Brands target China's middle class

12 June 2013
China's aspirational middle class is set for continued massive growth, representing huge opportunities for marketers, a report has found. 

Research by McKinsey suggests that by 2022 75% of the country's urban consumers will be earning $9,000-$34,000 a year, compared to only 4% in the year 2000. That figure had risen to 68% in 2012.

Continued economic and financial reform will see urban household income at least double by 2022, and within the blossoming middle class the upper range will become increasingly dominant.

McKinsey has found that these consumers are more likely to buy laptops, digital cameras and specialised household items such as laundry softener. Products of this kind were was bought by 56% of the upper middle class last year, compared to just 36% of the mass middle class.

Expansion in the sale of luxury goods driven by the ultra-wealthy consumer also continues apace, with 16-20% growth over the last four years. By 2015, it is likely that a third of the money spent around the world on top-of-the-range products including bags, watches, jewellery and clothing will be spent by Chinese consumers on the mainland or elsewhere.

McKinsey has identified a group which it calls Generation 2, which consists of some 200m people in their teens and twenties, who have been brought up in an age of largesse, are more self-confident and brand-conscious than their elders.

Teenagers in this group are also exercising ever more influence over family buying decisions, meaning they are especially fertile ground for exploration by companies.

"The new upper-middle-class opportunity is where the future is," said Alan Jope, head of Unilever's business in north Asia. "It's huge across categories and even more important than the luxury class of consumers."

Nevertheless, companies should not ignore the lower tier consumer, McKinsey believes, given the sheer size of the mass market. To that end, some companies are adopting a dual strategy, to target both the high end and the more general consumer.

Michael Yeung, president of Wrigley Asia Pacific, added: "Consumers in coastal China may be getting wealthier and trading up, but China's interior and lower-tier cities will continue to be a vast market for us."

Data sourced from McKinsey; additional content by Warc staff
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