00:00More foreign brands in China are shifting to local control.
00:04The latest is ice cream chain Haagen-Dazs, owned by General Mills,
00:07selling its China stores to a group including tea brand Ninji.
00:12Here's Siobhan McCall.
00:13Thanks, Julia.
00:14Yes, batting off increasing domestic competition
00:17is becoming a challenge for international companies in China.
00:21Haagen-Dazs was once seen as a status symbol in China
00:25and its cafe-style stores like this one in the video
00:28were considered an ideal place for a date night.
00:32And products like ice cream mooncakes are a successful example
00:36of how the Western brand has adapted to suit Chinese tastes.
00:41But Chinese consumer habits are changing.
00:44More are turning to homegrown brands
00:46driven by a mix of national pride,
00:49the so-called gochow trend, and lower prices.
00:53Well, Chinese giant Miksu,
00:55now the world's largest food and beverage chain,
00:57sells ice cream for as little as 30 cents.
01:01Compare that with around $5 for a similar Haagen-Dazs product.
01:07China is Starbucks' second largest market globally,
01:10and its reserve roastery in Shanghai is very popular with tourists,
01:14like this one here.
01:15Reserve roastery the size of half a football field.
01:20Over here is an example of some of the food you can find.
01:23You can see there are different types of pizzas,
01:25there are focacchas, there are different croissants.
01:28This is in a Starbucks.
01:30Not only that, they roast all of the beans in-house,
01:33and it's a different blend from other Starbucks around the world,
01:36because it is locally grown.
01:38But local brands, most notably Luckin Coffee,
01:41have been competing and beating Starbucks in revenue and by number of stores.
01:48Starbucks has now sold majority stake in its China business
01:52to local private equity group Boyu Capital for $4 billion.
01:56It reflects plans to expand into smaller cities
01:59and to operate with faster decision-making.
02:04Burger King has sold 83% of its China operations
02:07to a Beijing-based private equity group.
02:10McDonald's did the same back in 2017.
02:13KFC, meanwhile, runs its China business through Yum China,
02:17a separate listed company often held up as a success story in localisation.
02:22It even has a China-specific menu.
02:26That's appearing in this video here, these consumers trying it,
02:28and is now the country's biggest restaurant chain.
02:31And many local Chinese brands are expanding into international markets,
02:36including sportswear company Anta.
02:39Anta is now one of the world's largest sports brands.
02:42Its ambassadors include Eileen Gu,
02:45the most successful Olympic free skier of all time.
02:48Earlier this year, Anta agreed to buy a stake
02:51in German sports company Puma for close to $2 billion,
02:54while Luckin Coffee now has at least 18 locations in the United States
02:59and has also bought American cafe operator Blue Bottle.
03:03Well, Chris Pereira is founder and chief executive of Impact,
03:07a global consulting group that helps Chinese companies expand across the world.
03:13The first most important thing is the consumer trends and consumer preferences are changing.
03:19KFC, just as an example, recently launched a new health-focused brand called K-Pro,
03:24selling, of all things, smoked salmon and vegetables, healthy food.
03:29So the one huge trend I've seen recently is people talking more about their blood pressure,
03:34their health.
03:35They're thinking, is it better to eat fried food or is it better to have baked food?
03:39And these questions were almost non-existent in China when I went first to China 20 plus years ago.
03:45The second is just China's overall reform and opening up is really in a new stage of development,
03:51if you ask me at this stage, that we're seeing, as I'm sure you've seen,
03:54many Chinese companies going overseas.
03:56And as part of that, they're learning new business practices
04:00and the competitiveness of local Chinese companies is really putting pressure on companies
04:05like Starbucks, Haagen-Dazs, KFC, et cetera.
04:08KFC and Haagen-Dazs are examples of brands that actually did pretty well when it comes to localization,
04:14but it feels like maybe that isn't enough now to conquer the China market.
04:17Yeah, I think there's different stages of localization.
04:22I guess the very early stage of localization would be, hey, you can have a shrimp burger
04:25at McDonald's, right, and localizing the flavors.
04:29I think the localization push needs to go to another level now in China and overseas
04:34where you're doing local partnerships, you're speaking the local cultural idiosyncrasies,
04:42maybe caring more about the local city you're in, whether it's Shanghai, Hangzhou, Beijing.
04:46China isn't just China.
04:48In a certain city, there's very specific markets, even in specific districts of a city,
04:53that you need to have the insights to really get the heart of the consumer.
04:57I wonder, is there a danger that these foreign brands reinvent themselves for the Chinese market
05:02and they actually lose their international identity and by doing that, their appeal?
05:08So localization is a double-edged sword for sure.
05:11Sure, there's always a question.
05:12So we've helped over 400 Chinese brands expand overseas and almost every CEO will ask me the same question.
05:19What exactly should I localize, right?
05:20If I localize everything, I lose my competitive edge because I'm no longer bringing the Chinese feed,
05:26the Chinese efficiency, the various things from the Chinese supply chain to the local market.
05:30If I don't localize anything, I'm too foreign and I'm not accepted in the local market.
05:34So I think the answer is you need to hire locally, you need to localize your workforce
05:39and the local workforce will give you the suggestions and the inspiration for what you should localize
05:45and what you should bring from your home market to China.
05:48We're seeing the reverse happening as well.
05:50Chinese brands are entering the US market and we're seeing the likes of Anto Sports buying up stakes
05:55and German brand Puma.
05:57What would the challenges be for them entering international markets?
06:01The challenge for Anto, meaning in these fashion brands, is you're actually wearing these products, right?
06:07If you're driving a car, that's one thing as part of your lifestyle.
06:10If you're driving a BYD or other Chinese company making new energy vehicles,
06:15that's close to your lifestyle, but it's not something you wear, right?
06:18But with clothing, I think that's the next stage of consumer connection.
06:24And I think these recent acquisitions, there's so many sports partnerships going on right now.
06:29Now, TCL, for example, working with the snowboarder Guilin.
06:35And these sort of partnerships, I think, are planting the seeds for the next five or ten years.
06:39So young people will see Chinese companies doing interesting, fun things with the stars that they love.
06:44And as they grow up, I think you'll find that there'll be more interest in Chinese brands like Anto or
06:50leaning in the future.
06:51And do you think Chinese consumers can fall back in love with Western brands?
06:56So the responsibility for this is on the Western brands to really get to know China better.
07:03One opportunity I suggest everyone take is the, right now it's a visa-free travel to China.
07:10You should go to Shenzhen, go to Hangzhou, go to Shanghai, grab a coffee, get to know the market better.
07:14Because it's not enough just to have a great Western brand.
07:16You need to have connections and relationships in China.
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