Once upon a time, Procter & Gamble (P&G), the international giant, was a model for many Chinese enterprises, bringing advanced consumer research concepts to them. However, P&G's fiscal 2016 first-quarter results showed that in the quarter ending September 30, 2015, its organic sales in the Chinese market fell sharply by 8%.

Sharing insights: Reflections on P&G's lost way in the Chinese market... In fact, not only P&G, but many other foreign brands face the same problem:

In the FMCG sector, the 2015 China Shopper Report shows that among 26 FMCG categories, local Chinese brands hold 70% of the market share and contributed 87% of market growth in 2014. Foreign brands saw their market share decline in cities of all tiers, even in first- and second-tier cities where they previously had advantages. Nationwide, foreign brands' market share fell by 1.6%.

In the home appliance sector, air conditioner market data shows that in the first half of 2015, foreign brands accounted for 17.7% of color TV sales, 22.2% of washing machines, and 12.9% of refrigerators. In the air conditioner market, foreign brands had the smallest share at only 5.9%, down 0.7 percentage points year-on-year, and continuing to shrink.

In the automotive sector, according to data compiled by Gasgoo Auto Research Institute, SUV sales in September reached 579,979 units, up 62.8% year-on-year. Compared with the 72.4% growth of independent brands, foreign brands grew 53.4% year-on-year, with total sales of 275,185 units, far below the SUV market average. Their market share fell 3.0 percentage points year-on-year to 47.4%, trailing independent brand SUVs.

In the financial sector, over the past decade, China's financial opening has accelerated, and market access for foreign financial institutions has become increasingly broad. However, the market share of foreign banks in China has remained stagnant. Despite the total assets of foreign banks in China growing at a compound annual rate of 17%, their proportion of total assets of Chinese banking institutions has not advanced.

In the internet sector, eBay, Amazon, Google, MSN, and others—global internet giants that dominate worldwide—have all stumbled in China. Instead, local companies like Taobao, JD.com, Baidu, QQ, and Meituan have succeeded, often by copying their models.

Sharing insights: Reflections on P&G's lost way in the Chinese market...

Without listing all examples, a series of data indicates that foreign brands are losing their way in the Chinese market. A new survey by consulting firm Bain & Company found that China's over 1.34 billion consumers increasingly prefer local brands in shopping, including toothpaste, laundry detergent, juice, biscuits, and other goods. Bain noted that amid China's economic slowdown, which has slowed sales growth for companies, most of those still achieving sales growth are Chinese companies. The European Union Chamber of Commerce in China's "Business Confidence Survey 2014" showed that two-thirds of European multinationals said operating in China is becoming increasingly difficult, nearly half (46%) believe the golden age for multinationals in China is over, and 33% said their pre-tax returns in China are lower than their global average profit margins.

For Chinese brands, this is worth celebrating; for foreign companies, it is not good news.

Sharing insights: Reflections on P&G's lost way in the Chinese market...

"China is a big market," as everyone on Earth knows, and we have heard it for many years. With China's rise, any multinational aiming for globalization cannot ignore the business opportunities this emerging market brings. But as China transforms from a manufacturing powerhouse to a consumer powerhouse, the market is no longer just "a place of unlimited potential where you can pick up gold by bending down." Globalization has placed multinationals and Chinese companies on the same stage, and competition and gamesmanship are pushing the Chinese market to mature and consumers to become more rational. The Chinese market is not a high ground that can be easily captured; entering does not mean occupying and lasting.

More and more multinationals are re-evaluating the Chinese market. In fact, localization and branding are two variables that cannot be ignored, directly determining whether their future is bumpy or smooth. With the acceleration of world economic integration, more companies are going global. Compared with operating domestically, multinational operations face a more complex business environment, including economic, political, legal, social, and cultural environments. How to adapt to a market and management environment vastly different from their home country is particularly important for multinationals. To advance localization, a deep understanding of the Chinese market is essential.

Sharing insights: Reflections on P&G's lost way in the Chinese market...

China has a vast territory, a large consumer population, varied consumption levels, different consumer needs, and diverse consumption purposes. A province in China may have a population equivalent to a European country, and its market area may be as large as several European countries. The numerous consumer groups and vast market areas undoubtedly increase the difficulty of operating in the Chinese market. If you try to operate a Chinese provincial market using the same approach as a European country, you will face great difficulties and slim hopes. Additionally, variables arising from income levels, cultural factors, environmental influences, customs, and ethnic differences lead to more uncertainties and complex consumer motivations.

As China's economic development enters the "new normal," with slowing growth, consumers are more cautious and increasingly base purchases on actual needs, making the consumer market more unpredictable.

Sharing insights: Reflections on P&G's lost way in the Chinese market... Take P&G as an example. As one of the earliest foreign giants to enter the Chinese market, P&G once played a role in educating the market and became the "Whampoa Military Academy" of the FMCG sector in China. It was successful in product development, market positioning, pricing strategy, channel distribution, talent cultivation, and organizational management. A European company executive once said, "At that time, P&G had almost all the advantages of a giant: early entry into China, deeply rooted brands, strong financial resources, indifference to short-term gains, and a reputation as a talent nursery, with industry word-of-mouth spreading quickly." However, after the market was educated, foreign brands flooded in, and global competition intensified, P&G remained stuck in its old track, lacking change and drifting away from the market. While other competitors went further on the path of specialization, P&G lost its direction from famous brand to brand. Over the years, P&G's retail growth in China fell from nearly 35% in 2005 to about 6% in 2013, facing challenges from latecomers in various segments. Euromonitor data shows P&G's market share in China's toothpaste market dropped to 19.7%; in laundry detergent and soap categories, local Chinese companies Guangzhou Liby and Nice Group have a combined market share of 27.6%, while P&G has 7.6%.

Sharing insights: Reflections on P&G's lost way in the Chinese market...

As users of P&G brands, every consumer seems to look forward to its rebirth and revival. Just as many great companies have been abandoned by the times because they failed to innovate in business models, today's P&G faces this possibility. All we can do is wait and see.

What to do about the Chinese market? It seems that neither the big bosses nor the professional managers in China can provide a quick answer. Past experiences have lost their effectiveness today. China is no longer the rapidly growing China. "China is big, but difficult," as GE CEO Jeff Immelt said.

Sharing insights: Reflections on P&G's lost way in the Chinese market...

In essence, multinationals have made a fatal mistake: they are too slow to transform. Chinese society is transforming, and Chinese companies are transforming rapidly, while multinationals either delay transformation or do it slowly.

Since the 18th National Congress of the Communist Party of China, China has comprehensively deepened reforms and further expanded opening-up, which will provide more opportunities and broader space for multinationals to develop in China. This means the government is willing to engage in deeper dialogue with multinationals. In other words, China still needs multinationals. China is transforming from a manufacturing country to a service-oriented country, and this transformation still requires the global experience and advanced technology of multinationals.

Whoever seizes the opportunity, whoever dares to reform and innovate, will take the lead and win the future.

-END-

Content Selection

Reply with the following keywords to search and read related articles: Sales Supervisor, Second-tier Management, Regional Manager, Distributor Management, New Channels, City Manager, Competition, 2015, Manufacturer-Dealer Game, Product Stagnation, Terminal Visit Management, Route Management, Deep Distribution, Internal Management, Sales Skills, Profit Improvement, Recruitment, Distribution, Daily Management, Team Motivation, Trade Promotion, Sales Misconceptions, New Product Launch, Township Market, New Product Pricing, Sales Target Achievement, Closing Deals, Market Visit Inspection, Baijiu, Beer, Sales Increase, Agency Products, Channel Crossing, KA, Terminal Merchandising, New Market, Market Operation, Learning, Book Recommendations, Inventory Management, Sales Novice, Consumer Promotion, Execution, Old Products, Expired Product Handling, Model Market, Investment Promotion, New Media, Distributor Development, Performance Appraisal, Assessment, Annual Planning, Shopping Guide, Morning Meeting, Display, Transformation, Inventory Pressure, Holidays, Distributor Cost Control, Channel Operation, Marketing Theory and Laws, Brand Truth, Order Meeting, Team Management, Training, Work Report, Work Report.