From Apple to Coke, global brands are having a tough time in China

Western brands are having to work harder to win over customers in China.

Where once American or European companies might have expected to find a vast market for their products, changing tastes and the challenge from new Chinese competitors are forcing them to adopt new strategies to succeed in the world’s second-largest economy. Still working.

Like tough challenge in front of big names starbucks ,SBUX, And Apple ,AAPL, This has nothing to do with the trade war. At least, not yet. It’s about new competition and increased wealth.

“Appearance is no longer enough,” said Benjamin Cavender, a Shanghai-based analyst at consulting firm China Market Research Group, referring to brands that have become household names in the West. “Chinese consumers’ tastes are rapidly evolving.”

coca cola ,CCE, is one of the top companies that is having to adapt to this new reality.

“We’ve seen a tremendous change in consumption patterns,” the company’s China CEO Curtis Ferguson told CNN at the World Economic Forum in the Chinese city of Tianjin last week.

Ferguson said Coke has launched more than 30 new beverage brands in China in the past six months, bringing its total to about 275. These range from regular Coke to more exotic varieties with flavors like yellow bean and apple fiber. Coke also has its own line of tea in China.

This is a big change from the Atlanta-based company’s previous approach of relying on the strength of its brand.

The philosophy, Ferguson said, was “let them drink Coke.” He argued that Western companies could not afford to treat their brands as sacred.

“Either you destroy your own brand in China, or someone else is going to do it for you,” he said.

Starbucks learned the hard way the difficulties of changing Chinese consumer habits.

The coffee chain has around 3,000 stores in the country, making it one of the Among its top markets. But in June, the company reported a sudden slowdown in growth just weeks after announcing rapid expansion plans in China.

This is partly because it faces increasing competition from an emerging local competitor. Luckin Coffee opened its first store in China less than a year ago. Now its number is more than 500. Many of its customers order coffee online for delivery or takeout. Chinese consumers are also increasingly turning to delivery apps, Like Meituan Dianping for food or drinks.

“Starbucks has always been a slow adopter of technology in China,” Cavender said. Its customers were “tired of waiting in line to order.”

The global coffee giant is now trying to correct its course. In August it worked together alibaba ,Dad,China’s largest e-commerce company will start delivery services.

Global carmakers are also struggling to adjust to changes in China’s auto market, the world’s largest. This is being shaken by the rapid proliferation of electric vehicles, which has been promoted through government subsidies, resulting in market congestion.

Francois Provost, President of Asia-Pacific Renault ,RNLSY,That said, the French carmaker is now facing competition from both traditional rivals and new upstarts in China. local players NIO ,NIO,For example, in China an SUV sells for almost half the price Tesla’s ,TSLA, Model X.

The sticker price is important in China, Provost said, because most customers are first-time buyers. But drivers are also demanding electric vehicles with longer battery life as networks of charging stations are still being built across the country.

“The big challenge is to increase range efficiency and at the same time reduce user costs,” Provost said during a panel. Discussion at the World Economic Forum. It will be difficult for automakers, he predicts: “I can’t honestly say we have full visibility on this.”

Apple ,AAPL, has lost market share to local rivals in China over the past two years. Analysts estimate that iPhone accounts for less than 10% of smartphone sales in the country. In the United States, it is about 40%.

Apple faces tough competition from Chinese players like Huawei, Oppo, Vivo and Xiaomi.

“In recent years, Apple has fallen significantly in the Chinese market,” said Canalys researcher Mo Jia. “Very aggressive technological innovation from Chinese brands is changing the high-end landscape.”

The American company’s latest models, the XS and XS Max, include features that could increase their appeal in the Chinese market, such as dual SIM Cards and a big screen. But analysts doubt it will make much difference.

“Apple is fighting a bit of a losing battle,” Cavender said.

— Sherisse Pham and Rishi Iyengar contributed to this report.

CNNMoney (Hong Kong) First Published September 25, 2018: 10:23pm ET