China is currently the third biggest market in the world for FMCG new product testing.
There are perceptions held by some that business success in China is based solely on the vast size of the marketplace and that Chinese companies can not effectively compete with foreign firms. At the Nielsen China Forum, Mitch Barns, president of The Nielsen Company, Greater China, debunked the eight most common myths about the role innovation plays in the Chinese consumer products sector and discussed how innovation is the engine of business success.
8 Most Common Myths:
- China is not innovative
- Innovation is easy and guarantees success
- Innovation in China means something different than in other countries
- Innovators are always more successful than followers
- Multinational corporations drive innovation in China
- Local companies are not innovators
- Local brands cannot compete in premium categories
- Big research and development spending guarantees innovation success
“Companies and people who believe these myths are ignoring what is happening in China today as opposed to ten or twenty years ago. Today’s China is as innovative – or more so – as any other country. The numbers of patents issued continues to grow each year and major global corporations have invested millions of dollars to open R&D centers in the country. The fact is, China ranks as the third largest market in terms of new fast moving consumer goods product testing – besting countries such as Germany, Japan and Australia – and is expected to place second next year, supplanting the United Kingdom,” said Barns.
“But those who think innovation in China is easy based on little more than the size of the marketplace are making a big mistake: based on Nielsen experience, only 2% of new product ideas reach success in the market. Mega brands require the same long-term commitment to and investment in establishing themselves in China as they do elsewhere,” said Barns.
Ben Wilson, Marketing Director China for Reckitt Benckiser said the processes of large multinational companies could sometimes get in the way and the he believed local companies often had the advantage of being more nimble. “Multinationals have a lot to learn from the guys here (China),” Wilson said.
Lynn Chu, Director of Nielsen China, agreed. She said Chinese companies often chose to bet big on a new idea and if the idea didn’t work, they didn’t get stuck trying to make it work; they moved on to the next big thing.
Barns also waded into the common debate regarding the superiority of foreign brands over local offerings: “To date, multinationals have tended to import brands from other markets and tailor them to China or acquire local brands. Properly done, this provides a good way to get into the market. But there are few true China-specific innovations from multinationals, and local companies are stepping up their innovation game thanks to a superior understanding of the consumer. This deeper knowledge about the consumer has led to local company success in the premium segment, once solely the domain of multinationals.”