Changing the face of China

Advertisers seldom prefer blondes

By Mary Hennock BBC News Online business reporter

Foreign brands have literally changed the face of China since it first eased open its markets, altering everything from shopping habits, to hobbies and even the urban landscape.

Urban Chinese were quick to embrace big name foreign shampoos, soaps and detergents, beer and cigarettes as a form of affordable glamour - symbols of a better life.

Pale complexions are big money

Along with the products themselves came advertising, now parodied in ironic sixties-style Pop art images of traditional Buddha statues clutching Coca-Cola, Marlboro cigarettes and Becks beer.

Makers of household goods such as Unilever, Procter & Gamble and Johnson & Johnson became the envy of those hunting for the key to the world's biggest market.

	:	At-a-glance
China's economic miracle

But their success will increasingly depend on "localising" famous brands, which means making sure the product, the advertising and the sales force are Chinese.

Local looks for ads

It is not enough to promote a brand as big in the West, says Marina Wu, a spokeswoman for Unilever in China, the company behind such strong sellers as Lux shampoo, Ponds skin cream and Walls ice cream.

Local competitors...are becoming stronger and stronger because they learn very fast

Paolo Gasparrini, L'Oreal China

"We used Chinese models from the beginning," says Ms Wu.

Make up firm L'Oreal also prefers Chinese models and has signed up actress Zhang Ziyi, star of the blockbuster kung-fu movie Crouching Tiger, Hidden Dragon, to promote Maybelline lipstick

Maybelline makes China's biggest selling lipstick, with 33% of the market.

But localisation goes far beyond image. Products themselves have been rejigged to suit Chinese hair, skin, and tradition.

Skin bleaching

Unilever's shampoos include black sesame and ginseng variants while its toothpastes contain herbs familiar from Chinese medicine.

It's important to invest in brand personality now

Stephen Drummond, Lowe China

But the biggest product alterations are in the skin care market, which is dominated by skin whiteners rather than tanning products, which are popular in the West.

Pale is beautiful in China - it marks out upmarket consumers from the country's 900 million sunburnt peasants.

Skincare products are huge sellers with market penetration of close to 100%, says Paolo Gasparrini, China manager for French cosmetics giant L'Oreal.

The strategy works: "If you ask citizens if [top brands] are local or foreign, they're not sure because they're so much part of the landscape," says Angie Eagan, Shanghai market leader for US consultancy firm Burson-Marsteller.

Even shampoos and hair colours are made to different recipes "because Chinese hair is stronger" than that of Caucasians, says Mr Gasparrini.

Chinese in charge

Both firms believe their success in adapting products and image is the result of training local managers.

"The average age in L'Oreal China is just 28 years old, exactly the same age as our consumer target," says Mr Gasparrini, one of just eight foreigners in a workforce of 3,000.

"This means that the Chinese work for Chinese" inside the firm and out, he says.

Of Unilever's 250 managers, 90% are Chinese.

Chinese competition

Two problems cloud these success stories: the first in the form of challengers who are 100% Chinese, and secondly from fake products.

In just three years, privately-owned Chinese start-up Nice Group has pushed past every big foreign name to dominate the household detergent market.

Advertising is getting funkier

"They are our biggest competitor in washing powder," says Ms Wu.

And Nice is moving into toothpaste too.

L'Oreal's Mr Gasparrini admits to facing a tough challenge from local shampoo brand Slek: "Local competitors...are becoming stronger and stronger because they learn very fast."

But counterfeit products present different, more political problems.

Counterfeiting is "one of the biggest challenges facing consumer goods companies....because most of the investment is in the image," says Ms Eagan of Burson-Marsteller.

China promised to protect copyrights when it joined the World Trade Organisation (WTO) last year.

The problem, says Ms Eagan, lies in getting the provincial authorities to comply with central policy which could deprive them of taxes from firms making fakes.

"The central government is receptive and has been answerable to the international community for a long time. It's how much muscle they can put behind it," she says.

Central government bodies are weighing in with high profile campaigns against potentially-deadly fakes.

Unilever has found the problem serious enough to warn consumers "How to distinguish counterfeit products" on its website.

Limits to growth?

With 90% of the population excluded from these changes, household goods makers are still reaching only a small proportion of China's huge population.

Most ads stick to a basic message

The struggle for the captive market, which is limited to the biggest cities, provincial capitals inland and the sprawling newly built suburbs of coastal China, will make the Chinese beauty industry increasingly cut-throat.

Ads will need to become a lot slicker and ritzier in the big cities to fend off competitors and build brand loyalty.

"It's important to invest in brand personality now," says Stephen Drummond from international ad agency Lowe's Shanghai office.

Advertisers can expect the boom times to keep rolling, but for one set of successful customers the Chinese market is getting a lot tougher.