China’s Anger at Foreign Brands Helps Local Rivals

Tim Min once drove BMWs. He considered buying a Tesla.

Instead, Mr. Min, the 33-year-old owner of a Beijing cosmetics startup, bought an electric car made by Tesla’s Chinese rival, Nio. He likes Nio’s interior and voice control functions better.

He also sees himself as a patriot. “I have a very strong affinity for Chinese brands and very strong patriotic emotions,” he said. “I loved Nike too. Now I see no reason for it. If there’s a good Chinese brand out there to replace Nike, I’ll be very happy about it. “

Western brands like H&M, Nike and Adidas have come under pressure in China for refusing to use cotton from the Xinjiang region, where the Chinese government has waged a widespread campaign to suppress ethnic minorities. The buyers vowed to boycott the brands. Celebrities dropped their advertising contracts.

However, foreign brands are also increasingly pressured by a new generation of Chinese competitors who manufacture high quality products and sell them through clever marketing to an increasingly patriotic group of young people. There is a term for it: “guochao” or Chinese fad.

HeyTea, a $ 2 billion milk tea startup with 700 stores, plans to replace Starbucks. Yuanqisenlin, a four-year low-sugar beverage company valued at $ 6 billion, aims to become China’s Coca-Cola. Ubras, a five year old company, wants to replace Victoria’s Secret with the non-Victoria’s product: non-wired, athletic bras that emphasize comfort.

The anger over Xinjiang cotton has given these Chinese brands another chance to win over consumers. When celebrities severed ties with overseas brands, Li-Ning, a Chinese sportswear giant, announced that Xiao Zhan, a boy band member, would become its new global ambassador. Almost everything Mr. Xiao wore in a Li-Ning advertisement sold out online within 20 minutes. A hashtag about the campaign was viewed more than a billion times.

China is experiencing a consumer brand revolution. The younger generation is more nationalistic and is actively looking for brands that can adapt to this confident Chinese identity. Entrepreneurs are rushing to build names and products that resonate. Investors are turning to these startups as tech and media companies’ returns decline.

When patriotism becomes a selling point, Western brands are put at a competitive disadvantage, especially in a country where global corporations are increasingly forced to follow the same policies as Chinese corporations.

China’s consumer protests are “a historic turning point and will have a long-term impact on Chinese consumers,” said Min. “Chinese consumers don’t want to eat the same crap that foreign brands have given them. It is important that foreign brands respect Chinese consumers as much as they respect Chinese brands. “

Foreign brands are far from finished in China. Its drivers helped make a jump into Tesla deliveries. IPhones are still very popular. Campaigns against foreign names have come and gone, and local brands that put too much emphasis on politics risk unwanted attention when the political winds change quickly.

However, the interest in local brands shows a clear shift. After Mao, the country produced few consumer goods. The first televisions that most families owned in the 1980s came from Japan. Pierre Cardin, the French designer, reintroduced fashion in 1979 with his first show in Beijing, bringing color and flair to a nation that wore blues and grays during the Cultural Revolution.

Chinese people born in the 1970s or earlier remember their first sip of Coco-Cola and their first bite of a Big Mac. We saw movies from Hollywood, Japan and Hong Kong for both the cabinets and makeup and the plot. We hurried to buy Head & Shoulders shampoo because the Chinese name Haifeisi means “seaworthy hair”.

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April 6, 2021, 7:10 p.m. ET

“We’ve gone through the European and American fad, the Japanese and Korean fad, the American streetwear fad, and even the Hong Kong and Taiwan fad,” said Xun Shaohua, who founded a sportswear company in Shanghai that competes with Vans and Converse.

Now could be the time for the fad in China. Chinese companies make better products. China’s Generation Z, born between 1995 and 2009, do not share the same attachment to foreign names.

Even People’s Daily, the Communist Party’s traditionally incumbent official newspaper, relies on branding. With Li-Ning, the company launched a streetwear collection in 2019. In the same year it published a report on Baidu, the Chinese search company called “Guochao Pride Big Data”. They found that when searching for brands in China, more than two-thirds were looking for native names, up from only about a third ten years ago.

As with so much in China, it can be difficult to say how much the Guochao Movement involves in politics. Building homemade brands fits in perfectly with the Communist Party’s desire to make the country more independent. The officials also want the Chinese to buy more: private household consumption only accounts for around 40 percent of Chinese economic output, much less than in the US and Europe.

Patriotism aside, entrepreneurs argue that their ventures are built on solid business foundations. There were similar trends in Japan and South Korea, where strong brands are now based. Local actors know better the capabilities of the country’s supply chains and how to use social media.

Mr. Xun’s sports brand has half a million followers on Alibaba’s Taobao marketplace and sells at the same prices as Vans and Converse, or even slightly higher. He said his brand competed by making shoes that would better suit Chinese feet and offering locally preferred colors like mint green and fuchsia. He sells exclusively online and works with Chinese and overseas brands and personalities, including Pokemon and Hello Kitty. At 37, he is the only one in his company who was born before 1990.

Guochao fashion has also revived older Chinese brands like Li-Ning. For many years, discerning city dwellers considered the brand, created by a former world champion gymnast of the same name, ugly and cheap. The characteristic red and yellow color combination after the Chinese flag was derisively referred to as “eggs fried with tomatoes”, an everyday Chinese dish. Li-Ning lost money. The shares lost.

Then the company presented a collection at New York Fashion Week in early 2018. Its angular look, combined with bold Chinese characters and embroidery, caused quite a stir at home. Shares have increased nearly tenfold since then. Now, Li-Ning’s high-end collections average between $ 100 and $ 150, just like Adidas’.

As ambitious as these businessmen are, almost everyone I’ve spoken to admitted that the Chinese brands still couldn’t compete with mega-brands like Coca-Cola and Nike.

Alex Xie, a marketing consultant who works with companies in China, used the sportswear industry as an example. Nike has a long lead over Chinese brands in research and development. It has a deep network of relationships in the sports world. It works closely with athletes to develop better shoes, sponsors many events and teams, including China’s national soccer, basketball and athletics teams.

“It just has a much closer relationship with its customers than any Chinese brand,” he said.

But for these western megabrands, the cotton dispute in Xinjiang is a major challenge that could help their Chinese rivals. While previous outrage over Western brands like the National Basketball Association and Dolce & Gabbana passed pretty quickly, this battle could go on, many people said.

“In the past, some Western brands have failed to understand or disregard Chinese culture, mainly due to a lack of understanding,” said Xun. “This time it’s a political problem. You have violated our political sensitivities. “

Then, like any savvy Chinese entrepreneur who knows which issues are sensitive, he asked, “Couldn’t we talk about politics?”

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