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The China Shift: Economic Realities

By: Jeff Falk
Posted: August 5, 2008, from the August 2008 issue of GCI Magazine.

page 4 of 5

GCI: Can you predict what role China will play in the fortunes of personal care companies in the coming years? Will there be shifts in the current paradigms?

Peter Kelly: My prediction is that, soon, Chinese brands, until now unheard of, will start to establish themselves in [Western] markets. This will start with consumer brands we first notice at the Beijing Olympics. In five years’ time, I predict there will be “Westernized” versions of Chinese brands on the shelves of Boots, CVS and Target. There has been a Chinese influence in design and products growing for a number of years. Tea and herbal medicines are an example in our own industry, as these have been incorporated into formulations for skin care.

Established brands in that market will become more aggressive as the consumer has more choice and a growing disposable income. Chinese brands, though, will get more Westernized and will prove to be formidable competitors as they re-brand and learn from their new U.S. or European rivals.

Brands that are established in China now will consolidate their business, tweak their products to suit the growing affluence and discerning nature of the Chinese consumer. [Those] thinking of entering now would be wise to re-evaluate. [They may be too late.] Brands looking to shift to Asia for manufacturing should also reconsider logistics, exchange rates and domestic labor costs. I don’ think companies will withdraw, but expansion or potential new arrivals will look elsewhere—such as Eastern Europe perhaps, as Taxi London has successfully done. It’s two to three hours away. No visa restrictions and, in a growing number of cases, tender a common currency.

Liz Grubow: There will probably be a strong nationalistic movement. We are seeing that now with a pride in country and culture. There is a great desire among the “Rare Generation—the Millennials and Gen-Y of China” to cultivate their own style and brands. They are more competitive, ambitious and individualistic than any previous generation.