Report: Localization strategy key to business growth

Multinational consumer goods companies in China are using a “4D” model to become dynamic scale insurgent brands, according to a study by consultancy group Bain & Co.

The 4Ds, representing Design for Chinese consumers, Decide in China, Deliver at China speed and using a Digital way, help brands stay relevant and thrive with local speed.

“It’s clear that local and international brands alike have recognized the importance of acting like scale insurgents and are focusing on local speed to thrive,” said Bruno Lannes, Bain partner and an author of the report.

With a growing number of multinationals establishing their R&D centers in China, it’s important to have specific product formulations based on China-specific consumer insights, creative packaging and consumer or marketing engagement around the Chinese marketing calendar and large festivals.

“For instance, you see it on the supermarket shelves on cans of Budweiser with gold and premium packaging cues (“icons of premiumness”) to cater to local preferences, or special Budweiser Supreme gold and premium packaging for celebratory meals,” Lannes said.

Among the biggest benefits of being a domestic company is that decisions don’t need to be run through global or regional headquarters.

As such, it becomes crucial that successful multinationals create a China-centric operating model. This covers local control of governance, local empowerment and specific KPIs and allows for being agile to test and learn new developments through micro-battles, the report said.

Successful companies now “support China instead of reviewing China. They let China set the agenda with the headquarters instead of the other way around”, Lannes noted, citing Chinese executives now heading the China units of Nestle, Procter & Gamble, and other large multinationals as proof of localized decisionmaking and talent strategy.

Meanwhile, with China’s size and available platforms, brands can reach millions of consumers quickly and effectively. But the key is speed in the innovation and reaction to new developments.

Researchers suggested taking cues from the meteoric rise of domestic brand Genki Forest, which has achieved amazing success in the soft drink sector in less than five years and was on track to reach $1 billion in revenues in 2021.

A recent example would be Unilever’s newly-unveiled ice cream plant in Taicang, Jiangsu province, where the speed of rolling out innovation will be cut to three months from 12 months.

For instance, the R&D team uses 3D printing to mock up packaging samples and develops new nozzles about 80 percent faster than the time taken for developing a typical stainless-steel component.

With the COVID-19 pandemic unlocking people’s desire to consume ice cream at home, the company aims to develop unique products that pamper the taste buds of the Chinese, said Benny Xu, ice cream general manager for Unilever North Asia.

“Chinese customers prefer nottooor greasy flavors … they value quality and healthy raw materials as well as diverse and green packaging,” he said. “At the same time, e-commerce consumption is growing rapidly.”

Finally, the winning recipe will be inseparable from embracing digital technologies, a must-do practice in

China. The country is the most digitalized consumer market in the world across whatever dimension one chooses and the winning brands are the fastest at leveraging this new digital ecosystem.

For instance, French cosmetics giant L’Oreal deemed livestreaming so important that it quickly established an internal talent pool to serve the new channel instead of depending on an outside agency.

“The fact that multinationals are now replicating strategies developed in China and bringing them back to their home markets is something that was inconceivable a while ago, but shows the shift in thinking and why China is both the most important and most innovative retail and consumer market”, said Joanna Lu, Bain & Co expert partner and report co-author.”