- Multinationals are losing market share in China to domestic rivals as the quality and marketing of home-made goods become more sophisticated, according to our latest brand survey.
- This trend is particularly notable in third-tier cities. Multinationals face a greater challenge in these crucial markets than they did when first expanding into first-tier urban centres such as Beijing and Shanghai.
- We expect domestic brands to continue to erode the market share of multinationals. However, premium goods will maintain their cachet - our survey data show Chinese brands have had little success so far in categories such as cosmetics.
Multinational companies are continuing to lose market share to domestic companies across several categories, FTCR consumer brand data show. Our latest quarterly survey reflects the strides made by domestic companies in manufacturing for and marketing to a domestic audience. This trend is particularly notable in China's third-tier and smaller cities, a market of nearly 500m consumers.
Starting with Coca-Cola in 1979, many foreign companies entering the Chinese market have thrived in the country's biggest cities (see chart). They were helped by rising incomes and the fact that domestic competition was so weak. Amid signs of saturation in the country's most developed urban centres, foreign firms are now expanding into the giant market that is lower tier Chinese cities. China has 147 cities of more than 1m residents.
