RID­ING ON EMO­TIONS

Chi­nese con­sumers are seen as emo­tional and fickle — and com­pa­nies are rac­ing to keep up with their chang­ing tastes, re­ports.

China Daily (Canada) - - ANALYSIS -

When China’s Pres­i­dent Xi Jin­ping dropped in for a pint at an English country pub with Bri­tain’s Prime Min­is­ter David Cameron in Oc­to­ber, few could have fore­seen that it would start yet an­other Chi­nese consumer craze.

Within a few weeks monthly sales in China of the beer they drank, Greene King IPA, soared from 6,000 bot­tles a month to 80,000 bot­tles a month.

The Chi­nese, who nor­mally drink their own lagers such as Ts­ing­tao and Yan­jing, had sud­denly de­vel­oped a taste for English bit­ter ale.

The brewer that makes the beer was the lat­est to ben­e­fit from the seem­ingly un­quench­able de­sire of Chi­nese con­sumers to have the next lat­est thing.

This of­ten emo­tional and some­times er­ratic be­hav­ior is “shak­ing the world”, Jef­frey Tow­son, pro­fes­sor of in­vest­ment at Guanghua School of Man­age­ment at Pek­ing Univer­sity, said in a re­cent ar­ti­cle.

China is a vi­tal mar­ket for vir­tu­ally all lead­ing global consumer brands, yet the spend­ing be­hav­ior of the country’s con­sumers is so volatile that trends are be­com­ing in­creas­ingly un­pre­dictable. They do not of­ten be­have the way usu­ally seen in Western mar­kets, ex­perts say.

So for­eign multi­na­tion­als — like Chi­nese com­pa­nies that are just as des­per­ate to cap­ture their own do­mes­tic mar­ket — are hav­ing to ad­just their busi­ness mod­els and align them with the lat­est trends and fash­ions in the world’s sec­ond-largest econ­omy.

So there was much in­ter­est last month in the pub­li­ca­tion of the 2016 China Consumer Re­port, The Mod­ern­iza­tion of the Chi­nese Consumer, by the in­ter­na­tional man­age­ment con­sul­tants McKin­sey & Co.

It was the 11th such an­nual re­port, for which 10,000 con­sumers were in­ter­viewed.

Daniel Zipser, part­ner at McKin­sey’s Shang­hai of­fice and the leader of its consumer and re­tail prac­tice in Greater China who was co-author of the re­port, said it is the speed of the consumer trends that presents the big­gest chal­lenge to com­pa­nies.

“You see brands emerg­ing from nowhere to be worth a bil­lion dol­lars in just 12 to 18 months. We just haven’t seen that in the Western world.”

De­spite the re­cent slow­down in the Chi­nese econ­omy, Chi­nese con­sumers re­main among the most con­fi­dent in the world.

In the lat­est sur­vey, 55 per­cent of re­spon­dents said they ex­pected their house­hold in­come to rise over the next five years, barely un­changed from the 57 per­cent in 2012.

This con­trasts with only 30 per­cent of United King­dom con­sumers and 32 per­cent United States con­sumers, of­fer­ing sim­i­lar sen­ti­ments when they were last polled in 2011.

“Although there are re­gional dif­fer­ences with consumer con­fi­dence in North­east China (an area of de­clin­ing heavy in­dus­tries and higher un­em­ploy­ment)

You see brands emerg­ing from nowhere to be worth a bil­lion dol­lars in just 12 to 18 months (in China). We just haven’t seen that in the Western world.”

part­ner at McKin­sey’s Shang­hai of­fice and the leader of its consumer and re­tail prac­tice in Greater China

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