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Years ago， Procter & Gamble（P&G） and Unilever were two powerful giants that dominated the daily consumer goods market in China， while Local companies， suppressed by the two companies and other foreign brands， were struggling on the verge of collapse.
But the distress for local daily consumer goods companies might be swept away these days， as the market share of P&G and Unilever had dropped， while local companies， by contrast， saw an increasing share in the market.
The data from the China Association of Daily Consumer Goods revealed that the market share of local companies had already climbed to 45% by the end of May 2013.
Many local brands benefited greatly from this resurrection. Take Blue Moon for example， in 2007， this brand only took 14% of the detergent market in China， but the share increased to the startling 63% in 2013. The market calls it “an avenging increase”.
The fall of foreign companies started from 2008 and is yet to end by now. Many Chinese companies want to gasp this opportunity to reverse their situation. Softto is one of them.
Softto is one of the first established local daily consumer goods companies in China. When the supply was in shortage， it was quite popular in China. Then here came the age of advertising， when every Chinese people could see the advertisements of Softto once they turned on the TV.
Its board chairman Liang Guojian was previously a physician. He gave up his medical expertise and founded Softto. Its first knockout products were the “soaps with the effect of weight-reduction”. After several rounds of expansions， it became one of the few daily consumer goods companies that got listed in the Ashare market.
However， Softto began to suffer a falling business from 2008， thanks to the external stress from foreign companies and the internal managerial malpractices. Along with Soffto are Little Nurse， Tjoy and other local companies also had a hard life and were then sold to foreign companies.
The situation made a turn recently. Second-class brands struck back at the leading brands intensively. Chinese local daily consumer goods companies like Pehchaolin， Herborist and Chcedo – most are cosmetics brands – are now strong opponents of P&G and Unilever in their own fields. Their presence casts great stress on those foreign giants.
The Chance to Stand Up
A group of data could reveal the changing situations in the daily consumer goods market of China. Before 1993， Chinese local brands took 80% of the market. From 1993 to 2001， the local brands’market share dropped to 60% due to the aggressive P&G， which made its presence in China in 1988. Then， more foreign companies came in and the market share of local companies dropped to 20% between 2001 and 2008. The chance of turning around the situation came out in 2008， as the financial crisis assaulted the headquarters of P&G and Unilever， greatly distracting these foreign companies from the Chinese market.
The 45% market share was still much less than the heyday， but it rejuvenated local brands， and their confidence.
Apart from Blue Moon， another Chinese local daily consumer goods company– Shanghai Jahwa – set up a good example of resurrection. In 1992， Shanghai Jahwa only earned the gross profits of 27 million yuan， which could not even begin to compare with the spending of P&G and Loreal on ads that amounted to 1 billion yuan.
But in recent years， P&G and other foreign companies are much less aggressive while Shanghai Jahwa picked up the growth speed. In 2012， its sales revenue accounted for one third of Loreal’s， while the ratio was only one tenth 20 years ago.
“Now we have the confidence to reclaim our lost land，” said Ge Wenyao， board chairman of Shanghai Jawha， through his microblog.
The 2012 financial report of P&G shows that the U.S. giants’ operating revenue was US$83.68 billion， up 3.18% year on year. The operating profits amounted to US$13.292 billion， down 14.22%； the net profits dropped 8.83$ to US$10.756 billion. The financial report attributed the slump in profits to the increasing price of bulk commodities and the higher cost of advertising and marketing.
The regression of foreign companies gave local companies an opportunity which they do not want to miss. The key words to their resurrection are “small categories and big business”.
The Past Harsh Situation
Local brands were initially inclined to avoid the direct confrontation with foreign enterprises. They followed the strategies of differentiation： Softto produced the concepts of “weight reduction” and“breast enhancement”， which were very popular in the market. In 2003， the net profits of Soffto increased from 3.35 million to 70 million yuan and the prosperity lasted till 2007.
But the situation got worse in 2008. In that year， the net profits made a drastic decrease of 90.25% to 7.57 million yuan. In 2009， it fell to 2.93 million yuan， down 61.28%. One year later， it said goodbye to the profits as the net loss of 86.13 million yuan occurred to Soffto. The situation got worse in 2010 as it suffered the loss of 196 million yuan.
The harsh situation made many longtime insiders of Softto to recall the past glories from time to time. From 2008， the development of big shopping malls was beyond everyone’s expectation. This almost changed the consumer’s shopping habit. But Soffto did not pay enough attention to the development of sales terminals； instead， it relied on ads too heavily.
How important is the terminal？ Chinese local washing machine brand Little Swan made a test. It dispatched a group of salespersons to a shopping mall to stop any consumers who wanted to buy washing machines. They ushered those consumers to the area of Little Swan， where they were presented with the show to demonstrate the utility and efficiency of Little Swan’s products. The test proved to be very successful， as 70% of consumers stopped by Little Swan’s employees finally chose this brand.
P&G and Unilever got to know the importance of sales terminals in 2005 and 2006. They put great efforts in marketing. P&G labeled its products as proper targets for discount-based marketing. The frequent campaigns of discounted prices continuously hit the heartstrings of consumers and also pushed domestic companies to the brink of death.
The Counterstrike
In 2004， the daily consumer goods market in China went through a period of integration. In 2005， P&G spent 385 million yuan in delivering ads to China’s CCTV， the highest among all companies. This means that foreign companies have already taken control of the Chinese daily consumer goods market.
From then on， there were frequent reports about foreign companies’ acquisitions of Chinese local daily consumer brands. Little Nurse was bought by Loreal； C-Bons was acquired by Bayer； Dabao was integrated into Johnson & Johnson…
A source said that Softto was once very close to becoming a part of foreign companies. However， its directorate decided to maintain the independence of the brand.
In order to survive， Softto made a significant change to its operating strategies. In 2007， it turned to the “bottom price” model， which was usually adopted by the lowest-class brands.
The dealers of daily consumer goods are usually divided into two sections. The first and traditional one is more like service suppliers. For example， a dealer for P&G is only responsible for delivering and allocating goods for P&G while the U.S. company affords all relevant cost. The second and emerging one is called “bottom-price dealer”. Those dealers directly get goods from manufacturers and take charge of the following steps of selling， including finding proper channels， training and dispatching salespersons and planning marketing campaigns. This used to be a method popular for third- and fourth-class brands， which lacked proper judgment over the market. Soffto was the first second-class brand to take this method in the daily consumer goods market of China.
This reflected the desperation of Softto， but this condescendence saved it. The cost of marketing in shopping malls increased so much in recent years that many domestic enterprises were crashed. In addition to the increasing cost of materials， the profits of daily consumer goods enterprises were greatly reduced. In that situation， enterprises could not afford the additional cost of marketing， hiring and training salespersons. This gave “bottomprice dealers” the opportunity to rise –even Loreal adopted this pattern in some cities of Guangdong.
Blessed by this method， as well as the measures of streamlining itself， Soffto survived and began to fight back to reclaim the lost market.
Ma Zhenhang， operating director of Soffto， said that the company would spend two more years improving the corporate profile and increase the sales volume to over 4 billion in the next four years.
But the distress for local daily consumer goods companies might be swept away these days， as the market share of P&G and Unilever had dropped， while local companies， by contrast， saw an increasing share in the market.
The data from the China Association of Daily Consumer Goods revealed that the market share of local companies had already climbed to 45% by the end of May 2013.
Many local brands benefited greatly from this resurrection. Take Blue Moon for example， in 2007， this brand only took 14% of the detergent market in China， but the share increased to the startling 63% in 2013. The market calls it “an avenging increase”.
The fall of foreign companies started from 2008 and is yet to end by now. Many Chinese companies want to gasp this opportunity to reverse their situation. Softto is one of them.
Softto is one of the first established local daily consumer goods companies in China. When the supply was in shortage， it was quite popular in China. Then here came the age of advertising， when every Chinese people could see the advertisements of Softto once they turned on the TV.
Its board chairman Liang Guojian was previously a physician. He gave up his medical expertise and founded Softto. Its first knockout products were the “soaps with the effect of weight-reduction”. After several rounds of expansions， it became one of the few daily consumer goods companies that got listed in the Ashare market.
However， Softto began to suffer a falling business from 2008， thanks to the external stress from foreign companies and the internal managerial malpractices. Along with Soffto are Little Nurse， Tjoy and other local companies also had a hard life and were then sold to foreign companies.
The situation made a turn recently. Second-class brands struck back at the leading brands intensively. Chinese local daily consumer goods companies like Pehchaolin， Herborist and Chcedo – most are cosmetics brands – are now strong opponents of P&G and Unilever in their own fields. Their presence casts great stress on those foreign giants.
The Chance to Stand Up
A group of data could reveal the changing situations in the daily consumer goods market of China. Before 1993， Chinese local brands took 80% of the market. From 1993 to 2001， the local brands’market share dropped to 60% due to the aggressive P&G， which made its presence in China in 1988. Then， more foreign companies came in and the market share of local companies dropped to 20% between 2001 and 2008. The chance of turning around the situation came out in 2008， as the financial crisis assaulted the headquarters of P&G and Unilever， greatly distracting these foreign companies from the Chinese market.
The 45% market share was still much less than the heyday， but it rejuvenated local brands， and their confidence.
Apart from Blue Moon， another Chinese local daily consumer goods company– Shanghai Jahwa – set up a good example of resurrection. In 1992， Shanghai Jahwa only earned the gross profits of 27 million yuan， which could not even begin to compare with the spending of P&G and Loreal on ads that amounted to 1 billion yuan.
But in recent years， P&G and other foreign companies are much less aggressive while Shanghai Jahwa picked up the growth speed. In 2012， its sales revenue accounted for one third of Loreal’s， while the ratio was only one tenth 20 years ago.
“Now we have the confidence to reclaim our lost land，” said Ge Wenyao， board chairman of Shanghai Jawha， through his microblog.
The 2012 financial report of P&G shows that the U.S. giants’ operating revenue was US$83.68 billion， up 3.18% year on year. The operating profits amounted to US$13.292 billion， down 14.22%； the net profits dropped 8.83$ to US$10.756 billion. The financial report attributed the slump in profits to the increasing price of bulk commodities and the higher cost of advertising and marketing.
The regression of foreign companies gave local companies an opportunity which they do not want to miss. The key words to their resurrection are “small categories and big business”.
The Past Harsh Situation
Local brands were initially inclined to avoid the direct confrontation with foreign enterprises. They followed the strategies of differentiation： Softto produced the concepts of “weight reduction” and“breast enhancement”， which were very popular in the market. In 2003， the net profits of Soffto increased from 3.35 million to 70 million yuan and the prosperity lasted till 2007.
But the situation got worse in 2008. In that year， the net profits made a drastic decrease of 90.25% to 7.57 million yuan. In 2009， it fell to 2.93 million yuan， down 61.28%. One year later， it said goodbye to the profits as the net loss of 86.13 million yuan occurred to Soffto. The situation got worse in 2010 as it suffered the loss of 196 million yuan.
The harsh situation made many longtime insiders of Softto to recall the past glories from time to time. From 2008， the development of big shopping malls was beyond everyone’s expectation. This almost changed the consumer’s shopping habit. But Soffto did not pay enough attention to the development of sales terminals； instead， it relied on ads too heavily.
How important is the terminal？ Chinese local washing machine brand Little Swan made a test. It dispatched a group of salespersons to a shopping mall to stop any consumers who wanted to buy washing machines. They ushered those consumers to the area of Little Swan， where they were presented with the show to demonstrate the utility and efficiency of Little Swan’s products. The test proved to be very successful， as 70% of consumers stopped by Little Swan’s employees finally chose this brand.
P&G and Unilever got to know the importance of sales terminals in 2005 and 2006. They put great efforts in marketing. P&G labeled its products as proper targets for discount-based marketing. The frequent campaigns of discounted prices continuously hit the heartstrings of consumers and also pushed domestic companies to the brink of death.
The Counterstrike
In 2004， the daily consumer goods market in China went through a period of integration. In 2005， P&G spent 385 million yuan in delivering ads to China’s CCTV， the highest among all companies. This means that foreign companies have already taken control of the Chinese daily consumer goods market.
From then on， there were frequent reports about foreign companies’ acquisitions of Chinese local daily consumer brands. Little Nurse was bought by Loreal； C-Bons was acquired by Bayer； Dabao was integrated into Johnson & Johnson…
A source said that Softto was once very close to becoming a part of foreign companies. However， its directorate decided to maintain the independence of the brand.
In order to survive， Softto made a significant change to its operating strategies. In 2007， it turned to the “bottom price” model， which was usually adopted by the lowest-class brands.
The dealers of daily consumer goods are usually divided into two sections. The first and traditional one is more like service suppliers. For example， a dealer for P&G is only responsible for delivering and allocating goods for P&G while the U.S. company affords all relevant cost. The second and emerging one is called “bottom-price dealer”. Those dealers directly get goods from manufacturers and take charge of the following steps of selling， including finding proper channels， training and dispatching salespersons and planning marketing campaigns. This used to be a method popular for third- and fourth-class brands， which lacked proper judgment over the market. Soffto was the first second-class brand to take this method in the daily consumer goods market of China.
This reflected the desperation of Softto， but this condescendence saved it. The cost of marketing in shopping malls increased so much in recent years that many domestic enterprises were crashed. In addition to the increasing cost of materials， the profits of daily consumer goods enterprises were greatly reduced. In that situation， enterprises could not afford the additional cost of marketing， hiring and training salespersons. This gave “bottomprice dealers” the opportunity to rise –even Loreal adopted this pattern in some cities of Guangdong.
Blessed by this method， as well as the measures of streamlining itself， Soffto survived and began to fight back to reclaim the lost market.
Ma Zhenhang， operating director of Soffto， said that the company would spend two more years improving the corporate profile and increase the sales volume to over 4 billion in the next four years.