Chinese lessons

Date: 2015-10-07; view: 574.

P&G has the best track record of any consumer-goods firm in China, says Tom Doctoroff, the head of greater China for J. Walter Thompson, an advertising agency that is part of WPP. This is because it has bothered to learn what sells in China and, importantly, how much consumers are willing to pay for their slice of western convenience and style—still relatively little.

In shampoo, for instance, P&G's Rejoice brand has won a 25-30% share of the Chinese market. Its Olay skin-moisturising brand is a market leader and has tripled sales since 2000. The overall skin care category should double to $3.4 billion by 2010, Laurent Philippe, the head of P&G's Chinese business, said recently. But Chinese consumers are wary of new products and prefer a trusted brand. So P&G is hoping to capture its share of that growth by extending the Olay brand across a range of categories (such as whitening creams) rather than by introducing rivals.

P&G has also been quick to understand the importance of advertising on China's national television network—long considered too expensive by other multinationals. In a country where people are, from long experience, suspicious of fine-sounding claims, China Central Television (CCTV) is a much-trusted broadcaster. Unlike in the West, where media are proliferating, CCTV still dominates the airwaves, and families all across China believe in it. As a consequence, products sold on CCTV also tend to be trusted. It must feel to P&G as if it has rediscovered in China the golden age of the American mass market.

Firms such as Wahaha, which sells water, milk and soft drinks, and Haier, a white-goods group, have become household names because they have spent money advertising on CCTV. P&G was the first foreign company to take CCTV seriously. Last November, it became the biggest overall spender in the national auctions for airtime held by CCTV, paying 385m yuan ($46.5m) for advertising slots. The slots will help P&G to develop its business in central and western China and second-tier cities.

All this has translated into strong results: the group's sales in China have grown by 25% for three consecutive years, to nearly $1.8 billion at the end of 2003. Profits, meanwhile, have risen by an average of 140% a year. Already, that growth has elevated China to P&G's sixth-biggest market in 2003. It could eventually claim second place behind America.