Foreign brands lag in China NPD

Warc, 2 September 2014

BEIJING: International businesses are struggling to succeed with new product launches in China's increasingly saturated FMCG market, new research has said.

Market researcher Kantar Worldpanel China and polling business TNS analysed 210,000 new products launched in 77 categories over the past three years in China and concluded that it was becoming increasingly difficult for new product launches to achieve incremental growth, Xinhua reported.

Multinational companies were finding it harder to make an impression than local companies, even at the premium end of the market they typically inhabited. The study found that the success ratio of new premium products from Chinese companies was 30% higher than those from multinationals.

In part this was because local businesses often had a better understanding of the market and were launching products that were a better fit with the needs of Chinese consumers, Kantar/TNS suggested.

But the study also noted a tendency for multinationals to simply look at what had worked well in other markets and then attempt to replicate that in China.

"The problem is that China is so unique that simply copying the success from another market often doesn't work," the report stated.

Of the tens of thousands of products launched, fewer than half lasted three years – just 45% of all new product launches were still on the shelves after that length of time. And while 19% had achieved incremental volumes for their owners, just 4% could be described as big winners.

But incremental growth was better than simply aiming to register the greatest sales volumes, the study argued. Bigger was not necessarily better, as that thinking took no account of the potential for cannibalising sales from existing products.

Overall, Kantar and TNS noted that a few years ago new product launches had contributed about 8% of a company's growth but by 2013, that figure had fallen to 6%, highlighting the difficulty of driving growth through innovation.

In addition, as the Chinese economy cooled and disposable income levels decreased, people became less likely to spend freely. Chinese consumers were perfectly willing to try new products, the report suggested, but they tended to look to trusted recommendations from friends and family.

Data sourced from Xinhua; additional content by Warc staff