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“Chinese Brands, Made In USA”—Might Be A Booster for USA-China Economy

The 16th Annual 2011 Shanghai International Cosmetic Beauty Show provided an opportunity to gain insights into the Chinese cosmetics industry and its consumers.

By: Jonathan Lin
Posted: July 12, 2011, from the July 2011 issue of GCI Magazine.

“To make something special, you just believe its special,” was the sage wisdom imparted by Po’s father in the animated film Kung Fu Panda. What does this have in common with cosmetics in China? I was just waiting for you to ask!

It is no secret that the Chinese cosmetics industry has been experiencing huge growth, and, by all measures, it appears poised for significant growth into the foreseeable future. Current estimates put the number of cosmetics brands in China between 3,700 to 4,000, and foreign companies such as L’Oréal, Unilever, P&G and Estée Lauder are dominating the market because the are perceived to be superior in quality and effect.

So what about the domestic Chinese players? It seems that when a Chinese brand starts to “make it” and gain popularity, it quickly becomes acquired by a foreign company. So why are there not many Chinese brands who are big players in the Chinese market? Surely competing in the home court should offer some advantages. I have identified two key reasons.

1. Lack of Brand Vision: The Chinese brands do not have faith and believe that they can become stronger brands. As Po’s father pointed out, they do not believe they are special. That feeling filters through down to their products.

2. Quick Profits vs. Brand Building: Building a stronger brand is very costly and only happens over an extended period of time. In China, everybody is interested in getting rich now, and few brand owners and top executives have the patience or are willing to invest heavily in building a brand. When faced with the prospect of taking the cash now vs. possibly higher returns in a quickly changing and ever uncertain future, top executives choose the riches now path.