing. On Weibo, brands normally implement celebrity endorsement. On Wechat official account, brands post deep introduction of products. On Red, brands and KOLs post products-related tutorial.

Data source: QuestMobile, Online marketing in different forms

Launch cross-over products in big e-commerce promotion

Co-branding is more a strategy to get hold of targeted audiences who have complex behaviors. Through cooperating, brands can find a connection between consumers and brands. For example, Chando’s cooperation with Bilibili is a new try for its marketing strategy. As a place attracts most young generation, Bilibili provides a platform for Chando to increase consumers base.

Source: Chando, Chando X Bilibili

Unique marketing strategies for each Chinese domestic cosmetics brand

Perfect Diary, a textbook case for private traffic

Perfect Diary, established in 2016, is one of the young Chinese domestic brands. It targets 20-35 year old women, which is a high spending power group. In March 2017, it opened an online store on Taobao and Tmall. Half a year later, Perfect Diary opened on Red, WeChat store and hosted three Pop-up stores in Shanghai. In 2018, It established a Douyin and JD store. On January 19^th, 2019, it owned the first offline experience store in Guangzhou and expanded to 40 offline stores now.  

Behind Perfect Diary’s bold IP collaborations

IP cooperation is becoming a popular marketing method for domestic Chinese brands. Perfect Dairy cooperated with lots of IPs to launch new products. The most popular IP cooperation is with the Discovery channel.

Source: Tmall, Perfect Diary X Discovery

The history of Perfect Diary’s IP cooperation consists of three stages. In the first stage, Perfect Diary started to explore the market and launched fashion week related products. It reached celebrities, who have high credibility and cultivate the trust in the market. In the second stage which is the explosive phase, Perfect Diary cooperated with cross-over IP and KOLs to promote a single product. In this stage, it cooperated with makeup KOLs and reached to the followers, which increase the influencing power of brand. In the third stage where the brand continuously grew, it cooperated with mass and trendy IP. This cooperation helps to expand customers group, including people make-up beginners. 

Perfect Diary implements private traffic to build brand-owned traffic pool

Perfect Diary builds private traffic in two ways and uses two virtual BA (Beauty Advisor) to manage different types of consumers. Xiaowanzi (小完子) is in charge of consumers, who purchase online and joined through a lucky money card. Xiaomeizi (小美子) maintains the consumers who attracted from offline pop-stores or give aways. The source of customers is different, which requires two virtual BA to communicate customers in different tactics.  

Data source: Maoshihu, Process to reach Xiaowanzi

Florasis redefines the oriental cosmetics

Florasis’ sales performance is rising

Florasis was founded in March 2017 and opened its Tmall flagship store in August 2018. Although the sales for 2018 were only 43.19 million RMB, Florasis’ sales reached 1.1 billion RMB in 2019, rising nearly 25-fold. 

Florasis also presents an excellent in its first Double Eleven promotion. According to Mktindex, Florasis gained 220 million RMB sales and ranked fifth among the top 10 Chinese cosmetics brands that gained most sales.

Distinctly Asian makeup

As a chinoiserie cosmetics representative, the idea behind Florasis brand is ‘the Oriental makeup, using flowers to nourish the makeup look’. It includes everything from product ingredients to package design. Product ingredients highlight to use nature grasses and flower, and nourish the skin mildly. Package design and product name also filled with chinoiserie. For example, Florasis’s carved lipstick replicates the ancient Chinese carving technique and carved flowers on the lipstick, creating a precedent for the three-dimensional texture lipstick in China.

Source: Taobao, Florasis’s classical relievo

Pregnant woman friendly

Florasis gives people a safe and harm-free impression. It emphasizes that its products contain zero alcohol, zero-hormones and contains no harmful ingredients. An actor (Jiani Zhang) in Story of Yanxi Palace, which is a popular Chinese drama, recommended Florasis’ CC cushion. Zhang posted her using experience as a pregnant woman on Red, which drew most followers’ attention and discussion.

Source: Red, Jiani Zhang promoted Florasis’ product

Picking right KOL and spokesman

According to Baidu Index, the spokesman’s effect can be observed. On 3^rd March 2019, search word ‘花西子’ peaked because Justin Lee promoted Florasis’ loose powder. Another peak on 18^th May 2019 is because Florasis announce Jingyi Ju as spokesman. Jingyi and Florasis is a perfect match, because Jingyi owns high traffic and was known as the oriental beauty.

Data source: Baidu index, What increase the search of ‘Florasis’

Little Dream Garden, a black horse in the body care market

Targets ingredient-oriented consumers

Little Dream Garden is a Chinese cosmetic, focusing on developing body care products. It targets customers who care about the ingredients. Therefore, it emphasizes the ingredient and efficacy, naming product by main ingredient, such as Shea Butter body scrub and Ceramide body lotion.

Source: Taobao, Shea Butter body scrub

Posts testing video to build trust

Little Dream Garden leverages KOLs and KOCs to post product testing videos on Red, guiding users to join in the discussion. The opinion of KOL and KOC can increase trust rate and prompt consumers to buy the products.

Source: Red, Products testing video

How WIS involves celebrities on Weibo

WIS is a Chinese domestic skincare brand, created in 2011. It aims to provide scientific and effective products. It does not have any offline store so far. The brand targets consumers aged 18 -35 who have the strong social ability. For brand positioning, low-price capture lots of post-90 and post-00’s interest.

Source: Wechat, WIS products

Weibo is WIS’ social marketing asset

The popularity of WIS results from social marketing on Weibo. For example, a member of Happy family, Weijia Lee, recommended its product on Weibo, which attracted more than 240 million readers and brought around ten thousand followers for WIS. At the same time, celebrities, such as Jiu He and Na Xie, reposted the Weibo and reinforce the marketing effect.

Source: Weibo, Weijia Lee promoted WIS

What can brands learn from the success of Chinese domestic cosmetics brands

Although foreign cosmetics brands represented more than half of the cosmetic market in China, the rise of Chinese cosmetics cannot be overlooked. In fact, they can provide a learning opportunity on how to effectively appeal to Chinese consumers.

• Listen to the customers

Under short video App + Live Broadcast + KOL marketing mode, brands not only promote their products but also listen to the feedback from customers. Upgrading products according to the feedback is an important strategy to maintain brands’ sales performance.

• Pick the right brands for collaborations

Most Chinese domestic cosmetics brands implement cooperation with brands in different fields, celebrities and etc. to launch limited products. This campaign can bring the brands more consumers, strengthen brand image and increase brand volume.

• Promote in an appropriate form

Chinese cosmetics brands promote their products in different forms according to the character of a product. A testing video will gain more trust for a product that emphasizes its harmless ingredients. 

Learn more about the Chinese cosmetics and personal care market

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article The rise of Chinese domestic cosmetics brands: Florasis, Little Dream Garden, WIS, and Perfect Diary is the first one to appear on Daxue Consulting - Market Research China.

History of Marie Dalgar

In December 2006, Marie Dalgar ((玛丽黛佳) created its first grafted mascara, which completely overturned traditional view on mascara. It achieved an amazing sales performance: Marie Dalgar claimed that they sell one mascara every 15 seconds. In May 2008, the Chinese cosmetics brand formally established Shanghai Feiyang Cosmetics Co., Ltd., the marketing center. The brand has followed the rapid development path based in Shanghai and expanding to the whole country. In the same year, it launched its official website, providing consumers with a comprehensive information platform. 

In January 2010, Marie Dalgar opened its’ international factory in Shanghai Fengxian Industrial Park, covering an area of ​​20 acres, which is the largest mascara production base in Asia. Besides, it won the “China Cosmetics Annual Best Single Product Award” at the 2010 China Cosmetics Industry Conference.

In March 2011, Marie Dalgar won the 2010 “Best Makeup Brand” and “Best Single Product” awards in China’s cosmetics industry. In the same year, the brand joined hands with the well-known fashion women’s website Kimiss, and organized makeup contest with international brands such as Armani, Bobbi Brown, and MAC.

Currently, Marie Dalgar is one of the most promising cosmetics brands in the Chinese market.

Marie Dalgar’s brand concept

As the brand claims, besides the perfect effects, makeup is also an artistic master piece. It enhances confidence and it is a factor for different life expression. Marie Dalgar represents the spirit of modern woman’s personality and the attitude of women in this era.

Focusing on young consumers

From the user portrait, Marie Dalgar’s target group is 18-24 year old college students, and 25-35 young white-collar workers in China who have just started work.  Brand has a strong focus on young consumers and builds products that are easy for them to use on different occasions. The youthful brand naturally attracts young consumers through its product innovation and engaging cross-over marketing in the ‘new retail’ environment. Having its own research and development centers and manufacturing bases allows Marie Dalgar to innovate and meet changing demands quickly.

Data Source: NetVoices, 2018 Top Cosmetic Brands in China Report, Marie Dalgar’s consumers by age

Marie Dalgar’s marketing strategies

The domestic brand embraces the “New Retail” concept, taking a unique approach to increase the consumer experience and build brand awareness. On top of this, it has been a pioneer in collaborations.

Cooperating with third parties for campaigns

Co-branding is a key marketing strategy. These collaborations are through co-branding, such as collaboration with KFC and Heineken, and through collaboration with social media platforms like Douyin.

Co-branding rather than embassadors

Every year, Marie Dalgar holds Crossover Art Project. The brand invites artists to express themselves by using its make-up products. For example, fashion photographer Paco Peregrin chose the theme ‘Facing’ in 2015. The following year, photographer Damien Dufresne opted for ‘Through your eyes’ . For its products packaging, the brand also calls on artists, like the young Chinese artist JINLE, invited to celebrate the year of the pig. Out of a limited edition run of 3,000 units, Marie Dalgar sold 1,000 units within 10 minutes. The campaign reached 62 million consumers online, with a total of 50 million engagements.

Source: Marie Dalgar, Wechat, Year of the pig campaign 

Cooperation with KFC

The young makeup brand decided to take advantage of the expanding retail ecosystem by cooperating with third parties for special campaigns. Marie Dalgar outsourced sales efforts and found other ways to use partners’ e-commerce platforms in China. In 2017 Marie Dalgar cooperated with KFC on campaigns and advertising, pulling in traffic from KFC’s huge consumer base.

Source: Chinessima, Marie Dalgar’s cooperation campaign with KFC

Marie Dalgar and KFC created the “Pink is Cool” theme cross-border lipstick gift box. “Pink” and the shared target audience became the basis of this cross-industry cooperation. Marie Dalgar used this collaborative lipstick to create a cool makeup look, and attracted the attention of makeup consumers through the sharing on the Weitao platform. KFC used stores and offline resources to create a cross-border offline theme store to promote this cooperation. The campaign helped the brand win 1.4 million visits on Tmall’s official store and make over RMB 12 million in sales. Most of visits were from selling limited edition gift sets, which included both KFC coupons and lipsticks.

Cooperation with TikTok

In April 2018, Marie Dalgar and TikTok jointly launched challenge event. Being the first collaboration of its kind in the beauty industry, the video challenge had a maximum number of participants of 75,000. The event and related advertisements reached approximately 288 million people.

Cooperation with CCTV

Marie Dalgar partnered with the CCTV documentary series “National Treasure” for a limited-edition lipstick. It helped to build a well-earned reputation among consumers for championing Chinese heritage. Collaborations don’t even need to be in the realm of high culture as long as it will reach the masses in popular spaces.

Cooperation with Heineken

Marie Dalgar teamed up with brewing giant Heineken and Tmall in 2019 to release a “forgiveness” gift box. The gift box was released on Tmall’s “Fans Day” to coincide with the European Champions’ League soccer final, which Heineken sponsors. The hook: soccer lovers could give their partners a gift box to beg “forgiveness” and apologize for ignoring them while watching the final. “Wearing a green cap” in Chinese means “to cheat on your loved one”–in this case, with soccer. Two boxes were offered in “his” and “hers” editions. One box featured green lipsticks and green tea flavors, while the other contained limited-edition Champions’ League bottles of Heineken.

Marie Dalgar uses AR to attract customers

Marie Dalgar and Ali jointly launched the “unmanned color vending machine” and the beauty unmanned store “TO GO “ combined with the platform’s big data to reach more potential consumers.  Marie Dalgar’s “TO GO” store features an augmented reality (AR) mirror to link offline consumers’ experience with their online purchase. This application of AI in beauty  boosted both offline and online sales.

Source: Chinessima, Marie Dalgar’s “TO GO” store in Shanghai

WeChat and Tmall are key platforms for brand’s retail and marketing

Marie Dalgar established the “Playing Color Academy” on WeChat. They use this mini-program to make more customers to reach offline channels. On top of this, Marie Dalgar uses WeChat database for analysis of user portraits and then send it to product development department.

Marie Dalgar actively uses Tmall and gained popularity among its users. In 2018 its rating there was even higher than such cosmetic giants as Armani, Estee Lauder and YSL. Besides, brand’s live streaming on Double Eleven was equally astonishing, with a total of nearly 100 live broadcasts for 300 hours and 1.3 million views. 

Data Source: NetVoices, 2018 Top Cosmetic Brands in China Report, Make-up brands rating among e-commerce users in China

Marie Dalgar is one of the leading cosmetic brands in China

Marie Dalgar is one of the fast-growing brands in the make-up market in China. Such foreign cosmetics brands in China as YSL, Dior and MAC are on the top of ranking.

Data Source: Kantar, Top-5 fast-growing make-up brands in China

Innovative products push Marie Dalgar’s sales in China

In its early stages, Marie Dalgar attracted attention thanks to its “grafting” mascara, especially adapted to the relatively short and sparse eyelashes of Asian people. “It lengthens eyelashes by 300% and increases their density by 700%”, according to Jumeili.

Marie Dalgar’s Innovative products:

• The world’s first grafted mascara
• The first micro-vibration electric mascara in China
• The first domestically baked eyeshadow and blush
• The first mascara with retractable brush in China
• The first vibrating mascara in China
• The first domestic mascara with adjustable thickness and variable extension brush

Pioneering projects:

• The first domestic mascara with 360° rotating brush
• The first custom-made DIY eye shadow in China

Marie Dalgar was the number one domestic makeup brand during the 2018 Double Eleven festival

On Double 11 shopping festival in 2018, Marie Dalgar’s online flagship store was on the Tmall’s Top Beauty brands list. Its mascara also was in TOP 3 hot single products. The daily turnover of offline shopping mall channel stores increased by 414% year-on-year during 11.11 festival. Marie Dalgar participated in Tmall Double Eleven many times, and won the “New Retail Outstanding Contribution Award” from Tmall. The relationship between Marie Dalgar and Tmall are complementary.

Marie Dalgar expands to the Asian market

All of these steps helped to make Marie Dalgar one of the best-selling local brands and advanced the company onto the global stage. It became the first Chinese brand to sell its products in Sephora stores outside of China.

Expansion to Singapore

At the end of 2018, the brand entered Singapore via Sephora. To Mary Dalgar’s CEO, Chen Haijun (陈海军), Southeast Asia is only a preamble before Europe and the United States. “Worldwide markets will represent 20% of the brand business within 5 years”, he said.

Because of it’s strong innovation power, and collaborations to expand it’s consumer base, Marie Dalgar is one Chinese brand that is worth learning from.

Learn more about China’s cosmetics market in our report

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article Marie Dalgar: a Chinese cosmetic brand gaining international momentum is the first one to appear on Daxue Consulting - Market Research China.

China is the second largest cosmetics market in Asia and the fifth in the world. It has been a profitable paradise for foreign cosmetics brands for a long time. Foreign cosmetics brands in China own around 70% of the market. In 2018, P&G and L’Oreal had the biggest market share in China, with 25.8% and 21.5% accordingly. The American Procter & Gamble, the French L’Oreal, The Japanese Shiseido, the Anglo-Dutch Unilever and the American Estee Lauder are the key players in China’s cosmetic market.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands)

Chinese consumers’ behavior is evolving very quickly, due to the huge economic growth. Hence, the middle-class in China are more sensitive to their life quality and health-awareness. Therefore Chinese consumers have been more interested in using overseas products which have a long history and more refined products.

Marketing strategies of foreign cosmetics brands in China

L’Oreal is a huge success among foreign cosmetics brands in China

L’Oreal shows rapid growth in Chinese e-commerce

The French brand has grown ten-fold on e-commerce since 2011. It is the leader on e-commerce in China, which is the fastest growing channel for L’Oreal. In 2020 e-commerce already makes up 50% of L’Oreal’s China sales.

Data Source: L’Oreal Group Annual Reports, Percentage of Loreal China sales from e-commerce

The next step for L’Oreal is new retail: the combination of the offline and online channels. It includes such technologies as augmented reality, virtual reality, and artificial intelligence. Today L’Oreal in China already provides skincare diagnostic supported by artificial intelligence for Vichy on Tmall.

Foreign cosmetics brands actively use KOLs in such online platforms as WeChat and Weibo. For example, many celebrities like Li Gong, Zhilei Xin (Famous Chinese actresses) promote L’Oreal cosmetics among Weibo users. 

Personalization and co-branding are the key cosmetics marketing strategy in China for L’Oreal

More and more companies focus on offering personalized experiences for their customers. To create a more customized digital experience, L’Oreal has integrated technology to let people “try on” lipsticks by pointing their smartphone camera at themselves. The L’Oreal-owned Giorgio Armani make-up brand became the first luxury line to use the technology on WeChat. WeChat users can order them from Giorgio Armani Beauty’s mini-program shopping site. Users also can screenshot, save and share images as well as view before and after images to elevate the consumer shopping experience. 

Source: Cosmetic Design Asia, Loreal Group has launched of its Augmented Reality (AR) make-up try-on application ModiFace in China

L’Oreal’s quick rebound after COVID-19

The French brand reported that its China sales have seen signs of recovery since the COVID-19 outbreak. Despite overall sales for the quarter shrinking globally, L’Oreal China achieved high growth in March 2020. The CEO of L’Oreal Group, Jean-Paul Agon highlighted that the company’s performance in China was “remarkable”.​ “China was able to close the quarter at plus 6% which is pretty amazing when you think about the difficulty that they had due to the pandemic.”​ L’Oreal China recovered quickly due the early restoration of operation and wide usage of the online-to-offline model. Additionally, during the Women’s Day Festival on March 8^th, 2020, L’Oreal group launched an online shopping event in China to trigger sales.

In March 2020 sales of L’Oreal Group in China became positive again. That proves that using of online-to-offline model and social networks promotion were successful marketing strategies for L’Oreal in China, and especially boosted their sales through the tail end of the pandemic.

Estée Lauder tops the list of 100 most prestigious cosmetics brands in China

Estée Lauder targets young Chinese millennials

The beauty brand targets young millennials to tap into China’s booming cosmetics and personal care industry. Its shift away from older consumers is part of its long-term investment strategy in the country. Estée Lauder’s cosmetics marketing strategy in China is to position itself as millennial-focused. It quickly identified that tapping into the high spending ability of young Chinese consumers with specialized luxury lines is essential for its success.

To gain a clear, competitive edge over its rivals, it redesigned its marketing campaigns. For example, Estee Lauder in China increased digital engagement, leveraged social media platforms such as WeChat and Weibo. Additionally, like many other foreign cosmetics brands, it collaborated with the local celebrities.

Estee Lauder focuses on digital strategy

E-commerce in China has developed rapidly and is a popular way to shop for most Chinese. Thus, it took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, the brand became one of the first high-end cosmetics brands to enter Tmall. They built a professional team with 50 persons to focus on the brand’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder Group in China had 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, as a part of its cosmetics marketing strategy in China, Estee Lauder opened online stores for its sub-brands. It helped to bring more consumption to the Group.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

KOLs and special products push the sales of Estee Lauder in China

Estee Lauder invests heavily in digital marketing, social media, and KOLs. For example, Yang Mi, a famous actress in China, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over 500 percent more sales. Meanwhile, some popular KOLs in China helped to increase consumption. In 2019’s double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Estee Lauder’s matrix covers almost all categories of cosmetic products and price ranges, reducing the risk that customers switch brands as their preferences evolve. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

P&G’s cosmetics marketing strategy in China highlights premium innovation and product mix

P&G launches a premium skincare brand in China

Unlike other top foreign cosmetics brands in China, Procter & Gamble (P&G) decided to put focus on the premium segment. In 2019 this American company brought a premium skincare brand called Oriental Therapy to the Chinese market. Chinese herbal medicine inspired the company to create this cosmetic line.

What makes it especially unique is that it meets skin’s different needs during the four seasons. According to Oriental Therapy’s Weibo post, the beauty line focuses especially on Chinese women.  The brand is now available via Tmall, WeChat, and Xiaohongshu shopping platforms. P&G believes that Oriental Therapy will fill the gap P&G has in its beauty offering in China. One of its key products, Springtime Hydrating Essence costs 450 RMB or 65 USD. The brand’s skin-care sets cost between 740 and 1140 RMB, or 107 to 165 USD.

Source: Weibo, Premium skin-care brand Oriental Therapy for China

However, P&G faces a lot of competition among foreign cosmetics brands. For example, companies like Estee Lauder and Shiseido are also upping the ante through launching new brands including DARPHIN and D-Program.

P&G uses Alibaba to sell in China

To expand its e-commerce P&G has turned to Alibaba Group, which operates the country’s largest online marketplaces. Alibaba also offers digital marketing solutions and access to a huge audience via its media ecosystem, including  Alibaba-related companies such as video-streaming site Youku and the Twitter-like Weibo microblogging site.

“E-commerce also plays a significant role in brand building, which is changing P&G’s century-long brand-building model.” – says Jasmine Xu, the company’s vice president for Greater China e-business and branding. Oriental Therapy has also opened a flagship store on Tmall, where it offers products in different combinations.

China is the second biggest market for Shiseido

Shiseido adopts cooperative cosmetics marketing strategy in China

In 2020 the Shiseido Group opened its first Beauty Innovation Hub outside of Japan at its flagship space in Shanghai.  Shiseido Beauty Innovation Hub represents a new way of working to drive consumer-centric solutions in China. At this space, Shiseido plans to collaborate with Chinese startups and disrupters, and create innovation which will deliver true value. Cooperation and localization, rather than head-on confrontation, is the strategy Shiseido takes. The Beauty Innovation Hub aims to work with local startups in the extended beauty space. On top of this, Shiseido in China plans to experiment and create new businesses. The hub serves as an open innovation platform for Chinese startups, opinion leaders, area experts, media and scientists.

Source: Medium.com, Shiseido Beauty Innovation Hub in Shanghai

Shiseido in China joins Tmall to promote online sales

In 2018, Shiseido revealed their New Retail strategy. A part of this strategy is a platform they developed called the “Shiseido Official Beauty Star Product Hall”.

In 2019, Shiseido signed a partnership with Tmall. It helped to develop new products based on what Chinese consumers are searching for on Tmall. The first co-developed products, a ‘mild and refreshing scalp shampoo’ and an ‘essence oil for split ends’ will launch on Tmall under Shiseido’s hair and body care brand Aquair. Shiseido said it expects e-commerce to generate 40% of its China sales by 2020.

“Without a doubt, whether it be e-commerce or digital innovation, Alibaba is the leader. Alibaba is one of the most important strategic partners for Shiseido China as well as for the entire group,” said Fujiwara, Shiseido’s CEO.

Data Source: Shiseido Annual Reports, Percentage of Shiseido China sales from e-commerce

Mary Kay uses scientific innovation in China

Mary Kay China targets young consumers

As Chinese consumers are more and more informed about beauty, Mary Kay is facing the challenge of developing interesting products. “In China​, beauty consumers demand for products and services are constantly increasing.

The current consumer trend of skin rejuvenation in China is strengthening, and the purchasing power of the 18 to 24 age group is rising,” said Katherine Weng, general manager of Mary Kay China. To cater to younger consumers, the company’s cosmetics marketing strategy in China is to create “bold and interesting” ​products. In 2019, it launched Pink Young brand in China. As company claims, “It’s the answer for today’s woman who wants to show her femininity along with her fierceness.”

In 2018, the company invested around $50 million in the Mary Kay Science and Technology Center, located in Shanghai. Additionally, the company sees the need to increase its online presence. It has launched a new channel which enables consumers to use WeChat to place orders with independent beauty consultants.

Mary Kay focuses on direct sales in China

Mary Kay is one of the world’s biggest direct selling enterprises of skin care products and cosmetics. Within a short time, Mary Kay China established its name among Chinese consumers and experienced steady growth in the country’s first-tier cities. Now, it has set up 35 branch offices across the country. When the company first began expanding beyond China’s big cities, its direct-sales model was new to consumers in China’s second- and third-tier cities.

Mary Kay has three key strategies. First, it drew up strict rules on how beauty consultants should conduct themselves and present Mary Kay products. Second, it developed advertising campaigns in a variety of regional print and broadcast media. Third, the management team established special training programs for consultants.

The sales force represents a competitive advantage. Consultants know their customers well. Such personal networks are vital because Chinese consumers tend to trust people with whom they have a good relationship. Their close relationships with relatives and friends would ease making follow-up visits to get feedback and introduce new products.

Summary of the marketing strategies of foreign cosmetics brands in China

Co-branding

Not many foreign cosmetics brands use co-branding as a key strategy. Co-branding helps brands “exchange” customers, and effectively expand their consumer base. As competition in the Chinese cosmetics market is fierce, such giants as L’Oreal or P&G have not shown interested in involving other brands for cooperation. Shiseido has another approach. It has its Innovation Center in Japan, where it also cooperates with other local brands. Thus, cooperation with the Chinese start-ups was a natural marketing strategy for this company.

KOL marketing

KOLs are popular social media users who can influence a wide audience. In China they usually post on WeChat or Weibo, but other platforms like Xiaohongshu can be considered depending on the target audience. Many foreign brands cooperate with them to expand their audience, especially among millennials. To gain new consumers and increase sales, L’Oreal and Estee Lauder chose this cosmetics marketing strategy in China.

Direct sales

Direct sales are a traditional channel for all foreign brands in China. However, as of 2020 most brands consider e-commerce as a key sphere for development. During the COVID-19 outbreak direct sales showed its vulnerability. Mary Kay is the brand which always had its special strategy of creating personal relations between beauty consultants and customers. Nevertheless, now Mary Kay in China is also considering using digital technologies to promote its products.

E-commerce

The target audience in the cosmetics industry is the post-80’s and post-90’s generations. They always keep up with the latest trends and care a lot about their appearance. One of the most effective ways to approach them is to find where they spend most of their time: online platforms and social networks. Most foreign brands widely use online methods to expand their influence in the Chinese cosmetics market.

Special products

Some foreign brands focus on a special approach to the Chinese market. They create products and sub-brands oriented on the Asian audience. It could be skincare products created specifically for Asian skin or inspired by the Chinese traditional medicine. That helps to increase customers’ loyalty and increase sales in the Chinese market.

Author: Valeriia Mikhailova

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

<iframe src=”//www.slideshare.net/slideshow/embed_code/key/naoF39ytNoyFpJ” width=”595″ height=”485″ frameborder=”0″ marginwidth=”0″ marginheight=”0″ scrolling=”no” style=”border:1px solid #CCC; border-width:1px; margin-bottom:5px; max-width: 100%;” allowfullscreen> </iframe> <div style=”margin-bottom:5px”> <strong> <a href=”//www.slideshare.net/DaxueConsulting/the-cosmetics-and-personal-care-market” title=”The cosmetics and personal care market in China by Daxue consulting” target=”_blank”>The cosmetics and personal care market in China by Daxue consulting</a> </strong> from <strong><a href=”https://www.slideshare.net/DaxueConsulting” target=”_blank”>Daxue Consulting</a></strong> </div>

This article Marketing strategies of foreign cosmetics brands in China is the first one to appear on Daxue Consulting - Market Research China.

Meanwhile, Estee Lauder Group launched twelve brands into the Chinese cosmetic market, enabling China to be its No.2 international market. In 2019, Estee Lauder Group’s net sales in the Asian-Pacific region reached 3.6 billion USD. In contrast to the American region’s negative change, the Asian-Pacific area earned a 21 percent increase year-over-year.

Data Source: JUMEILI.CN, Regional Net Sales of Estee Lauder Group

History of Estee Lauder

Mrs. Estee Lauder created Estee Lauder in New York. Now, it is the world’s biggest company for skincare products, cosmetics, and perfume. Its products are available in over 13,000 outlets in over 130 countries around the globe. One of Estee Lauder’s strengths is R&D and product development. Also, it keeps a harmonious relationship with its customers, making it possible for the company to acquire more growth in the future. Mrs. Estee Lauder had always insisted that a woman can always be beautiful and fashionable. Thus she injected her lifestyle and sensitivity to fashion into the brand.

The layout of the Estee Lauder Group in China

Estee Lauder Group launched many well-known brands, promoting its whole layout in the Chinese cosmetics market.

Estee Lauder Group in China desires to provide a wide range of cosmetic products to Chinese customers

When Estee Lauder initially entered China, it focused on high-end product sales. In 2005, however, it launched six new brands into the Chinese market. Estee Lauder assigns its brands to different target customers. It hopes every customer can find suitable products from Estee Lauder Group. M.A.C highlights the personal style, looking more fashionable, while Estee Lauder is a typical high-end brand. Now, all-around brands’ matrix almost covers all categories of cosmetic products and price zone, reducing the risk that customers change their preferences. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

Brand matrix of Estee Lauder Group in China

Now, Estee Lauder Group has many famous brands. Its top brand is LA MER. Then Estee Lauder follows as the first tier brand, and Clinique and Origins follow as the second-tier brands. Smaller brands also include Aramis, Prescriptive, Tommy Hilfiger Toiletrie, Kiton, Darphin, Michael Kors Fragrance, and Bobbi Brown. Currently, only parts of its brands are in the Chinese market. However, Estee Lauder Group never stops its expansion in the Chinese market. On June 16th, 2020, two luxurious fragrance brands from Estee Lauder Group, BY Killian and Editions de Parfums Frederic Malle, initiated in Shanghai International Finance Center.

Source: JUMEILI.CN Original Brands of Estee Lauder Group in China

Source: JUMEILI.CN Acquired Brands of Estee Lauder Group in China

Strategies of Estee Lauder in China

Through decades of development, Estee Lauder has a big market share in the Chinese cosmetic market. Fan Jiayu, the general manager of Estee Lauder China, shared that Estee Lauder paid attention to what they do now and looked forward to the future’s business environment. Estee Lauder China always keeps its awareness of possible crisis to evaluate its position and prepare for potential risks. That allows the brand to strengthen its brand awareness in China and customer stickiness.

Estee Lauder established an R&D center in China to better satisfy Chinese customers’ needs

According to the CEO of Estee Lauder in Asian and Pacific Districts, Fabrice Weber, Estee Lauder contended a keen interest in the Chinese market. He hoped that Estee Lauder could merge into China market instead of being a ‘foreign’ company. In 2005, Estee Lauder set up a team to research Asian skincare needs. In 2010, Nutritious Super Pomegranate series appeared that were designed for Asians to improve dehydrated skin. On June 2^nd, 2011, Estee Lauder announced the establishment of its Asian R&D Center in Shanghai.

Estee Lauder China’s e-commerce sales boomed in 2020

Ecommerce in China has developed rapidly and is quickly becoming the main purchasing method among Chinese. Thus, Estee Lauder took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, Estee Lauder became one of the first high-end cosmetic brands that entered on Tmall. Estee Lauder built a professional team with 50 people to focus on Estee Lauder’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder in China got 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, Estee Lauder Group opened online stores for its sub-brands, bringing more consumption for the group.

After the COVID-19 outbreak spread through China, Estee Lauder’s March e-commerce sales spiked, with a 135% YoY increase. During this same period, Lancôme’s Tmall sales increased by 110%, and those of Perfect Diary’s by 29%, according to data from WalkTheChat.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

Estee Lauder builds close relationships with celebrities and KOLs

Celebrity endorsement marketing is also behind Estee Lauder’s success in China. Fabrizio Freda, Estee Lauder’s CEO, contended that 75 percent of investments were spent on digital marketing, social media, and KOLs, earning a high efficiency. For example, Yang Mi, a famous Chinese actress, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over a 500 percent increase in sales. Meanwhile, the cosmetics brand also engaged in  KOL marketing in China. In the 2019 double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Source: Weibo Estee Lauder, Estee Lauder announced Yang Mi to be its Asian-Pacific region brand ambassador, gaining over one million shares.

The cosmetic market is competitive, so Estee Lauder needs to prepare for potential risks

Estee Lauder received great results in the Chinese market due to its excellent strategies. However, Estee Lauder in China also meets tremendous challenges from both thriving domestic brands and well-known international brands. Particularly, L’Oréal Group, has an identical layout in the brand matrix that involves different levels of brands. Especially, one of its cosmetic brands, Lancôme, is the main competitor of Estee Lauder. One of their eye creams uses similar technology and has similar functions, triggering aggressive competition between them. Yet, although Estee Lauder won significant market shares in China, it still faces crucial competition. Therefore, Estee Lauder needs to maintain vigilance in case of potential risks.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands only)

COVID-19 impact on Estee Lauder Group in China

COVID-19 had a great impact on the cosmetic market. Travel retail channels could not function well due to decline in China’s inbound and outbound tourism.

In March 2020 Estée Lauder reported a 11% decrease in net sales from the same period last year. As a result, the company has implemented a host of measures to reduce spending in advertising, administration, and human resources, as well as furloughing part of its vast retail staff and cutting salaries of top management.

The short-term impact on Estee Lauder online business in China is roughly the same as that of physical channels, but e-commerce can play a leading role in business recovery in the future.

Authors: April Peng & Valeriia Mikhailova

Learn more about China’s cosmetics and personal care market

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article How Estee Lauder adapted to China with strong e-commerce and R&D is the first one to appear on Daxue Consulting - Market Research China.

China has been the world’s largest automotive market for years. That is why carmakers around the world are fighting to sell their cars to Chinese consumers. However, in a market mainly dominated by Chinese brands (42%), what are the trends and growth drivers that international carmakers can follow?

The automotive sector is one of the top pillar industries for China’s economy and a major employer. In 2019, for example, the automotive sector contributed 9.6% of the total retail sales of consumer goods. The sector also accounted for around 10% of total employment in China.

COVID-19 impact on the automotive industry in China: decline in sales

COVID-19 placed significant burdens on the automotive industry in China. Hubei Province where the outbreak started, accounting for about 9% of the country’s auto production. Wuhan, Hubei, as one of the key development cities of the country’s six major automobile industrial clusters, not only gathers many vehicle manufacturers, but also has more than 500 automobile parts enterprises.

The auto industry is especially facing major challenges both on supply and demand side—new passenger car sales in the Chinese market slumped by over 80 percent in February 2020. Forecast shows that China’s automotive market will decline 15.5% in 2020.

Data Source: Statista, PwC, China’s auto market size

China’s first quarter vehicle sales saw the biggest impact. According to the China Association of Automobile Manufacturers, sales of passenger cars declined 42.4% year over year during that period. SAIC, one of China’s largest manufacturers, reported a 44.9% percent drop year to date in April. Its SAIC-Volkswagen and SAIC-General Motors joint ventures, dropped 50.4% and 47.7% year over year in retail sales from January to April respectively.

Government policies to help the automotive industry in China

To stimulate the automotive market, government launched some policies. 10 cities released incentive schemes. For instance, Guangzhou announced a subsidy of 10,000 RMB for New Energy Vehicles sold between March and December. Additionally, a State-level subsidy to New Energy Vehicles was extended until 2022.

Epidemic highlighted imbalance of car brands in the Chinese market

The epidemic has exacerbated the imbalance between the various car brands. From January to March 2020, the total sales volume of the top ten enterprise groups was 3.295 million units. It had a year-on-year decrease of 41.7%, which was 0.7 percentage points lower than the industry decline. It accounts for 89.7% of total car sales, which is 1.1 percentage points higher than the same period last year. This shows that under the impact of the epidemic, the market share of small brands has shrunk even more.

A phenomenon worth noting is that compared with last month, the sales of major foreign brands also showed a rapid growth, of which the growth rate of Korean brands is particularly significant.

COVID-19 boosted electric cars market

China’s reaction to the crisis shows a commitment to new technologies, signaling how the crisis could build resiliencies moving forward. The real opportunity after COVID-19 lies in the shift from internal combustion engines to cleaner, electric vehicles in China. China is set to keep its long-term strategic goals for automobile electrification and meet climate change goals set by the Paris Agreement.

In March 2020, the production and sales of electric vehicles were also significantly better than that of the previous month. The growth rate was rapid and the year-on-year decline was narrower than that in February. For example, electric car maker Wei Lai released the delivery data for March 2020. The delivery volume reached 1533 units, an increase of 11.7% year-on-year and an increase of 116.8% month-on-month.

The auto industry in China slowly rebounds back

On February 2020, due to China’s recovery from the coronavirus outbreak, car companies ushered in the first wave of resumption of work. They include Geely Automobile, Great Wall Motor, Changan Automobile, Xiaopeng Automobile, Weilai Automobile, Tesla Shanghai Super Factory and so on. The outbreak of the epidemic has also made car companies pay more attention to the online car sales model. Many brands have launched online car purchase activities during the epidemic, thereby stimulating consumers’ desire to consume.

In March 2020, as the industry’s orderly resumption of production, the monthly production and sales volume rebounded significantly, but still did not reach sales level of 2019.

Data Source: China Association of Automobile Manufacturers (CAAM), China car sales 2019/2020

Retail sales of light passenger vehicles also surged ahead in March, as reported by the China Passenger Car Association. Year over year, March 2020 sales were still below 2019 levels, but 26%, not the 80% drop seen in February. Sales in April 2020 have begun to catch up with just a 2% drop year over year.

Automotive brands show signs of recovery

From the perspective of different brands, Changan Automobile sales reached 119,000 in April 2020, an increase of 32% year-on-year, ranking first. In April, the company achieved sales of 105,400 units, an increase of 44% month-on-month and 2% year-on-year. Great Wall Motor sold a total of 81,000 new cars in April, an increase of 35% month-on-month.

Chery Automobile increased by 15% month-on-month in April 2020, but continued to show negative growth year-on-year. 

Volkswagen’s China terminal sales in April 2020 were 16.57 units, an increase of 9.9% year-on-year and an increase of 41% month-on-month.

Weilai (also known as NIO) delivered 1,533 vehicles in March 2020, an increase of 117% QoQ.

Data Source: China Automobile Association, Weilai sales January-March 2020

Therefore, key automotive brands show the signs of recovery, however this process will take time.

In 2020, mainstream automakers supposed to have many new models launched on the market. However, due to the impact of the coronavirus epidemic, it is difficult to carry out offline listing activities such as test drive, auto show, and press conference.

Data Source: China Automobile Center, Summary of originally planned models to be launched in the first quarter of 2020

Chinese auto industry still has big potential

Despite the significant impact of COVID-19 on China’s automotive industry, the market potential is still quite huge. China is still expected to become the largest vehicle market with around 260 million units in operation. At 173 units per person now, there is room in China for more light passenger vehicle purchases.

However, after COVID-19, the market will definitely not simply snap back to where it was before the pandemic. According to a forecast from IHS Markit , light vehicle sales will decline 15.5% in China for 2020.

Why 2018 was a turning point for car manufacturers in China?

For the first time in twenty years, sales in the automotive industry in China are declining

In 2018, for the first time in 20 years, China saw its new car sales decline by 2.8%. In 2017, 28.88 million cars were sold in China compared to only 28.08 million in 2018.

Sales in most provinces of the China declined in 2018 except Guangdong, which saw an increase of 5.3% compared to last year, which can easily be explained by the rapid development of the local economy (Guangdong has had the highest GDP for 29 years in China).

Despite this decline, China remains the world’s largest automotive market, accounting for about 30% of total global car sales in 2018. Compared to the 28 million cars sold in China in 2018, only 5.2 million cars were sold in Japan, 16.5 million in Europe and 17 million in the United States in 2018.

But then what explains this decline in car sales in China?

Alternatives to cars are increasingly successful in China

One of the main reasons for the decline in car sales in China in 2018 is that there are many relevant alternatives. Chinese car shoppers are increasingly value minded and open to the alternatives to buying new cars. Moreover, the younger generation of Chinese is increasingly sensitive to environmental issues and tend to consider more environmentally friendly options.

In recent years, car-hailing apps have been gaining popularity in China. By the end of 2018, there were more than 100 car-hailing platforms in China, and the total number of car-hailing app users has exceeded 330 million.

This is the success of car sharing apps such as Didi Chuxing or bicycle sharing apps such as Mobike, which have seen their number of users increase in recent years:

Didi Chuxing

Didi is now one of the main alternatives to owning cars in China.

The business model of this Chinese transportation network company can be compared to Uber’s model. The cost of fares is very low and the simplicity of the service, easily ordering a fare on the app, make China gradually becoming the largest ride-hailing market in the world, with a value of US$30 billion.

In 2018, Didi held more than 80% of China’s ridesharing market.

Mobike

Mobike, a fully station-less bicycle sharing company in China, also offers a great alternative to private cars in China, especially in big cities.

Bikes are often used to connect to buses and subway stations, what we can call intermodality. For example, in Shanghai, approximately 1 in 5 users take bikes to make subway and bus connections (Mobike, 2018).

Thus China has now become the leading country both in terms of ride sharing and bike sharing in 2018, and this can be bad news for car manufacturers in China.

Second-hand car market shows growth in China

The Chinese craze for used cars is also an essential reason for the decline in car sales in China in 2018.

In 2018, second-hand car sales in China rise with a growth of 11.5%. Sales are even expected to reach over 20 million in 2019.

As consumers prioritize value for money, they become more price conscious and lose confidence with spending. Online marketplaces for second-hand cars, like Renrenche (人人车), Uxin (优信) or Guazi (瓜子), are also developing fast and allow customers to find the best price quickly without having to visit multiple brick and mortar shops.

Despite this, consumers continue to buy private cars in China, whether for practical reasons or for pleasure. According to the graph below, 58% of them buy a car to travel comfortably on holidays. Driving has been a very popular way of travel (average 300km) in China. In Tier-3 and Tier-4 cities, the school bus hasn’t been very popular, so many parents also need safe and convenient transportation for their children.

New-energy vehicles in China have become very trendy

Electric cars sales are increasing

Electric or hybrid cars have been very successful in recent years in China, thanks in particular to the support of the Chinese government but also because buying an electric vehicle avoids the cost of purchasing a license plate, which is a considerable saving.

In 2018, the sales of new energy vehicles in China consistently grew reaching 1,25 million units sold.

Buyers of new energy cars in China are mostly urban and young: 40% of China’s electric car sales in 2018 came from 6 large Chinese cities which are Beijing, Shanghai, Shenzhen, Tianjin, Hangzhou, and Guangzhou because of the awareness of the pollution problems inherent to combustion vehicles and the gasoline-car restrictions that have been implemented in these cities. Most of them are also the first person in their family ever to own a car.

China’s biggest electric carmaker: BYD

BYD Company Limited was China’s top-selling electronic car manufacturer in China in 2018. Created in Shenzen in 2003, the brand launched its first electric car model, the E6, in 2011.

In 2018 BYD sold a total of 520,687 cars in China including 247,811 electric vehicles, achieving a year-on-year jump of 25%.

The best-selling BYD model in China in 2018 is the Song, 91,426 units sold, for an average price of $28,000.

BYD’s marketing strategy in China is to develop a flexible and segmented offer to reach a wider audience: BYD then decided to go on all-in on hybrid rather than pure electric with one of its model, ‘Qin.’ It is a more flexible option for consumers, who can drive it as an electric car for their daily commute and reach much farther distance without having to worry about charging.

Thanks to its various plants in China the company also has a competitive advantage to integrate all of the key components in-house. And with the help of subsidies, BYD has been able to build economies of scale, pushing down their cost per unit and allowing them to spend more on research and development.

High-connectivity: Cars in China have to be mobile-first

Connected vehicles in China have to be mobile-first

A connected car is a vehicle connected to the Internet through its communication system. It allows the driver to connect his smartphone to the car, but also the car itself to connect to the surrounding cars and infrastructure.

Since China is a mobile-centric nation with mobile commerce representing a quarter of the country’s overall retail market ($1.5 trillion in sales in 2019), it is normal to find this requirement in the 2018 car trends in China.

Thus the global connected-car market in China is expected to grow 270% by 2022 and 41 million people will make use of in-car connectivity by 2021.

According to a 2017 Kantar TNS study, 79% of Chinese respondents plan to buy a connected car in the future, compared to about 50% for Americans and Europeans.

According to Jack Ma, Alibaba’s chairman, there is no doubt that the future of cars in China is high-connectivity:

‘’Today, 80% of your smartphone’s functions are not relevant to making phone calls or conversation. I believe that in the future, a car will have 80% of its functions not related to just transportation.’’

But Chinese consumers are more and more difficult to please in terms of connectivity services; they are seeking innovative in-car services and are even ready to pay subscriptions for content.

Which is why automakers and tech giants are all racing peers to new tech horizons!

Integration of Alibaba’s Tmall Genie in BMW vehicles

The partnership between BMW and Alibaba is an excellent example: Alibaba Group’s smart assistant, Tmall Genie, will launch in select vehicles from the BMW Group in China by the end of the year.

Tmall Genie will be fully integrated into BMW vehicles, offering drivers several entertainment and shopping options in the car. Drivers will be able to use Tmall Genie to buy online, watch movies, listen to music, check the weather or make appointments appointments in BMW.

Top innovative car brands in China

Volkswagen in China has delivered its 30 millionth car to Chinese customers

For the company which connection with China started in 1978, 2018 was a real milestone. They achieve sales record with 4.21 million vehicles delivered to customers in China including 196,300 imported cars, which corresponds to a + 0.5 % evolution compared to 2017.

The best-selling Volkswagen model in China is the Lavida with 504 000 units sold in 2018, a 4-door sedan which has been sold exclusively in China since 2008. Depending on the generation, its price is between 110,000 RMB and 160,000 RMB.

Because Volkswagen was the first foreign car manufacturer in China, it can now compete directly with Chinese competitors. And the brand’s communication strategy is really to emphasize this authenticity and improves its reliable brand image.

To do that, SAIC Shanghai Volkswagen wants to show how close to Chinese consumers it is.  At the end of 2018, a campaign announcing the launch of new models then revealed a desire to align the brand’s image with China’s powerful economic growth:

The timing of the publication, that was the 40th anniversary of the policy of openness and reform, was ideal.

To attract the growing target group of young, middle-class customers, Volkswagen also decided to launch JETTA as a brand in February 2019 (it was only a Volkswagen model before). The idea is to target first-time buyers, who account for 81% of the customers in the entry segment, by offering high quality, safety, stable value, and fresh design. In 2018, the brand also announced the launch of the SOL brand in partnership with the Chinese auto manufacturer Anhui Jianghuai Automobile, whose first model is an electric SUV.

Geely in China: ‘’Making Refined Cars for Everyone’’

Geely enters the automotive industry in China in 1997 and is now among the 500 largest companies in China. In 2010 Geely group bought the Swedish carmaker Volvo.

In 2018 Geely sold 1,500,838 units in China, an increase of 20.3% from 2017 and had a 6.9% market share.

The brand has a very young customer base with 51% of customers born in the 1990sor later, it’s a new generation of young innovative consumers who have a global vision and a global mindset. Thus, Geely communicates on high connectivity and ultra-modern design to directly target this audience. They often highlight their design teams and the famous designer Peter Horbury they work with to show their modernism.

The best-selling Geely model is the Bo Yue, a compact crossover SUV with 255 695 cars sold in China in 2018.

Geely is now trying to expand internationally by developing its battery manufacturing business with CATL Geely Power Battery Co. Ltd and acquiring new foreign brands like Proton’s Norwich-based subsidiary Lotus or Daimler recently. The brand also invests heavily in new energies cars with its ambitious project Blue Geely, wanting 90% of its sales to be consist of Evs in 2020.

Landrover in China: designing ‘’China SUV of the Year’’

Jaguar Land Rover entered the Chinese automobile market in 2010 and has witnessed exponential growth each year until 2018. A total of 492,388 Jaguar Land Rover units were sold in China in 2018.

Land Rover’s strategy in China is to demonstrate a commitment to the Chinese market by offering unique designs and models that meet consumer requirements and preferences. That is why in 2012, JLR entered a joint venture with Chery Automobile Company to manufacture Range Rovers to build vehicles designed specifically for the Chinese market (Jaguar XFL and XEL are good examples). Thanks to this, Land Rover in China has won numerous awards that allow it to raise brand awareness:  recipient of the 2018 ‘China Reputation Award’ for the second time, Range Rover Velar wins ‘China SUV of the Year’ and ‘China Car Design of the Year.’

How do carmakers promote their cars in China?

Offline promotion: How to keep a substantial brick and mortar presence for car manufacturers in China

Offline promotion remains very important in the automotive industry in China today. Indeed, despite the development of the massive development of e-commerce and m-commerce in China, nearly 90% of car purchases were made at 4S stores in 2018. This means that Chinese consumers still appreciate contact with sellers and want to be able to go to offline stores to get information and buy a car.

• 4S stores in China

4S stores are today the most popular distribution channels for the vehicle brands in China. There are more than 28,000 4S stores in China. They have dominated the offline purchase channels in tier-1, tier-2, and tier-3 cities; now they are expanding to tier-4, tier-5 cities and rural areas.

Consumers choose 4S stores as they provide all in one service: ‘‘4S’’ means Sale,  Spare part, Service and Survey. So, they cover all business related to vehicles such as sales (new cars and second-hand cars), maintenance, car wash, auto finance, car rental, etc.

It is also interesting to note that the competition among 4S stores is increasing, trying to fight on price, discount activities, test-drive services and insurance.

• Exhibitions, events, and shows: the entertainment marketing strategy

There are more and more events and exhibitions in China that attract millions of people each year. For instance, Auto Shanghai, the Shanghai Motor Show which has made its mark among international shows, host every two years more than 900,000 visitors from 18 countries. The 2019 edition is currently being held (April 23-28).

Automotive shows are an excellent way to stand out from the competition and showcase its best models to demonstrate the brand’s research and development capabilities.

Despite their international scope, the domestic players are most active at these shows with more than 70% of new products produced by Chinese carmakers.

• Showrooms, storefronts and flagship stores

Car manufacturers in China are now investing more and more in showrooms in major cities to impress consumers: stores are no longer just places to buy cars but luxury spaces to live a real experience.

In 2018 NIO invested CNY80 million (USD11.7 million) in a store in the iconic Shanghai tower and paid more than CNY100 million annual rent.

The brand also pays a yearly rent of about CNY80 million for a shop in Beijing’s Oriental Plaza mall.

Online promotion: Using KOLS and social media to boost your sales in China

In China, websites and social media are dominating the promotion channels for vehicle brands in 2018.

With a perfect online service layout, automotive E-commerce platforms have real marketing advantages. Automotive E-commerce represented by Youxin, Emao, and Taobao makes full use of the business sector (new cars, used cars and auto finance). They are user-centric, E-commerce data-based, product and service innovation-oriented, aiming at creating a  full life cycle Eco-marketing platform. It is a good source of information before buying a car in China.

Also, almost half of consumers obtain information about cars from automotive websites, since those websites usually have comprehensive knowledge about car brands and models.

On social media, young auto enthusiasts (post-90s and younger) have a stronger willingness to share content about vehicles with others. Half of the auto enthusiasts spend 5-15 minutes on every online post (website and social media) about vehicles.

Social networks have therefore become strategic for car promotion in China. This is why many brands now use KOLs (Key Opinion Leaders) to convey messages in a more subtle way. Indeed, more than 70% of vehicle consumers follow at least three KOLs, their purchasing behaviors are highly influenced by KOLs’ opinions and experience.

New retail: How the Alibaba strategy applies to the Chinese automotive market

New retail in the automotive market in China is more consumer-centric.  This is a trend that has been widely followed by car manufacturers since the success of Alibaba’s New Retail strategy launched in 2016.

By collecting consumers’ data (such as interests, price and design preferences), vehicle brands are able to provide cars, auto-configuration and services based on consumers’ requests. Thus, the consumer’s journey is shorter because the touch points are blended: for example, Wechat content is now a touch point for each step of the car buyer journey in China.

This is the strategy that Ford decided to implement in partnership with Alibaba: they launched the Super Test-Drive Center in Guangzhou to allow people to buy a car from a staff-less machine in under 10 minutes.

Customers just have to go to the Tmall app and choose the model they want to test-drive via the online catalog. To register, customers must take a picture of their face and once in the store, once the customer shows their face to facial recognition,the car chosen online arrives from the multistory structure. Then, the customer can test the car for a few days (3 days max) and order it online.

How could international carmakers improve their marketing strategy in the Chinese market?

Target a young audience

New cars buyers in China are young and connected consumers. As they gain purchasing power, they are the future of the Chinese automotive market.

Do not neglect offline communication channels

The paradox of the explosion of e-commerce in China is that buyers are still demanding physical presence or human contact. Thus, offline channels must be up to the task.

Keep a close eye on your online reputation

Control your reviews and comments and opt for an influence marketing strategy because brand reputation plays a vital role in the buying cycle of a car in China.

Rely on well-made design

Content and design provide an important first step in customer experience in China in 2019: work on a modern and sophisticated design for your website, your products, and your communication.

Leverage to e-commerce and new retail

For automakers, innovation linked to the e-commerce platforms and deepening relationships with end users will be key to benefit from the increasingly technology-enabled car market in China.

Author: Steffi Noël

Daxue Consulting offers further analysis of the automotive market in China with a forward-thinking approach to topics such as digitization, high-tech implementation, artificial intelligence, and many others. To know more about the evolution of the automotive industry in China, do not hesitate to contact our project managers at dx@daxueconsulting.com.

This article Automotive industry in China: How carmakers compete for first place is the first one to appear on Daxue Consulting - Market Research China.

Bayer AG is a global enterprise with core competencies in the life science fields of health care and agriculture. Bayer, headquartered in Leverkusen, Germany, is one of the most famous companies among the world’s top 500 enterprises. In 2019, the total number of Bayer’s employees was 103,824 and the annual sales were 43.5 billion euros. Bayer’s products cover high polymer material, medical and health products, chemical industry products, and agricultural products. Bayer puts a lot of emphasis on its research and development. Its capital expenditures amounted to 2.9 billion euros, R&D expenses to 5.3 billion euros in 2019.

Bayer’s current state in China

Bayer entered the Chinese market in 1982. Bayer has operated its business in Hong Kong, Taiwan, and mainland China. Currently, China has become one of the largest markets for Bayer globally and an important driver for the growth of Bayer’s business. In 2019, Bayer’s sales in Greater China reached 3.724 billion euros. As of December 2019, Bayer has more than 9,000 employees in Greater China.

Bayer is deeply rooted in the Chinese market

Source: Quanjing, China’s pharmaceutical industry

The Chinese market is a crucial driver of Bayer’s growth. Bayer complies with the policy and regulations of China, exploring its business in line with specific rules in China. Two examples that Bayer China firmly supports China’s regulations are as follows.

Bayer cuts price largely to win contracts with the Chinese government

In 2018, China’s government launched the centralized procurement program, in order to lower drug prices. A lot of drug companies are invited to place bids after the number of different kinds of drugs that will be needed in the public hospitals are determined by China’s health care security authorities. Under this centralized procurement program, the drug company which offers the lowest price will become the supplier of a certain drug. The Chinese government aims to reshuffle China’s pharmaceutical industry through the price war, and both foreign and domestic players have to come up with survival strategies to secure the market.

According to Chinese media, in January 2020, 77 pharmaceutical companies won contracts with the government by cutting drugs’ prices by 53% on average. Among them, Bayer made a big offer in the bidding. For example, it cut the price of its off-patent acarbose for diabetes (which affects a large part of the Chinese population) by almost 90%, and the new price is 78.5% lower than the price ceiling set by the Chinese government in December 2019.

By adopting an ultra-low-price strategy in the price war, Bayer hopes to expand its market share of some drugs like acarbose. In this way, it can secure its Chinese market and earn more profits in the future. For Bayer, the Chinese market is so important that it worth taking the large price cut to support the price war launched by the government.

Bayer fired an employee for breaking home quarantine rule during COVID-19

Bayer fired an Australian Chinese employee for breaking the coronavirus quarantine rule in China. In March 2020, a video of the woman gbreaking the home quarantine policy to go on a run went viral on the Chinese social network and drew widespread criticism from the public.

Bayer’s response reflects that it firmly follows laws and regulations in China, and supports the coronavirus rules of the Chinese government. This decision has been widely applauded by Chinese netizens and the company is considered as responsible and compliant. Hence, Bayer China has built a positive image through this crisis. 

Boosting innovation and advance digitalization

In 2016, China announced the Healthy China 2030 Blueprint. Currently, China is speeding up the initiative and improving patients’ access to medicines by increasing their affordability. “With the mission of helping China achieve health goals, Bayer China will make unremitting efforts to bring innovations faster to Chinese patients and provide more complete medical services.” Jiang Wei, executive vice president and managing director of Bayer China, said.

Bayer strengthened R&D and innovation

Under the Healthy China 2030 plan, China has promulgated policies from various aspects to increase support for the development of innovative drugs. Many pharmaceutical companies, including Bayer, are seizing opportunities and making full use of policy support to accelerate the approval of various new drugs in China.

Since 2017, Bayer has brought 14 innovative drugs to China. As an important part of the “China Innovation Strategy”, Bayer is continuously accelerating the introduction of more innovative products into China through the China R&D Center. The China R&D center, established by Bayer Health Consumer in Qidong, Jiangsu, is also actively carrying out category innovation, and enhancing the technical support and protection level of existing listed products.

At the same time, Bayer establishes long-term strategic cooperation with China’s top scientific research institutes including Tsinghua University and Peking University and strives to apply more cooperation results to the in clinical practice. Also, Bayer China is exploring cooperation opportunities with Chinese pharmaceutical companies and biological start-ups, leveraging the complementary advantages of both parties to fully develop innovative results. For example, Bayer and CStone Pharmaceuticals collaborate to evaluate D-L1 monoclonal antibody CS1001in combination with regorafenib as a treatment for multiple cancers.

Bayer China embraces digital transformation

Source: creamandpartners.com, Bayer cooperates with VeChain

Bayer has seen great potential to foster digitalization in China’s pharmaceutical industry, and has sped up its digitalization.

In 2017, Bayer teaeds up with Alibaba Health (AliHealth) to provide Chinese patients with healthcare services ‘at their fingertips’. At the same time, Bayer China can follow health trends of Chinese people and better satisfy their self-care demands by leveraging the big data advantages of the Alibaba platform.

Bayer re-started the ‘Bayer G4A China’ program in 2019, a global digital health startup partnership program to select Chinese startups that have digital potential. In 2019, Bayer China forms a co-operation agreement with Yaoshibang, a domestic online B2B pharma platform, to offer a new digitized medicine and health services solution in China. During this collaboration, the parties will exploit their advantages in the fields of medicine, health, and the internet.

In 2020, Bayer announced its partnership with VeChain, a pioneering public blockchain startup, to co-establish CSecure, a blockchain-based traceability platform for drugs. This new blockchain-powered solution will allow Bayer to track clinical drugs across the supply chain digitally.

Bayer considers digitalization as its vital strategy in China’s pharmaceutical industry. Digital transformation will enable Bayer to provide patients with new drugs and personalized treatment faster, improve the efficiency of healthcare service, and ultimately better serve patients. 

Bayer’s China Vision & Mission

Source: Bayer China’s Weibo, Bayer’s logo

With its strong marketing strategies, crisis management, and cooperation with the government, Bayer China devotes itself to provide better products and services for Chinese in the areas of health and nutrition. Bayer is a key player in helping China achieve the Healthy China 2030 plan, which makes the future outlook for the pharmaceutical brand’s development in China very promising.

Learn about China’s vitamin and health supplement market

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article Bayer in China: How the Pharma giant gained the strong approval of Chinese consumers is the first one to appear on Daxue Consulting - Market Research China.

Founded in 1946 by French designer Christian Dior, Dior is one of most famous fashion luxury brands in the world. Since its founding at Avenue Montaigne in Paris, Dior has always been synonymous with magnificence and elegance. The first womenswear collection by Christian Dior in 1947 caused a global sensation while leading the “New look” revolution. Until now, whether in fashion, cosmetics or other, Christian Dior has always been at the top of the fashion luxury industry. As China makes up 40% of the global luxury market, Dior also considers China as a major market. At the same time, Dior in China approaches Chinese luxury customers from both product side and creative side.

Source: Dior.com – The new look of Christian Dior

The fragrance, makeup and skincare products are under Parfums Christian Dior division has more than 300 points of sales at the moment in China.

Parfums Christian Dior

From year 1973 on, Dior has had its own R&D center. Over 200 specialists, biologists, pharmacologists and researchers cooperate with over 20 R&D centers in the world’s top universities and science institutes to develop the best products. Dior has always put tactile impression of products as an important factor. All its products bring a perfect combination of technology and joy.

The beauty division (Parfums Christian Dior division) of Christian Dior maintained strong growth, driven by the success of its classic perfume, makeup and high-end skincare lines. Perfume such as J ‘Adore, Miss Dior and Sauvage are big success in the market. Cosmetics, including Rouge Dior and Ultra Lipstick collection lead a trend among customers. Also, the high-end skincare products are growing well, especially in the Asian market. Dior is the #2 luxury brand in China’s perfume market.

Dior Pink City: Dior in China plays with pop-up stores

Source: Sohu.com – Dior Pink City is coming to Shanghai. A beautiful Pop-Up store in a fashion-savvy Chinese city.

After launching the Dior Pink City pop-up store in Macau, the pop-up store came to Shanghai in July 2019. As the first station in Mainland China, Dior made five themed rooms in the pink city, including Dior pink flower shop, Dior pink library, Dior pink urban spa, Dior pink music hall and Dior pink café.

In the Dior Pink City pop-up store, consumers had the chance to experience personalized fragrance trial services, get bouquets of elegant flowers, and relax and get massages in the spa area, experience High-end skincare Dior Prestige, print exclusive photos and finally get small surprises crafted by Dior.

Dior in China entered E-commerce on Tmall

Tmall, owned by Alibaba group, now offers more than 3,000 beauty brands and the proportion of well-known brands the platform to launch their online stores. The big name brands which have official stores on Tmall rose from 555 in 2015 to 84% in 2018. According to Alibaba, Over 3 million women buy at least five tubes of lipstick on Tmall each year. Additionally, affected by the COVID-19 epidemic, COVID-19 pandemic, luxury and fashion brands are paying more attention to Chinese e-commerce platforms.  Just after launching the brand-new Bobby handbag collection, Dior in China had new, strategic moves.

On June 2020, Dior launched its own official Tmall store, right before the Chinese online shopping carnival 6.18. However, only products of skincare, cosmetics and perfumes were available on the Tmall store. So far, Dior has already gained 335k fans within one month.

Dior collaborated with Liu Yuxin

Source: qianlong.com -celebrity live broadcast on Ju Huasuan came to next level

During the Covid-19 quarantine, the Chinese TV show ‘Youth with you II’ has been extremely popular among Chinese, especially among young Chinese consumers. The TV show aimed to select 9 girls to form a girl music band. Liu Yuxin won the first prize for her impressive performance and high popularity. Dior announced collaboration with Liu Yuxin on skincare collection ‘Capture Totale’. The live broadcast on Ju Huasuan (a group buying website) with Jing Tian (Chinese actress, also official ambassador of Capture Totale) helped Dior in China received more than 3k orders and over 2.5 million RMB revenue.

THE9, the girl music group that Liu Yuxin belongs to, was invited to collaborate with Dior for its Bobby bag.

Source: twoeggz.com – Dior invited the new group THE9 to promote BOBBY

Christian Dior Couture

Besides maintaining the brand’s unique style and elegant brand image, Dior fashion division (Christian Dior Couture division) also has launched its official account on popular Chinese social media platforms.

Dior has introduced limited edition Lady Dior bag for Chinese valentine’s day

Luxury brands, such as Burberry, started to use WeChat Mini programs to plug into digital China. For Chinese Valentine’s Day in 2016 (Qixi Festival), Dior launched a WeChat mini program for selling its limited edition Lady Dior China valentine bag. For this bag, Chinese luxury customers choose the decorative embroidery pattern on the strap. The bag was sold out within a few hours on the first day of the WeChat Mini program marketing campaign.

Dior in China made a great effort on doing local Chinese social media campaign and marketing campaign to reach a wider range of customers.

Source: luxexpose.com – Lady Dior Small China Valentine Bag Sold Out Within Few Hours Via WeChat

Dior became the first luxury brand to enter Tiktok and Bilibili

In the past few years, Dior launched its official accounts on popular Chinese social media, such as Weibo, Wechat and Red. On August 2018, Dior launched its official account on Tiktok (known as Douyin in China), making it the first luxury brand to use the platform. So far, Dior has more than 491.1k fans and 3.6m likes with 628 posted videos.

For luxury brands, Bilibili represents a chance to capture young Chinese customers, Gen Z consumers in China and familiarize them with their products and brand ethos. Generation Z accounts for 81% of the platform’s user base according to QuestMobile. The advantages are clear: although they may not have significant buying power now, this generation is expected to account for 55% of total luxury spending by 2025. Dior launched official account on Bilibili on June 2020 with totally more than 7k fans, 22 videos and 132k plays within a month. At the same time, Dior is also the first luxury brand to use Bilibili.

Dior will launch an exhibition in Shanghai

Chanel’s Mademoiselle Privé exhibition in Shanghai in 2019 attracted a large number of Chinese visitors. Dior launched its Miss Dior exhibition after, and invited many of Chinese celebrities. This year, Dior will launch its exhibition in Shanghai ‘Christian Dior Designer of dreams’. Different from Chanel, the exhibition of Dior will showcase more than 70 years of the brand’s artistic creation to Chinese luxury consumers from an unprecedented Chinese perspective.

Source: Dior official WeChat account – The exhibition “Christian Dior, Designer of Dreams”

The exhibition will last about three months. Together with 8 well-known Chinese artists, this exhibition will open a new chapter in the history of Dior in China. A host of masterpieces, including 275 couture gowns, manuscripts and works by artists, are ready in the museum. Next the brand is inviting Chinese luxury consumers to explore Dior’s elegant world and spirit of the pursuit of dreams.

At the same time, the opening ceremony of the exhibition will be broadcast simultaneously on several Chinese social media, including Dior’s official Weibo account, official WeChat mini program and official Tmall flagship store. Additionally, Tencent video and Huawei video will also broadcast the activity.

Author: Qing Zheng

Learn more about China’s perfume market

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article Dior in China: A prime case of luxury fitting into a Digital China is the first one to appear on Daxue Consulting - Market Research China.

The development of vitamins and health supplement market in China

The market size of healthcare products in China is growing

Large market size of healthcare products represents the high potential in China.

According to iimedia, the market size of healthcare products in China, maintained around a 10% YOY growth rate between 2013 and 2019. This  which is similar to the US growth rate in 1970’s. China’s healthcare market size reached ¥222.7 billion in 2019, which makes China the second largest market for healthcare products, just after the U.S.A.

Data source: iimedia, Market Size of Healthcare Products in China

The market segment of healthcare product was occupied most by dietary supplement with more than half of the market in 2019.

Data source: chyxx (中国产业信息院), Market Segment of Healthcare Products in China

The health supplements industry in China developed along with the improvement of Chinese people’s living standards and health awareness

Most Chinese considered a healthy lifestyle to include physical and mental health. A healthy lifestyle should be without physical illness and with positive mental health, good social life etc.

Many Chinese see health supplements as a part of a healthy life. Hence, health supplements, such as vitamins and fish oil, are an important choice for health-conscious Chinese consumers. In a survey conducted by iimedia, 48.6% of the participants choose health supplements as their first choice to improve their health condition.

Price distribution of health supplements ranges from RMB 50 to over RMB 300. Most consumers buy health supplements for under 150 RMB on Taobao and Tmall. Customers’ price preference means high-end products are popular among a small group.

Data source: Taosj (淘数据), Price Distribution of Health Supplements in Chinaby Sales Volume

China’s demand for vitamins is continuously growing

Vitamin market in China is expanding, as vitamin products are becoming widely used in China. An increase in market size can be expected under COVID-19 impact.

Data source: iimedia, ‘Size of Vitamin Market in China

Vitamin E is the most popular vitamin in China, followed by vitamin C

Vitamin E is the most popular vitamin in China, making up 36% of the market. Followed by vitamin C, which takes 30%. The popularity of vitamin E is is partly due to the fact that Chinese believe it can prevent cancer. Chinese’ vitamins preference is different from other countries, such as USA, where vitamin D is very popular.

Data source: chyxx (中国产业信息院), Market Share of Vitamin Market in China by Vitamin Types

Skin care is the #1 concern among Chinese vitamin consumers

Vitamins which target skin health have large market potential in China. From information by DXY (丁香医生), 40% of the survey participants regard skin problems as a bothering health problem.    

Data source: DXY (丁香医生), Top Health Problems Chinese Concern

Skin problems, as the biggest health problem plaguing Chinese people, have led to an increased demand for vitamins, as some vitamins are beneficial to skin health. Vitamin A, C and E can help skin maintain a youthful state, prevent pigmentation, freckles and wrinkles. Thus, they are popular in vitamin market in China. For example, Gold Partner (黄金搭档) sold over 90,000 monthly vitamin C chewing tablets, which is #1 vitamins product for skin problems on Tmall. Considering the apparent concern for skin health, it is also no surprise that China’s skincare market is booming.

Millennials are the target market

Chinese millennials are the target group in vitamin and health supplement market in China, as post-90s gradually become the main force of vitamin consumption. According to Baidu Index, age of people who searched “vitamin” on Baidu distributed mostly in aged 20-29 years old.

Data source: Baidu Index, Age Distribution of people Searching ’Vitamin’

In one survey about post-90s’ health products consumption, top three health-related health-related products purchased are health supplements and vitamins (38%), nutrients dense fruits (27%) and traditional Chinese medicine (25%).

Source: Analysys (易观), Top Health-related Products Purchased by Chinese post-90s

Consumer Analysis in vitamins and health supplements market in China

Core drivers of purchasing vitamin and health supplements

Function, product quality, brand and price are four main drivers of purchasing, according to an analysis, which aims to research what factors effect most when Chinese consider buying vitamin and health supplement.

Data source: iimedia, Main Drivers of Buying Vitamins and Health Supplements

Most customers’ positive perceptions are related to functions. On Weibo or Zhihu, Chinese consumers mentions the function of relieving fatigue and skin whitening ect., when talking about vitamins health supplement.

Data Source: Sample of Weibo & Zhihu Posts, netizens opinions in the Vitamin and Health Supplement Market in China

Core obstacles of purchasing vitamins and health supplements

There is a large gap between China and developed countries in per capita consumption of health supplements. In 2019, per capita expenditure spent on health supplement was only $18 on vitamins and health supplements, while in America, that was $148, eight times higher than in China. However, the market is now growing fast as COVID-19 stimulated the consumption in China.   

Data source: chyxx (中国产业信息院), Expenditure on Health Supplements by Country

Factors, such as Price, product effect and reputation, will stop potential customers from purchasing vitamins and health supplement. Most complaints of health supplements result from effect. Consumers gave negative comments when the high price does not match the value. In addition, the reputation of health supplement in China is damaged by media. Most Chinese customers are bombarded with negative information of health supplement, which to some extent embedded a negative image of vitamins and health supplements in Chinese.    

Data Source: Sample of Weibo & Zhihu Posts, Obstacles for Entering Vitamin and Health Supplement Market in China

Other obstacles, such as the size of tablets and taste, also potentially stop people from purchasing vitamin and health supplements. Although Centrum (善存)’s multivitamin products have high popularity online, Chinese customers complain the design of bottle and the size of tablets on RED (小红书).   

Source: Sample of Weibo & Xiaohongshu Posts,, Comment about Centrum (善存)

Market Competition in China’s vitamin and health supplement market

Vitamins and health supplements from Australia and U.S.A are the most popular in China.

2018’s customs data by CBNDATA, shows that Australia and U.S.A are top two import countries of the vitamin and health supplement market in China. Australia and U.S.A account for 22.3% and 20.4% of VDS imports to China respectively. Their brands quickly seized China’s health supplements market share by cross-border and social e-commerce.

Source: CBNDATA , Customs data, Top 5 Imported Countries in Vitamin and Health Supplement Market in China

Besides Chinese brands, Australian brands, such as products from Swisse and Cenovis, are the most popular on China’s online market. By-Health (汤臣倍健) ranked #1 in May 2020, followed by Swisse (#2) and Centrum (#7).

 Data Source: Taosj (淘数据), ‘Top health supplements brands on Taobao & Tmall

Most vitamin and health supplement brands leverage online and offline campaign to build brand image and promote

How brands build youthful image through cooperating with celebrities?

Many health supplements brands aim to build a youthful brand image by using young KOLs and actors as spokespersons. For example, By-health rebuilt its brand image by endorsing young celebrities, Xukun Cai (蔡徐坤) to attract young consumers and associate with younger personalities. In order to shape the young image, By-health cooperated with Transformers and released cross-over products on Tmall.

Source: Tmall, Youthful Image of By-health

Cenovis is trying to raise brand awareness and attract more young consumers through endorsing Chengyu Hua (华晨宇) who is a singer with high-traffic in mainland China.

Source: Cenovis’s endorsement with Chengyu Hua

Centrum changed brand’s perceptions into young, funny and approachable by cooperating with Joker Xue (薛之谦, a famous Chinese singer and actor). Centrum worked with Joker Xue to film videos ads on Tencent.

Source: Tencent, Centrum filmed videos ads on Tencent

Offline marketing activities to reach Chinese vitamin and health supplement consumers

Many brands use offline marketing activities, such as sport events and pop-up stores, to interact with consumers in vitamin market in China.

By-Health built a museum which can use AI and hologram technology to educate about nutrition science and provide health examinations. These activities help visitors understand health situation and sell By-Health’s products.

Source, By-Health, By-Health’s Science and Technology Museum

Swisse built a immersive urban oasis pop-stores in malls during 618 promotion, where Chinese customer can see its healthy and natural brand image vividly. In addition, Swisse cooperated with The Color Run (Color run: Five-kilometer paint race), the sport event attract most young generation in China.

Source: Swisse, Australia-themed pop-up shops (Left) & Swisse X The color run (Right)

In order to expand target population, Centrum launched a carnival to interact closely with children and sponsored a child-parent TV program.  

Source: centrum, Centrum carnival & TV Program

Covid-19 stimulation: How Covid-19 stimulated the sales of vitamins and health supplements

Chinese consumers are more interested in vitamin and health supplements as COVID-19 increased their health awareness

The health supplements industry in China developed along with the improvement of Chinese people’s living standards and health awareness. Chinese netizens showed more interest in improving their immunity during the coronavirus outbreak in January 2020. Demand for vitamins and health supplements that can enhance their immunity became strong during COVID-19.

Source: Baidu Index, Search Trend of ‘Strengthen the Immune System’

Chinese people showed strong demand for  vitamins and health supplements that can enhance their immunity. Accordingly, health supplements that could improve immunity got more sales.

More Chinese consumers have showed purchase intention for vitamin and health supplements since the epidemic increased their health awareness.

Data Source: BCG (Boston Consulting Group), ‘What Chinese will Buy Most in The Post-COVID-19’

Brands seize the opportunity to increase sales revenue during the most serious period of COVID-19

The biggest price drop of health supplements was in February, as many brands decreased online price to have more consumers during the most serious period of COVID-19. However, many consumers were focused more on personal protection and disinfection products.

Data source: CHUANCAI securities, SOOCHOW securities, Changes in Price of health supplements in China during COVID-19

Then, the sales revenue of health supplements greatly increased from March along with people’s health awareness further improved.

Data Source: Taosj (淘数据), E-commerce Sales of Vitamins and Health Supplements

For example, the health related products of BY-HEALTH (汤臣倍健) and Swisse had significantly increased their online sales.

Data source: Taosj (淘数据), Sales of By-Health & Swisse during COVID-19

What can we learn about the vitamin and health supplement market in China

• Physical and mental health are both important for Chinese people

Many Chinese people are eager to have both physical and mental health. Therefore, in addition to promoting physical health, how to help consumers relieve mental pressure is also an important sales point for all health-related brands in the Chinese market.

• People under 30 are the key customers for many brands

Many health supplements brands aim to build a youthful brand image to reach out more young consumers in China. They frequently used young KOLs and actors as spokespersons. At the same time, Baidu index analysis shows young Chinese consumers have the most interest in vitamins and health supplements.

• Skin health is a top concern of Chinese vitamin consumers

More and more Chinese people are bothered by skin imperfections. Because of Chinese beauty standards, skin whitening is an important driver for Chinese women to take vitamins. Therefore, some health supplements launched products targeting skin problems and received positive feedback.   

• COVID-19 stimulated consumption in the vitamin market in China

The COVID-19 outbreak brought great attention to physical health, Chinese people showed strong demands on vitamins and health supplements to enhance immunity.

See our full report on China’s vitamin and health supplement market

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article Skin and immunity concerns drive the Vitamin market in China is the first one to appear on Daxue Consulting - Market Research China.

Since the 2008 melamine scandal, the domestic milk market in China has had a hard time gaining the trust of consumers. This scandal hurt all players, including Mengniu Dairy and Yili Group, which are the leaders of the Chinese dairy industry. The crisis has also influenced milk consumers in China to purchase milk and dairy products from foreign brands, putting domestic milk producers at a disadvantage.

Even though the evolving consumer perception of milk in China has facilitated the growth of import and consumption of foreign milk firms, domestic milk firms in China still have dominated the milk market in China. Moreover, according to MarketLine, regarding the overall performance, from 2015 to 2019, the milk market in China has seen steady growth. Thus the market is anticipated to grow in the future.

Analysis of China’s milk market

Size of China’s milk market is gradually expanding

Chinese consumers are turning on to the nutritional benefits of milk products. It is predicted that sales of milk in China will increase from 11.95 billion RMB  (2018) to 12.83 billion RMB (2022), with a 1.7% annual growth rate. Thus the market size of milk in China has been growing steadily.

Data source: MarketLine, China’s milk market value  

Consumption of milk in China has grown four-fold since 2012

Due to the influence of traditional dietary habits and limits of economic development, in 2012, each person consumed only about 6.39 kilograms of milk per year. That was only about 1/3 of the consumption of an average Indian consumer and 1/10 that of a western consumer. Moreover, the consumption of powder milk in China ranks at the top among all countries in the world.

In 2020, the consumption of milk in China has increased remarkably. The consumption of milk per capita is projected to reach 28 kilograms in 2020 and 41 kilograms in 2030.

Data source: Qianzhan, Sales volume of the milk market in China  

Data source: Qianzhan, Sales value of milk in China 

Domestic brands regain trust, imported milk in China faces fierce competition

According to IBISWorld, due to the preference of milk consumers in China and demand for middle and high-end milk, import volume has increased steadily. With rising import volume and average prices, the import value of milk in China reached $5.47 billion in 2019, with a YOY growth of 7.6%.

Since domestic Chinese milk brands have dedicate to enhancing the quality of milk they are replacing some import products, which has led to a declining proportion of imports in the domestic demand of milk market in China. As a result, in 2019, imported milk represented 7.5% of domestic demand for milk in China, which decreased from 10.1% in 2014.

Data source: IBISWorld, Import partners of milk market in China (2019)

The price of milk in China is gradually increasing

Overall, the price of milk in China has a rising trend. The increasing price attributes to the rapid growth of consumption of milk in China and the condition of upstream supply chains.

Data source: ruzhipincy & chyxx, Price evolution of milk in China  

UHT milk is the most popular milk among Chinese consumers

The product segmentation of milk in China is mainly categorized into liquid milk and powdered milk. They are similar in terms of nutrients while different in terms of taste, form and price. Powdered milk consists of the process of dehydration and evaporation, which helps preserve it. Even though it loses its flavor during the dehydration process, it perfectly matches with smoothies, tea and filtered coffee. On the other hand, fresh milk contains more nutrition than powdered milk does and has a better taste.

Liquid milk is the largest segment. According to MarketLine, UHT milk is more popular with milk consumers in China, in contrast to  western consumers who prefer fresh liquid milk. 

The milk powder segment in China targets both adults and infants. According to Nielsen China, online and offline milk powder sales reached 1.8 billion RMB and 1.5 billion respectively in 2018. Specifically, according to IBISWorld, the infant milk powder segment has been experiencing rapid growth and highly profitable. The market size reached 175.5 billion RMB in 2019 and is expected to reach 216.3 billion RMB by 2024. With the implementation of the two-child policy, demand for infant milk powder is increasing rapidly.

Consumption of milk powder for adults, especially for families, has been rising steadily. Online shopping has facilitated the growth of this segment. The milk powder for adults in China is in the early stage of the product lifecycle by considering its market scale and profitability. Hence the market size of this segment remains stable as milk consumers in China lack product awareness.  

The supermarket is the most important distribution channel in China’s milk market

According to IBISWorld, Supermarkets are the largest suppliers of milk and offer the most extensive product range. Regarding food wholesalers, the majority of milk brands in China sell their products in local regions. They often establish wholesalers in the target province and are in charge of recruiting and managing distributors in tier-two or three cities. Regarding food retailers convenience stores, the revenue generated from these channels has experienced continuous growth. Other markets, including online shopping, have been developing rapidly in recent years. Milk consumers in China purchase milk from online shops due to its convenience and low prices.

Data source: IBISWorld, Distribution Channels of Milk Market in China (2019)

‘Safety’ is the number one concern of Chinese milk consumers. Consumers from different regions and segment groups in China consume milk in different ways.

Regarding Chinese consumers’ attributes of milk, consumers from developed areas value “safety first” while consumers from less developed regions value quality and brand. In general, both of the groups value safety certification, shelf life, nutrition, taste, brand organic, etc.

Families are likely to purchase a large amount of milk on the weekends and prefer fresh milk; office workers and students prefer buying liquid milk with paperboard packaging in the morning.

Milk packaging in China

Regarding the packaging of milk in China, paperboard, plastic and glass are common materials. Domestic milk firms in China mainly outsource both paperboard and plastic packaging to foreign firms such as Tetra Pak, PrePack and SIG Combibloc. Paperboard packaging is normally used in preserving both UHT milk and fresh milk. It helps preserve the quality of the milk. Thus the quality is less likely to go bad easily and can preserve more than six months. Plastic and glass are used in preserving fresh milk. The size of the packaging is mainly standardized as 250 ml.

Photo source: Zhihu, Packaging of milk in China

Chinese prefer to purchase milk in smaller packaging than westerners do. Owing to the habit of some milk consumers in China, it is convenient for students and office workers to carry a single serving size of milk with them. Secondly, the established supply chain and logistics in China cannot support the transportation of fresh milk perfectly. Hence milk with paperboard packaging is more prevalent in the milk market in China as it can preserve for an extended period and does not require a sophisticated logistics system to preserve the quality.

Does being lactose intolerant stop Chinese from consuming milk?   

Even though research shows that Asians, including Chinese, are mostly lactose-intolerant, it does not affect the sales of milk in China significantly. According to Zhihu, their consistent milk consumption can be explained by:

1. Consumers perceive that a small amount of milk would not aggravate the discomfort of lactose-intolerance, and this might is another reason why packaging milk in small portions popular in China.
2. Some people do not even realize they suffer from lactose-intolerance since their symptoms are not obvious.
3. Some of them perceive that the ingredients of Chinese milk are adapted to eliminate the effect caused by lactose-intolerance, that is, ingredients such as water and chemicals are added to dilute the lactose.

Brand analysis of China’s milk market

Domestic Chinese milk brands are making a return after being tarnished by scandals

Among the top 10 dairy milk companies, 9 are local brands. Mengniu, Yili, Guangming, Wangzai, Wandashan, Weita Milk and Chenguang are the top seven Chinese domestic brands with two producers originating from Taiwan and Hong Kong. Founded in 1999, Mengniu is the largest dairy milk company in China. It possesses over 20 branches in 15 provinces and exports its products to the US, Canada, Mongolia and South-East Asia. Although it maintains a good reputation, not even Mengniu can escape from the melamine scandal. As a 2008 Olympic Games sponsor, Yili, the second-largest dairy company, has explored a new way to market its product and overcome the scandal.

In 2020, Mengniu and Yili have further consolidated their leading positions in China’s milk market, with more than 30% of market share. Both firms have developed differentiated milk products to capture market share aggressively.

Data source: Euromonitor, Company Shares of Milk in China (2019)

Yili has focused on high-end milk products   

Regarding milk products of Yili, even though the company has developed a variety of milk products, it aims to focus on its high-end segment. Its representative product, Yili and Satine, according to Euromonitor, earned the third (7.4%) and fourth (6.7%) place respectively, in the brand shares of milk product (2019). Satine is positioned as the high-end brand as Yili has significant investment across different business units. Shuhua is a lactose-free product and targets lactose-intolerant consumers. School milk targets students and solely sells to schools in China while QQ Star targets kids in China. Wei Ke Zi is the flavored milk product.   

Photo source: Yili, Milk Products of Yili

Mengniu has adhered to the product differentiation strategy

Likewise, Mengniu has developed various milk products to tailor to different competing with Yili. According to Euromonitor, Mengniu and Deluxe are the pure milk and earned the first (7.9%) and second (7.4%) place respectively, in the brand shares of milk product (2019). Deluxe is the high-end pure milk product. Future Star targets kid consumers in China while Xin Yang Dao targets lactose-intolerant consumers. Mengniu has also developed flavored milk such as Zhen Guo Li and Nai Te. Zhe Zhi Niu Lai (This cow) is the milk product that targets university students in China. Mengniu has also expanded its product lines to fresh milk (i.e. Shiny Meadow and Green House) which Yili has yet to focus on.

Photo source: Mengniu, Milk Products of Mengniu

Influence of COVID-19 and future trends

The outbreak of COVID-19 has affected lots of industries, including China’s milk market. The pandemic has affected each business unit of the milk’s value chain in China.

The value chain of China’s milk market goes through the process of feed manufacturing, milk production, delivery, processing, packaging, distribution, and lastly, retail. Regarding the upstream business, the pandemic has affected the production of

As the situation is gradually recovering in China, so does the milk market. The government in China has implemented particular policies and subsidized the business involved in the milk’s value chain. These actions have sped up the recovery of the milk market in China.

Fresh liquid milk is the future trend

In 2019, the trend of “freshness” has emerged in the milk market. Key industry players such as Yili and Mengniu have started to invest in fresh milk significantly. The outbreak of Covid-19 may foster the growth of this trend since the National Health Commission of China recommends drinking milk. The government sector has suggested that drinking milk is an effective method to strengthen the immune system. Moreover, milk consumers in China have consistently perceived drinking milk as a means of calcium supplement and skincare. Thus it helps to cure osteoporosis and facilitates growing height. As more and more milk consumers in China value nutrition, taste and freshness, nutrition-added fresh liquid milk is likely to be the future trend in China’s milk market.

Photo source: Sohu, Nutritious and fresh liquid milk sold in small cartons in the Chinese market

Creative product packaging can draw consumers’ attention

In comparison with traditional promotion tools such as advertising and direct selling, creative product packaging is a cost-effective tool to promote products and is popular with young consumers. Hence more and more companies have gradually applied this tool.

Photo source: adquan, Creative product packaging of New Hope Group’s milk 

New Hope Group has applied the creative product packaging successfully on its flavored milk. With this co-creation strategy, New Hope Group has collected a list of mottos via social media in China and printed them on the packaging. Meanwhile, the company has designed cute images that are popular among Chinese consumers. These mottos reflect the current Chinese culture and humor of self-depreciating optimism, or passive acceptance of negativity. They are relatable and effectively tease young people’s lifestyles in a lighthearted way.  

In conclusion, China’s milk market is experiencing a steady growth in market size and revenue. Domestic milk brands have occupied the majority of the market share. Currently, the dominant milk product in this market is long-life liquid milk. Nonetheless, with the changing consumers’ perception and improving logistics, fresh liquid milk is projected to be the future trend in this market. Moreover, creative packaging is a useful promotional tool to appeal to milk consumers in China effectively.

Author: Amelia Han

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

Listen to China Paradigm on Apple Podcast

This article The milk market in China: consumers’ perception of nutrition has sustained the growth of this sector is the first one to appear on Daxue Consulting - Market Research China.