With a heightened awareness and more media coverage in China on key issues like pollution, the environment, and food safety, as well as more exposure to global brands, there has been a growing trend of people seeking a more active and healthier lifestyle in recent years. These increasingly health-conscious Chinese consumers represent an important growth opportunity for companies selling their products and services across a myriad of industries from health & wellness, sports & apparel, through to pharmaceuticals and even into more niche categories. However, in order to attract these consumers brands will need to be more forward thinking in their marketing approach.
With more than 300 million people expected to migrate to Chinese cities in the next 15 years, and the total urban population predicted to reach around one billion people by 2030, also comes changing consumer profiles and an increase in demand for a better lifestyle. According to data from CTR China National Resident Survey (CNRS-TGI) almost 10% of respondents claim to be eating more healthy food now than 2 years ago and this falls in line with similar trends that highlight a growing importance of health among the Chinese population.
Although the Chinese fast food industry grew at an average rate of over 12% per year from 2009 to 2014, the awareness among Chinese people of the bad effects of junk food has also risen by 15% in the past two years alone. This illustrates a shift in consumer attitudes and expectations towards better food quality. Yum Brands, which owns KFC and Pizza Hut, is the largest western restaurant operator in China with over 6,500 outlets and 50 % of its global revenues come from China alone. But as western fast food brands continue to expand in terms of outlets, business has also appeared to be slowing down in some areas. KFC, for example, is experiencing a number of challenges to try to maintain high quality standards while continuing its expansion in the China market, having witnessed a 10% drop in sales in the 2nd quarter of 2015. As well as the negative effects of the recent food safety scandals in China this is also a result of increased competition from domestic Chinese fast food brands that continue to grow rapidly in terms of more localized food offerings and promotions that appeal to consumers including healthier options like rice-based meals and steamed dishes rather than fried foods that are typically found in western branded restaurants. At the same time consumers are becoming increasingly concerned about the safety and standards of food sourcing and preparation. Similar trends can also be seen on a global level. Brands like McDonald’s and Burger King have in recent years started to add more healthier items like salads to their menus, and although this has not always resulted in driving a significant amount of new business, there has also been an influx of newer brands into the market who are starting to win customers through the promise of ‘fresh food’. One such example is Chipotle who have been growing quickly at 20 % annually. Other changes which are transforming the fast food industry include offering customers the possibility to choose their own ingredients and customizing their food with a more healthy mix.
Since China’s new food and safety law took effect on 1st October, 2015, and the country begins to roll out the first new regulations since 2009, the relationship between brands and consumers will become more and more critical and this will start to significantly impact both Chinese and international brands in the market. Many important measures have been put in place in an attempt to improve China’s food safety record including stricter safety measures related to infant formula and milk powder, healthy food processing and online food sales. In response to the new regulations as well as the constantly changing dynamics in the consumer market, brands will need to look at new ways in which they can attract and retain customers both online and offline.
It is imperative that brands begin to understand the need to adapt to these new conditions in order to maintain loyalty and growth in this fluctuating and demanding environment. Changing socio-economic and political parameters, shifting perceptions of the role of consumerism, increasing competition as well as consumers’ familiarity are all factors which will not only change the market in the coming years but also consumers ‘immunity’ to promotional messages. Brands need to fundamentally re-evaluate; from the way they view their broader role within society and construct strategies to the way they carry out research, communicate and innovate. The key is to recognise themselves not as mere money-making machines and vehicles of consumerism, but as intricate entities within the broader system of culture.
If you look briefly over the evolution of branding and advertising you can see how it’s been changing and where the future lies, which is critical for forward thinking brands that want to make a difference in China…. In its early stages, brand communication lacked a specific strategic positioning; characterised by simplicity of form, content and directness in tone of voice. Nevertheless, even in its infancy, advertising was entwined with culture.
As consumerism progressed, the need for market differentiation and more sophisticated branding techniques, created the “Unique Selling Proposition” (USP). Branding was based on a product’s unique attributes and competitive advantage. Repetition was used to create lasting associations in consumers’ minds. USP belonged to a peak period of consumerism that was based on value justification and purchase through competitive advantage.
As consumerism acquired more pleasure-seeking characteristics, USP was replaced by Emotional Selling Proposition (ESP). The role of branding shifted to linking a product with a specific consumer benefit instead of a product attribute. The role of advertising was to instigate a unique and intense emotional connection between product experience and consumers.
USP and ESP reflected the changing cultural conditions of their times, highlighting the corresponding evolution of consumerism. Nowadays, culture has become much more important to consumers. In a world where established culture (universities, museums, countries) becomes branded, branding reciprocates by moving towards established culture. This marked the development of Cultural Selling Proposition (CSP). Red Bull is an early stage example of a brand whose communications are based around CSP. Instead of creating fictional stories, Red Bull employs reality to promote itself, creating documentaries, having athletes and everyday people as its protagonists.
We can find strong locally relevant brands in many markets worldwide, including China where culture is now a critical area that marketers can no longer neglect. From health to sports to food & beverage, brands have started to see great success by adopting a culturally-tapped marketing strategy which combines the past, present and the future, fusing nature and technology simultaneously to give a cutting edge positioning in all their brand communications.
Culture and branding have become inseparable in their definition and perception, with brands becoming agents in pushing the cultural agenda. Culturally tuned brands are interacting with consumers in new ways, places and moments by telling stories that are part of culture. Consumers purchase branded products in order to experience and be associated with these stories and enhance their own cultural identities. Traditional media are on decline along with their influence. Emergently, brands are tapping into media that interact with consumers in real time and in their reality. Ambient advertising, events, pop-up stores and even digital media have become expressions of CSP, allowing brands to act as agents of cultural authenticity and to create more meaningful interaction with consumers. Brands have now become cultural entities and communications have become vehicles of culture. Businesses, especially those in the area of health and wellness, must understand this in order to stay ahead.
“Written by Panos Dimitropoulos, Account Director of Cultural Insight, and Sam Woollard, Client Development Director, with support from the Added Value China team.”
*Data collected from: CTR China National Resident Survey (CNRS-TGI)
Contact: Added Value Shanghai Office, T: +86 (21) 3612 6666, Email: cninfo@added-value.com