Foreign brands under threat – the WTO column

(later also at Chinabiz)
What have P&G, Unilever, Nestle, Dupont, Johnson & Johnson, Heinz, KFC, Colgate, Smith Kline and Haagen Dasz in common? They are all consumer good producers that got into problems after consumer complaints were taken to the media or caused uproar at the internet. In most cases there was a combination of actors, including local government departments who stepped in after the scandals started to move.

Some of the domestic media, like the China Economic Net here, have been collecting evidence and signal that the collective foreign brands are losing their trustworthy name, they had in comparison to domestic consumer goods, where Chinese consumers would not be surprised to learn they would produce a shoddy quality.

Companies are reporting reduced sales after such incidents, like the SK-II skin cream of P&G is said to have lost 30 percent of its revenue. Now, are the foreign brands screwing up in terms of quality? Are the foreign companies bad crisis managers when they are hit by the ire of Chinese consumers? Or are these barrages of publicity part of political campaigns by domestic media to make the equally dirty alley of domestic brands look rather clean?

Renowned Chinese scientists have been put in place to comment on the resulting loss in confidence Chinese consumers say to have in the trustworthiness of foreign brands.
Professor Mao Shoulong, sociologist at the Renmin University, “holds that quality is just a basic factor that ignited the distrust, and the more important reason lies in the discriminative attitudes foreign brands showed toward Chinese consumers when dealing with crisis,” says the article in the CEN… “Chinese consumers have always trusted foreign brands, which they believe adhere to strict production standards and thus have credible quality. But these negative incidents are damaging the trustworthiness of foreign brands.”
When you are held in high esteem, the fall down in consumer confidence might more nasty bruises, especially when you think the reaction of the consumer was rather unfounded. Partly, Chinese consumers, media and government departments do tend to react more sensitive when foreign companies cross a line, that would be more acceptable for a domestic company to do, as we have also seen in ‘scandals’ involving commercials that ‘insulted’ the dignity of at least some Chinese.
In quite a few cases popular sentiments could grow out of control, because the companies involved did initially not take the consumer reaction too serious. That is of course a cardinal sin against the marketing rule that the customer is always right, even when you honestly believe he is dead wrong.

Chinese consumers rightfully ask to be treated in the same way as consumers elsewhere in the world. Especially when it involves scandals that involve less serious or even no health effects on the users that might be tough in an emerging market where consumers would use every right between a return-policy and civil suits to squeeze money out of embattled firms. But only with a very, very clean health record, foreign firms might be able to resist themselves against all too irrational claims. Dealing with consumer crises should become part of normal management skills. Setting a standard in the Chinese market has always been one of the arguments foreign companies often used to justify their presence in the Chinese market. It looks like they are getting an opportunity to prove they can do things better.

Fons Tuinstra