Mondelez China sees challenge in provinces
As the economic turndown hits consumer spending in China’s megacities, FMCG companies are turning to the provinces as the next frontier of growth, according to snack company Mondelez China president Stephen Maher.
“E-commerce and tier-three and -four cities are going to make up for more than 80 per cent of our anticipated growth for the next five years,” he said at the Food and Beverage Innovation Forum in Shanghai.
Tier-three cities are classified as those with a GDP between US$18 and $67 billion plus populations between 150,000 and three million, while tier-four cities generally have fewer than 150,000 residents and less than US$17 billion in GDP.
Maher said marketing to consumers in tier-three and -four cities was more challenging, partly because TV channels and cable TV penetration had less impact in provincial cities.
Also, companies could not assume that products popular in tier-one cities would automatically find success in the provinces. This meant they had to work directly with local retail chains to build brand awareness in the smaller cities, rather than via a distributor – a different strategy from that for top-tier cities. Companies might also need to adapt the product format.
“The market share of big companies drops off in small-format retail … it is not working,” said Maher.
“With Oreo biscuits we have the cookie jar, which in smaller cities sells at RMB1 [US14c] and lends itself to a self-merchandise format,” he said to give an example of how big companies needed to adapt.
No related posts.