Colgate adopts innovative approach in China

10 June 2010

BEIJING: Colgate-Palmolive, the FMCG giant, is developing new approaches to innovation and advertising as it seeks to adapt to the "very complex" nuances of the Chinese market.

According to Franck Moison, the organisation's chief operating officer for emerging markets, one major obstacle to be overcome in China is the distinct characteristics of various regions in the country.

"There is not one China. There is the coastal China with the key cities, and then the 'A' cities, and then we have the 'B' and 'C' cities and the rural areas," he said.

"Typically you will see the most successful consumer goods company in China … will not have one national plan."

Given such diversity in popular preferences and habits, brand owners must offer a slate of products which fit the unique needs of each of these audiences.

"You will have a go-to-market approach favouring the premium product in the coastal areas and A, B, C cities, and you … will have a different portfolio to deal with the rural areas," Moison argued.

Communications must also be subjected to an equally rigorous form of segmentation if they are to make a genuine impact among such a broad mixture of demographics.

"Marketing in China is complex and costly, because you need to adapt your portfolio to those different realities," Moison said.

At present, Colgate-Palmolive holds a 32.2% market share in China, where its competition comes from multinationals like Unilever and Procter & Gamble as well as a large number of domestic players.

"You ... have growing local brands, none of them being very strong, but collectively they still represent at least a third of the market," said Moison.

"They tend to be premium, not only low price as one may be expecting. So there is still room for us to grow there."

Indeed, Moison predicted that, in the long-term, rising levels of wealth are likely to generate an uptick in demand for more expensive goods.

"What we see as a megatrend … [is] the rapid growth of income for the consumer. Premium products are [that are] those winning. It was not the case just a few years ago," he said.

However, price still be key in the foreseeable future, and Colgate's factory in China, which can manufacture 1.5 billion toothbrushes a year, has provided it considerable flexibility in this area.

This plant allows it to make brushes that are available for as little as $0.25 (€0.21; £0.17) or as much as $6, enabling the company to attract customers on a range of budgets both locally and internationally.

Moreover, the pioneering business models required in China, centred around creating bespoke solutions, resulted in the launch of brand extensions which have since been rolled out elsewhere. 

"We can develop some new products in Asia and take them … [to] other markets, maybe other emerging markets, but maybe even Europe or the US," said Moison.

"It's already happening in the field of toothbrushes. An innovation that was developed in China has been going very successfully around the world."

Data sourced from Thomson Reuters; additional content by Warc staff