Consumer trust levels low in China

05 May 2011

BEIJING: Companies in the food, pharmaceutical and advertising industries are failing to inspire trust among Chinese consumers, a report has found.

Research body the Chinese Academy of Social Sciences surveyed 1,171 adults in Beijing, Shanghai and Guangzhou, three of the country's biggest cities.

It employed a 100-point scale to rate various sectors in terms of the extent to which they are respected by shoppers, with high scores indicating unfavourable attitudes.

Several categories face "serious public mistrust" -including the food segment, which scored 65.4 points, after numerous high-profile scandals on product safety, including a tainted baby milk scare.

Major multinationals like Heinz and Nestlé are involved in official efforts to redress such issues, which have greatly undermined confidence levels.

"Many consumers to this day are very hesitant when it comes to dairy because of the malpractices that took place," Frits Van Dijk, Nestlé's executive vice president and zone director for Asia, Oceania, Africa and the Middle East, said recently.

"Nestlé did not use one litre of contaminated milk because we control the supply chain and we check the quality on the spot when we buy from farmers.

"It's sad to see companies use melamine in products - they haven't learned, despite people having been executed."

Pharma - a field currently experiencing rapid growth - secured 64 points, demonstrating a similar lack of popular support.

Roche, the owner of Herceptin and Accutane, is using innovation in order to ensure its products achieve a strong position.

"We … have experienced in China in particular, price reductions that the industry as a whole is experiencing," said Pascal Soriot, its chief operating office, pharmaceuticals.

"Many of the so-called branded generics have experienced price reductions in China, which we believe confirms the fact that our strategy of focusing on innovation and differences of products is the only sustainable strategy in the long run."

Elsewhere, the study stated the retail estate and advertising industries both lodged totals surpassing 70 points, representative of a broad feeling they are "cheating" the public.

In the latter instance, this even though many areas, like luxury goods and cosmetics, are subject to increasingly tight regulation, prompting organisations such as Avon to prioritise direct selling.

"In China, we have withheld advertising and obtained lower sales incentives," said Charles Cramb, Avon's interim chief financial officer.

"Investments in China will resume once the new sales model starts to take hold."

Data sourced from Xinhua/Seeking Alpha; additional content by Warc staff