November 10th, 2008, Beijing China TNS Worldpanel, global market leader in consumer purchasing information, today announced that although China’s dairy market was hit by sales spiralling downwards, there are many winners emerging from the melamine scandal.
The overall consumer purchase volume measured in the worst week amidst the milk scandal plummeted by 54% compared to the same week in 2007, and seriously affected all industry players. However, when measured over four weeks up to 3rd October dairy purchases only went down 18%. Research data clearly shows that in a quest to buy safer milk, many Chinese consumers switched from standard to premium products and from local to international brands, especially when buying infant milk products, and most noticeably in the lower tier cities.
For the international brands, this subsequently led to market share gains, even though dairy prices were hiked up by a staggering average of 26%, and 33% for infant milk. The largest impact was felt in smaller cities, as many of the local brands that previously had a strong presence had to withdraw their products from the shelves, giving way to international brands.
Dumex, a widely distributed international infant milk brand with factories in China saw its market share in lower tier cities increase from 9.8% to 20.1%. Another winner of the scandal was local manufacturer Ausnutria (Aoyou), whose market share shot up from 2.6% in 2007 to 6.8% in the same four week period in 2008, indicating that consumers appreciate that Aoyou sources its raw materials from Australia and emphasises this in its marketing.
By comparing consumer reactions to local brands in recent interviews with over 1,600 Chinese consumers, TNS Worldpanel found out that consumers are more confident that especially the larger players like Mengniu and Yili will recover from this incident, while smaller brands still lack consumer confidence. In fact, the confidence in the recovery of local brands is significantly larger in smaller cities than in tier one cities, where consumers are more willing to pay higher prices for international brands.
“Obviously this incident represents a huge opportunity for international brands with premium products who should now step up with aggressive marketing strategies. But we also know that large local brands can benefit from the trust that consumers have shown in them. We recommend they act as fast as possible, especially in the market for liquid milk and yogurts where they still have less international competitors than in other food sectors. One possible option is to accelerate the premiumisation of the category, focussing on marketing premium priced products from credible sources and production processes. If they can prove to consumers that they are making all efforts to recover from this crisis, local brands will be able to fight back for their market shares successfully.” says Jason Yu, General Manager TNS Worldpanel China.
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Notes:
TNS Worldpanel China classifies as follows:-
Tier one cities: 20 Provincial Capitals, 4 Municipalities (Beijing, Shanghai, Tianjin and Chongqing) and Shenzhen, so altogether 25 cities
Tier two cities: Prefecture level cities by government definition
Tier three cities: County level cities by government definition
About TNS
TNS is a global market information and insight group.
Its strategic goal is to be recognised as the global leader in delivering value-added information and insights that help its clients make more effective business decisions.
TNS delivers innovative thinking and excellent service across a network of 80 countries. Working in partnership with clients, TNS provides high-quality information, analysis and insight that improve understanding of consumer behaviour.
TNS is the world’s leading provider of customised services, combining sector knowledge with expertise in the areas of Product Development & Innovation, Brand & Communications, Stakeholder Management and Retail & Shopper. TNS is a major supplier of consumer panel, media intelligence and audience measurement services.
In business since 1992, TNS is one of the first international market research agencies to start operations in China. In recent years, TNS has grown substantially and established itself as one of the most successful and reputed market research and consulting agencies in China, with over 150 professional researchers and more than 300 employees in three full service offices in Beijing, Shanghai, and Guangzhou. TNS China focuses on the Automotive, Consumer, Finance, Healthcare and Technology sectors.
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The Kantar Group
The Kantar Group is one of the world's largest research, insight and consultancy networks. By uniting the diverse talents of more than 20 specialist companies – including the recently-acquired TNS – the group aims to become the pre-eminent provider of compelling and actionable insights for the global business community. Its 26,500 employees work across 80 countries and across the whole spectrum of research and consultancy disciplines, enabling the group to offer clients business insights at each and every point of the consumer cycle. The group’s services are employed by over half of the Fortune Top 500 companies. The Kantar Group is a wholly-owned subsidiary of WPP Group plc. For further information, please visit www.kantargrouptns.com
