Daily Chemical giant stepped up to siege national brands

Advertising investment in China increases by US$1 billion annually, fully penetrates into market segments

Daily Chemical giant stepped up to siege national brands

Many foreign brands have begun to hype the concept of herbs.

Since August, Procter & Gamble International’s Procter & Gamble giants and Unilever have been warming up in China. For the first time in China, the customized TV drama “Silky Heart” and “Invincible” have become new giants who are not only advertising but also new money-burning techniques. The two largest fast-moving consumer goods giants invariably targeted the 1.3 billion Chinese market. How do foreign brands respond?

International giants

“The market potential of China’s daily chemical industry is very large. The annual growth rate is as high as 20%-30%.” Yan Qiang, a managerial advisor for Zhengli Strategy Group, said that the fast-moving consumer goods industry relies on the high-frequency consumption of consumers at a high frequency, which is achieved through sales. Profit, so the market size is crucial. The market size of China’s 1.3 billion people will undoubtedly become a contestable spot for the giants P & G and Unilever.

In order to compete for the Chinese market, Procter & Gamble and Unilever did not hesitate to spend huge amounts of money to customize TV dramas for marketing, monopolizing the prime time of domestic TV dramas in August of this year, and subtly blending the brand positioning of the two shampoos in the “soft and clear” brand. "Final Heart" and "Invincible" in the title and story. It is reported that through this war, Ching Yang recaptured 5% of the market share from Hafeis.

At the same time as making custom-made dramas, P&G and Unilever also announced plans to increase their marketing budgets.

According to foreign reports, Procter & Gamble’s advertising spending has increased by 1 billion U.S. dollars over the past year, and it will continue to maintain an 11% share of total revenue. Unilever’s advertising and marketing expenses in the first half of this year increased by about 462 million U.S. dollars. At the end of last year, it also participated in the CCTV advertising tender for the first time. It spent a lot of time to catch up with the three-time “Brand King” Procter & Gamble.

"In the past 22 years, P & G has invested more than 1.5 billion U.S. dollars in the Chinese market. In the next five years, we will continue to invest at least 1 billion U.S. dollars." The new CEO of Procter & Gamble, Mai Ruibo, publicly expressed his interest in China in his August visit to China.

Heavy investment to build research and development center

On August 18, the Procter & Gamble Beijing R&D center with a total investment of up to US$80 million was completed at the new site of the Tianyi Industrial Park in Shunyi, Beijing. This is P & G's largest global center, with more than 500 employees from 16 countries. Compared to the 80s of last century, when P & G just entered the Chinese market, only 20 R&D teams were really different today. More importantly, this is P & G's own property that has invested a lot in China for the first time.

Quite similarly, the arrival of Paul Polman, the CEO of Unilever, who had just been in office a year ago, was at the opening ceremony of its Shanghai R&D center. The R&D center, which covers an area of ​​about 30,000 square meters, is located in Changning District, Shanghai. In order to protect its position as the sixth largest in the world, Unilever has tossed 50 million euros and even abandoned its research institutes in Chicago and Japan. .

"If Unilever can't do well in China, then it can't be done globally," Polman said.

As the economic situation continues to change, unlike the R&D institutions that have been set up in China by the major multinational corporations in China since 1997, the two new R&D centers will focus on high-end research and development. Unilever’s Shanghai R&D center includes basic research that is decisive for the development of new products. And Mai Ruibo claims that the Beijing R&D Center represents all of the cutting-edge technology of P&G R&D.

Market participants pointed out that the establishment of these two research centers will upgrade “Made in China” to “Chinese Research”—researching Chinese consumers’ consumption habits, preferences, and the like, and arguing for the two major Japanese giants to compete in the Chinese market. Lay a more solid foundation.

Local brands are in crisis

In China's daily chemicals industry, foreign brands have high-end high-end markets, while local brands tend to stay low-end, but now, this situation is rapidly changing.

As the saturation of foreign brands in the first-tier cities has increased, they have begun to diversify, increasing their penetration in the larger low-to-middle consumer markets, and big acquisitions of local brands such as Xiaoniao, Sibao, and Dabao, which were originally shared by foreign brands and local brands. The competitive landscape of high and low-end markets is changing. Johnson & Johnson retains and develops the Dabao brand in order to be compatible with the brand's advantages in the low-end consumer market.

“Domestic brands have a high entry fee at Shangchao and are forced to open up the rural market.” Yan Qiang said that in addition to the acquisition of local brands to attack the low-end consumer market, foreign brands operate and tax costs, some foreign brands It is also used to create a variety of crises to reduce the credibility of national brands or the value of the capital market, and then make acquisitions. After being acquired, national brands lose the dominant power of products, while foreign brands obtain the sales channels and control rights of these national brands. For example, “Chinese toothpaste”, which was once the champion of sales, fell to a disastrous position after Unilever dominated the management. After the United States and Canada, which was once the “first skin care brand”, sales of Unilever’s joint venture dropped sharply and evaporated overnight.

Recently, foreign brands have made new moves against local brands. It is reported that Carrefour recently wanted to report to Haodi, Lafang, Bawang and other local chemical companies: If you want to continue on the shelves, you must pay an additional fee of 8% to 15%. Some media even interpreted it as "Procter & Gamble and Carrefour cull local brands."

Li Xuerong, a senior research fellow at China Investment Advisors, believes that if the news is confirmed, it will be detrimental to Chinese local chemical companies because local companies will lack brand advantages compared with foreign companies, and if they add a shelf fee, they will make profit. Further narrowing may even exit the store.

Resources also play with traditional Chinese medicine concepts

"In the face of strong foreign capital brands, national brands can hardly compete with them." Yan Qiang said that most national brands have therefore chosen another way, and finally found a breakthrough in the traditional Chinese medicine formulations of daily necessities.

The conservation of Chinese herbal medicine has won the hearts of people in China. Traditional Chinese medicine has an unrivalled influence as the traditional essence of China. It is precisely with the formulation of Chinese herbal medicine that national brands have developed a blue ocean in the market. For example, today's chemical products market is showing a trend of “trim medicine formula”, “chemical formula” and “other formula” products.

"Yunnan Baiyao" toothpaste only used a short period of 5 years to successfully break the monopoly of foreign brands Crest, Colgate, Black, etc., occupying the fifth place in the toothpaste market. The overlord shampoo, which claims to originate from the “Chinese Medicine Family”, strove to break through under the strong encroachment of Pantene, Rejoice, and Head & Shoulders, and grabbed the fourth place in the shampoo brand's market share. Shanghai Jahwa's fashion herbal personal care brand, Herborist, has gone out of the country and successfully entered the sales network of the world's top-end cosmetics retailer Sephora.

Statistics show that the market share of Chinese herbal medicine far exceeds 10 billion. National brands are rising with the concept of Chinese herbal medicine.

The huge market appeal of the Chinese herbal medicine concept also attracted foreign brands to follow suit. The success of P&G's Crest Herbal toothpaste series is closely related to the market operation of its “herbal” concept. And Crest's "Han Grass Extract" toothpaste is even more imaginative. Zeng Xiwen, vice president of Unilever Greater China, revealed that its R&D center in Shanghai will open up an entire floor to specialize in the research and development of herbal products.

Reporter observation

Safe and healthy Johnson

Dirty Tyrant

With Procter & Gamble, Unilever has spent large sums of money to overweight the Chinese market, and national brands have fallen into a disadvantageous position. The main reason is that they face the "price war" of foreign brands in their products. The development of mid-to-high end brands lags behind and the profits of enterprises have shrunk. Sales can not keep up, there is no capital to operate, not to mention competing with foreign brands marketing planning and promotion methods.

In the daily chemical industry, foreign brands still occupy more than half of the country, and national brands have risen with the concept of Chinese herbal medicine in the daily chemical industry. But after all, there are only a few brands such as Shanghai Jahwa, Bawang and Yunnan Baiyao.

In the case of Overlord, although the Food and Drug Administration came forward to clarify that dioxane is not an artificial additive, and is only an inevitable by-product of the production process, the dioxane content of the overlord shampoo is far below the safety standard, but it still cannot stop. **'s repeated questioning, its reputation has plummeted. In fact, the earliest burst of dioxane containing a foreign baby brand Johnson's bath liquid, the result is that Johnson has nothing, the Overlord has evolved into a public event. Insiders pointed out that foreign brands, regardless of funds or public relations capabilities, are much stronger than national brands, and have the ability to respond to emergencies.

It was difficult for national brands to occupy a place with Chinese herbal medicine formulas, but they were struggling under the influence of foreign brands. According to industry insiders, this aspect is due to the monopoly of foreign brands in the market and strong capital, on the other hand, it is caused by unfair competition from some competitors. In addition, it also has to face the "price war" of foreign brands and the "media war" of emergencies. Faced with this situation, national brands have to rise. Apart from differentiated Chinese herbal medicine concepts, they must also strengthen their own competitiveness and strive to create high-value-added brands.

In the case of an overwhelming number of international giants in China, the national brands must emerge from the bright landscape in the daily chemical industry. They must enhance their competitiveness and increase the development of mid- to high-end brands in order to enhance the brand's influence and profitability. Herborist has entered the European market, and Longliqi and other local daily chemical companies have also developed their own high-end brands. This is a good start. For the government, it should also vigorously support these national brands and enhance the country's international competitiveness.