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.

Product Innovation: Fruit Tea & Soft European Bread Pairing

Nayuki introduced the “fruit tea and soft European bread pairing” as its signature product to the market. Although product pairing has been widely used in the retail industry, it was quite an audacious move for Nayuki to make. Most of Nayuki’s competitors in the industry, including Starbucks and Hey Tea, choose to stay “focused” and stick to one category only, no matter it is coffee or tea. With unique insights into the psychology of Chinese female consumers, Nayuki’s founder Peng Xin, however, considered “Fruit tea & European bread” a great combination that meet “two kinds of needs in a single scenario” and the sales number of the soft bread take up no less than 50% of Nayuki’s total sales nowadays.

Source: Sina Weibo, Nayuki’s soft European bread and tea pairing

Behind the success of Nayuki’s product innovations are its high-quality raw materials and stable supply chain. In order to ensure the quality and distinct taste of Nayuki’s products, Peng Xin and her team have visited and signed contracts with several renowned tea plantations across China and Taiwan. Nayuki has also built its own factories to manufacture fruit in season, which further enhanced the stability of its supply chain.

Aesthetic-Centered Marketing

Although China’s new style tea market is quite a large cake to share, getting a slice of it is not easy considering relatively low barriers to enter the industry and fierce competitions from both local and foreign companies in China. According to the white paper for 2019 new style tea consumptions co-published by Nayuki and 36kr, about half the consumers of new style teas in China belong to the post-90s generation and female consumers take up 70% of the market. Targeting a young and female-dominated market, Nayuki has been taking an aesthetic-centered marketing approach.

Nayuki has been working on a branding project called “Nayuki Cupseum” since 2019, which has been quite successful so far. The concept of the project is to exhibit artworks made by world-renowned artists using Nayuki teacups. So far, Nayuki has held three series of exhibitions which include “Big hugs to you” collaborating with American artist Christopher David Ryan during May 2020, “Being A Cat” with Pepe Shimada and “Ni Hao New Year” with Cinyee Chiu. Apart from the “Nayuki Cupseum” galleries, Nayuki cooperated with the 50th Anniversary of Anderson Lifetime Achievement Award in September 2019, during which every store would exhibit paintings of “The Ugly Duckling,” “The daughter of the sea,” and “Gorrila.”

Source: Nipic, Nayuki Poster

“Marketing isn’t just about advertising. Product development, space design, developing new techniques are all marketing,” according to Peng Xin, the founder of Nayuki. The emphasis on Nayuki’s aesthetic appeal is reflected on its physical stores as well, from lighting, to color tone, to location, all tailored to the needs of young female consumers, such as taking pictures inside the store to publish on social media. The in-store experience seems to be no less important than the quality of the tea itself for consumers. Nayuki is selling more than a cup of tea, but a whole package of experiences from purchasing online, to picking up at the store, to taking a selfie with its beautifully made teacup, which at its core is a reflection of a lifestyle ideal consumers have been longing to have.

Nayuki’s Cultural Appeal: The Arts of Cultural borrowing

Nayuki might strike consumers as a Japanese brand, but it is in essence a local Chinese company that borrowed a Japanese name. This should not come as a surprise as this kind of cultural borrowing is hardly an uncommon practice, especially in the fashion industry. The rising of Nayuki implies the strong influence of the Japanese cultural exports among Chinese consumers. Although tea-drinking culture originated from China and later exported to Japan, the Japanese tea-drinking culture has evolved a system of its own and become quite different from the modern-day Chinese tea-drinking culture. Therefore, taking on a Japanese brand image has facilitated Nayuki’s success by differentiating itself from other local Chinese beverage brands.

Post-Pandemic Age: What to Expect for Nayuki and China’s New style tea Market?

Although the coronavirus has been contained very well in China, consumption patterns have largely shifted from offline to online, which might continue to be the new normal until the vaccines come out. In the meanwhile, new challenges have been raised for the China’s new style tea market and brought new opportunities for Nayuki as well. In response to consumers’ expectations for a higher security standard, Nayuki has adopted a new operating mode that requires no direct human contact. According to Baidu index search frequency data, the search volume for Nayuki peaked in middle of the pandemic on April 1^st, during which Nayuki brought 3,000 free drinks to cheer up the doctors and nurses at the Leishen Mountain hospital in Wuhan.

Data Source: Baidu Index, Search Index for Nayuki from January to August 2020

The pandemic has also rushed China’s new style tea market into digital transformation. During the period when Covid-19 was at its peak in China, Nayuki offered free delivery for all online orders. As a result, the total number of transactions completed on Nayuki’s WeChat mini program have doubled compared to the previous year. However, such transformation requires both financial and technological support, which might imply a reshuffle of the market. Although major companies such as Hey Tea and Nayuki could probably make through the pandemic with enough funding to adjust to the new normal, small beverage stores might find it very difficult and eventually exit the market.

What we can learn from Nayuki’s success

• Nayuki conducted market research to precisely identify their target consumers, then focused their marketing tactics on them. Nayuki has a clear brand positioning that targets 25 to 29 year old women. Nayuki’s marketing campaigns such as the “Nayuki Cupseum” projects and art exhibits with the Anderson Lifetime Achievement Awards are both tailored to satisfy the cultural and aesthetic needs of a young female audience.
• Nayuki differentiated itself from the myriad of other new-style tea brands on the market with its product pairing and store aesthetic. Additionally, the brand borrowed a Japanese name which is unique and stands out.
• The tea-store used an O2O marketing strategy to establish online presence, which was especially useful during the COVID-19 pandemic. Consumers are raising their standards for safety and convenience, which is particularly important for brands to establish online presence during a pandemic. Relying on third-party platforms like WeChat, Nayuki realized digital transformation and made it through the pandemic.

Author: Isabella Li

Learn more about the tea market in China

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

Listen to China Paradigm on Apple Podcast

This article The success of Nayuki, the Chinese new-style tea store going global is the first one to appear on Daxue Consulting - Market Research China.

Meituan officially launched its own ride-hailing APP Meituan Dache (美团打车Meituan ride-hailing) for Shanghai and Nanjing’s markets.

Meituan Dianping is a Chinese website and APP for food delivery services, consumer products and retail services. As a very typical representative of mobility in China, Meituan Dianping was originally called Meituan. After merging with Dazhong Dianping it changed its name to Meituan Dianping.

As a leading food delivery APP, Meituan also started to develop its ride-hailing service in China, which is a significant step of its business strategy to improve the system of mobility in China. Meituan Dache, Meituan’s ride-hailing app in China, ranked third in the App Store Free download list after its official launch in Shanghai for a week in February, 2017.

On March 21, 2018, Meituan officially announced its first batch of expansion cities of new ride-hailing business, including Beijing, Shanghai, Hangzhou, Xiamen, Chengdu, Fuzhou and Wenzhou. Also, Meituan began to recruit drivers in these cities. However, the plan was not implemented after a year-long period of stagnation.

Challenges for Meituan: Competition and regulations

After entering Nanjing, Meituan heavily subsidized the drivers to grasp more opportunities to compete with Didi. Also, Meituan divided the drivers into three levels and gave different subsidies accordingly. For instance, at the beginning, the standard earning for new drivers was 2,200 yuan per week. After reaching the standard, the drivers can get 800 yuan extra bonus per week.

Hence, the cost associated with its ride-hailing drivers increased exponentially, from 290 million RMB in 2017 to 4.46 billion RMB in 2018, with an average monthly investment of 370 million RMB in 2018.

Date Source: Meituan Dianping 2019 annual report – Meituan’s ride-hailing driver related costs (million RMB)

In order to expand the market share quickly, Meituan launched a price war against Didi through subsidies in Shanghai and Nanjing. But the war did not last long since Meituan cut its subsidies shortly after. To maintain its market share in Nanjing and Shanghai, Meituan lost 50 million dollars per month. Additionally, the transportation sector intervened and warned Meituan against disturbing social order by starting price wars.

The Meituan Dache APP drained Meituan’s finances

According to the Q1 2019 financial report released by Meituan, the new Meituan business, including the travel business, spent 31.3% of the sales cost but only contributed 20.8% of the revenue. This added to a total loss of 439 million RMB in Q1 of 2019.

The cost of sales of Meituan new business decreased from 5.2 billion RMB in Q4 2018 to 4.4 billion RMB in Q1 2019 and the revenue also decreased from 4.2 billion RMB in Q4 last year to 3.9 billion RMB in Q1 2019.

As for the two financial figures, the report explained that it was mainly due to the significant reduction of subsidies for ride-hailing services in China in Q1 2019 and improved profit margins of new businesses and other divisions. Meanwhile, Meituan will continue to restructure mobike’s overseas business in order to reduce the loss of the bike-sharing business.

Merged to Meituan APP from Meituan Dache APP

Since late April 2019, although Meituan’s ride-hailing endeavor has once again been launched in Nanjing, Shanghai and other 17 cities, it is no longer the former Meituan ride-hailing APP. Meituan Dache was transformed from the self-management team to an aggregation platform.

The new Meituan ride-hailing APP in China provides travel services for users by accessing travel service providers such as Caocao travel service, Shouqi car-hailing service and Shenzhou special car service. This means that Meituan no longer did its own business, but instead became an aggregation platform.

Users can go directly to ‘ride hailing’ from the restaurant booking page, which allows them to call a car in real time or for reservation. Meanwhile, users can choose from a menu of car types including taxi, economy, comfort, business and luxury by Shouqi Taxi, Caocao Taxi and Shenzhou Private Car.

Source: Meituan App open interface

If the users of Meituan ride-hailing want to call a cab to a restaurant, they can also directly click the ‘ride-hailing’ button on any restaurant business page in the Meituan APP. The system will identify the location of the user and the address information of the restaurant, automatically fill in the starting and ending address. As a result, Meituan created a ‘one click’ solution to call a car directly to the restaurant, all within the same app.      

Didi Chuxing started its food delivery business in China

Source: losborgia.com – Didi launched the food delivery business in China

Didi Chuxing Technology Co., formerly named Didi Dache, is a Chinese transportation company. As the leading company in ride-hailing in China, Didi Chuxing (滴滴出行) launched its food delivery service locally. On March 6, 2018, the first 9 cities to launch Didi Takeaway (滴滴外卖) were Wuxi, Nanjing, Changsha, Fuzhou, Jinan, Ningbo, Wenzhou, Chengdu and Xiamen. Didi Takeaway wanted to win the first batch of merchants and users by reducing commission and issuing rewards. Wuxi city was the first target city for Didi, in June 2018, and then Didi entered Nanjing, Taizhou, Chengdu and Zhengzhou in July. Didi Takeaway has posted their discounted information on the platform, such as 1 RMB ice cream, 2 RMB tofu pudding and 2.5 RMB barbecue. These discounts have helped Didi attract many users in a short time. However, Didi failed to enter the sixth target city, Ji’nan, due to the low profitability in previous five cities.

So far, Didi has not entered a sixth city and the previous five cities are still operating normally. Nevertheless, according to consumers, because the subsidies lasted only a short time and there were only a few merchants in the app. Additionally, some said Didi poorly designed the interface of the takeaway platform, hence Didi delivery was largely forgotten in the market.

Didi has invested 1 billion rmb in food delivery service in China in 10 months

In December 2017, Didi launched their food delivery business in China. Some people think that as Meituan entered the ride-hailing market in China, Didi fought back by entering the food delivery Chinese market.

There have also been media reports that profitability of UberEats, a food delivery business run by its international rival Uber,  inspired Didi.

However, although Didi invested more than 10 billion rmb in food delivery business in China, the result wasn’t as good as expected. On 15^th February 2019, Cheng Wei, founder and CEO of Didi Chuxing, announced that Didi will focus on its most significant ride-hailing business in China, continue to increase investment in safety and compliance while improve efficiency, so the non-core business may be closed.

Didi will shift the market for its food delivery business abroad

Mobility in China is becoming more mature and competitive. As a result, companies try to develop into overseas markets. Didi launched its food delivery service ‘Didi food’ service in Osaka, Japan in April 2020.

Source: Twitter.com – Commercial of Activities by Didi post on twitter in Japan (Summer delicacies for you to eat! Activities in progress)

Meanwhile, DiDi Food announced its expansion to Aguascalientes, Toluca, Chihuahua, Torreón, and Saltillo in Mexico on 22th April, 2020. So far, the company has already been operating in Mexico City, Guadalajara, and Monterrey. The mobility in Mexico is still in its infancy compared to the mobility in China.

Additionally, Didi has expanded restaurant delivery service from convenience stores and pharmacies to encourage people to stay at home during the COVID-19 epidemic.

87% of restaurants in the Didi app are small and medium-sized enterprises. Sales of these partner restaurants have risen 45% since the lockdown began. So far, restaurant enrollments have increased to 75% per week, while delivery partner enrollments have increased to 250% per week.

Source: kr-asia.com – Didi wants to challenge Uber by bringing Didi Food delivery service to Mexico City

The challenges that Meituan and Didi are facing

Didi and Meituan are definitely the giants of mobility in China. However, there are still big challenges as they try to overlap the ride-hailing business and food delivery business in China.

As an instrumental APP, the simple platform of Didi is far from being a life-oriented aggregation platform, as it focuses primarily on ride-hailing. At present, users have not yet cultivated the habit of ordering food from Didi, since users are used to the aggregation platform like Meituan or Ele.me (an online food delivery service).

Different from the ride-hailing business in China, which basically needs only online operation and maintenance, Didi needs a large offline business develop team to expand its food takeaway market.

Also, it’s not easy for Meituan. The transportation bureau intervened and warned Meituan against disturbing social order by starting price wars on the day Meituan launched in Shanghai. They announced that all registered cars and drivers of Meituan ride-hailing business in China must obtain the relevant business license for online ride-hailing in Shanghai and the relevant data need be connected to the regulatory platform.

In addition, the Shanghai Municipal Commission of Communications, Municipal Public Security Bureau, Market Price Bureau also warned Meituan that they shall not disrupt the normal market order for the purpose of crowding out competitors or monopolizing the market by operating at a price lower than the cost. Meituan’s should change its advertising slogans such as “starting with one yuan”.

Wang Gang, CEO of Didi analyzed that the competition between Meituan and Didi is not just about ride-hailing business and food delivery business, but “a battle for access to secondary traffic”. Whether Meituan is involved in ride-hailing service in China or Didi is involved in food delivery service in China, both parties can take good use of their users’ consumption scenarios as the basis and form a data circulation system about their users’ consumption preferences for ‘basic necessities of life’. If successful, it will greatly enhance the development of mobility in China.

Author: Qing Zheng

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

Listen to China Paradigm on Apple Podcast

This article Mobility in China: Opportunities and challenges of when ride-hailing meets delivery 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.

Chinese superstitious beliefs can be divided into three categories:

Traditional and secular Chinese superstitions

Originating from feudal society, these superstitious beliefs evolved into customs and religions but vary by region. The traditional secular superstition is mainly to believe that certain activities, ceremonies, numbers, natural phenomena, and dates will bring good luck, and taboo certain numbers and phenomena. For example, Chinese choose auspicious wedding dates according to the lunar calendar, because they believe that selected date can bring joy and harmony to marriage.

Believing the existence of ghost and gods

People believed that there are gods, demons and ghosts in the world, who have the ability to control the natural phenomena and the birth, aging and death of human beings. For example, on July 15^th of lunar the , people in south worship river gods in hopes of fair weather and a good crop yield in the coming year. In modern China, these ceremonies based on superstitious beliefs are becoming less common.

Believing fate

Many superstitious Chinese believe in fate or destiny, and that their live path is arranged from birth. Hence, when they feel they are at a cross-road in life, some people may go to fortune-tellers for help to relive anxiety about their future.

Superstition and spirituality products in China

Due to such a long history of superstition, spirituality products in China have rich opportunities to develop. From crystals to amulets, from fortune-telling to tarot and horoscopes, the spirituality and occult industry is a big business today, but it still remains under researched in the domains of marketing.

The Healing Crystals market in China

Healing crystals are thought to promote physical, emotional and spiritual healing. Different colors and types of crystals have different functions. For example, pink crystals can bring more love and kindness in your life, while purple crystals help you get a better performance in study.

The Donghai Crystal Market, located in Lianyungang, Jiangsu province, China produces 70% of the national reserve of the precious material, is known as the “Land of Crystals”, producing 80% of Chinese crystal products. Donghai Market receives 1,000 foreign tourists and local visitors daily, 5,000 daily visitors during the peak and a total of 300,000 visitors a year. The annual turnover is between 469 million RMB and 480 million RMB. With the rapid development of the “Internet Plus”, Donghai Market also caught the express train of internet development, forming an “online + offline” omni-channel sales system. So far, there are more than 30,000 crystal online stores in 27 domestic and foreign e-commerce sales platforms. The cumulative sales volume of crystal exceeded 160 million on Double 12 Day. The price range of crystals on Taobao is from 60 RMB to 5,000 RMB.

Source: Popo. Inside of Donghai crystal market

Amulets market in China

Amulets originate from Southeast Asia, including Buddha amulets, ghost amulets and Guman Thong. People worship amulets with sacrifice in hopes of achieving aspirations such as getting promotion and getting rich. There are 3,000 online shops on Tabao with average sales of 300-500 items per month. The price varied from a hundred to more than ten thousand. In term of people’s comments on Zhihu, amulets made by Luang Por and ajahn are popular in the market.

Foreign superstitions influence: The tarot and astrology market in China

Tarot was introduced to Chinain the late Qing dynasty from Europe but is now prevalent in the 21^st century. Tarot cards it is a tool for analyzing, predicting and advising people.

Astrology which is also from Europe has become enormously popular among young people in China. Astrology is the idea that stars can shape personalities and destiny. It is a name given to a group of stars in the sky that make up a certain pattern, and everyone has their own astrology based on their birth date, time, and location.

Both Tarot and astrology possess a potential in China’s spirituality and occult market. In 2005, the China Tarot Association (CTA) was established with 270,000 members, and the overall downloads of astrology and Tarot reached 80,000 times in App stores. According to the survey launched by China Youth Daily, 70.3% of the respondents say that there are many people like astrology around them and 20% of them follow the guidance of astrology and tarot cards to arrange their relationships and career paths. The most popular tarot shops on Taobao has more than 3,000 orders in a month, and each order costs around 100 RMB to 200 RMB.

Read more on how astrology is used in Chinese marketing

Fortune-telling market in China

Chinese fortune-telling has thousands of years’ history; known as ‘suanming’ in Chinese,it is a practice of predicting information about a person’s life. Among many kinds of Chinese superstitions, fortune-tellers have the most active believers. 362 million have visited physiognomist, which is a fortune-teller who analyzes fate or personality based on facial characteristics, in the past 12 months. In comparison, Nearly 145 million people in China believe in Fengshui, 141 million believe in the God of wealth

More than 91% of Chinese do not have scientific literacy  are more likely to believe fortune-telling. However, fortune-telling, as an ancient and mysterious business, has becomes popular in venture capitalism in China. The “Internet plus” fortune-telling business seems to have entered a stage of vigorous development, and AI fortune-telling is the product. Opening up WeChat’s mini programs, there are many AI fortune-telling programs come out. Users only need to upload their face photos and the intelligence software will decode photos and generate an analysis report.

Until December 2019, according to data from Tianyancha, more than 50 projects of AI fortune-telling have been financed. A certain Guangdong culture company makes an annual net profit of 500 million RMB by fortune-telling.

Interest trends of superstition and spirituality products in China

From Baidu index’s result, fortune-telling‘s search trend transcends the other 4 categories with absolute advantage. Thanks to the long history of traditional superstition, fortune-telling is more popular and credible in China. Guman Thong is on the second place, because the effect of Guman Thong is exaggerated on Internet, covered with a veil of mystery. There are many stories of raising Guman Thong on forum that saying how it helps them achieve their desires, and what punishments you will get if you do not treat them well which further strengthening awe towards Guman Thong and making people believe Guman Thong indeed has superpower.

Source: Baidu index, search trends of Chinese superstitious and spirituality products

Distribution and promotion methods

Social media

These sellers are active on all kinds of social media such as Douyin, Bilibili, Kuaishou and Weibo, and mainly focus on short video platforms. At the first stage, sellers need to cultivate their social media account by filming divination videos to attract followers. Once audience feel like videos are efficacious, they will contact video bloggers for paid one-to-one consultation, and bloggers will sell spirituality products to audience.

Source: Douyin, Tarot divination

Source: Weibo, July’s astrology predictions on the Chinese internet

Source: Kuaishou, Tarot divination

Source: Bilibili, Tarot divination    

E-commerce

Consumers also will search key words like “Fortune-telling” and “Tarot” in Taobao to seek one-to-one consultation. Usually, consumers pay online via e-commerce platforms, and add sellers’ WeChat for deep consultation.

Advertising

The most common advertising method for superstitious service is through Baidu and Tianya forums related to Chinese superstition. Fortune tellers or superstitious product distributors will leave their WeChat ID on the Chinese web for people to add.

Consumers of superstitious, spiritual and occult products in China

According to the Baidu index, 60% of Baidu searches of spirituality products are from 20-29 year olds, meaning they are a significant part of market online. People from 30-39 years old also occupied a large proportion around 30-40%. Two factors are at play to explain this data, first is that people of this age group are computer savvy and are simply more likely to turn to Baidu than local temples. Secondly is these two age groups are in the most anxious stages during the whole lifetime. They are at an age where they make a lot of important life decisions, like marriage, having children, and career path. Once they encounter problems, asking for help online is their top of mind. The data also shows that 70% of them are female

Data source: Baidu index, age distribution of e-commerce spirituality products’ consumers

Based on these two insights, divination questions on social media are mainly targeting females aged from 20-39. For example, on Bilibili and Douyin, you definitely will find that most of videos are around marriage, romantic relationships and careers, targeting females. For example, “your next relationship” and “will you end up together”. These are exactly what females from these two age groups confront.

Source: Bilibili, Tarot divination

Is scientific literacy really the end of Chinese superstitions?

The rise of scientific literacy is somewhat of a threat to many traditional Chinese superstitions. However, the modern society does make room for the evolution of the spiritual and occult market in China. Especially, due to their busy work schedules and family pressures,  many people feel helpless and search for answers. For some, spiritual products are what support them to keep going.

Hence, scientific literacy is not the end of the Chinese superstitions market. In fact, they seem to go hand-in-hand,  Al fortune-telling projects is one piece of evidence, along with the popularity of Tarot card short videos. Although some prefer Chinese fortune-telling due to its long history in China, younger generations around 20-39 show a high interest in foreign superstitions. Younger generations show a higher acceptance of new things and they are active in social media, meaning they are likely to be imbued with new values and thoughts.

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

Listen to China Paradigm on Apple Podcast

This article Traditional and modern Chinese superstitions: Ghosts, gods, fate, and wedding dates 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.

China is a traditional fishing country that accounts for two-thirds of worldwide aquaculture. With the growing middle class and the rise of disposable income, the Chinese purchase a progressively more diverse basket of seafood products and the premium seafood market in China is expanding.

Demand for luxury seafood products has increased significantly in China over the past few years. For example, in 2015, China accounted for approximately 20% of the luxury seafood consumption globally. With polluted and overfished waters at home, China is importing a lot of premium seafood. Wealthier Chinese consumers who can afford to avoid scandal-plagued chicken and pork have in some cases switched to seafood. 

Chinese consumers are looking more and more to foreign countries for premium seafood products. For instance, according to the Norwegian Seafood Council, the value of Norwegian salmon exports to China reached $54.8 million in the first half of 2018. This was a rise of 544% year-on-year.

[Data Source: Global Times, ‘Norwegian salmon exports to China’]

Luxury seafood products on the Chinese tables are becoming more easily accessible

The list of premium seafood on the table is becoming longer with the increase of luxury seafood imports to China. According to Eva Kam, Project Manager at Daxue, all the high-end seafood was from Hong Kong before but China has now its own providers in foreign countries. Luxury seafood appreciated by Chinese consumers include lobster, crab, salmon, oysters, sea cucumbers and many others. The luxury seafood consumers are not only rich people but also the emerging middle class in China. The rising incomes and the growing middle class contribute to an attractive outlook to the premium seafood market in China.

Imported premium seafood is more welcomed in China

Most seafood advertisements use the words fresh and live (鲜活), France（法国), imported with original packaging （原装进口, Ready to eat （即食). They highlight foreign origin of seafood, as Chinese people tend to trust it more.

Source: 5tu.cn, Advertisement of seafood, both using word “fresh”

The pollution of China’s own waters create demand for imported seafood, especially for the higher-value species like crabs, lobster and salmon. Chinese consumers have also become more food safety-conscious. This underlines the importance of clear and precise information about seafood products.  For example, Canada and Denmark are famous for its caridean shrimp (pandalus borealis), Russia and Chile for king crabs, France for oysters and Norway and Australia for salmon.

Data Source: Under Current News, China’s fresh salmon imports by country

The perception of Norwegian salmon is positive in China

Norway is one of the primary countries of origin for seafood by Chinese consumers. Over the past few years, awareness about Norway as a seafood producer has grown from 7% in 2012 to 22% in 2018. In the same period, awareness of Japan as a seafood nation fell from 52% to 28%. Salmon is probably the most famous Norwegian product in China.  About 44% of Chinese consumers prefer Norway as a country of origin for salmon, an increase of 25% compared with a few years ago.

Australian seafood is gaining momentum

Australian seafood enjoys an extremely strong reputation in China. In particular, Australian rock lobster and abalone are held with a high regard.  Such perceptions express local media and WeChat discussions that promote the quality of Australian seafood. In Ningbo and Qingdao in 2017, for example, local media reported with excitement about the first direct sales of Australian rock lobster. Specific promotional events help to highlight Australian seafood, for example: an Australian lobster tasting event in Chongqing; Lobster fest in Shanghai; and the Australian Lobster Festival in Yongcheng, Henan.

Exports to China from Australia reached $658 million in 2017–18, making China the most valuable export destination that year for Australian fisheries products. The increase in export value was driven by an increase in the value of Rock Lobsters, Salmonids and Abalone species.

Data Source: Australian Bureau of Statistics, Australian seafood exports to China

Australia’s coronavirus-battered exports of premium seafood are recovering as China gradually moved out of lockdown. China’s demand for premium seafood is gradually on the rise again, though it remains sporadic and prices are much lower compared to pre COVID-19 levels.
Barry Dun, CEO of Australian Reef Fish Trading Co (ARF), told the company’s exports to China had recovered to 15 to 25 percent of the pre-outbreak volume.

Foreign oyster brands are popular in China

The perceptions of French oyster brands are very positive in China. For example, oysters of Gillardeau (吉拉多) brand have the reputation of “Rolls-Royce in oysters”, having strong salty tang of the sea. Another French brand Belon promotes their oysters as “rare”, “expensive” and “king of oysters”. Other popular French oyster brands include Fine de Claire (芬迪克莱尔), Ostra Regal (皇御) and Fleurdeseaux (水中花). All of them highlight the exclusiveness of their products.

Most restaurants selling premium seafood are western-oriented

Analyzing restaurants that sell oysters in Shanghai and Beijing, we can see that mostly they sell imported oysters, and most often as a side dish. Only some places exclusively sell oysters as a key element of the restaurant. The price varies from 30 to 150 yuan per dish. The key feature of the restaurants selling oysters is that most of them are western-oriented. For example, popular Beijing restaurant Maison FLO awarded as Michelin Plate, sells oysters as a side dish for 118 yuan.  Most restaurants sell cooked oysters rather than raw.

Source: Dianping, Western-oriented restaurants with oysters in Shanghai

Some examples of restaurants in China serving oysters:

• The Plump oyster       
  • Gillardeau: 89 RMB
  • French L’emeraude Oyster: 69RMB
  • Providing cost-effective combo of oysters
• OTTIMO
  • Gillardeau: 78RMB
  • Special oyster cooked by three ways: 78RMB
  • Famous for oysters and wine
• Oysteria
  • Fresh oyster:10RMB for each
  • Cost-effective combo of oysters

Premium seafood restaurants use VIP membership to attract customers

Seafood restaurants in China actively promote on social media with discounts and offers. For example, some restaurants offer VIP membership for those who order for more than 500 yuan. Also, customers who order for more than 300 yuan get free beer and soft drinks.

Some restaurant in Dalian came up with the advertising campaign on Valentines’ Day in 2018 offering discounts to people coming with their significant other. They could have a discount up to 65%. Through this well-planned marketing campaign, the restaurant created double the sales volume and attracted 5,000 customers.

Social media contribute to the growing premium seafood consumption

Seafood promotion in China increasingly relies on social media platforms such as Dianping (大众点评) or WeChat (微信). Thanks to the boom of e-commerce in China, consumers can buy their favorite premium seafood on electronic commerce platforms such as Tmall and JD, which are both reputable and reliable operating systems. For example, Canadian lobsters are available on Tmall.com as well as fresh Australian lobsters and oysters too. Chinese consumers can also buy raw oysters on WeChat.

[Australian fresh lobster on Chinese E-Commerce Platform Tmall]

Taobao and Tmall as e-commerce channels for the premium seafood products in China

During the severe epidemic period, the sales volume of seafood online declined by 55.8%. Once the epidemic was alleviated in March, the sales volume bounce back with a great growth of 136%. However, the sales volume of seafood dramatically dropped by 62% since the Xifadi incident. Two breakouts of coronavirus in seafood markets exerted negative impact on seafood industry, since people associate seafood as a channel of transmission, even though there was no evidence to prove it.

Data Source: Taosj.com, The sales of seafood in Taobao and Tmall Apr-June 2020

The price range of seafood is from 10-150RMB, most of price centers at 50-150 RMB, meaning online sellers mainly target middle and working-class consumers. Those online consumers prefer domestic brands to foreign brands.

Crawfish is the most popular seafood on Taobao & Tmall. In terms of oysters, mainland ones are the best sellers in Taobao. The sales volume of mainland oysters are 95 times that of French oysters. The sales of oysters on Taobao and Tmall in April 2020 was 27 million (27,588,327) RMB, the volume of sales was 465,441 items. In May there was a slight decline, the sales of oysters in Taobao and Tmall in May were 16 million (16,253,835) RMB.

Hema supports seafood farmers

Since the beginning of the year, the entire seafood and aquatic industry has been affected, and the recovery is still slow. Recently, a new round of outbreaks has caused consumers to worry about imported seafood, and it has affected the entire aquatic product category, and sales have declined significantly.

Hema app launched activities related to agricultural assistance. Oysters and crabs farmers have suffered heavy losses. During the New Year, they suffered a 70%-80% decline in sales from previous years. In June, only 40% of the previous year’s sales recovered. “Save Domestic Seafood” on the Hema app has about a dozen types of seafood sold at a reduced price. For example, the price for gentian grouper has been reduced from the original 59.9/piece to the current 39.9/piece. The price for abalone dropped from 11.9 yuan/piece to 6.9 yuan/piece. 

Food bloggers and KOLs promote premium seafood consumption in China

Many Chinese food bloggers pay attention to premium seafood in their blogs. For example, popular Chinese blogger Mi Zijun (密子君), who has 6.15 million followers on Weibo. She went to the famous Xu Ji Seafood restaurant in Changsha and ordered 60 pounds of seafood including shrimps, hairy crabs, oysters and ate it in one hour. She shared her experience with followers and advised to visit this restaurant. 

Source: Eat More, Chinese blogger Mi Zijun tries seafood

There are several food KOLs in China each with their own approach. What they all have in common is they like to take photos of food or restaurants. For example, 羽萱的妈妈 had some posts about some seafood, such as shrimps and crabs.

Source: Weibo, Dragon Social, Example of post of blogger 羽萱的妈妈 on weibo

Douyin (TikTok)

Many people use Douyin to share their seafood experience. So-called “mukbangs”, which is a Korean term to describe those who eat a large amount of food during live-streams, are especially popular.

Answering the question on Zhihu “Why are videos about seafood are so popular on TikTok?”, one user claimed that there are a lot of ways to eat seafood (raw, cooked), so bloggers can gain the attention of audience. Besides, many people eager to try it, but not many have a chance, so they watch videos about it instead.

For example, girl from a small town in Jiangsu province named Zhang Xiuling (张秀玲) became a celebrity with 440,000 followers on Douyin. Jiansu is not only a place for seafood, but also a large seafood distribution center. Over the years, wholesalers have transported the seafood to all parts of the country through trucks. In recent years, young people in the town have started selling seafood online using Douyin for promotion.

Source: Sohu, Douyin, Blogger Zhang Xiuling promotes seafood on TikTok

Weibo and WeChat offer new ways of promotion for the premium seafood market in China

Very premium seafood such as sea cucumbers sell very well on Taobao.  However, Taobao’s algorithms make it so high-selling shops can get more orders, additionally, the promotion cost of Taobao is very high. Therefore, many premium seafood producers are developing some new sales ideas, such as promotion through WeChat. In addition, WeChat can also allow old customers to attract their circle of friends.

Source: Zhuanlan.zhihu, Sea cucumber advertisement on Weibo

Besides, at present, there are many manufacturers of sea cucumbers, crabs and other seafoods promoting through Weibo. The advertisement adopts the sales method through WeChat and offers delivery. The purpose of the advertisement is to attract more users in WeChat. During the process of the advertisement, it has received a total of 718 reposts, 1,327 comments and more than 5,000 likes. 

Premium seafood is a seasonal product in China

Chinese primarily consume seafood at banquets, events and other social functions. The close associations between luxury seafood and banqueting is partly because of the increased importance of Cantonese cuisine. The strong influence of Cantonese cuisine affects the types of seafood served and the ways they are prepared. Some of the important dishes at these banquets typically include: lobster, geoduck, crabs, abalone, shark fin, sea cucumbers, and reef fish.

Imported premium seafood is increasingly taking a place at the Chinese New Year dinner table.  Not only are Chinese families spending more on seafood at Chinese New Year, but the variety of imported and premium categories such as lobster and king crab is also increasing. In the past two years, large-scale imports of shrimp, as well as high-end lobster, king crab and salmon have witnessed “explosive growth” during the Chinese New Year.  For example, prices for king crab rise by as much as 30 percent before the Chinese New Year.

Baidu index: search frequency for “lobster” peaks during Chinese New Year

Lobster market in China

China’s lobster industry is booming

A new generation of Chinese consumers attaches great importance to health, and they have higher requirements for lobsters. Therefore, the lobster market in China tries to ensure the quality of lobster and sends them to the consumers faster. New refrigeration logistics help to transport lobster to reduce damage and maintain high quality lobster during long-distance transportation. In addition, established tracking systems have created an open and transparent market environment. It helps customers follow the production process from farm to table.

From a national perspective, the main lobster producing areas are the Yangtze River Delta region as well as Hubei, Anhui, Hunan, and Jiangxi provinces.

[Data Source: Baijiahao, ‘Share of lobster production in China’]

According to statistics, yearly lobster consumption in China in 2018 reached 1.3 million tons, an increase of 22.56% from the previous year. 80% of retailers sell lobster through dine-in channels (including supper stalls). 20% of retailers sell lobster through Internet channels.

[Data Source: Aquatic Products Association, Guanyan World Data Center, ‘Lobster market in China’]

Big cities have larger lobster consumption

At present, the consumption of lobster in China has appeared all over the country. In recent years, the consumption of lobster has developed from large cities to the south and northwest China. This progression is due to the development of e-commerce in conjuncton with lobster cooked food products. Currently the lobster market in China in the northwest, south, and northeast regions continues to grow. However, cities such as Beijing, Hangzhou, Shanghai and Changsha still have the highest levels of consumption.

Baidu index: searching frequency for “lobster” in Chiense cities

China is the fastest growing market for Boston lobster

The premium seafood market in China is one of the most important for the American lobster industry. In 2016, total US lobster exports to China had reached around 8 million kilograms, valued at $136 million, accounting for 14% of total US lobster exports. In 2018 import of lobster from the US to China reached 1,232 metric tons. However, in 2019 this value was down 91% year-on-year over the period, due to Chinese tariffs.

[Data Source: UCN, ITC, Chinese customs, ‘China’s imports of American lobster’]

The Chinese New Year is the busiest season for the American lobster industry, as demand is growing. China’s monthly lobster imports peak before Chinese New Year. In January 2019, China imported 2.3 metric tons of live or fresh lobster. In February 2018, during the end of the festival, the figure was 2.4 metric tons. This is a rise from January 2017, with 1.9 metric tons.

Increasing consumption of premium seafood in China

Crab market in China

According to statistics, the output of crab reached about 800,000 tons in 2018 in the premium seafood market in China. The industrial scale was 64.8 billion yuan in 2016. It was about 77.8 billion yuan in 2017, with an annual growth rate of about 20%. In 2019 China’s crab market reached 100 billion yuan.

[Data Source: Baijiahao, ‘Market scale of crab industry in China’]

The top ten crab production areas in China are Jiangsu, Anhui, Hubei, Shanghai, Jiangxi, Henan and Taiwan. The total output of Jiangsu accounts for about 44% of the country. Hubei accounts for 22%, Anhui accounts for 13%, and other regions account for 21%. 

Due to the entry of e-commerce giants, the industry scale of crabs is increasing year by year. For example, JD.com adopts the “airline + refrigerated truck” transportation matrix. It adds air routes, airport express lanes and truck transportation routes to ensure that the delivery time of crabs is not more than 48 hours. SF Express sends them directly from multiple lake areas. It opened more than 22,000 shipping directions, ensuring the supply of crabs and safe delivery.

Data Source: Baidu Index, Search frequency for “crabs” 2017-2020, search frequency for crabs peaks during hairy crab season in the fall

Data Source: Baidu Index, Search frequency for “crabs” in 2020, Chinese new year is also a primary occasion for crab consumption.

According to Baidu index, the demand for crabs in 2020 was quite low, comparing to 2017-2019. The reason could be the coronavirus outbreak in China. In 2020 the demand was higher during Chinese New Year, as people tend to eat premium seafood during that time.

Sea cucumber in the premium seafood market in China

Sea cucumber is a premium product with large popularity in China. Asia is the largest consumer market of sea cucumber in the world, with a market share of more than 70%, followed by North America.

The Chinese sea cucumber industry shows an overall stable trend. Farm-gate prices have continued on an upward trend in the past two years. Production volumes and stocked amounts have also increased significantly. The growth in consumption of sea cucumbers increased from 3.8 million tons in 2014 to 4.1 million tons in 2018. By 2025 the consumption of sea cucumbers in China will be around 5.9 million tons.

Data Source: Baidu Index, Search frequency for “sea cucumber” 2017-2020

Data Source: Baidu Index, Search frequency for “sea cucumber” in 2020

Due to coronavirus outbreak in China, the demand for sea cucumber in 2020 was lower comparing to 2017-2019. During 2020 the demand was quite stable, except increasing during Chinese New Year period.

Caviar industry in China

With the development of China’s economy and improvement of living standards, the caviar industry has also developed rapidly. By the end of 2014, there were 63 sturgeon farming units in China, including 40 raw sturgeon farming units. From 2006 to 2012, China’s production of artificially cultured caviar increased from 0.7 tons to 28.8 tons, with a compound annual growth rate of more than 85%.

In 2018, world caviar output reached 271 tons, while China’s caviar output was around 100 tons. China plans to rely on artificially cultured sturgeon to become the main exporter of caviar in the world.

Data Source: Baidu Index, Search frequency for “caviar” 2017-2020

Data Source: Baidu Index, Search frequency for “caviar” in 2020

The demand for caviar was stable during 2017-2019, however due to COVID-19 outbreak, in 2020 it saw a decline. 

Oysters industry in China

Chinese consumers are more and more demanding about the quality of oysters they buy. Therefore, they are willing to pay a high price for high-quality oysters. Chinese consumers tend to choose imported premium seafood products. Imported oysters come from Japan, the US and Australia.

Eating raw oysters is a relatively new concept in China. Data from the China Fishery Statistical Yearbook 2019 shows that China’s oyster aquaculture production reached 5.1 million tons in 2018, a year-on-year increase of 5.3%. In 2017 it was 4.8 million tons.

[Data Source: China Fisheries Yearbook 2019, ‘China’s oyster production’]

The main producing areas of Chinese oysters are in Fujian and Guangdong provinces. Fujian has a long history of oyster farming and has so far become China’s largest oyster farming area. In 2018, Fujian oyster aquaculture production reached 1.8 million tons, ranking first in the country. Guangdong oyster production was 1.1 million tons, taking second place.

Despite the outbreak of coronavirus in 2020, demand is gradually returning to the 2019 level. During the peak of COVID-19 outbreak in China (February-March 2020), the demand for oysters decreased significantly. But since mid-March, it showed stable dynamic. Analyzing Baidu index from April-June 2020, we can see that the demand for oysters was stable during April-May. However, there was a slight decrease in June due to discovery of COVID-19 on the chopping board of a seller of imported salmon at Beijing’s main wholesale seafood market.

Data Source: Baidu Index, Search frequency for “oysters” 2017-2020

Data Source: Baidu Index, Search frequency for “oysters” in 2020

Data Source: Baidu Index, Search frequency for “oysters” April-June 2020

COVID-19 impact on the premium seafood market in China

Fall in prices for lobsters

Lobster prices have plummeted to the lowest levels in four years after the spread of coronavirus halted charter flights to Asia. It happened at a time when sales usually boom for Chinese New Year celebrations. That is why the lobster industry was particularly affected. Prices for a whole lobster weighing 1.5 pounds have tumbled 17% since January 20, falling to $8.10. This is the lowest price since 2016. Demand for live Canadian lobster has dwindled to 5% of normal volumes in mainland China.

After the coronavirus outbreak in China restaurants started canceling reservations and people stayed home. When it comes to premium seafood exports, the most affected countries were the US, Canada and Australia, as they are the main exporters of lobsters to China. For example, the US company Lobster Co saw an inventory loss of 40% of its value as shore prices dipped from $7.45 to $4.38. They had to sell 50,000 pounds at a loss. In Australia fishers and wholesalers began trying to offload the premium product in local retail markets.

Salmon industry saw the decrease in sales from COVID-19

The discovery of COVID-19 on the chopping board of a seller of imported salmon at Beijing’s main wholesale seafood market is set to disrupt demand for product in the Chinese market. Carrefour in China and Wumart were among the supermarkets to stop selling the product.

It may be possible for salmon to be contaminated by virus-contaminated water during processing, transportation or packaging. Despite this, the outbreak in the seafood market will inevitably impact demand, with consumers fearful of any possibility of transmission.

Chile, Norway and the Faroes are the main suppliers, with rapid growth in the market in recent years playing a key role in producers’ strategies. Norway held 45 percent market share of fresh salmon to China from January to April 2020. The Norwegian Seafood Council claimed last week of June exports fell to 240 tones – a decline of 34 percent.

“As the probe into the cause of the latest outbreak is underway, salmon business around the world will be affected,” Cui He, president of the China Aquatic Products Processing and Marketing Alliance (CAPPMA), told the Global Times Sunday.

The premium seafood market in China after COVID-19

According to the statistics, import of seafood in China in the first quarter of 2020 fell by 27% from the fourth quarter of 2019.

    
[Data source: Statista, ‘China’s import of seafood’]

By the first quarter of 2020, consumption was almost stagnant. Besides, the import and transportation of Chinese seafood was blocked. Although China’s premium seafood imports slowed in 2020, consumption has a potential to grow.  The coronavirus epidemic in China will have a serious economic impact on the Chinese and global premium seafood market and supply chain. It will also have an impact on both supply and demand of seafood in Asian countries.  However, the Chinese market has recovered earlier than other countries around the world. There is hope that once the supply chain of seafood regains balance, the industry will function normally.

After the epidemic is over, experts expect that the public will experience retaliatory consumption. Gradually the demand for seafood is returning to normal. For example, the frequency of searching “lobster” on Baidu increased after the epidemic situation got better.

Baidu index: search frequency for “lobster” increased after COVID-19 outbreak

Key takeaways for China’s luxury seafood market

• The premium seafood market in China has great potential due to rising living standards in the country.
• Although premium seafood is particularly popular during the Chinese New Year, it may soon become a regular meal in middle-class Chinese families.
• The coronavirus outbreak had a huge impact on the premium seafood market in China. It interrupted the supply chain and reduced consumption. However, the trend shows that China is returning to normal life and demand for premium seafood will soon be restored.

See our report on China’s seafood market:

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

Listen to China Paradigm on Apple Podcast

This article The premium seafood market in China is the first one to appear on Daxue Consulting - Market Research China.

Burberry’s China market entry strategy

In September 2010, Burberry bought out its first Chinese franchise partner in a £70 million deal, giving it greater control over its presence in the country. As of now, Burberry has over 57 stores in 31 cities in mainland China, including eight in Beijing, nine in Shanghai and three in Hangzhou. As China’s share of the global luxury market expands further, from 33% in 2018（when Chinese luxury consumers spent about $122 billion on high-end goods） to 41% in 2025 (when Chinese luxury consumers will spend between $173 billion and $181 billion), giving Burberry more market growth potential in China. Burberry’s strategy to enter China’s luxury market is mainly as follows.

Franchising

As a medium-cost method with rapid expansion, franchising is regarded as an increasingly critical method, which helped Burberry to enter the China’s luxury market with professional, local management. Franchising gives retailers the opportunity to build a global business in a short time. At the same time, franchising does not bring huge financial pressure on the domestic retail business.

However, the main drawback of franchising is the lack of control over the brand. Thus, it is crucial to find a right partner to eliminate possible control difficulties.

Flagship stores

Opening a flagship store is a method to enter China’s luxury market with the highest level of control and involvement, emphasizing branding rather than generating profit. Two years after seven openings of flagship globally in 2012, the “Dreams of London” was introduced in Burberry’s China flagship store in Shanghai. In the flagship store, products equipped with high-tech chips trigger multimedia content in the mirror, which displays the in the brand showroom.

Inspired by the global flagship store at 121 Regent Street in London, the space combines the best of British craftsmanship and materials. Burberry’s flagship store in China showcases the extraordinary performance of the brand, helping Chinese luxury consumers feel the multi-sensory image of the brand, aiming to increase brand awareness and achieve brand resonance.

Source: luxuo.com, Burberry Opens Flagship Store in Shanghai

At the beginning of expansion of Burberry in China, as the market knowledge and management experience acquired in the western countries may not be appropriate, Burberry tended to conduct marketing through low-control intervention, such as wholesale, franchising, concession, etc., to test the market reaction. After a few years, when the retailer had accumulated enough local experience and knowledge, it decided to accelerate its organic growth through the use of franchises and bring operations in-house. This has allowed Burberry to tighten its grip on brand identity at different times. Thus, maintaining the global exclusivity of the brand image.

E-commerce in China

Internet sales help international retailer measure its international sales if it decides to open the physical store in a new foreign market. As a market entry method to enter China’s luxury market, internet is a form of export that enables retailers to promote their products beyond the country of origin through online platforms, mobile devices and social media and establishes a direct and mutual relationship between retailers and consumers.

Burberry in China has accumulated about 1.51 million followers on Weibo, a very popular Chinese social platform, and the number of followers on Tmall sales platform has now reached 2.16 million.

Burberry launched its Wechat Mini program on Wechat on Chinese valentine’s day (Qixi) in 2018, the mini-program campaign takes the form of a game. The campaign encourages fans to play the game with their partners. After completing the game, users will be able to get access to Burberry’s latest collection, including two Qixi bags sold exclusively in China.

Source: Jingdaily.com – Burberry Launches 2 Handbags Just for China on First WeChat Mini-Program

Late last year, Burberry and Chinese tech giant Tencent struck an exclusive partnership to develop social retailing in China. Burberry and Tencent will pioneer a concept that combines social media and retail to create digital and physical Spaces for participating communities to interact, share and shop.

Burberry’s first step will be to open a store backed by Tencent technology that offers a unique experience that connects the social and online lives of luxury customers to their physical environment. This will be a unique testing and learning space, serving as a laboratory for experimental innovation that can be extended to other parts of network of Burberry in China.

Source: Burberryplc.com – Burberry and Tencent enter into exclusive partnership to develop social retail in China

Current strategy in China

In the past, Burberry in China has tended to adopt a low involvement and control approach to enter China’s luxury market, such as franchising, licensing and concession, to maximize its market share and sales. Having accumulated a lot of resources and experience, Burberry has recently started to use overseas partnerships to further increase revenue and brand equity through stricter control of its flagship, self-owned and other wholly-owned stores.

Target customer in China

McKinsey estimates that China’s luxury spending will nearly double between 2020 and 2025.

From the perspective of age, the post-’80s (Generation Y) accounted for more than half of the consumption of luxury goods in China, making them the main force of luxury consumption in China. In addition, two-thirds of the post-’90s generation (Generation Z), who tend to be only children because of the one-child policy, said their parents (mapping as Generation X) approved of luxury purchases.

In addition to target Generation Y (the current luxury consumer main force), Burberry also sees the potential of younger consumers. From the perspective of Burberry’s entry strategy and marketing strategy in China, Burberry has been continuously entering into various popular social platforms in China and launching events with advanced technology on the social platforms for young Chinese generation, such as the events held on WeChat Mini Program, which are deeply favored by young Chinese generation.

China, the fastest-growing market for luxury goods, continues to be underpinned by a growing middle class and the latest sign that consumers remain confident.

Marketing strategy in China

Multi-channel marketing strategy in China

Burberry sells five product categories (accessories, Women’s, men’s, children’s and beauty) in three strategic regions, Asia, EMEA and the US, through both online and offline channels. Although the global revenue of Burberry in 2018 reached 2,733 billion dollars, decrease by 1% compared with last year, luxury sales in Mainland China increasing by 20% in 2018.

The revenue from offline channels is larger than that from online channels in China; however, it is a significant channel to create a seamless brand display. Burberry adopts a multi-channel marketing strategy in China combining online and offline.

Physical store

So far, Burberry has operated 57 stores in 31 different cities of China, including two pop-up stores and one flagship stores located in Shanghai. Physical stores are likely to bring about a number of functions that cannot be replaced by online channels. The purpose of in-store shopping lies not only in goods acquisition, but also in the shopping experience, the social activities, as well as the entertainment.

Burberry’s stores in China are designed to provide customers with superior customer service and experience. Also, offline stores still account for the majority of its revenue. However, for Chinese luxury consumers buying brands like Burberry, offline stores can also help solve the problem of counterfeiting.

Integration of online channels

Despite its crucial contribution, the influence of physical stores might be geographically limited. Thus, the integration of online channels helps to create a comprehensive channel to communicate products and enhance brand awareness (regardless of regional restrictions). For the Chinese market, Burberry is present on popular social platforms including Weibo, and WeChat with seamless commercial accessibility on the platforms.

The seamless integration enables Burberry to extend purchase opportunities beyond markets where it has a direct presence. For instance, Burberry partnered with social platforms to allow followers globally to experience the flagship opening event like “Dreams of London” in Shanghai.

Moreover, Burberry invited the followers on WeChat to watch the women’s wear show at London Fashion Week (AW14) on social platform. As described above, Burberry launched WeChat Mini program for fans to participate in the game and release the limited edition bags in China.

The integration of online channels expands the accessibility through the Internet, because it dilutes the exclusive brand image and value of Burberry and promotes the brand’s visibility and participation in China.

Collaborate with Chinese celebrities and KOLs

In China, choosing a popular and suitable spokesperson via celebrity endorsement is a key to success. In 2016, Burberry introduced Kris Wu (Chinese actor, singer), who is hugely popular with the young Chinese generation, as the first non-British spokesman. Burberry’s retail revenues went from declining to growing by more than 20% in two months. The following year, Burberry announced Dongyu Zhou (Chinese actress) as the brand’s first female ambassador in Asia. Zhou’s unique temperament and extraordinary acting skills have endeared her to the young Chinese generation.

Kris Wu and Dongyu Zhou were invited to Burberry’s Spring/Summer 2018 fashion show at London Fashion Week. Burberry wanted to leverage the popularity from two celebrities to appeal to China’s millennial luxury shoppers.

In 2019, Chinese actresses Wei Zhao and Dongyu Zhou have landed new roles as the faces of Burberry’s Chinese New Year campaign. As an actress, director and pop singer, Wei regards something of national treasure in China. Since she starred in a hit TV series in 1998, she has accumulated a lot of popularity in China. Unlike the new generation of stars Kris Wu and Dongyu Zhou, the Chinese customer that loves Wei is more concentrated in Generation X and Y.

Source: luxurysociety.com – Zhao Wei and Zhou Dongyu star in Burberry New Year ads as downturn fears emerge

Creating cartoon characters as brand endorsements

To celebrate the Chinese New Year in 2020, Burberry created its cartoon rat character called Ratberry. Named ‘Bobo Rat’ in Chinese, it represents the Year of the Rat, which is integrated with the Thomas Burberry Monogram for the brand’s Holiday Collection. Also, Dongyu Zhou posted Hashtag #Ratberry# on Weibo for several times, interacting with followers while receiving many likes and comments.

Source: Chinafilminsider.com – How Burberry Won Over Chinese Consumers With ‘Ratberry’ Campaign

Burberry in China collaborated with different celebrities to appeal to Chinese luxury consumers of different generations. In attracting the millennial luxury consumers, Burberry had also consolidated current main Chinese luxury consumers. From this perspective, Burberry has set up a good model for luxury brand in China.

Luxury brands are increasingly partnering with KOL on social platforms and Burberry in China is no exception. In addition to Weibo, Burberry also cooperates with many Chinese local Kols on Xiaohongshu (China’s foremost social shopping and UGC platform).

Author: Qing Zheng

Learn how brands maximize profit with a direct to consumer strategy in China

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

Listen to China Paradigm on Apple Podcast

This article Burberry in China: Sales increasing faster than any other region is the first one to appear on Daxue Consulting - Market Research China.

China is the largest tea producer in the world 

The total global tea output in 2018 was 5.9 million tons, China contributed 2.6 million tons of them (44.7%). China is the largest tea producer in the world, but it still has a huge market demand for tea leaves. Hence, the output of major tea producing countries will continue to grow. In particular, the increased awareness of Chinese consumers on health will drive the global tea market to further increase.

Data Source: iimedia, Tea market in China report by daxue consulting. China is the major tea leaf producer in the world

The tea industry chain in China includes tea planting, picking, use of fertilizers, processing, and packaging. Also, different kinds of tea are rolled, dried, and oxidized. The sales channels are supermarkets, tea shops, restaurants, and e-commerce platforms in China.

China’s tea production market

Green tea leaves make most of the China’s tea production. Considering China’s huge market demand, green tea will continue to maintain its output advantage for a considerable period. Besides, drinking tea is an important part of the Chinese culture and living customs.

Data Source: iimedia, Tea market in China report by daxue consulting. Green tea has the biggest output in the Chinese market

China’s tea sales will maintain an upward trend. With the increase of income of Chinese residents, quality will become an important factor in the sales of tea.

Data Source: Qianzhan, Tea market in China report by daxue consulting. The tea sales revenue in China

China’s demand for tea is rising steadily

China’s 1.4 billion people already drink nearly 40 percent of the world’s tea, and they are thirsty for more. Chinese consumers prefer higher quality tea products, they often rely certification for assurance the tea is organic and sustainably grown. Besides, they agree to pay much more per serving than Western tea consumers. The best tea in China can be up to US$1,000 for 500 grams.

Data Source: Chyxx, Tea market in China report by daxue consulting. Tea leaf prices in China

China exports green tea and imports black tea

Green tea accounts for 83% of the total tea exports. Exports of black tea, green tea, and flower tea all increased by more than 6%. Black tea accounts for 83.3% of tea imports. The rise of new tea drinks such as milk tea in China has further increased the demand for black tea.

Data Source: Chyxx, Proportion of tea exports/imports by tea type

Key characteristics of tea consumers

According to the survey of China Tea Industry Research, tea consumers are mainly enterprise employees with 50,000-120,000 RMB annual salary. They usually have decent spending power and pursue a high-quality life. Hence, office places are a common place to consume tea.

Data Source: China Tea Industry Economic Research, Tea market in China report by daxue consulting. Characteristics of tea consumers in China

Where do Chinese consumers buy tea

Chinese consumers still mainly rely on offline channels such as exclusive stores or large supermarkets in China. Tea enterprises should broaden their channels and combine online & offline to find new ways to attract customers. Quality assurance, convenient purchase, good experience and low price are the focus of consumers attention. Tea companies must consider them when doing channel construction.

Data Source: China Tea Industry Economic Research, Tea market in China report by daxue consulting. Purchasing channels of tea

Drinking milk tea is a daily habit for many Chinese people, and a huge driver of the market

According to the survey of 36Kr Research, milk tea is becoming a part of daily lives for many Chinese people. Around 93% consumers buy milk tea at least once every week. Milk tea consumers are usually repeat customers. That is why it is essential for milk tea brands to improve customers loyalty leading to repeat business.

Data Source: 36Kr research, Tea market in China report by daxue consulting. Milk tea consumption in China

New-style tea consumers are mostly young women in tier-1 cities

Women under 40 years old are the main consumer group. Urban white-collar women in China are particularly keen to milk tea and fruit tea. Only 30% of consumers are male. The male consumer market still has a large space to develop. More research on male flavor and aesthetic preferences of new-style tea may help to further penetrate the market. This is consistent with the fact that many stores are in first tier cities. Tier-1 cities are saturated markets, but second and third tier cities have a lot of room to grow.  However, lower tier city consumers are more concerned with price.

Data Source: 36Kr research, Tea market in China report by daxue consulting. Age distribution of new-style tea consumers

The leading brands in China’s new-style tea market

Most of the direct-sale shops are high-end brands. They are more concentrated in the first-tier cities with higher prices but less offline stores. It means franchises are helpful for expansion but not for a high-end image. There is little variation in store menus, which means there is a trend of product homogeneity in the market.

Case studies of tea brands in China: path to success

Lipton (立顿) – The most successful tea bag brand

Lipton is the largest foreign tea brand in China. It is a black tea brand from England. It mainly focuses on black tea, green tea, jasmine tea, and oolong tea. Its advertising slogan is: “Direct from tea garden to the tea pot”. In 1992, Lipton officially entered China and started to sell black tea and green tea.

Due to the high quality and clear target market, Lipton in China achieved very large sales and market share. Lipton’s owner Unilever invested 50 million USD in Anhui (安徽) province to build one of the biggest tea factories in the world at that time. In 2008, the total annual output value of Lipton was about 23 billion RMB, which was almost the 2/3 of the output value of the China’s tea bag industry. 

How Lipton built itself as a mainstream tea brand

Lipton brought its standardized design and production of tea products when the brand entered China. They helped Lipton reach every corner of the market while also building brand awareness among Chinese consumers. Many foreign tea brands sell tea products from abroad using Chinese distributors. However, Lipton invested in building a local factory and hiring local employees. With this strategy, Lipton greatly reduced the costs and localized the brand. It helped the brand to act quickly to meet the needs of Chinese consumers. In 2008, Lipton was one of the first international brands advertising on mobile Internet in China. The brand was also one of the first to use e-commerce in China.

Lipton targets Chinese white-collar workers and young adults with its tea bags

Tea is traditionally a leisure product. Therefore, many Chinese brands target middle age and elderly people, who have more leisure time. Most Chinese tea brands sell loose leaf tea, which can make people enjoy the process of brewing tea. Lipton mainly targets on white-collar workers in China and young adults in urban areas. The brand uses its tea bag as a competitive difference in China’s tea market, because it is convenient and safer. It also greatly simplified the steps of drinking tea in China.

Lipton is facing great challenges in China

According to the annual report of Unilever in 2019, Lipton’s profits decreased. The brand is facing many challenges in China. Lipton’s tea usually is very cheap, which means it must keep high sales to get enough revenue. Besides, most Chinese young adults (21-30 years old) crave creativity and novelty. Lipton is losing this huge consumer group.  Now, competition in China’s tea market is tighter and consumers preferences have changed. But Lipton has not innovated its package and products, it’s less exciting for Chinese consumers. More Chinese competitors are rising, they have better understanding of consumers, more creative package, and advanced marketing (such as KOLs in China).

Xiao Guan Tea (小罐茶)

Xiao Guan Tea is a high-end Chinese tea brand launched in 2014. It covers six categories: green tea, black tea, oolong tea, dark tea, white tea, and reprocessed tea. The brand targets young adults with strong consumption power and pursue the quality of life. By the end of November 2018, Xiao Guan Tea’s sales revenue reached 2 billion RMB in China’s market. It has around 650 offline shopsin the nation.

Data Source: Xiaoguantea.com, Sohu.com, Tea market in China report by daxue consulting. Online sales channels of Xiao Guan Tea

Positioning itself as a high-end brand

Xiao Guan Tea positions its products as high-end. The brand built its high-end image using well-designed packages and offline stores. It can create the distinct sense of modern luxury for consumers. Xiao Guan Tea uses aluminum cans and high-end gift box as packages, which make the tea healthy, and easy to conserve. Hence, Xiao Guan Tea products are now popular gifts during some Chinese holidays.

Xiao Guan Tea is upgrading its tea manufacturing by developing and using AI

In cooperation with IBM, they developed a robot that can scan and pick out the impurities of tea leaves. One robot can finish 50-60 human workers’ job every day. The technology can reduce labor expenses and improve processing efficiency. Xiao Guan Tea and Siemens launched a cooperation at the end of 2018 to build a new smart tea production facility in Huangshan (黄山). The factory will use AI technology in China to achieve the intelligence of the job-shop, optimizing the production process.

The impact of COVID-19

With the coronavirus outbreak in China, exporting became slower and more expensive. The epidemic also has complicated international logistics. Thus, China’s tea export progress is much slower and export costs increased. The main tea import countries strengthened their customs inspections and some countries reduced or stopped importing China’s tea. Offline retail channels had the biggest impact due to coronavirus in China. More than 60% of tea shops had no sales revenue during February 2020. Online orders for tea decreased and some products had delays in delivery because of the lack of employees in logistics. Therefore, online tea sales also declined.

Long-term impact

The economic impact of the coronavirus in China on tea distribution channels is temporary. The main impact on tea retails was mainly in February and March. The online and offline sales both will quickly recover when the epidemic is over.

Increased focus on health and social

After the COVID-19 outbreak, there is no doubt that everyone will pay more attention to personal health than before. Although tea leaves are not medicine, they are still health-related products, and have health benefits. The proper promotion of the knowledge about tea leaves will help facilitate everyone’s tea consumption. Chinese people’s enthusiasm for social networking is still growing, tea brands need put more emphasis on packaging and appearance design.

Because the COVID-19 outbreak, Chinese consumers have stronger health awareness. Many consumers choose to buy milk tea with little or no sugar. Fruit tea is also popular for due to having less added sugar and more health benefits. For milk tea brands, it’s essential to add the concept of health into their promotion and advertising.

Socializing is more and more important for today’s young people. Tea is not only a kind of drink, but also a sense of fashion and ceremony for them. Thus, milk tea shops now focus more on appearance. Therefore, if traditional tea brands want to increase sales, appearance is as important as quality and taste.

See our full report on the tea market in China

Learn from a tea entrepreneur on China Paradigms

This article The tea market in China: Analysis of the largest tea market in the world is the first one to appear on Daxue Consulting - Market Research China.